German Bad Bank Finalises Sale Of Spanish Assets To Oaktree

8 May 2015 – Cinco Días

Over the next few weeks the German bad bank is expected to sell the assets that it owns in Spain. FMS Wertmanagement expects to sell the so-called Gaudí portfolio, which contains properties in Spain and Portugal, in a single transaction to Oaktree.

“Now is the time to sell the whole portfolio”, said José Holgado yesterday, Commercial Director of FMW Wetmanagement, at the Spanish real estate market’s second investment forum, which was held yesterday as part of SIMA (Salón Inmobiliario Internacional de Madrid or Madrid International Real Estate Fair). Holgado estimated that the value of the portfolio amounts to almost €900 million, although that is the nominal value, which will be reduced during the final negotiations.

The German entity, created in 2010 with assets from the nationalised Hypo Real Estate bank, operates in the same way as Sareb, the Spanish bad bank. Although the nominal value (of the portfolio) is almost €900 million, it is understood that these non-performing loans and assets have lost value since the start of the housing crisis, therefore they will be sold at below market prices, in the same way as (the assets sold by) the Spanish Sareb. Moreover, since (the portfolio is being) sold on a wholesale basis, the cost will also decrease.

Although several funds have valued FMS Wertmanagement’s portfolio, in the end it will be the Californian fund Oaktree, owner of Panrico, which takes over the Gaudí portfolio, subject to the negotiation of the final details. One of the most significant assets in the portfolio is the luxury Hotel Arts de Barcelona, a five star property managed by Ritz-Carlton. This complex was acquired by several buyers in 2006, including one company that was linked to the Singapore fund GIC. The German bank Hypo Real Estate was one of the entities that granted loans (to it). Once HRE was nationalised, part of the unpaid, syndicated debt was transferred to FMW Wertmanagement.

Other funds

According to the specialist publication CoStar, in addition to Oaktree, the portfolio also sparked interest from other funds including Cerberus Capital Management, Orion Capital Managers and Colony Capital. That publication estimates that the final price of the transaction will amount to approximately €500 million.

The sale of the Gaudí portfolio, which is being managed by Cushman & Wakefield, comprises 16 loans in Spain and two in Portugal. According to sources close to the transaction, Oaktree would immediately acquire another five star hotel in Cascais (Portugal), five shopping centres, four office blocks, 17 industrial storerooms, as well as several other residential and industrial assets.

The shopping centres include the MegaPark in Barakaldo (Vizcaya), Heron City de Las Rozas and Plaza Éboli, both in Madrid.

According to Holgado, FMW Wertmanagement commenced operation holding debt from assets worth €175,000 million, of which €100,000 million have now been sold. The director of the German bad bank said that now is the right time to sell given the significant liquidity in the market.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Oaktree Enters Exclusive Negotiations On Project Gaudi For c.€500m

13 April 2015 – CoStar Finance

Oaktree Capital Management has entered exclusive negotiations with FMS Wertmanagement for the predominantly Spanish Project Gaudi commercial real estate loan portfolio for a price thought to equal just over €500m, CoStar News has learned.

Negotiations are ongoing and the Board of FMS Wertmanagement is still to approve the sale, but Colony Capital, the second finalist, is no longer in the running to acquire the bad bank’s prospective maiden European NPL.

Project Gaudi, named after the legendary Catalan architect, has an unpaid balance of €740m, and is expected to trade at around 68 cents in the euro.

Cerberus Capital Management and Orion Capital Managers made up the top four, as revealed by CoStar News at the turn of the New Year.

Project Gaudi loan portfolio, which is being sold by Cushman & Wakefield’s Corporate Finance team in London, is comprised of 18 loans with broadly an equal split of performing, sub-performing and non-performing loans.

Project Gaudi, comprised of 16 loans secured by Spanish assets and two loans secured by Portuguese commercial properties, includes:

  • two five-star hotels in Barcelona and Cascais;
  • five shopping centre and leisure centres;
  • four business parks in Madrid and Barcelona;
  • a portfolio of 17 self-storage assets; and
  • several residential and industrial development sites.

The marquee asset in Project Gaudi is the 483-bed Hotel Arts in Barcelona (pictured), managed by Ritz-Carlton.

A consortium comprised of Host Hotels & Resorts, Dutch pension fund Stichting Pensioenfonds ABP and Jasmine Hotels Pte, an affiliate of Singapore sovereign wealth fund’s GIC Real Estate paid €417m in July 2006 for Hotel Arts, which at the time was the largest ever single-asset real estate transaction in Spain.

FMS Wertmanagement, founded in 2010 after the German government nationalised Hypo Real Estate, brought the Project Gaudi loan portfolio for sale in October.

The four second round finalists all placed bids above 60 cents in the euro, which reflects a price of €444m or above.

First round bidders included Davidson Kempner in a joint venture with Värde Partners, Blackstone, Deutsche Bank, Marathon Asset Management, Sankaty Advisors, BAML, Colony Capital, Starwood Capital, Apollo Global Management and Lone Star.

FMS Wertmanagement had as much as €13.4bn in remaining commercial real estate loans, as at the end of 2013, including €5.8bn of German loans, €1.8bn of US loans, €1.7bn worth of UK commercial real estate loans and €0.8bn and €0.6bn of loans secured by assets in France and Netherlands, respectively.

Spain has returned to economic growth in 2014 following seven difficult years of rising unemployment, salary deflation and depressed consumer spending.

But an increase in business activity has led to unemployment reducing and consumer confidence has reached its highest level since 2001 with improvements in disposable income and recovering house prices reinforcing this optimism.

All parties declined to comment.

Original story: CoStar Finance (by James Wallace)

Edited by: Carmel Drake

Bankia And BMN Both Put NPL Portfolios Up For Sale

27 March 2015 – Expansión

Divestments / Bankia and BMN are seeking to replicate the transaction completed by Catalunya Banc in 2014 on a smaller scale. The market expects a “boom” in these sales in 2015.

After two years divesting shareholdings and bad debts, Bankia considers that the time has come for it to transfer some of the non-performing mortgages that it deems to be unrecoverable. The entity led by José Ignacio Goirigolzarri has put a portfolio amounting to €1,300 million up for sale, of which more than €900 million relate to unpaid mortgages. BMN has also put a similar package of loans up for sale, amounting to €160 million, of which €52 million relate to mortgages.

Investors have received these operations with a great deal of anticipation, because since Catalunya Banc transferred a portfolio of problem mortgages amounting to €6,500 million to Blackstone last summer, no other entity had decided to follow suit.

After the step taken by Bankia and BMN, a number of entities are expected to join the band wagon and put some of their real estate loans to individuals up for sale.

Change of course

Until now, the bank had been reluctant to sell mortgages to opportunistic funds for reputational risk reasons. To avoid this, Bankia and BMN have decided to exclude loans relating to subsidised and social housing (from their portfolios). Moreover, sources in the financial sector explain that overseas funds may offer more alternatives for non-performing loans than the banks, since they purchase the loans at a discount and so can offer discounts themselves. These investors, just like the banks, must comply with the Code of Good Practice developed by the (Ministry of) Economy in 2012.

The sale launched by Bankia forms part of Project Wind, advised by KPMG . In total, the portfolio contains overdue loans amounting to €1,300 million, which are split into three sub-portfolios: mortgages; loans to SMEs and real estate developers, secured by properties, worth €180 million; and unsecured loans amounting to €210 million.

The mortgage portfolio comprises 4,300 loans, with an average value of €214,000. Most of the mortgages were granted to purchase property in Cataluña (32%), Madrid (25%) and Valencia (18%). Furthermore, 83% of the 4,300 non-performing loans are involved in judicial proceedings.

These types of transactions allow banks to remove non-performing assets from their balance sheets, release provisions and devote new resources to new more profitable activities.

Foreign funds will monitor this transaction very closely, especially those who have purchased a real estate platform in recent years: Cerberus (Haya Real Estate), Apollo (Altamira), Centerbridge (Aktua), TPG (Servihabitat), Blackstone (Catalunya Caixa Inmobiliaria) and Värde Partners y Kennedy Wilson (Aliseda). Having purchased the real estate management platforms in 2013, these investors are now keen to nurture (feed) them with their own assets, and whereby obtain profitability from their investments.

In addition to this transaction, Bankia has two other deals in the pipeline: the sale of hotel loans – Project Castle – for which it has received non-binding offers of between €200 million and €300 million; and the transfer of syndicated and bilateral loans amounting to €500 million – Project Commander – which Deloitte is advising.

On a smaller scale

In the meantime, BMN has put a similar portfolio up for sale to that offered by Bankia as part of Project Wind. It amounts to €160 million, of which one third are unpaid mortgages. The sale of this portfolio, known as Project Pampa, is being managed by N+1. Almost all of the 300 mortgages included in this portfolio are secured by properties in Cataluña.

BMN hopes to close the sale of its portfolio by the end of May. In the case of Bankia, the transfer process may last until the middle of the year.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Blackstone Rules Out Property Bubble From Mass Influx Of Funds

11 March 2015 – El Economista

Claudio Boada, senior advisor to the fund Blackstone, has said that a property bubble does not exist in Spain today. But he warned that “we must be careful” in the market and “not confuse apples with oranges”.

In a discussion held during one of the “Money in 2033” conferences, organised by PwC, Boada said that he is not concerned that the mass influx of American and Asian funds into Spain will generate a bubble, but he recommended that the market be cautious in this respect. Moreover, he indicated that the returns on these funds will be “lower” in the future than they are currently.

Boada recalled that in recent months Blackstone has closed a transaction with Sareb, whereby it acquired a portfolio of 39 ‘non-performing’ loans with a nominal value of €237 million. In addition, at the end of this month, it is hoping to close the purchase of a portfolio from Catalunya Caixa, an entity that is now owned by BBVA.

During the discussion, the Chairman of the Centre for Economic and Policy Research, Guillermo de la Dehesa, noted that in Spain, 70% of financing comes from banks and the remaining 30% comes from the market; the opposite occurs in the United States.

De la Dehesa recalled that with interest rates close to zero, funds have to look for returns for their stakeholders and said that, for the moment, they are specialising in buying ‘real estate’ and damaged assets, through which the stakeholders will make money in the end.

Finally, he said that in the United States, there is a large concentration of funds, which have accounted for 27% of the new loans offered; this, he says is something that concerns the cental banks.

Original story: El Economista

Translation: Carmel Drake

Sabadell Puts €250m NPL Portfolio Up For Sale

29 January 2015 – Expansión

Opportunistic funds / “Project Cadi” includes non-performing loans that the entity once granted to real estate developers

Banco Sabadell is making progress in its strategy to reduce the volume of foreclosed assets and bad debt on its books. The financial group led by Josep Oliu, which today releases its results for 2014, has just put an NPL portfolio worth €250 million up for sale.

According to market sources, the so-called Project Cadi includes non-performing loans that were once granted to real estate developers. Through Solvia, Sabadell is taking a very active role in packaging these types of loans, in the face of strong buyer interest from opportunistic funds that are now active in the Spanish market. At the beginning of the month, the bank already disposed of another portfolio worth €435 million (Project Tritón), which included 630 non-performing loans to small- and medium-sized developers, as well as 700 foreclosed assets in Valencia, Andalucía, Cataluña and the Balearic Islands. This sale was put together through a bond issue, acquired by Deutsche Bank and Hipoges. Sabadell may already be sounding out the market with a view to selling other portfolios over the next few months.

This type of transaction reflects the confidence that funds have in the recovery of the real estate market in Spain. In parallel, banks are interested in this kind of transaction because they lighten their balance sheets and allow them to generate income from assets that are no longer productive and that have already been provisioned. According to sector sources, these transactions are closed with discounts of around 75%, which means that the funds are paying the financial institutions 25% of the nominal value of the loans.

The largest transaction of this kind in Spain was closed in 2014 by Blackstone, which acquired a €6,392 million mortgage portfolio from Catalunya Banc. Lone Star and JP Morgan also bought loans from Eurohypo amounting to €4,500 million. Other funds that have acquired portfolios include Aiqon, Lindorff, Cerberus and Starwood.

Original story: Expansión (by S. Saborit and J. Zuloaga)

Translation: Carmel Drake