Tag: NPLs

Apollo Gets Ready To Buy Property Developers & Hotels In Spain

14 March 2017 – El Confidencial

A new player has emerged in the Spanish real estate market. Apollo, one of the largest fund managers in the word, has decided to join the fray between Värde, Castlelake and Lone Star, and analyse the purchase of its own property developer, according to sources familiar with the entity.

The firm led in Spain by Andrés Rubio is tackling this strategy through its new fund (its third), which already has €2,700 million and which plans to raise up to €4,000 million. This money will be used to acquire real estate assets, NPLs and hotel portfolios in Spain, Italy, UK, Ireland and Germany. Our country could receive around €1,000 million of investment, given that Apollo is expected to continue its commitment to the hotel sector, into which it took a giant leap last December, when it acquired two portfolios from CaixaBank and Popular, and looks set to enter the property development business with a bang.

According to the same sources, one of the companies that is on the fund’s radar is Levitt, which has some of the best plots of land and fame in the sector. Its possible sale has been mooted in the market for a while, given the generational change that the group faces and the appeal of the company, which operates in the high-end segment.

Asentia, Colonial‘s former bad bank is one of the other companies that has been making a name for itself in the market; Acciona Real Estate has also been considering its options, which range from an IPO to the entry of a large fund into its share capital; whilst Procisa, the former property developer behind La Finca, has sold 40% of its offices to Värde and continues to control important developments on plots of land in Madrid (Pozuelo de Alarcón and Brunete), Huelva (Cartaya) and Lleida (Baqueira).

In fact, Apollo was previously involved in negotiations regarding a similar operation to the one that Värde ended up signing with the Cereceda family. But the rapid consolidation that has taken place in the market, with the creation of Aedas by Castlelake, the purchase of Vía Célere by Värde and the imminent debut of Neinor on the stock market, has convinced the fund that a window of opportunity has now opened up in the property development sector.

Apollo plans to invest this new €1,000 million fund over the next three or four years, during which time it wants to become a top-tier player in the property development sector, in line with the moves made by its competitors, and to create its own hotel platform.

In the residential sector, it intends to focus on buildable land, located primarily in Madrid and Barcelona, the two provinces where the incipient recovery is being felt most strongly.

In the tourist segment, in parallel to the strategy to purchase loan portfolios secured by hotel collateral, the fund is actively looking for well-located establishments to create a vacation platform along the coast and on the islands, comprising around 20 assets.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Sareb Supports EBA’s Proposal To Create EU Bad Bank

7 February 2017 – Cinco Días

Last week, the European Banking Authority proposed the creation of a continent-wide bad bank and that initiative has now been approved by the European Central Bank. Brussels can also count on support from Spain, a country that, to a certain extent, has become an essential reference point following the rescue of the Spanish banking sector and the creation of Sareb, the national bad bank.

“The EBA’s proposals echo a lot of our experiences, as well as the lessons learned during the process”, says Íker Beraza (pictured above), Deputy General Director of Finance at Sareb (…).

Sareb allowed Spain’s banks to free themselves from non-performing loans amounting to €50,700 million. It is hoped that this will able to be replicated on a European scale. In Italy alone, NPLs amount to €276,000 million, and in France and Spain, the volume still amounts to more than €140,000 million. In total, Europe’s banks have more than €1 billion in doubtful loans.

The definitive clean up of these balance sheets has become an obsession in Brussels in recent months. And the plans to find the most appropriate way of doing this are accelerating. (…).

A working group between the 28 EU member countries, operating under the chairmanship of the French Treasury, has been debating for six months regarding possible solutions for putting an end to the crisis that is weakening the financial sector, reducing the availability of credit and hampering growth.

Like in previous phases of the crisis, the heated dispute between countries in the north and south is reducing the chances of reaching an agreement. But an air of urgency is starting to dominate and the EBA’s proposal has brought to light buried contracts, with the possibility of transferring up to €250,000 million in non-performing loans to the European bad bank.

Last Friday, high profile representatives from the European Commission, the ECB, central banks and Treasuries, attended a seminar, behind closed doors, regarding “the crisis of the non-performing loans”, organised in Brussels by the Bruegel study centre.

Beraza attended, on behalf of Sareb, as one of the most prominent speakers. “The EBA’s proposal is interesting and we can share important lessons that we have learnt since 2012”, said Beraza.

Beraza said that experience in Spain is proof that “the transfer of assets is a very efficient tool and that in Spain, to date, it has worked out 20 times cheaper than recapitalisation”.

Sareb’s Director considers that the creation of a similar entity on the European scale “would give the system the robustness it needs to handle crises, which have been shown themselves to be almost always systemic, as well as contagious from one country to the next”.

Sources at the European Commission say that the initiative could begin with a first step based on coordination between the national bad banks. The ECB is also keen to establish a common model upfront for the creation of all national banks in the Eurozone.

Moreover, the EBA’s proposal rules out the mutualisation of the potential losses of the European bad bank, which would be borne by the national authorities. This safeguard was introduced to stop Berlin from vetoing the project. (…).

“It is clear”, said Beraza, “that the bad bank model is here to stay in Europe, as an effective tool to be used in the time of crisis”.

Original story: Cinco Días (by Bernardo de Miguel)

Translation: Carmel Drake

The EBA Lobbies For The Creation Of A European Bad Bank

31 January 2017 – El Economista

On Monday, the European Banking Authority (EBA) urged the European Union (EU) authorities to establish an alternative investment fund to acquire delinquent loans from the European financial sector, with the aim of stimulating economic growth in the region.

In a speech in Luxembourg, the President of the EBA, Andrea Ernie, highlighted that tackling the high level of delinquent debt in the EU – which stands at approximately €1 billion – is an “urgent and viable” issue, according to Reuters.

In this sense, Enria indicated that EU banks may sell some of their non-performing loans to an EU “asset management” company.

Enria proposes assigning an agreed “real economic value” to the non-performing loans sold and for the investment fund that buys them to act as a “bad bank”, given that it would have the obligation to dispose of the assets within three years at their real economic value, rather than at market price.

“If that value is not achieved, the bank must bear the impact at the market price and a public recapitalization must be carried out with all the conditions that accompany the process”, said the President of the EBA.

In this regard, the Managing Director of the European Stability Mechanism (MEDE), Klaus Regling, welcomed the EBA’s initiative and added that the proposal does not involve sharing banking risks between member states, which is something that Germany has firmly opposed in recent years.

“It is likely that the public sector will have to play a role”, said Regling at the event, where he also said that the “bad bank” should aim to acquire up to €250,000 million of non-performing loans.

Original story: El Economista

Translation: Carmel Drake

CaixaBank Sells €700M In Debt & Foreclosed Hotels To Apollo

29 December 2016 – El Confidencial

CaixaBank is going to close 2016 with a healthier balance sheet, thanks to the latest divestment operation that it is about to sign. According to financial sources, the banking institution led by Gonzalo Gortázar (pictured above), has reached an agreement with Apollo Global Management to sell €700 million in foreclosed assets linked to the hotel sector. The US fund is hereby going to acquire 20 four- and five-star holiday establishments that the bank has been holding in its portfolio following non-payments by customers.

The transaction, which has been dubbed Project Sun, is just awaiting the finishing touches from CaixaBank and Apollo, the opportunistic fund that purchased 84% of Banco Santander’s real estate company – Altamira – for €664 million and all of Evo Banco, which previously belonged to the former Novacaixagalicia for €80 million, amongst other things. Nevertheless, the agreement between the bank headquartered in Barcelona and the NYC-based firm is limited to two thirds of the portfolio that was initially put up for sale.

The Spanish financial institution, which has been advised by Alantra, had valued Project Sun at around €1,000 million, on the basis that it contained, on the one hand, unpaid loads secured by 112 hotels; and, on the other hand, 32 establishments that the bank had foreclosed due to non-payment. According to the internal documentation from the sales notebook, in total, 11,000 rooms were put up for sale, the largest hotel portfolio of the year. But at the last minute, the entity has decided to get rid of debt amounting to only around €350 million and 20 hotels worth a similar figure, which means that 12 properties have been left out of the agreement with Apollo Global Management.

The reason is that the offers that it received for these other holiday establishments were well below their respective book values, and so they have chosen to not sell them now so as to sell them for a bad price. Most of the hotels and loans are located in Andalucía (37), Cataluña (22) and the Canary Islands (19). Besides Apollo, which has been advised by Arcano and by Gustavo Gabardo, former Director General of NH Hoteles, CaixaBank had also received interest for this portfolio from other so-called vulture funds, such as Starwood, Cerberus, Oaktree and Bank of America, which had already acquired assets from Bankia, Santander, Sareb and Sabadell.

With this transaction, CaixaBank is going to close the year with €2,400 million less in terms of overdue debt, having already completed the sale of other non-performing loan portfolios. On 30 November, it got rid of the portfolio known as “Far”, which it sold for €700 million to Lindorff and D. E. Shaw. In July, it did the same with another package of unpaid credits for €900 million (Project Carlit), which it sold to Goldman Sachs and D. E. Shaw. (…).

This is the eleventh operation of its kind that CaixaBank has completed since it started to try to remove toxic loans from its balance sheet. (…). Over the last two years, it has managed to get rid of non-performing loans amounting to almost €6,000 million, a strategy that has allowed it to reduce its default rate from almost 12% at the height of the financial crisis to just 8.7%.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake

Sareb Puts Its Largest Portfolio Ever Up For Sale

18 October 2016 – Expansión

Sareb has just launched a competitive process to sell the largest portfolio so far in its three and a half year life. The macro-operation was approved at the most recent Board meeting, in light of the investor appetite that is being left unsatisfied by the shortage of products currently available for opportunistic funds, which buy distressed debt at knockdown prices. The target audience for this latest portfolio are international specialist funds with management capacity and knowledge of the Spanish market.

According to sources in the sector familiar with the operation, the portfolio comprises a package of 200 non-performing loans, which are secured by residential flats, mainly housing blocks located in Cataluña, Andalucía, Madrid, Galicia and the Community of Valencia. Together, their nominal value amounts to €1,000 million.

The competitive process is now officially open, although no offers have been received yet. (…). According to the sources, Sareb plans to sell the whole package to a single buyer before the end of the year.

The bad bank has its own investor relations department and regularly holds road shows for large financial institutions. Last year, it held meetings with 780 international investors. In Spain, the opportunistic funds that have sold portfolios over the last four years have managed to obtain returns (IRR) of between 10% and 20%, according to sources in the sector.

This year, Sareb’s activity has been characterised more by individual operations than by high volume deals. Its transactions have become more complicated since the Bank of Spain introduced accounting regulations requiring the bad bank to mark to market the value of its assets each year. (…).

Sareb is a giant container of NPLs, above all loans to property developers, which it purchased from the savings banks that received public aid. 25.7% of the entity’s remaining balance sheet correspond to real estate assets. (…).

Sareb has outsourced the sale of its real estate assets to four agents: Solvia, Altamira Asset Management, Servihabitat and Haya Real Estate. On average, it is selling around 27 units per day and has a market share of 4%, which is low because the market is very fragmented. For the first time in 2015, sales of land exceeded sales of residential properties. The latter are being sold for an average price of €74,000, according to Sareb’s annual report for 2015.

Sareb is also a property developer

Earlier this month, the entity put its first completed residential developments on the market. They contain 700 homes located all over Spain, which were left unfinished when the savings banks started to have solvency problems. These properties are being sold to the public for prices ranging between €32,000 and €390,000, and along with 1,300 other new build homes, form part of the “Casas de Estreno” campaign. The corporate website receives 409,000 visits per year and intensive utilisation of big data is helping the entity to maximise its returns from these transactions. (…).

Original story: Expansión (by Raquel Lander)

Translation: Carmel Drake

Bain Capital Raises €2,770M & Sets Its Sights On Spain

8 August 2016 – Expansión

Bain Capital wants to become one of the largest buyers of real estate in Spain. On Thursday, the US fund announced that it has completed the acquisition of three asset portfolios from Spanish banks, worth €1,146 million, over the last few months. The sellers are Cajamar, Sabadell and Bankia in three separate deals.

The acquisitions have been made through the fund’s Bain Capital Credit business unit, known until now as Sankaty.

And as if that weren’t enough, in the last few days, the US investor has completed the creation of a new fund in the USA worth $3,100 million (€2,769 million) for distressed investments (assets close to bankruptcy) and assets in special situations, according to Bloomberg.

“We see potential for making new investments in the Iberian Peninsula, especially in the real estate and overdue loan markets”, said Fabio Longo, CEO and Head of the real estate and overdue loan business in Europe at Bain Capital Credit. “We are excited about the opportunity to consolidate our position in the market for non-performing real estate assets in Spain through these investments”, added Alon Avner, CEO and Head of Bain Capital Credit’s European business.

Individual transactions

Of the three portfolios purchased, the largest was bought from Cajamar, containing €511 million of overdue syndicated and bilateral loans, granted primarily to real estate developers in different phases of bankruptcy. This deal, known as Project Baracoa, was the first major competitive sale of loans by a Spanish entity.

In addition, Bain Capital Credit acquired a portfolio of loans with a nominal value of €415 million from Sabadell, comprising overdue loans to property developers, mainly secured by residential and tertiary assets. This operation was known in the market as Project Pirene.

The most recent purchase by the US fund in Spain involved the Project Lane portfolio, comprising €220 million of foreclosed assets sold by Bankia. This was the first operation of its kind carried out by the nationalised group after the failed sale of Project Big Bang at the end of last year, through which it had wanted to sell all of the homes, developments and land on its balance sheet. In the end, Bankia was unable to reach an agreement with the investor who had expressed the most interest, Cerberus.

For all of these operations, Bain Capital has been advised by the asset managers Copernicus, HipoGes and Altamira; the consultancy firms Aura REE and CBRE; and the lawyers J&A Garrigues and Cuatrecasas.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Axactor Acquires €144M NPL Portfolio From BMN

4 July 2016 – Expansión

The Nordic group Axactor, which purchased Geslico last month, is another star player in the market. It has just acquired its fourth portfolio in Spain: Project Otello, from BMN, containing €144 million worth of NPLs. The investment will be financed using Axactor’s available liquidity and credit facilities from the Norewgian bank DNB. The deal forms part of the Norwegian group’s strategy to grow in the main European markets.

By purchasing the portfolio directly from BMN, this operation is the first that the company has completed in the primary market, a type of transaction that requires greater financial and legal compliance than acquisitions made in the secondary market.

Original story: Expansión

Translation: Carmel Drake

Banks Still Own Problem Assets Amounting To €213,000M

5 May 2016 – Cinco Días

Spain’s banks still have a heavy burden weighing down on them following the burst of the real estate bubble: they now own foreclosed assets worth €84,000 million, taken on since the start of the crisis.

According to the Bank of Spain in its financial stability report, published on Wednesday, that figure “has remained stable since December 2012, always ranging between €75,000 million and €84,000 million”.

Of that amount, 37.6% relates to land, 25% to finished buildings, 22.3% are foreclosed assets resulting from the acquisition of homes, and 5% are buildings under construction.

In the last year, land has decreased by 0.5 points, finished buildings have dropped by 0.43 points, homes have increased by 1.8 points and buildings under construction have remained stable.

But beyond these properties, the banks’ exposure to non-performing assets and problem loans amount to almost €213,000 million in Spain’s financial sector as a holw.

The banks have lots of “non-performing assets on their balance sheets, which do not generate any revenues for the income statement, but which do require financing”, said the financial supervisor, which has published data relating to 2015 year-end.

“A hindrance to solvency”

The Bank of Spain also warns that “although these two indicators have decreased, by 14.5% as a whole, over the last year, they still represent a significant percentage of the total assets of the banks in their business in Spain and they place negative pressure on the income statements of the entities, reducing their profit generation capability and therefore, representing a hindrance to increasing the solvency of the institutions”.

In terms of total loans that have been refinanced or restructured, that balance amounted to €205,000 million at the end of last year, which represents a YoY decrease of 6.4% compared with the end of 2014.

Of the total amount of loans whose initial terms have been adjusted, “51.5% relate to non-financial companies and 46.2% to households”, said the Bank of Spain.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake

Sareb Expects To Complete 22 Housing Developments In 2015

11 May 2015 – El Economista

The Asset Management Company for Bank Restructurings (Sareb) expects to finalise (the construction of) 22 housing developments during the course of the year; in the meantime it will study the selection of 60 other construction works with a view to their completion.

Sources at the so-called ‘bad bank’ have explained to Europa Press that the developments that will be completed this year are located in (the autonomous communities of) Cataluña, Valencia, Galicia, Castilla y León, Extremadura, Madrid and Cantabria, and they have indicated that “in theory” they will be available for sale.

In 2014, the company approved the launch of 52 housing developments and 30 of those obtained their First Occupancy Licence during the year. Investments in real estate assets during the year amounted to €35.6 million, primarily focused on the urbanisation of land and plots (of land) and on the progression and finalisation of work in progress.

Specifically, 19 developments were approved in Cataluña, 17 in Valencia, four in Galicia, three in Cantabria, three in Castilla y León, two in Castilla-La Mancha, two in Madrid, one in Extremadura and one in La Rioja. Of those, it is expected that the following developments will be completed this year: nine in Cataluña, five in Valencia, two in Galicia, two in Castilla y León, one in Extremadura, one in Madrid and two in Cantabria.

Maintain the rate of property sales

Sareb has set itself the objective of maintaining the rate of property sales at close to 15,000 in 2015 and retaining its position amongst the five largest players in the market. It is also seeking to increase the quality of services through its new “servicers”.

The ‘bad bank’ is looking to intensify its offer to those investors that specialise in adding value, as well as to sell a “wide range” of portfolios to institutional investors during the year.

The company generated income of €1,115 million during 2014, thanks to sales to specialist investors. It also closed eleven major transactions, primarily involving loans, which accounted for 84% of its wholesale transactions (during the year).

In this way, Sareb closed the sale of the following portfolios: ‘Kaplan’ (loans to SMEs secured by residential property and land); ‘Crossover’ (land in Alicante, Baleares, Barcelona and Madrid); ‘Dorian’ (rental housing); ‘Klaus’ (loans to SMEs); and ‘Pamela’ (loans secured by buildings in Madrid).

Other transactions included the sale of ‘Agatha’ (loans and rental property); ‘Aneto’ (loans secured by residential property and land); ‘Olivia’ (loans secured by residential and commercial property); ‘Meridian’ (loans secured by tourist assets); and ‘Corona’ (offices leased in Madrid).

Original story: El Economista

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