Sareb To Create A Socimi For Its Rental Properties

19 May 2017 – Expansión

Sareb is preparing to create a Socimi through which it will manage its rental business. That is according to Luis de Guindos, the Minister for the Economy, Industry and Competitivity, who made the announcement yesterday. He stated that the Government is considering creating a real estate investment company, which it would “place on the market before the end of the year”. De Guindos made these declarations at a symposium about Spain’s role in the reworking of the EU, organised by the Association for the Advancement of Management (APD).

The objective of this strategy is three-fold. On the one hand, Sareb would obtain new income, through the dividends that its Socimi would generate from renting out its assets. On the other hand, the debut of this subsidiary on the stock market would allow the entity to raise capital, which could be used to reduce Sareb’s indebtedness. According to De Guindos, we should take into account that Sareb has already divested more than 20% of its assets. Finally, through the Socimi, Sareb would have a structure to accelerate its sales, given that it could place entire blocks of flats in the hands of the Socimi.

Several unknowns

The Minister of the Economy said that this strategy is supported by “the current, strong performance of the market”, which is turning its focus towards the rental segment, and as such, Socimis are generating significant returns from their assets. Nevertheless, the new Socimi presents several unknowns, such as how many assets may be transferred to the new entity. It is also worth remembering that the majority of the properties that Sareb manages are located in peripheral areas or in new urban developments, where the rental market is complicated. Nevertheless, the regulations governing this type of company require 80% of the revenues to come from rental properties, and so Sareb would have to be very careful when it comes to choosing the assets to transfer. De Guindos did not indicate how much private capital he hopes to raise through this initiative, how much weight individual shareholders would have in the Socimi or what percentage take would be assumed by institutional investors.

Sources at Sareb indicate that the entity has 4,600 homes, but has still not decided how many of those would be transferred to the Socimi, aside from stating that “it would be a small percentage”.

Asset sales

Over the last five years, since it was created, Sareb has divested 20% of its assets. That percentage is small still and makes it difficult to fulfil the entity’s mandate, which requires it to liquidate all of the assets that were transferred to it by the banks in a period of 15 years and in an orderly manner. Moreover, it is worth noting that Sareb has already sold the properties that were easiest to place, with the aim of boosting the market, which means that now it is left with those properties that have the least possibilities.

Although the volume of real estate transactions grew at an annual rate of 16.1% during the first quarter, according to data from INE, and the stock of unsold homes is starting to run out in certain areas, prices are still falling in certain segments of the market and sales are not being closed.

Finally, the launch of the Socimi would come in parallel to the decision taken by Sareb to start building an average of 1,500 homes per year until its liquidation, even through it estimates that the figure would be much higher during the next three years, reaching up to 4,000 homes.

Original story: Expansión (by Pablo Cerezal)

Translation: Carmel Drake

EU Agrees To Create National Bad Banks To Assume Doubtful Debt

11 April 2017 – RTVE

On Friday (7 April),at a meeting in La Valeta, Malta, the Economic and Finance Ministers of the European Union agreed to back the creation of national bad banks, which will take on doubtful debt from the banks and whereby try to solve the problem of the “high” level of toxic assets in the European financial sector.

These non-performing loans, whose value amounts to almost €1 billion (equivalent to 7% of the EU’s GDP), account for 5.4% of the entire European credit portfolio, on average (in Spain, they account for 5.9%). Of particular concern is the high proportion in Italy (16.4%).

The Vice-President of the European Commission for the Euro and Social Dialogue, Valdis Dombroviskis, said that there had been “widespread support for the development of a project regarding how to design a national asset management company” and he encouraged ministers “to make use of the experience regarding asset management companies already in operation in some member states”.

In this sense, he explained that the EU Executive will work on a document that will serve as a guide for the creation of bad banks at the national level, which will take on these toxic products. When asked about the possibility of launching such an entity at the European level, the Latvian remarked that “most of the instruments are already in the hands of the member States” and that “loans are issued in accordance with national legislation”.

The ECB used the bad bank in Spain by way of example

Meanwhile, the Vice-President of the European Central Bank (ECB), Vitor Constancio, highlighted that the preparation of this plan by Brussels was a “very important” conclusion to emerge from the meeting. He gave the example of the good results in cases such as Spain, through the ‘Company for the Management of Assets Proceeding from the Bank Restructuring’ (‘Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria’ or Sareb). (…).

Dombrovskis added that Brussels is also exploring initiatives to facilitate the development of secondary markets for doubtful loans and in this sense, stated that “comparable and high-quality” data are “invaluable” because investors “have to know what they are buying”.

De Guindos defended the Spanish model

The Spanish Minister for the Economy, Luis de Guindos, defended the creation of a bad bank for the non-peforming loans of Europe’s banks as a solution that would eliminate “the root” of this problem, based on the model that Spain has put into practice for its real estate assets with Sareb. (…).

De Guindos underlined that it is also “very important” to value these assets properly and ensure that the provisions to cover them “are at the correct level”. Also, there must be a “fast-track legal system (in the EU) so that lenders are able to foreclose loans”.

The option of creating a bad bank was proposed by the European Banking Authority (EBA), which presented Spain’s Sareb by way of example of the benefits of these types of structure. Sareb was created to provide an exit for toxic real estate assets, but it is not supported by all parties.

Original story: RTVE

Translation: Carmel Drake

Gov’t Extends Eviction Moratorium Until 2020

21 March 2017 – Rtve

On Friday, the Government approved the extension of the anti-eviction moratorium for vulnerable families from their normal homes until 2020 – the initiative had been in force since 2013 and was due to expire in May of this year. From now on, the measure will include families with dependent children aged under 18. That is according the Ministry of the Economy, Industry and Competitivity, Luis de Guindos (pictured above), following the Council of Ministers meeting. He said that the aforementioned law “would be expanded and deepened” in order to protect the most vulnerable groups following the crisis.

De Guindos said that the Royal Decree Law will now cover other (new) cases so that more families can benefit from these measures. It will include vulnerable families with dependent children aged under 18 (not only those aged under 3 years old, like until now); single-parent families with dependent children (removing the need for there to be two children in single-parent families); unemployed people (without having used up the benefit); disabled people; dependent people; those with a serious illness; and cases where there is a victim of gender violence in the family unit.

The Minister for the Economy also explained that the Code of Good Practice – which financial institutions can voluntarily sign up to – includes the option of renting foreclosed normal homes at a discounted price. (…).

Agreement with the opposition parties

The text in the Royal Decree Law has been prepared with a “broad consensus” according to the Minister in a statement. De Guindos said at a press conference that all of the main parliamentary groups have been involved in the negotiations, and so he has ensured that there is a “very strong consensus to approve it”.

In fact, the Government had initially announced the extension of the moratorium on evictions of vulnerable families from their usual homes until 15 May 2019, although it was in favour of extending it for another year, as reflected in a non-legislative motion, approved by the Congress of Deputies, and that is what it has done in the end.

Socialist sources cited by Europa Press have indicated that the PSOE and the Government have agreed this decree and have also reached an agreement to submit a plan, within eight months, containing measures directed at facilitating the recovery of home ownership from people in situations of economic vulnerability that are immersed in eviction processes, unable to pay their mortgages. (…)

In any case, De Guindos confirmed that “the most important things are not the palliative measures. Instead, in order to put an end to the drama of evictions, the economic recovery needs to continue”. In his opinion, the main reasons for the 30% decrease in the number of evictions in the last year have been economic growth and the creation of employment.

Original story: Rtve

Translation: Carmel Drake

Gov’t To Extend Suspension Of Evictions For Vulnerable Families

6 February 2017 – RTVE

Last Wednesday, the Minister for the Economy, Luis de Guindos, announced that the Government will extend the moratorium that prevents families in vulnerable situations from being evicted from their primary residences. The moratorium was due to expire on 15 May this year and its extension had also been requested by the Socialist Party.

“Yes, we will do so again now (extend the moratorium), like we did in 2015. We are open to negotiations”, said De Guindos, after confirming that 24,000 families have now benefitted from this measures, which favours certain groups.

The Minister was responding to questions from the Socialist congresswoman María del Mar Rominguera (…), who asked him about the Government’s intention to extend the deadline for the suspension of evictions of the most vulnerable families from their homes.

De Guindos said that the Government has protected the people who have suffered the most during the economic crisis and pointed out that some of the measures undertaken in this regard, such as the Code of Good Practice and the Social Housing Fund, approved by the Government, have benefitted more than 76,000 vulnerable families.

Evictions from primary residences have decreased by almost 30%

De Guindos said that the Government is willing to continue with these actions because they are having a “positive” effect, although he pointed out that the most recent statistics indicate that evictions from primary residences have decreased by around 30% “and that is a result of the economic recovery”.

De Guindos insisted that the creation of employment is what will confirm the economic recovery, given that “it is not only a matter of establishing palliative measures, although they are also important”.

“If employment improves in Spain, if there are increasingly more possibilities, if we increasingly see that house prices are not collapsing, we will see how situations involving evicted families will become increasingly marginal”, he said.

The PSOE supports the extension

Meanwhile, the Socialist congresswoman said she appreciated the fact that the Government has extended the moratorium for anti-evictions, which was due to expire in May (…).

The PSOE had requested an extension of the moratorium, four years after it first came into force. Nevertheless, De Guindos did not specify how long the moratorium would be extended for. (…).

Original story: RTVE 

Translation: Carmel Drake

S&P Increases Spain’s Rating To BBB+ With “Stable” Outlook

5 October 2015 – Expansión

On Friday, the credit rating agency Standard & Poor’s (S&P), one of the world’s three main players in this sector, together with Fitch and Moody’s, announced an increase in its rating for Spain’s long term sovereign debt from BBB to BBB+, with a “stable” outlook. In this way, the agency rewarded Spain for the impact that the structural reforms approved in recent years have had on the economy.

In a statement, S&P said that “the increase in the rating reflects our view of the behaviour of the Spanish economy over the last four years – we consider that it has been strong and balanced, and that it is gradually benefitting the public finances”. The agency has been particularly encouraged by the two employment law reforms that have been approved since 2010 (under the governments of Zapatero and Rajoy), which have, in its opinion, improved the competitiveness of Spain’s exports and its service sector.

“The rating from S&P is a sign of confidence in the future of the Spanish economy and an acknowledgement that the political uncertainties do not carry significant weight”, said the Minister for the Economy, Luis de Guindos, yesterday, after S&P made its statement. In reality, the agency is not quite so optimistic – it says that there is still “considerable uncertainty” over whether the next government to emerge, following the elections on 20 December, will continue or even increase the pace of reforms that are still required to improve the economy and fulfil the growth and deficit targets in the medium term. “It is unclear just what a potential change in government would mean for the Spanish economy’s primary weakness, its unemployment rate”, it said.

S&P does not see much danger in the secessionist challenge and believes that Cataluña will continue to form part of Spain; furthermore, it expects that the tension between the central Government and the regional authorities will gradually dilute. However, it warns that a hypothetical independence would hit the Spanish economy hard, including its GDP per capita, its foreign trade balance and the public finances.

Risks still remain

Nevertheless, there are also some purely macroeconomic factors that could divert the country from its positive path…”We would consider reducing the rating if economic growth does not reach our projections; if the monetary policy does not manage to stop the deflationary pressures from eroding the fiscal performance and growth in Spain; and if, contrary to our expectations, net debt exceeds 100% of GDP”. The agency expects this ratio to decrease as the economy improves, and forecasts that it will peak at 98.4% this year and drop to 98% in 2016.

Similarly, the agency says that it is important to remember that certain exogenous factors have favoured the (recent) economic recovery, such as for example, the price of oil and the euro exchange rate.

For the time being, Standard & Poor’s expects nominal GDP to grow by around 4% over the next three years. Last Wednesday, the agency improved its growth forecast for Spain in 2015 by 2 p.p., from 3% to 3.2%, and by 1 p.p. in 2016, to 2.7%. Its estimation for 2017 is 2.4%. (…).

Original story: Expansión (by Yago González)

Translation: Carmel Drake