NH Rejects Barceló’s Offer But is Willing to Consider Other Proposals

11 January 2018 – Expansión

Yesterday, the Board of Directors of the NH Hotel Group revealed its position regarding the proposal made by Barceló to merge the two businesses. And, although it expressed its “unanimous” rejection of the offer, it did say it was willing to consider future “strategic opportunities” within the framework of “the consolidation trends that are prevailing in the sector”.

“The Board has carefully considered the fact that the proposed structure – a merger – would not allow for the creation of value for our shareholders over and above that already forecast for NH operating independently”. In its analysis, the Board does not consider appropriate “either the intrinsic value assigned to NH by the Barceló Group’s offer, or its scope or the exchange ratio offered”, according to the explanation presented to the CNMV.

The Co-President of Barceló, Simón Pedro Barceló, sent a letter addressed to NH’s Board of Directors in November, proposing the integration of the two groups to create a “national champion” with more than 600 hotels and 110,000 rooms around the world, as Expansión revealed on 20 November.

The Mallorcan group proposed taking control of 60% of the resultant (merged) company and for the remaining 40% to end up in the hands of the shareholders of the NH Hotel Group. It also set the price of the latter at €7.08 per share, which meant valuing the company at €2.48 billion.

Exchange ratio

For NH’s most senior governing body, which met yesterday for the second time to analyse the proposal made by its competitor, the exchange ratio proposed by Barceló does not reflect the relative valuation of the two companies, nor does it incorporate a control premium over NH’s share value or take into account the potential appreciation in the firm’s share price operating independently. Moreover, NH’s directors emphasised that the offer does not open a window of liquidity for its shareholders. The offer – which is non-binding and conditional upon a due diligence (detailed analysis) – proposes an integration with NH Hotel in exchange for shares issued by the latter, with the resultant company being listed. This operation, therefore, would effectively allow Barceló – which is owned by the third generation of the family of the same name – to debut on the stock market.

“The Board has valued very negatively the fact that the offer from Grupo Barceló lacks liquidity for NH’s shareholders”, reiterated the Board of the listed company.

NH’s Board of Directors includes Alfredo Fernández Agras, representative of Oceanwood (with 12% of NH’s share capital); José Antonio Castro and Jordi Ferrer Graupera, both representatives of Hesperia, with a 9.1% stake; and Ramón Aragonés, CEO of NH. By contrast, HNA does not have a presence on the Board, despite being the majority shareholder, with a 29.5% stake. The Chinese giant was expelled (from the Board) in June 2016 due to a conflict of interest after it signed a purchase agreement with Carlson Rezidor, which competes with the Spanish firm in certain European countries.

Sources at Barceló expressed their respect regarding NH’s decision, although they acknowledged that the position adopted by their rival left them with “a bitter taste since they had not been able to convince the Board of the good intentions behind the operation”. And they added: “We think that the offer was good for the Spanish hotel industry, the shareholders of NH and Barceló and the economy of the country as a whole, which would have benefitted from having a national champion to go out and compete seriously overseas”.

In response to NH’s rejection, Barceló “said the discussion was over”. According to sources at the company, “no other proposals are possible”.

The decision of NH’s Board of Directors was made public at the end of trading. NH’s shares finished trading yesterday at a price of €6.115 per share, after rising by 1.83%. Since Barceló expressed its interest in NH, the share price of the latter has increased by 22% (…).

NH closed 2016 with sales of €1.475 billion, an EBITDA of €181 million and a net profit of €30.8 million. The group’s strategic plan for the next three years forecasts a recurring profit of €100 million and an EBITDA of up to €290 million in 2019.

Meanwhile, Barceló closed 2016 with turnover of €2.855 billion, net sales of €1.98 billion, an EBITDA of €339 million and a net profit of €125 million.

At the operating level, NH has 380 hotels and 59,000 rooms in more than thirty countries, whilst Barceló owns more than 230 hotels in 22 countries and almost 52,000 rooms.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Santander Considers Selling 51% Of Popular’s RE To A Single Fund

20 July 2017 – Expansión

The process initiated by Banco Santander at the end of June to find partners willing to take on some of Popular’s portfolio of foreclosed assets and doubtful real estate debts (with a gross value of €30,000 million) is moving ahead and the entity’s preferred options are starting to emerge (…).

According to sources familiar with proceedings, one of the options that Santander is considering is the sale of 51% of this real estate business to a single buyer.

The same sources explain that the sale of a majority stake to an investment fund would allow the Cantabrian bank to deconsolidate all of the non-performing real estate risk from its balance sheet, as it would be left with a minority stake. Santander has engaged Morgan Stanley as the advisor bank for the process and has appointed independent director Pedro Pablo Villasante to supervise the entity.

Sources in the market indicate that interested parties include some of the funds specialising in these assets, such as Apollo, Blackstone and Lone Star. They add, nevertheless, that the definitive format through which these firms will enter into the operation has not been defined yet since any deal is still in a very preliminary phase.

Non-binding offers

Sources at Banco Santander acknowledge that this possible deconsolidation of the real estate business, through its sale to a partner, is just one of the options being considered. However, they maintain that the definitive decision as to whether the entity will choose a single buyer or more than one buyer has not been taken yet and is not even close to being taken.

According to sources close to the bank, the operation is still in the “attracting interest and receiving non-binding offers” phase. This period will continue until at least after the presentation of the results corresponding to the first half of the year, which is planned for Friday 28 July.

The period during which the various funds may submit their non-binding offers is expected to remain open until that same date, at least. Market sources are confident that other major investors will also express their interest, including Cerberus, Goldman Sachs, KKR, Kennedy Wilson and Värde Partners. The next phase will see the receipt of the binding offers

Following the resolution of Popular and its acquisition for €1, Santander revealed its plan to reduce its non-performing real estate assets by 50% within 18 months. The segregation of the property portfolios into a single vehicle could reduce that period even further (…).

Santander’s proposed plan may also include an additional agreement with the buyer fund to acquire 51% of the servicer Aliseda. That subsidiary, which is responsible for managing all of the real estate assets proceeding from Popular, is currently controlled in its entirety by Santander, after the entity chaired by Ana Botín repurchased the 51% stake held by Kennedy Wilson and Värde Partners on 30 June (…).

Popular’s real estate portfolio, which is located primarily in Andalucía, the Comunidad Valenciana and Cataluña, includes around €17,000 million in foreclosed properties and another €13,000 million in doubtful property developer loans. These assets include, for example, more than 25,800 homes (which are being marketed by Aliseda) and office complexes (…).

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake

Santander Invites NBOs For Popular’s Assets & Aliseda By End Of July

6 July 2017 – Voz Pópuli

It could be the largest real estate operation of the last few decades in Spain. Santander has revolutionised the world of the major investments funds with the express sale of all of Banco Popular‘s property, after engaging Morgan Stanley to coordinate the sale.

The bank chaired by Ana Botín may sell all of Popular’s real estate assets and loans, worth €30,000 million, in one go. The process is going faster than investors expected. Santander and its advisor have given the funds it has invited to participate until the end of the month to submit their non-binding offers (NBOs). And the prices being floated amount to around €5,000 million, according to financial sources consulted.

Blackstone, Apollo and Lone Star are already working on the process and Cerberus may join them shortly. They are the largest opportunistic funds present in Spain, with the most financial muscle to be able to handle an operation of this kind. That is why they have been chosen. However, the doors to new investors have not been closed.

The idea is that the buyer will acquire a 51% (or higher) stake in a joint company together with Santander and that that company will hold Popular’s €30,000 million assets. These assets are provisioned at 69%, and so they have a net value of almost €9,250 million. We calculate therefore that to acquire 51% of these assets and loans, plus take over Aliseda (which Santander repurchased last week), the buyer will have to pay around €5,000 million.

The key, after the summer

In addition to the bids for the 51% stake, experts are not ruling out the possibility that one of the funds will go off piste and put a proposal on the table for a smaller package of assets. Santander is open to all ideas at this stage. The group plans to first listen to the proposals, analyse them over the summer and then negotiate the small print between September and December.

This is the operation that the large opportunistic funds have been waiting for since 2011. Those investors arrived in Spain during the worst period of the crisis with the purchase of small loan portfolios and real estate platforms, with their sights set on the hope that large opportunities would arise some day, such as in this case with Popular.

In fact, they have been complaining for a couple of years that the portfolios coming onto the market are too small (ranging between €500 million and €1,000 million) for their appetite, given that other types of competitors have emerged that have caused prices to soar and have left them without any assets.

It is also worth considering that the funds that are participating in this process raised capital at the end of last year to invest in Southern Europe. Specifically, €15,000 million. As such, they have liquidity to handle operations such as Popular’s.

The three funds and Cerberus starred in major acquisitions in Spain during the crisis. Blackstone acquired Catalunya Banc’s macro-portfolio of doubtful mortgages amounting to €6,400 million. Apollo purchased Altamira, several portfolios and Evo Banco. And Lone Star secured Project Octopus (€4,500 million in large real estate loans), purchased Neinor and listed it on the stock market, and has recently agreed to acquire Novo Banco in Portugal.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Deutsche Bank Buys Diagonal Mar For €493M

10 August 2016 – Expansión

Deutsche Asset Management’s real estate investment division for Iberia, a subsidiary of Deutsche Bank, has confirmed its purchase of the Diagonal Mar shopping centre in Barcelona for €493 million.

Although the final price has been adjusted downwards with respect to the non-binding offer presented by the entity (which valued the asset at €505 million), it still exceeds the €451 million that Intu Properties paid for Puerto Venecia (Zaragoza) and the €375 million that Klépierre spent on the acquisition of Plenilunio (Madrid).

The operation also generates significant capital gains for Northwood, which acquired the property from the Irish bad bank Nama for €150 million in 2015. CBRE has advised this operation on the sell-side, whilst Deloitte advised the buy-side. (…).

Original story: Expansión

Translation: Carmel Drake

Deutsche Bank Buys Diagonal Mar For €495M

2 August 2016 – Expansión

Yesterday, Deutsche Bank completed the purchase of the Diagonal Mar shopping centre from Northwood for around €495 million, making it the largest shopping centre transaction in the history of the Spanish market.

In this way, although the final price has been adjusted downwards with respect to the non-binding offer presented by the entity (which valued the asset at €505 million), it still exceeds the €451 million that Intu Properties paid for Puerto Venecia (Zaragoza) and the €375 million that Klépierre spent on the acquisition of Plenilunio (Madrid).

The operation also generates significant capital gains for Northwood, which acquired the property from the Irish bad bank Nama for €150 million in 2015. CBRE has advised this operation on the sell-side, whilst Deloitte advised the buy-side.

Background

The shopping centre, located in district 22@ in Barcelona, has passed through many hands since the real estate company Hines was awarded the mixed use project at the end of the 1990s. The project included a residential area, offices, hotels and a large shopping centre, with a constructed surface area of 100,500 sqm and a gross leasable area (GLA) of 87,000 sqm, as well as 5,000 parking spaces.

In 2002, the German investment fund Deka paid around €240 million for the property, which, was subsequently sold, in 2006, to the Irish investment group Quinlan for €300 million, in its first operation in Spain. Nevertheless, following the burst of the Irish bubble, the asset was taken over by the banks.

Three years after that operation and in a very different economic environment, the property has generated a lot of interest. Specifically, 18 candidates submitted non-binding offers for the property, including Axa, Invesco, Hines, Unibail, the Singapore sovereign fund GIC, Blackstone and the Socimi Merlin, which was the only Spanish company that submitted an offer, for less than €450 million. Only four candidates participated in the final phase: CBRE Global Investment, ECE, Henderson TH and Deutsche Bank.

In order to reposition the asset, Deutsche Bank plans to invest €30 million over four years in a project that includes restructuring the top floor of the shopping centre to create more space for high-end fashion brands (€15 million), refurbishing the other floors with a budget of around €8 million and renovating the centre’s exterior façade for almost €7 million.

With this renovation, the purchaser expects to strengthen Diagonal Mar’s competitive position and increase its gross operating profit (EBITDA) over five years from €20 million in 2015 to more than €26 million.

Impact

The shopping centre, opened in November 2001, was designed by Jean-Louis Solal and the architect Robert A.M. Stern. Diagonal Mar is located in a prime spot, approximately five kilometres north east of the city centre. With more than 200 outlets dedicated to fashion, restaurants, leisure, a bowling alley and other services, the centre has 4,800 parking spaces and an outdoor space: La Terrassa del Mar. Diagonal Mar received 16.7 million visitors last year, up by 2.3% and generated net sales – excluding Alcampo (which falls outside of the transaction perimeter) – of €210 million, up by 8.5%. (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Amazon To Double The Size Of Its Logistics Centre In Madrid

19 November 2015 – Expansión

The US giant Amazon is going to double the surface area of its logistics centre in San Fernando de Henares, Madrid, to 75,000 m2.

Today, Amazon will begin construction of a new warehouse measuring more then 45,000 m2 in San Fernando de Henares, Madrid, adjacent to its current logistics facilities at the site. (…).

The new centre, which will serve customers all over Europe, will begin shipping orders in Q2 2016. (…).

The centre currently occupies a surface area of 32,000 m2, although its storage capacity amounts to 70,000 m2, thanks to the construction of towers that have allowed it to optimise the space. The last of these towers, which added an additional 12,000 m2 of space, was constructed to support Amazon’s entry into the food and cleaning sector this autumn. (…).

Warehouse in Barcelona

Amazon’s logistics capacity in Spain may be further extended with the construction of a warehouse in Barcelona, which will also serve customers all over Europe, especially in the South of the continent. The electronic retail company has submitted a non-binding offer, amounting to €30 million plus IVA, for a site measuring 150,808 m2 in the Mas Blau II industrial estate, in El Prat, which currently belongs to Institut Català del Sòl (Incasòl).

Original story: Expansión (by M. Prieto)

Translation: Carmel Drake