Insurance Companies Have Unrealised Gains Of €2,400M From RE

26 August 2016 – Expansión

Mapfre, Mutua Madrileña and Catalana Occidente own the majority of the real estate in the insurance sector, whose total portfolio amounts to €4,475 million.

Insurance companies in Spain are accumulating a cushion of unrealised gains in their real estate investments amounting to €2,433 million, according to data from the Director General of Insurance and Pensions.

This amount is the difference between the value that the companies assigns these assets on their balance sheets and the market price of these assets, according to the mandatory appraisals that have to be performed periodically by independent appraisers.

These latest gains in the insurance sector are still well below the threshold of €4,226 million achieved in 2009, at the beginning of the burst of the real estate bubble.

Unrealised gains are recognised in the accounts of entities if the properties are sold at a profit. They are also included in the calculation to measure the solvency margin of the entities, which measures the firms’ strength to deal with unforeseen events using their uncommitted assets.

Insurance companies have traditionally invested in properties, given that they are a particularly appropriate asset for the long term over which they conduct their activity. They also generate regular income in the form of rental payments.

In addition, insurance companies have had to diversify their portfolios following the decrease in interest rates in recent months, which makes the investment strategy of these entities more complicated; they have traditionally focused on public debt, primarily in Spain.

Purchases

Insurance companies are risk averse in their investments and in the face of this new panorama, they have made several purchases that have increased their real estate portfolios, particularly important for the Spanish capital firms Mapfre, Mutua Madrileña and Catalana Occidente, which own the majority of the sector’s total portfolio of €4,475 million, according to data from the Director General of Insurance and Pensions. In recent months, these three entities have been involved in several real estate purchases amounting to more than €250 million. (…).

The Mapfre Group, which has a presence in fifty countries, reported latent gains of €975 million in its accounts for 2015 on the basis of the book value of its total real estate portfolio (€2,267 million) and the market price (€3,242 million). Most (56% or €1,835 million) correspond to real estate investments, whilst the rest (44% or €1,406 million) are properties used by Mapfre. (…).

Meanwhile, Mutua has accumulated a piggy bank of unrealised real estate gains amounting to €462 million, with total assets worth €1,443 million at market prices and €981 million on the balance sheet. Its assets are concentrated in Madrid, where historically it has owned a handful of individual buildings on Paseo de la Castellana. (…).

Grupo Catalana Occidente’s investment in real estate amounts to €1,024 million, which includes unrealised gains amounting to €465 million. The insurance company, which has a presence in more than fifty countries, acquired a building measuring almost 4,000 sqm in the 22@ district in Barcelona in July.

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake

Lar Buys Eroski Hypermarket In Alicante For €7M

11 June 2015 – Expansión

The Socimi Lar España Real Estate has acquired a hypermarket in the ‘Portal de la Marina en Ondara’ shopping centre (Alicante) from Altadena Invest for €7 million.

As a result of this operation, conducted through its subsidiary Global Brisulia, Lar España has added a gross leasable area (GLA) of 9,924 m2 to its portfolio. The consideration for the transaction has been disbursed “entirely from own funds”.

In October 2014, Lar España acquired a 58.78% stake in the company Puerta Marítima de Ondara, which owns the shopping centre in which the acquired hypermarket, operated by Eroski, is located.

The Socimi has indicated that this purchase “consolidates its position” in the “iconic” shopping centre in the region of Marina Alta (Alicante).

The company has explained that this acquisition “reaffirms” its objective to “realise long-term investments in the Spanish real estate sector, with a special focus on first class commercial assets”.

In this sense, its CEO, Roger Cooke, has underlined that Lar España “has strengthened its position in the face of future decisions to enable greater value to be added to the shopping centre, through the active management of the property”.

Original story: Expansión

Translation: Carmel Drake

Vulture Funds Bid For Martinsa’s Debt

4 March 2015 – Expansión

Some new players may be joining Martinsa Fadesa’s liquidation process. The decision taken by the real estate company’s Board of Directors on Monday to approve the liquidation plan has attracted investment funds in to the fold, interested in buying up some of its debt.

“The liquidation process appeals to investors that want to buy cheap and are willing to wait a long time (to recover their investments) and obtain a significant profit in return”, explains Mercadeuda, a company that specialises in connecting holders of debt with potential buyers.

However, the offers that Martinsa’s creditors will receive will be very aggressive. “I do not think they will offer to pay more than 10% of the nominal (value of the debt). In fact, the most reasonable offers will likely range be between 3% and 5%”, says Rubén Barriocanal, Investment Manager at Mercadeuda.

Martinsa Fadesa has assets worth €2,392 million and debt of almost €7,000 million, according to information filed with the CNMV. Of that liability, around €712 million is senior debt, according to the most recently presented bankruptcy report. More than €3,600 million comprises ordinary loans and around €1,750 million are equity loans.

The company’s principal creditors include Sareb, CaixaBank, Popular and Abanca. “The banks hold senior debt, and therefore they would not be particularly interested in selling. Instead, the offers from these investors, with high-risk profiles, are targeted at the holders of ordinary loans, such as suppliers.

For now, the movements between debt holders seem to be limited. “The only funds that are exchanging debt on the secondary market are minority and the amounts involved are modest. Some of them are the same players who bought stakes of less than €10 million three and a half years ago”, explain the financial sources.

The main brokers in this transactions include Bank of America and Citi.

Original story: Expansión (by R. Ruiz and D. Badía)

Translation: Carmel Drake