Santander Transfers Land Worth €4bn to a Newly Created Land Manager

18 March 2019 – Cinco Días

Santander is making history once again. The entity has created a company to which it is going to transfer all of the land proceeding from its exposure to property, which has a gross book value of around €4 billion (and a net value of around €2 billion).

The purpose of this new vehicle, known as Landmark Iberia, will be to advance with the urban planning procedures required to generate value from these plots and to continue selling the land, with the ultimate goal of selling the whole company if an attractive offer is received.

Landmark is not like any of the bank’s previous projects given that it is not a servicer. Its job is to generate value from the plots that it receives from Santander – it is the first entity of its kind in Spain.

The operation forms part of the group’s overall strategy to reduce its exposure to real estate, in accordance with the instructions of the Bank of Spain. Last year, Santander decreased the value of its exposure by 55.9% in gross terms to €15.1 billion, according to the entity’s annual accounts, thanks to its operations with Blackstone (project Quasar) and Cerberus.

Landmark will likely become the largest landowner in the country, alongside other major companies in the sector such as the property developer Metrovacesa and the fund Cerberus.

Original story: Cinco Días 

Translation/Summary: Carmel Drake

Madrid-Based Socimi Única Finalises its MAB Debut with c. 30 Commercial Premises

14 June 2018 – Eje Prime

Única Real-Estate is one step closer to its stock market debut. The Socimi is finalising the procedures to start trading on the Alternative Investment Market (MAB) this month. The company owns 29 commercial premises in the Community of Madrid (25 in Madrid capital and four in other municipalities) with a combined net book value of €32.5 million and an annualised gross rental income of more than €1.9 million.

The Socimi is committed to diversifying its portfolio to ensure that no single asset exceeds 15% of the total portfolio, and for a moderate financial leverage equivalent to less than 40% of the market value of the combined investment.

Única, which defines itself as a long-term investor, was created in 2015 and financed its previous growth through capital increases. In September 2017, the real estate firm became a Socimi. The President of Única is Eduardo Paraja, who used to be the CEO of Metrovacesa and an external advisor to Habitat.

Original story: Eje Prime

Translation: Carmel Drake

Blackstone to List New Socimi with 4,000 Rental Homes Purchased from Sabadell

29 May 2018 – El Confidencial

One of the first funds to bet on the boom in rental housing in Spain, Blackstone, is on the verge of listing its fourth Socimi to specialise in this market, an area that is really blossoming.

The Socimi in question is Torbel Investments, a vehicle that primarily comprises the so-called Project Empire, a portfolio containing almost 4,000 homes, parking spaces, premises and storerooms that Banco Sabadell sold to the US fund two years ago.

At the time, the operation was worth around €600 million, although in net book value terms, Blackstone has recorded the assets at €113 million, according to Torbel’s most recent official accounts, corresponding to the year ending 2016.

Currently, the fund is on the home stretch of the procedures necessary with the CNMV – Spain’s National Securities and Markets Commission – to list the vehicle, whose natural destination is the MAB – Alternative Investment Market – given that Blackstone’s objective is, simply, to fulfil the demands of the Socimi regime to list the company so that it can benefit from the tax advantages.

That point means that this placement is completely different from the one being finalised by Testa, another giant in the rental housing sector in Spain, which is expected to make its debut on the main stock market in June, with €1.834 billion in assets.

Plethora of Socimis

Since it acquired these homes from Sabadell, Blackstone has managed all of the flats through its own servicer company, Anticipa, the firm that is behind the day to day operations of all of the large residential acquisitions carried out by the fund.

By geographical distribution, both in terms of property value and rental income, the main markets in which the Socimi has a presence are Madrid, Alicante, Murcia and Valencia, in other words, regions where the former entity CAM – Caja de Ahorros del Mediterráneo – had its greatest presence before it was acquired by Sabadell and whose foreclosed assets comprise this portfolio.

Blackstone is competing head to head with Testa to be the largest landlord in Spain, but it is adopting a very different strategy given that whilst the firm in which Santander, BBVA, Acciona and Merlin all hold stakes is opting to concentrate the greatest number of homes possible in a single company, the US fund is playing its hand by backing several smaller vehicles.

For the time being, Blackstone has already listed Fidere, which owns more than 5,700 homes, many of which have some kind of public protection;  it also has Albirana Properties, owner of another 5,000 rental assets; and Corona Patrimonial. But, in addition, the fund has been creating other Socimis such as Tourmalet and Pegarena.

All of these companies are expected to continue expanding their portfolios with assets from Project Quasar, the portfolio that Blackstone acquired from Santander, and which contains a sizeable portfolio of homes from the former Banco Popular.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

BdE Rejects Popular’s Proposal To Carve Out Its Bad Bank

14 October 2016 – El Confidencial

The cornerstone of Banco Popular’s new business plan, the carve-out of its bad bank (so-called Project Sunrise) has been blocked by the Bank of Spain.

According to sources close to the operation, the supervisor has refused to allow the accounting deconsolidation of this vehicle in which the bank was planning to group together the majority of its real estate assets, given that the solution would not transfer the risk outside of the group and the provisioning level (33% of the gross value of the assets) is insufficient for such an operation. As a result, the entity chaired by Ángel Ron will have to assess alternative options.

Popular’s bad bank project seeks to remove €6,000 million in gross real estate assets from Popular’s balance sheet (initially that figure was going to be €7,500 million, but the worst assets were removed from the portfolio in the hope that approval would more likely be obtained) with the aim of freeing up capital, an operation that the bank regards as critical if it is to meet the objectives it promised investors when it completed its capital increase in June.

But, as things now stand, Project Sunrise may now only be carved out from the bank at the individual level and not from the consolidated group, which is ultimately what matters to the ECB in terms of solvency. Similarly, the carve out would not stop the calendar of provisions for foreclosed properties, with the consequent cost for the bank. A spokesperson for the entity highlighted that the project has not yet been formally presented to the Bank of Spain. Popular’s share price fell by 7% during morning trading to €1.02/share, a new historically low value.

There are basically two obstacles standing in the way of the full carve-out, according to sources. The first is that Banco Popular would be the main financer of its bad bank, which will have share capital equivalent to just 13% of its assets, and it may have to continue as the shareholder. The supervisor governed by Luis Linde has refused to grant permission to other banks in similar circumstances for the deconsolidation of this type of vehicle, and so authorisation in the case of Popular would represent an unfair situation for its competitors.

The second is that the provisioning level is very low, currently equivalent to just 33% of the gross value of its assets (which means that their net value amounts to €4,000 million), when the market requires a minimum of 50% for these kinds of assets, which are basically low quality Spanish properties. This is justified because Popular expects to see price rises of up to 14.2% with respect to their current value in its most positive scenario, but the market considers that this forecast is too optimistic. All of this means that there will not be sufficient investors willing to buy this structure to allow Popular to reduce its stake below 51%.

The only solution: recognise more provisions

Given this blockade, Ron is exploring other alternatives, such as listing the vehicle on the stock market and gifting its capital to the bank’s current shareholders in the form of a dividend. But that solution is far from optimal because it means that the financing risk would remain inside the Popular group and because it would need to place more than 51% of the share capital by means of this gift. Besides, the entity would have to assume the cost, which is the present value of the future cash flows that it expects to obtain from the sale of these assets.

According to some banking experts, the only solution that may save Project Sunrise would be a sizeable increase in its provisions, which would reduce the net book value of the bad bank and facilitate the generation of profits from the sale of its properties. Only this measure would allow Popular to obtain sufficient demand from investors to place a significant percentage of the share capital and to obtain financing from outside of the bank. But that would mean significantly increasing the €4,700 million provisioning level that it announced when it completed its capital increase, which would in turn cause its losses to soar.

“We are not going to give away the money we raised during the capital increase”

Moreover, this measure goes against the philosophy under which Popular undertook its capital increase and clean-up: “We are not going to give away the money we raised during the capital increase to buyers of the vehicle, we are not going to use the funds that our shareholders have given us to reduce the transfer price and whereby allow other parties to make money from our assets”, explained a source at the entity.

And so, Popular is facing a situation in which it is going to be very difficult to find solutions that are satisfactory for it and at the same time keep the Bank of Spain happy. The problem is that time is running out and the market – which has serious doubts over its capacity to fulfil its promises this time after it failed to do so following its previous capital increase – is not going to extend the period for it to complete its feasibility plan beyond the first quarter of 2017. And it is not just the market, some of the Board members, led by the Mexican Del Valle family, have already made an attempt to replace Ron and have even started talks with other banks regarding a possible merger.

“The managers at the bank are very clear that everything is at stake over the next six months: if they do not fulfil their objectives in terms of provisions, restructuring, the sale of the bad bank, etc., then they know they will be done for”, concludes one of the sources consulted. And the segregation of Sunrise is the key to fulfilling these goals”.

Original story: El Confidencial (by E. Segovia and J. A. Navas)

Translation: Carmel Drake

Popular To Put 15,000 More Properties Up For Sale

16 July 2015 – Expansión

Popular is strengthening its strategy to achieve one of the main objectives it has set itself for the coming years, namely to accelerate the divestment of its non-productive assets. This mainly relates to its real estate portfolio, which includes €15,000 million of problem loans to developers, SMEs and individual borrowers, and a further €14,600 million of foreclosed assets.

One of the initiatives that the bank has set for 2015 is to increase the number of finished properties available for immediate sale through its web channel, by 15,000. It is looking to boost its web channel and thinks that it has great potential. This increase of 15,000 assets represents an increase of almost 50% to the portfolio that the bank currently has available for sale (taking the total to around 30,000 properties).

Channels

Currently, Popular sells 73% of its assets through its network of branches, another 21% through commercial agents and only 6% online. In the rest of the sector, digital channels account for 50% of such sales.

The entity, in turn, is accelerating the sale of large portfolios to wholesale investors. In the last two quarters, Popular has closed four such transactions amounting to €333 million, with a 9% discount on the net book value. These operations have included various assets, from residential land to commercial properties and garages.

As a result, the bank has doubled its volume of property sales in the last year. During the first quarter, Popular closed divestments amounting to €534 million, compared with €249 million recorded between January and March 2014, an increase of 115%. In this way and in just one quarter, Popular sold assets with a value very similar to the total amount sold in the whole of 2013, when sales amounted to around €700 million.

Popular’s strategy to dispose of its problem assets has been boosted in the last year and a half, following the partnership agreed in 2013 with the funds Värde Partners and Kennedy Wilson. That transaction, structured through the joint venture known as Aliseda, is not only generating capital to strengthen the bank’s balance sheet, but is also seeking to take advantage of the funds’ extensive experience in this business to accelerate the sale of assets, reduce the length of the recovery process and maximise divestment prices. Kennedy Wilson and Värde Partners, which control 51% of Aliseda, have almost €25,000 million in assets under management. (…)

Original story: Expansión (by M. Martínez)

Translation: Carmel Drake

Ibercaja Has 3 Portfolios Up For Sale With Assets Of €2,300M

14 July 2015 – Cinco Días

The Aragonese entity is currently managing three separate divestments

Ibercaja wants to clean up its balance sheet and diversify its business before it goes public at the end of 2016. The entity currently has real estate assets worth €2,300 million up for sale under three separate transactions. Ibercaja wants to retain its independence by listing on the stock exchange. The deadline for the presentation of non-binding offers for the portfolio known as Project Kite is this week.

Ibercaja has its mind made up. It does not want to participate in any mergers and is even less willing to be absorbed by another, larger entity. “A few years ago, they tried to include us in mergers through the SIP, but we were not at all convinced. We wanted to retain our independence and that is still our plan”, say sources at the bank when asked about a possible merger with the other medium-sized banks (such as Unicaja, BMN, Ibercaja, Kutxabank, Abanca, Liberbank, Cajamar and Bankinter). The entity chaired by Amado Franco plans to go public at the end of 2016, and it has already engaged KPMG to conduct the relevant studies with that objective in mind. The decision to go public is closely linked to the “Law on Banking Foundations”, which forces the former savings banks to go public if they do not want to be penalised with a reserve fund because their foundations control more than 50% of their capital. The ECB is also putting pressure on these entities to list and or/merge.

One of the main objectives of Ibercaja’s strategic plan for 2015-2017 is the divestment of unprofitable assets. A few days ago, it sold a portfolio of non-performing loans amounting to €200 million, for which it pocketed just over €10 million. Now it has out Project Goya on the market, with assets amounting to around €900 million, in the form of debt to property developers, secured by homes, according to reports from Idealista.

This transaction comes just a few weeks after the entity put Project Kite on the market, which includes mortgage loans from 124 property developers, amounting to around €800 million. In fact, this week sees the deadline for interested investors to submit their non-binding offers. Moreover, during the first six months of the year, the entity sold 1,971 properties through its real estate platform, Salduvia.

Those sales were generated in a homogeneous way across the whole country. The figure represented a 12% increase on the sales recorded a year earlier and represented the divestment of 25% of the stock that the entity had for sale. These transactions have been closed with an overall discount of 4% on the appraisal value of the assets and have generated a positive result on the net book value of €6 million. Salduvia’s sales forecasts for this year stand at 4,300 homes, i.e. 75% of the stock that is currently available for sale and an increase of 20% on the sales recorded in 2014, which amounted to 3,558 units. That sales figure would represent a reduction in real estate risk of €650 million.

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: Carmel Drake