Tag: N+1

Project Baracoa: Cajamar Puts €800M Portfolio Up For Sale

21 January 2016 – Expansión

The banks have begun 2016 with the firm intention of accelerating the clean-up of their portfolios of problem assets. In this vain, Grupo Cooperativo Cajamar has put up for sale €800 million of loans granted to now bankrupt companies, and has whereby joined Banco Popular in the market, which announced yesterday that it wants to sell €8,000 million of real estate assets this year.

Cajamar’s operation is the one of the largest to go on the market in recent months and matches the scale of others launched by larger groups such as CaixaBank, Bankia and Sabadell.

With this operation, Cajamar is looking to reduce its default rate, which is one of the entity’s Achilles heels. The ratio amounted to 14.27% in September 2015, having decreased by two percentage points in twelve months.

The operation has been launched by N+1 under the name Project Baracoa. The portfolio contains 966 loans to companies that have now filed for bankruptcy. The loans are worth almost €800 million and 85% are secured by real estate collateral.

Cajamar has closed other operations of this type in recent years, such as the sale last year of a €640 million portfolio of unsecured written-off loans to Cerberus. That is one of the funds with which the cooperative group has done the most business, including the sale of its real estate management unit, Cimenta 2, for €225 million, plus €20 million depending on the performance of the business plan.

In addition, the US fund is one of several investors that has been sounded out regarding a possible investment in the share capital of Cajamar’s bank, Banco de Crédito Cooperativo (BCC), in the event of a potential capital increase prior to an eventual IPO. For the time being, Generali and TREA Capital have both become shareholders.

BCC is the only Spanish cooperative group to be supervised by the ECB. The entity brings together the business of 32 rural savings banks: 19 that form Grupo Cooperativo Cajamar – the vendor of the Baracoa loan portfolio – and another 13 entities, which are also shareholders of the bank, but through a cold merger. BCC had assets worth just over €40,000 million at the end of September 2015.

The entity saw its results drop in 2015, as it generated lower gains from its financial operations (ROF). As such, it earned €39 million during the 9 months to September, i.e. 46% less than during the same period in 2014.

However, the group still generates sufficient margins to continue increasing its revenues by reducing the price of its deposits, as a result of which it increased its interest margin in 2015. The lower provisions were good news for the group, as they decreased by 60%. Despite that, profitability (ROE) decreased to 1.9%.

One of the challenges still facing the group led by Cajamar is the need to clean-up its portfolio. The entity still holds almost €3,000 million of loans to property developers.

One of the areas on which the entity is trying to focus in order to increase its portfolio of profitable loans is consumer finance, with the signing of an alliance with Cetelem, owned by BNP Paribas. Cajamar has also teamed up with other companies, such as those specialising in insurance, namely Generali; and investment funds, such as TREA.

In terms of its integration, last week, the 19 entities led by Cajamar announced the homogenisation of their brand.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Fortress Finalises Its Withdrawal From Spain

17 November 2015 – Expansión

Strategy / The US fund will close the sale of Paratus to Elliott and Cabot Financial this week. It will also complete the ERE affecting more than 50% of Lico Leasing’s workforce.

The opportunistic fund Fortress is continuing its withdrawal from the Spanish financial sector. The US investor is finalising the sale of one of its financial businesses in the country, namely, Paratus, a platform that specialises in the management of problematic banking assets, which Fortress has controlled since 2009.

According to several financial sources, the sale of Paratus will be signed this week with the fund Elliott Advisors and the British group Cabot Credit Management Group, owned by JC Flowers and Encore Capital, taking ownership.

Each of the investors will take over a different part of Paratus’ business. Elliott is most interested in the real estate division and in the team. At the beginning of the sales process – known as Project Coast and advised by N+1 – Paratus held loans amounting to €152 million, secured by 866 properties; 500 homes worth just over €100 million; and a team comprising 43 professionals.

Meanwhile, Cabot is interested in acquiring the unsecured loans, which Fortress is selling for €426 million. The British group is looking to build upon its recent entry into the Spanish market, following its purchase of the Gesif platform from Elliott.

In addition to this possible sale, Fortress is also reducing its exposure to the Spanish financial sector by conducting an ERE at Lico Leasing. At the end of 2014, this subsidiary of Fortress had 130 employees. Through the restructuring, the fund has got rid of the commercial divisions of Lico Leasing, its other major financial business in Spain, which it acquired from the savings banks just one year ago; this means that it will no longer capture any new loans.

Complex operation

Fortress will continue to manage Lico Leasing’s existing portfolio and will continue to operate Geslico, its subsidiary that specialises in problem loans. That company recently integrated two of Fortress’s other companies in Spain: Auxiliar de Servicios y Cobros and Gestión de Activos de Aragón.

Fortress’s commitment to Lico Leasing was cut short due to the time required for its approval – almost two years – and by the re-opening of the credit tap by banks following the measures introduced by the ECB.

The US fund will continue with its other activities in Spain, by providing financing to companies and the real estate market.

Original story: Expansión

Translation: Carmel Drake

Project Macarena: Sareb Sells 1,300 Homes & 30 Plots

16 October 2015 – Expansión

The company has put up for sale one of the at least three portfolio that it plans to sell before the end of the year.

Sareb has officially started its busiest season of the year. The company, led by Jamie Echegoyen, has now begun to put large asset portfolios on the market, aimed at overseas funds. It hopes to increase its annual sales as a result. According to financial sources, over the last few days, the entity has distributed information about Project Macarena, a portfolio comprising debt amounting to €410 million, which is secured by residential assets.

The portfolio has been divided into three tranches: the higher quality debt tranche, which is backed by 810 homes – including 11 complete developments – and 2 plots of land; one unpaid debt balance, which has 450 home as collateral; and overdue credits, with 29 plots of land as guarantees, located primarily in Madrid, Tarragona, Barcelona and Málaga.

Aside from the land, the majority of the portfolio is located in Madrid, which accounts for 24.5% of the portfolio’s nominal value; Barcelona (21.4%); and Málaga (16.3%). The sale is being advised on the financial side by Irea and on the legal side by Ashurst. According to the information distributed to investors, this project offers “a potential upside resulting from the macroeconomic improvement and in particular, the current recovery in the Spanish residential market”.

According to financial sources, this portfolio has been designed specifically for the large overseas funds operating in Spain, since it contains residential properties only and the assets are clustered together in a handful of areas – this makes the portfolio more manageable for these investors.

In the case of the unpaid loans, Sareb reports in the sales brochure that around 70% of them are already in the process of asset foreclosure or debt recovery. Meanwhile, the tranche of higher quality credits is secured by homes with an occupancy rate of 95%, which increases the chance of recovering the debt.

Other portfolios

In addition to Project Macarena, Sareb has two other portfolios ready to launch, which it will bring onto the market very soon: one contains debt from a few property developers, worth €600 million; and the other contains credits backed by tertiary sector assets – hotels, offices, retail premises and logistics sites – amounting to €200 million. And the entity has not ruled out the possibility of launching further operations before the end of the year.

These three portfolios join two others that were launched over the summer. The first, at the hand of Sareb’s asset manager Haya Real Estate. That was Project Silk, advised by N+1, whose portfolio comprises €1,000 million of overdue loans to small property developers. The second was Project Vega, through which the company hopes to get rid of €180 million of debt, backed by land.

If Sareb manages to complete the sales of these five portfolios only, then it will reduce its balance sheet by €2,400 million between now and the end of the year. These operations are even more important in 2015, given the slowdown experienced in the retail sales channel, caused by the migration of assets to new managers: Haya, Altamira, Solvia and Servihabitat.

Sareb also needs to strengthen the top half of its accounts to be in a better position to deal with the provisions that it is going to have to recognise following the new accounting circular, approved two weeks ago. And all of this, with the aim of continuing to repay debt -€3,000 million in 2015 – which Echegoyen has committed to and which is key to enabling it to reduce the financial costs of the company.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Arcano Launches Its First RE Investment Fund

29 July 2015 – El Economista

Arcano, one of the most active players in the asset management sector (with private equity funds of funds and funds with loans for companies, with €3,000 million of managed or advised assets) has decided to launch a third business line: investment in all kinds of real estate assets.

According to José Luis del Río (pictured above), CEO of Arcano Real Estate, the first fund will have a budget of €200 million. “We hope that, a year from now, once we have completed the fund raising process, we will have more overseas investors than domestic. For our first partial close in July, we have secured commitments amounting to €50 million, of which three quarters have been pledged by Spanish players. We wanted to start by inviting local investors as we have been working with them for many years”.

Arcano has created an integrated team, comprising seven property management professionals, to evaluate its investments. They are looking to benefit from opportunities in a sector that is currently undergoing a strong recovery after eight years of falling prices.

Differentiation

“We want to differentiate ourselves from the large international funds that focus on securing the lowest possible prices, and from the socimis, which are paying over the odds in some cases as they seek to secure rental income to pay their shareholders. We want to add value and through that, build the return for the fund. We will not act in an opportunistic way”.

Between 50% and 70% of our investment will be focused on the residential market. From the development of land in good locations, in cities or on the coast, in conjunction with real estate developers, to the renovation of buildings. “Local developers will be our partners, not our competition”, explains Del Río, who has 25 years of experience in the sector, first as Head of Real Estate at AB Asesores, then at Morgan Stanley (which acquired AB) and subsequently at N+1, where he was the Director of Real Estate until 2011.

We will differentiate ourselves by entering operations that require investment and specialist management, such as the transformation of buildings to change their use, for example from a hotel to an office. “Provided these changes of use are already approved, we will not have to assume any urban planning risk”, says the Director.

In terms of regions, the team will focus primarily on Madrid and then on the coast, Bilbao and Sevilla for residential assets. For offices, it will look only at Madrid and maybe Barcelona; and for hotels and shopping centres, it will consider the whole country. Finally, for logistics assets, it will analyse Madrid, Barcelona, Zaragoza and Valencia. “We will be a very small and very RE-focused fund. And we will work quickly. We will close the first transactions before the end of the year, possibly in Madrid”. The average ticket will be between €5 million and €25 million.

Original story: El Economista (by Carlos Pizá)

Translation: Carmel Drake

Ibercaja Sells €210M NPL Portfolio To Seer Capital

6 July 2015 – Expansión

On Friday, Ibercaja closed the sale of a portfolio of non-performing loans, worth €210 million, to the US fund Seer Capital. The operation generated gross profits of almost €10 million for the Aragonese entity.

The portfolio contained doubtful unsecured loans, which were all fully provisioned, as well as non-performing loans.

Like other institutions, Ibercaja has accelerated the sale of problematic loans in recent years to devote its resources to productive assets and obtain profits on loans that it has already written off.

Ibercaja sold a similar portfolio in 2013, worth €540 million, to the US fund Yorvik and Savier Asset Management, owned by Javier Botín.

This is the first transaction that Seer Capital has undertaken in Spain. The fund was created in 2008 by Philip Weingord, former director of Deutsche Bank. The US firm manages assets worth €1,806 million, including mortgages, syndicated loans, SME loans and consumer finance with some kind of default (non-payment).

Other divestments

Moreover, Ibercaja Banco has refocused its strategy in recent months to take on a more active role in the market. Thus, the entity has engaged KPMG as an external advisor to perform the preparatory work towards an IPO in the coming years. The entity has until the end of 2018 to list on the stock exchange and so it has recently begun to explore that option in more detail.

In addition, a few weeks ago, the entity began a process to transfer the majority of the properties on its balance sheet. In total, the Aragonese group has put €800 million of foreclosed assets up for sale, including 6,900 residential units; 1,300 commercial premises and industrial buildings; and 600 plots of land. The transaction, known as Project Kite, is being advised by N+1.

Original story: Expansión (by J. Z.)

Translation: Carmel Drake

Sareb Sells Madrid Office Block To Axiare For €51M

17 June 2015 – Cinco Días

Sareb has sold six of the seven floors of an office building in Madrid to the Socimi Axiare Patrimonio, which thereby takes ownership of the majority of the building, located on the corner of Padilla and Velázquez.

The transaction has been closed for €51 million and represents Axiare’s first investment since it finalised its recent capital increase for €395 million. The purchase of this office block increases the Socimi’s total asset portfolio to €613 million, of which 73% is invested in office buildings.

According to Sareb, the building “has a surface area of 10,700 m2, spread over seven floors (above ground) and 85 parking spaces”. The profitability of the building is underpinned by its high occupancy rate.

Specifically, the office building has an occupancy rate of 92%; it houses tenants such as the Spanish consultancy N+1 and the US firm Westinghouse.

“The transaction represents a significant milestone for Sareb in the divestment of tertiary assets”, said the bad bank, which highlights that it comes after the sale of properties by the FAB Corona at the end of last year.

In recent months, the company has sold more than 50,000 m2 of office space in the capital, worth more than €130 million.

Original story: Cinco Días (by J. P. C.)

Translation: Carmel Drake

Project Kite: Ibercaja Puts €800M RE Portfolio Up For Sale

9 June 2015 – Expansión

Project Kite / The Aragonese group has engaged N+1 to negotiate the sale of 6,900 residential units, 1,300 retail premises and industrial warehouses and 600 plots of land with large overseas funds.

Ibercaja wants to forget about its real estate legacy and focus on its traditional business. After studying a possible operation for several months, the Aragonese group has now decided to sell nearly all of its real estate business. To this end, it has engaged N+1, which has distributed preliminary information about Project Kite to large international funds over the last few days.

Through this operation, Ibercaja offers investors €800 million of foreclosed assets, according to financial sources. Based on the latest available figures, as at the end of 2014, the group held more than €900 million of foreclosure homes, land and property developments on its balance sheet.

The €800 million portfolio will include 6,900 residential units (homes, garages and storerooms); 1,300 retail premises and industrial warehouses; and 600 plots of land, almost half of which have building permits. The homes are primarily located in Zaragoza, Madrid and Barcelona.

Management contract

According to sources, the operation may include a management contract for the remaining real estate assets and the transfer of a team of specialist professionals, comprising around 50 employees. The model for the transaction will be similar to the one adopted by Kutxabank last year.

With this project, Ibercaja joins Bankia, which recently put all of its foreclosed assets up for sale, in the so-called Project Big Bang. These entities are looking to get rid of the real estate assets that are weighing them down, whereby taking advantage of the interest that large funds are showing in becoming Spain’s new property companies, and thus being able to use their resources to grant new loans once more.

The political environment following the regional and local elections has caused many funds to review their strategies, although according to financial sources, they will continue to buy assets provided the misgivings about the general election do not increase.

Ibercaja already explored the possible sale of its real estate portfolio in the middle of 2014, but in the end it backed out.

In 2014, the group also studied the possibility of an institutional investor acquiring some of its share capital; it engaged JP Morgan to assist with that analysis, but ended up ruling out the option. All indications are that Ibercaja will accelerate its IPO in 2016, in line with the philosophy of the savings bank law and the wishes of the ECB.

The Aragonese entity – the result of the merger of Ibercaja and Caja 3 – generated €42.6 million during Q1 2015, up 6% from a year earlier.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Who Are The New Advisors In The RE Sector?

8 June 2015 – Expansión

The ‘big four’ audit firms and the investment banks are starting to advise on deals in the property sector, where specialist firms, such as Aguirre Newman, CBRE, JLL and Knight Frank, have been operating for more than 30 years.

Specialisation versus multi-disciplinary teams. The real estate investment boom in Spain is attracting both specialist consultancy firms and new players from the world of audit and banking. All of them are competing to advise on the major property transactions, both on the purchase and sale of companies, as well as of individual assets. This market saw investments reach €2,500 million during Q1 2015.

The large specialist consultancy firms arrived in Spain three decades ago. Having established themselves in the Anglo-Saxon markets, they were looking for other markets to advise companies and investors in their search for properties and land.

Such was the case of Jones Lang LaSalle (now JLL), Richard Ellis (now CBRE) and Knight Frank, which still lead the market for consultancy and transaction advice, together with a Spanish company: Aguirre Newman. The latter, created by Santiago Aguirre and Stephen Newman, is the only Spanish firm that competes with the multi-nationals to advise on large transactions.

Besides these four large firms, there are other international companies such as BNP Paribas Real Estate, previously known as Atisreal, Savills, Catella and the US firm Cushman & Wakefield.

(…)

Now, the RE teams from the large auditors – known as the big four – are entering the market. They have strengthened their teams in recent months, hiring staff from the real estate consultancies, and are taking advantage of the synergies they can offer with other departments (legal, tax, financing) to secure advisory contracts….Many international investors prefer this one-stop-shop model, especially when they are in a hurry to close a deal.

(…)

In this way, PwC has just advised on one of the largest transactions in the RE sector, the sale of the Ritz Hotel in Madrid (pictured above). PwC acted on the buy-side, advising Mandarin Oriental, whilst the vendors – Omega Capital (Alicia Koplowitz’s investment company) and Belmond (formerly Orient-Express) – worked with JLL. PwC has also advised on other recent transactions, such as the sale of the Plenilunio shopping centre to Klepierre.

Meanwhile, Deloitte Real Estate advised the US fund Tiaa Henderson on its purchase of the Islazul shopping centre in Madrid for €230 million, as well as on the sale of a batch of office buildings to the largest Socimi in the market, Merlin Properties. KPMG’s RE team is working with Credit Suisse to jointly advise Bankia on the sale of its Big Bang portfolio, the largest RE asset portfolio seen to date. It also advised Cerberus Capital and Orion Capital Management of their purchase of 97% of Sotogrande, amongst others.

The investment banks are also competing well with the consultancy firms and the big four, especially on the larger deals. They tend to receive buy-side or sell-side mandates for individual buildings and companies with asset portfolios.

In this way, N+1 is currently working with Popular on the sale of a RE portfolio, known as Project Elcano, worth €415 million. It is also working with Sareb on the disposal of part of the Polaris World portfolio.

Nevertheless, although there may be cases in which an investment bank works by itself on a RE transaction, the work performed by the large firms and the consultancies is usually complementary. The banks provide the financing and structuring advice; the RE consultancies value the assets.

(…)

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

Translation: Carmel Drake

Bankia Sells Hotel Loan Portfolio To BofA & Hedge Fund

5 June 2015 – Expansión

Project Castle / Following the sale of Realia, Bankia has now made profits of €926 million from the transfer of its investments.

Yesterday, Bankia closed the first sale of a loan portfolio since the regional and local elections, which have been threatening to destabilise the market. Far from that, the entity has managed to attract a US hedge fund (to the market), which has not closed any deals in Spain until now, namely: Davidson Kempner Capital Management (DK Capital).

This fund and Bank of America (BofA) have won the auction for Project Castle against other large international investors. This portfolio, whose sale has been advised by N+1 and the law firm Ramón y Cajal, comprises hotel loans worth €383 million. In total, the portfolio contains 91 loans linked to 45 properties of this type.

Bank of America will take ownership of the performing loans and DK Capital the doubtful loans. These types of hedge fund are renowned for carrying out aggressive restructurings of loans to take ownership of the assets and, subsequently sell them at a profit.

Optimisation

Sources at Bankia highlight that the transaction: frees up resources for the granting of new credit; increases the bank’s liquidity; and contributes to an improvement in the quality of the assets. Moreover, it will have a positive impact on capital (at the height of the Basel III implementation) amounting to €21 million.

As well as Project Castle, Bankia is also advancing with Project Big Bang, containing €4,800 million foreclosed assets for sale; and Project Wind, with €1,300 million doubtful loans, primarily mortgages to individuals.

These divestments come after Bankia sold its 24.9% stake in Realia to Carlos Slim on Wednesday. Bankia has now made profits of around €926 million on the sale of all of its investments in listed companies, such as Iberdrola, Mapfre, Deoleo and NH Hoteles.

The transactions closed since 2013 have generated revenues for the entity of €4,879 million, according to the company’s own data.

Having exited as a shareholder of Realia, Bankia now only retains minor industrial holdings, such as in the infrastructure concession group Globalvía, in which it holds a 50% stake alongside FCC, although these two shareholders are expected to close the sale of that company to the Malaysian sovereign fund during the course of this year.

Original story: Expansión (by J. Z.)

Translation: Carmel Drake

The Cerecedas Seek Financial Partner To Buy 30% Of Procisa

3 June 2015 – El Confidencial

Procisa, the real estate company made famous for developing the luxury La Finca estate is looking for a financial partner to provide the financial resources that it needs to continue with its other developments.

At a time when the interest of international funds in the Spanish real estate market is being called into question, one of the country’s iconic property developers is attracting interest from several overseas investors. Procisa, the company owned by the Cereceda family, which was made famous for its development of the luxury La Finca estate, is negotiating the sale of up to 30% of its share capital and is holding talks with several institutional investors.

The process, which is being managed by N+1, has been on the radar of the large players in the sector for several months – they see this as an opportunity to invest in a company that owns some of the most important plots of land in the capital.

After initially exploring the option of an IPO, which was dismissed following analysis with Citi, the real estate company has made progress in its talks with a small number of funds to which it has proposed the deal, with the clear message that their role will be limited to one of financial partner.

In line with the deals closed by other companies in the sector – GMP sold a 30% stake to GIC, and Acciona agreed to allow KKR to join as an investor – Procisa plans to form an alliance with a major investor, which will take a minority stake, but which will provide the financial resources the RE company needs to continue with its promotions.

N+1 has knocked on the doors of giants such as Goldman Sachs, JP Morgan, Cerberus, Bank of America, KKR and Blackstone to propose the deal to them. They could end up acquiring a stake of less than 30%, but this would be represent a historic milestone for this family company, led by Susana Cereceda, following death of her father, Luis Cereceda García, five years ago.

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A RE giant, heavily dependent on bank financing

With assets of €900 million, own funds of almost €200 million, debt amounting to €600 million and losses of €13 million in 2013 (the last year for which official results are available), the company is looking for a financial partner, after it reached an agreement with its lender banks last year to accommodate a loan amounting to €400 million, dating back to December 2009 and after it consummated the merger with Agruva and Luarce, some of the other companies through which the Cereceda family has constructed its real estate empire.

(…)

During these talks, the banks imposed a series of conditions on Procisa, which explains why the Cereceda family is now keen to find a financial partner that will allow it to resume its activity, after years of decreasing results and the creditors’ sword of Damocles hanging over its head.

(….)

As well as La Finca, Procisa is also the owner of Parque Empresarial La Finca, an office complex on Calle Cardenal Marcelo Spínola (Madrid), as well as several office buildings spread across the capital and it is planning the development of two replicas of its famous Somosaguas development in La Romana (Dominican Republic) and Cartaya (Huelva).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake