Tag: merger

CNMC Approves Merger Between Merlin & Metrovacesa

30 August 2016 – Expansión

Authorisation from the CNMC / The merger will result in the creation of the largest real estate company in Spain, with assets worth almost €10,300 million. The group will compete with the large European Socimis.

On Friday, Spain’s National Commission for Markets and Competition (CNMC) approved the merger between the Socimi Merlin Properties (owner of Torre PwC in Madrid, pictured above, amongst other assets) and Metrovacesa, the real estate company controlled by Banco Santander, in an operation announced on 21 June. With the green light from the supervisory body, the door has been opened for the creation of a giant that will become the largest real estate company in Spain and one of the largest in Europe. The group will own assets worth €10,297 million in total.

The CNMC approved the deal on the basis that the barriers to entry into the tertiary real estate business (shopping centres, offices, logistics warehouses, retail premises and hotels) are not instrumental. And on the basis that this business, which comprises domestic and international companies, is quite fragmented in Spain, according to the body.

The analysis performed by the Commission focused on the relationship of control between Merlin, Testa – the real estate company that the Socimi purchased from Sacyr and in which it owns a 99.93% stake, and for which it plans to complete the integration of the remaining 0.07% within the next few months – and Testa Residencial, which is fully owned by Testa and therefore controlled indirectly by Merlin.

Three carve-outs

The operation will involve the carve-out of Metrovacesa into three lines of business, as revealed by Expansión on 22 June. One real estate line, one residential line and one line for assets under development and land.

The new Merlin will group together all of the real estate business and will acquire Metrovacesa’s tertiary assets, worth €1,672 million. To execute the operation, the Socimi will increase its share capital by 146.7 million shares, at a price of €11.40 per share.

The residential arm of Metrovacesa will carve out its assets from its rental housing business and move them into the newly created company Testa Residencial. The gross value of that company’s assets will amount to €980 million and it will also take over debt amounting to €250 million not transferred to Merlin as part of the tertiary business.

In terms of the third line of business, a newly created public company will take ownership of Metrovacesa’s remaining assets, in other words, the set of land and work in progress in the tertiary sector whose characteristics “do not fit with the profile defined by Merlin for its investments”. The total value of the assets of this third company will amount to €326.49 million.

The Boards of Directors of both companies will meet on 15 September to give their final approval of the operation.

In terms of the shareholder structure of the new Merlin and Testa Residencial companies, Banco Santander will be the largest individual shareholder of both, with stakes of 21.95% and 46.21%, respectively. Merlin will be left with a 68.76% stake in the tertiary business and Metrovacesa will have a 31.24% stake.

In the case of Testa Residencial, Metrovacesa’s shareholders will acquire 65.76% of the share capital.

Original story: Expansión (by María Sánchez)

Translation: Carmel Drake

Merlin & Metrovacesa Will Approve Their Merger On 15 Sept

12 August 2016 – Expansión

Metrovacesa and Merlin have both convened General Shareholders’ Meetings on 15 September 2016, in order to approve their merger. Before the operation, the companies will distribute a combined dividend amounting to €116 million in total. Specifically, Merlin will distribute a maximum of €66 million to its shareholders, whilst Metrovacesa will pay out €50 million.

The main shareholder of Metrovacesa is Banco Santander, with a 70% stake, followed by BBVA, with 20% and Banco Popular, with almost 10%.

The agreement between Merlin and Metrovacesa includes a penalty of €75 million, plus the reimbursement of costs incurred, in the event that their respective General Shareholders’ Meetings do not approve the operation.

In addition to approval from the shareholders, the merger requires the green light from the Competition authorities. The companies notified the CNMC about the deal at the end of July and, according to the agreed timetable, the transaction will be completed in the fourth quarter.

The merger will give rise to a new real estate giant in the tertiary sector – offices, shopping centres, logistics warehouses and hotels – with a gross asset value (GAV) of €9,300 million and annual gross rental income of €450 million.

In addition, the operation will involve the grouping together of rental homes from Metrovacesa and Testa – owned by Merlin. The combination of the residential businesses of both groups will include more than 4,700 homes, with a GAV of €979 million. Testa Residencial will take on bank debt amounting to €250 million.

It is expected that Merlin will render advisory, planning and strategic management services to Testa Residential for a period of 30 years from the operation close, for a cost of €7.7 million p.a., which may be increased by 1.5% p.a. and which may be paid for through the capitalisation of shares.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Santander Considers Repurchasing 85% Of Altamira From Apollo

27 July 2016 – Expansión

The financial institution is considering taking back control of its real estate platform to improve its margins and create a large global firm to provide services in other countries.

The sale of Altamira could turn full circle. Santander and the US fund Apollo have held meetings in recent weeks to discuss the possibility of the Spanish bank repurchasing 85% of the real estate platform, according to financial sources consulted by Expansión.

These negotiations come just two and a half years after the financial institution decided to get rid of its controlling stake in the real estate platform. Then, Apollo fought off other funds in a competitive process in which it paid €664 million for 85% of the company, generating a gross profit of €550 million for the bank.

According to financial sources consulted, Santander’s new approach has arisen for three main reasons: the aim of creating a new area for the management of doubtful assets at the global level, ahead of the forecast increase in default rates in countries such as Brazil; to improve its margins, given that the current agreement forces the bank to pay commission to Altamira; and to take advantage of the financial improvement that Altamira is enjoying.

For the time being, the plans are in a very preliminary phase and both Santander and Apollo have explored other options for Altamira. One of the options would involve a movement in the opposite direction from the 85% repurchase: namely, to extend Apolllo’s agreement to other countries.

New management

Since Apollo took control of Altamira, changes have been introduced in the management of the platform with the aim of maximising sales. One of the new administrators’ great successes came when the company was awarded one of the four management contracts that Sareb put up for tender at the end of 2013.

Specifically, Altamira Asset Management took over the second largest contract on offer, comprising 44,000 properties and loans to doubtful property developers that had been originated by Catalunya Ciaxa, BMN and Caja 3, worth €14,000 million initially. To win this tender, the platform controlled by Apollo paid out €174 million as a deposit for this contract, which it will recover as it achieves its objectives.

In addition to these assets, Altamira administers foreclosed properties and loans linked to properties from Santander and from its main shareholder Apollo. Nevertheless, the Spanish bank will reduce the perimeter of the assets that it holds on its balance sheet as a result of the merger between Metrovacesa and Merlin Properties.

According to its accounts for 2015, Altamira Asset Management Holdings, the company in which Altamira holds a 85% stake, recorded profits of €25.2 million last year, down by 11% compared to the previous year. Part of that decrease was due to the costs of migrating Sareb’s portfolio of assets. Its turnover amounted to €267 million and the operating profit stood at €81 million. The company forecasts that its profits will increase this year thanks to the sales it will generate from Sareb: “In 2016, we will manage Sareb’s portfolio for the whole year, which is expected to increase the group’s turnover”, according to last year’s annual accounts.

Original story: Expansión (J. Zuloaga)

Translation: Carmel Drake

Merlin Competes With Hispania To Become Largest Hotel Socimi

26 July 2016 – Expansión

Merlin, which has incorporated several hotels into its portfolio following its purchase of Testa, now owns 24 properties worth €654 million. Merlin is the largest real estate company and Socimi in Spain.

The merger between Merlin and Metrovacesa will create the largest real estate company and Socimi in Spain, market leader in the office segment and with a leading position in the shopping centre sector. In addition, the new Merlin will be one of the largest hotel lease operators in Spain, which will allow it to catch up with Hispania, the Socimi in which the investor George Soros holds a stake.

Following the integration with Metrovacesa, Merlin will go from owning 12 hotels worth €398 million to having 24 hotels with a gross asset value (GAV) of €654 million. In this way, the new Merlin will increase the value of its assets by 1.6 times following the integration, which is expected to be closed during Q4 2016, after the competition authorities and the general shareholders’ meetings of both companies have approved the deal.

By number of rooms, the union of Merlin and Metrovacesa will give rise to a hotel lease giant, with almost 4,500 rooms and a gross yield of 5.8%. The operation will also allow the group to increase the appeal and liquidity of its hotel division. The hotel business will account for around 7% of the new Merlin, which will have an total asset portfolio worth €9,300 million.

The company’s integrated portfolio of assets will include hotels as iconic as the Eurostars de las Cuatro Torres, inherited from Testa and the Barceló Torre, inherited from Metrovacesa, both located in Madrid.

Ranking

For the time being, Hispania leads Spain’s ranking of the owners of hotels operated and managed by third parties, both in terms of the number of rooms and asset value. At the end of the first quarter, Hispania’s hotel portfolio included 8,234 hotel rooms in total, across 27 hotels, as well as two shopping centres and a plot of land, with a gross value of €862 million. In addition, in March, Hispania acquired the mortgage debt of Dunas Hotels & Resorts from several financial institutions, whereby acquiring 1,183 rooms in four hotels. The group, which owns the Hotel Guadalmina Spa & Golf (Marbella) and the Holiday Inn Bernabéu (Madrid) also bought the Hotel Oasis Resort (Lanzarote) last week. Following that operation, Hispania now owns 35 hotels and more than 10,400 rooms. Merlin’s hotel lease contracts all involve fixed rents, whereas Hispania operates using all types of lease contracts. Some include variable components linked to the evolution of the business. Currently, that is the most common type of lease contract in the hotel sector.

Exit

Nevertheless, Merlin has described its hotel division as “non strategic”, “which means that, in the medium term, it will be looking for a way out of this arm of its business”.

Sources in the sector believe that, if it chooses to exit the hotel business in a single transaction, then we will see a record-breaking operation in the hotel market. (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Merlin Merges With Metrovacesa To Create RE Giant

22 June 2016 – El Economista

The Socimi Merlin Properties has informed Spain’s National Securities Market Commission (CNMV) that it has reached an agreement with Banco Santander, BBVA and Banco Popular to integrate Metrovacesa into its share capital and whereby create the largest Spanish real estate group in terms of assets and residential rental properties.

Under the terms of the agreement, the current Metrovacesa company will be split into three parts: one unit will hold the tertiary property business, which will be integrated directly into Merlin (including the employees); one residential arm, which will include all of the residential assets and which will be integrated into Testa, a subsidiary of Merlin; and a third structure, which will group together all of the land and developments under construction into a newly-created company.

After completing the integration, Merlin will, in turn, be split into two companies. One entity will hold the portfolio of tertiary assets (offices, shopping centres and logistics properties), which will begin life with a total surface area of 3 million sqm, an asset value of €9,317 million and the capacity to generate rental income of €450 million (p.a.). The other firm will hold all of the rental homes of the two companies, worth €980 million, which will generate revenues of around €35 million.

Santander will own 21.95% of Merlin

As a result of the integration, Santander, the current majority shareholder of Metrovacesa with a 70% stake, will hold 21.95% of Merlin’s share capital, as well as a 46.21% stake in Testa Residencial, the firm that will bring together all of the rental homes.

The agreement will give rise to the leading Spanish real estate group and one of the largest RE firms in Europe, given that it will hold assets worth €10,297 million in total, according to announcements from the two companies. The integration of the two companies comes just a day after Merlin completed its purchase of Testa from Sacyr and a few months after Metrovacesa, which is currently controlled by Santander, completed its own restructuring.

The operation is subject to approval by the respective General Shareholders’ Meetings of Merlin and Metrovacesa, which will likely take place in September, and will be executed in several phases through carve-outs and capital increases. (…).

Original story: El Economista

Translation: Carmel Drake

Hispania Completes Its Socimi-Conversion Process

21 June 2016 – El Mundo

Hispania, in which George Soros holds a stake, has completed its conversion into a Socimi by merging with one of its subsidiaries, which was already operating under that company structure.

The firm has concluded this internal reorganisation just days after it completed a €230 million capital increase, which it undertook to raise funds to finance new investments.

Hispania has completed its conversion into a Socimi, a decision approved at its last General Shareholders’ Meeting, by signing a public deed that officially merges the two companies in the Commercial Registry, according to a statement to Spain’s National Securities and Exchange Commission (CNMV).

Until now, the company was a listed real estate company; and one of its subsidiaries operated under the Socimi structure and carried out the majority of its operations. Thus, with this operation, Hispania has reorganised its company structure by integrating several subsidiary companies and converting its parent company into a Socimi. The merger will take effect from 2017 for accounting purposes.

Investments

After completing these two operations, the Socimi plans to invest around €400 million over the next “nine or ten months” in new assets to grow its real estate portfolio. It acquired several hotel assets a few days ago.

Nevertheless, Hispania is ruling out buying any new homes for rent, given the narrow profit margin that it considers those assets offer in comparison with others. As such, the company will place its focus on the office and hotel markets.

Residential properties already account for around 12% of Hispania’s existing real estate portfolio, which was valued at €1,463 million at the end of last year.

Original story: El Mundo

Translation: Carmel Drake

The Banks Still Hold €77,250M Of Toxic Assets

13 June 2016 – El Mundo

The banks are still paying for the excessive risks that they assumed when they financed real estate operations virtually indiscriminately. Eight years after the burst of the real estate bubble, the default rate and volume of doubtful loans held by the top 12 banks have decreased, without exception.

Nevertheless, despite the balance sheet clean ups, the entities are still having to take on waves of land, buildings, homes and offices. By the end of 2015, the banks had absorbed €4,562 million more new foreclosed assets, which took the total volume of this toxic caption to €77,250 million. As such, they are having to take preventative measures and the recovery of their ordinary business is being hindered, according to a report prepared by Bankia’s research team.

The rescue of a sector in trouble may be hit by what is one of their major problems today. Since 2015, the recovery in prices and sales of the market that represents the main drag on the banks’ balance sheets is a relief for the sector because it allows the volume of sales of foreclosed assets to increase and at prices that are closer to the net values of the assets (which are discounted by the book value of the provisions recognised). This situation means that the banks will try to place significant portfolios of assets on the market over the next few months. The list of entities that are sounding out the wholesale market in search of buyers for their assets so far this year includes BBVA, Sabadell, Bankia, Popular…even Sareb, the so-called bad bank. (…).

Of the major Spanish entities to have survived the wave of mergers since 2010, BBVA is the one that held the highest volume of foreclosed assets at the end of 2015, with €16,138 million. Like in the case of Santander, that figure relates to property that the bank has had to take on in Spain and in the case of the group chaired by Francisco González, it is explained by the absorption of Catalunya Banc at the end of last year.

The entity created from the merger of the savings banks Catalunya, Tarragon and Manresa had already sold its portfolio of most problem mortgages to the investment fund Blackstone in April for €4,123 million (the portfolio had a nominal value of €6,000 million). Even so, BBVA is still, by far, the group that had to take on the highest volume of foreclosed assets in 2015: €2,385 million primarily land, which was 45% more than the second entity in the list, CaixaBank, which absorbed €1,634 million.

However, taking into account the recovery of the real estate market and the interest from investors, BBVA thinks that its exposure to toxic assets could be eliminated within a period of three years, as the group’s CEO, Carlos Torres, said in February. In this way, the asset digestion process could be entering its final phase, after a 2015 during which the entity sold around 21,080 foreclosed assets, 9% fewer than the year before, but with a significant increase in returns, which translated into capital gains of almost €120 million, compared with €17 million a year earlier.

At the other end of the spectrum are the entities that completed sales of assets to investment funds in 2015, which bought them at significant discounts. In this way, Kutxabank is the entity that liquidated its assets the quickest. Last year, it took a giant leap by reducing its volume of foreclosed assets by €1,503 million. In one of its major milestones, the bank created from the former Basque savings banks reached an agreement with Lone Star to transfer half of its real estate portfolio, held in the subsidiary Neinor, for €930 million and to grant a management contract for the other half.

Bankia, meanwhile, was the next entity that most reduced its foreclosed assets by the most, although its figures were much smaller than Kutxabanks, with sales of €352 million. (…).

Original story: El Mundo (by César Urrutia)

Translation: Carmel Drake

Hispania To Absorb Its Socimi In A Merger

6 March 2016 – Cinco Días

On Wednesday, Hispania Activos Inmobiliarios reported to the CNMV that it is going to absorb its Socimi Hispania Real by means of a merger. The operation was expected by the market and will involve the parent company adopting the tax structure of a listed real estate investment company. The firm will approve the transaction at its shareholders meeting in April.

The two companies have agreed the approval and signing of the merger project as part of a process to rationalise the corporate structure of the group, which has decided to adopt the Socimi regime.

Both the conversion into a Socimi, as well as the absorption of the Hispania Real Socimi by Hispania Activos Inmobiliarios will be subject to approval by the shareholders at their next meeting, which is expected to be held in April.

The company is the full and direct owner of all of the shares of the Hispania Real Socimi, as reported to Spain’s National Securities Market Commission (CNMV).

On 18 February, Hispania Activos Inmobiliarios announced its plans to convert itself into a Socimi. The firm is managed by Azora, whose President is Concha Osácar (pictured above).

Hispania, which debuted on the stock exchange in 2014, had already revealed that its future plans included the possibility of turning the company into a Socimi, a vehicle that has a special tax structure and that is obliged to allocate some of its profits to dividends.

In April 2014, Hispania constituted its subsidiary Hispania Real, which decided to adopt the tax structure planned for Socimis and through which Hispania has closed several asset acquisitions. Nevertheless, the company continued to operate the parent company as a public corporation so as to undertake other types of operations.

In addition, last year, the company bought Barceló Bay Hotels & Leisure (BAY), to create the Socimi with the largest exposure to the Spanish hotel sector, with 9,000 hotel rooms.

Original story: Cinco Días

Translation: Carmel Drake

Popular Puts RE Assets Worth €8,000M Up For Sale

20 January 2016 – El País

Banco Popular has made a commitment to investors and analysts to sell around €8,000 million in real estate assets that were foreclosed due to non-payment during the financial crisis. This amount represents approximately 30% of its bad bank, into which the entity led by Ángel Ron has placed the assets that have depreciated by the most and which are provisioned. In this way, the entity may be able to clean up its balance sheet.

Market sources believe that if Banco Popular ends up achieving this objective, it will generate profits of around €200 million, thanks to the recovery of provisions already recognised and the lower operating costs that will result from the disposal of such a large volume of properties. The entity declined to comment on its plans. The proposed real estate operation is seeking to change this negative trend, which reflects the doubts over its future.

The transaction will be divided into two parts: on the one hand, the entity led by Ángel Ron plans to set the branch network a target of selling €4,000 million of properties, which would require it to double the volume of sales recorded in 2014 and last year. The bank will try to take advantage of the improvement in the real estate market in recent months to avoid making losses on its sales.

On the other hand, Popular is negotiating with various real estate and vulture funds, regarding the creation of a special vehicle into which it would place €4,000 million of assets linked to property. The entity has not managed to close any agreement with these investors yet because the discount they are demanding is very high and it is not willing to accept such a reduction.

The perils of the stock exchange

Popular is the subject of numerous rumours about a possible takeover by one of the three largest entities (in Spain), which may be seeking to take advantage of its significant decline on the stock exchange. Nevertheless, “the entity complies fully with the (capital) requirements established by the supervisor”, according to an explanation provided by its managers in December, after figures were published showing that it complied with the ECB’s capital requirements.

Despite that, Popular’s share price has decreased by 23% in the last month and is trading at its lowest level for a year. The market value of its shares on the stock exchange amounts to just over €5,000 million, which makes it an attractive bank given its business model, and its significant penetration in the SMEs and retail markets. Popular’s share price is trading at a five year low.

Popular has always refused to participate in any operation in which it would lose control of the merged entity, but it has also admitted that anyone wishing to acquire the bank will have to pay a high premium to the shareholders. Meanwhile, the market is punishing its market capitalisation: Bankinter, which has assets amounting to around €60,000 million, compared with Popular’s €160,000 million, is worth more than Popular on the stock exchange. Bankinter’s market capitalisation amounts to around €5,400 million, i.e. around €400 million higher than Popular’s.

Original story: El País (by Iñigo de Barrón)

Translation: Carmel Drake

Goldman Enters The Bidding For Testa’s 1,500 Homes

5 November 2015 – Expansión

Testa’s residential portfolio is attracting interest from the large international funds. In October, the Socimi Merlin Properties commissioned Deloitte and CBRE to handle the sale of Testa’s residential portfolio, after acquiring the real estate company from Sacyr in June for €1,793 million.

Merlin, whose takeover of 100% of Testa was approved on 28 October, has taken the decision to divest the residential and hotel portfolios of the new company, which it has converted into a Socimi. The first process involves the sale of 1,519 homes spread across eleven buildings in Madrid, Toledo and Guipúzcoa. CBRE and Deloitte have invited interested parties to submit their bids within the next few days. The porfolio, which includes both unsubsidised and social housing properties, as well as around 30 commercial premises, has already attracted interest from international funds such as the German fund Patrizia and the US fund Blackstone, as well as from the real estate company Hispania. According to sources in the sector, Goldman Sachs has also now joined the list of candidates.

Goldman Sachs owns a sizeable residential portfolio at the global level. And it has already made a couple of purchases in Spain. The largest was in 2013, when it acquired 3,000 homes managed by the Community of Madrid’s Housing Institute (Ivima) for €201 million. At the beginning of this year, Goldman also acquired a batch of 18 buildings from the property developer La Llave de Oro, in Barcelona. It paid €90 million for this portfolio, which included 13 unsubsidised housing buildings, three more social housing buildings and two retirement homes.

The sales process, in which Merlin also offers buyers the option of purchasing 640 parking spaces, will allow the Socimi to generate income of around €300 million, money that it will use to reduce Testa’s debt ahead of its integration with Merlin.

Refinancing

In parallel, the real estate company is working to restructure the debt it has associated with Testa, which amounts to around €1,600 million. The objective is to “adapt the current repayment structure to match the cash generated by the company”, says Merlin in the takeover brochure presented to the CNMV.

Merlin plans to take ownership of 100% of Testa – it currently holds a 77% stake – before July 2016. Once the two companies have merged, the new Socimi will hold assets worth €5,800 million and will generate revenues of more than €300 million per year.

Merlin’s share price dropped by 2.9% in trading yesterday to €11.38.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake