Banks Still Hold €69,000M In Problem RE Assets

16 August 2016 – Capital Madrid

(…). The seven largest banks, which are all listed on the Ibex, still hold almost €69,000 million in problem real estate assets on their balance sheets, a figure that increases to well above €75,000 million if we extend the scope to include all of the major entities. And those same entities refuse to put their assets on the market so as to not push prices down any further.

Neither the sales made at a loss a few years ago, nor the toxic asset transfers made by some entities to Sareb, have been sufficient to remove this hindrance from the entities’ balance sheets, which weighs down on their results, as well as on their default rates.

The excesses committed by the majority of the banks in the real estate sector will still take a while to be cleansed. Proof of this is the fact that the balance sheets of the seven larges entities still contain foreclosed assets amounting to €68,734 million, a figure that increases to more than €75,000 million if we take into account the most representative banks. (….).

Of the banks on the Ibex, Sabadell leads the ranking by volume of foreclosed assets, with €19,900 million, despite having reduced its balance by 14.2% with respect to the first half of 2015 and having increased its sales through Solvia, its real estate subsidiary. That is because the integration of CAM still weighs down heavily on the balance sheet of the group chaired by José Oliu (pictured above).

Santander’s real estate activity has generated €16,000 million of assets, of which €6,000 million relate to Metrovacesa. The group calculates that €3,800 million of its assets have been foreclosed, the same level as a year ago, along with €2,000 million in overdue loans. (…).

BBVA is still generating losses in its real estate business, amounting to €209 million. The group chaired by Francisco González (FG) still holds €11,400 million in foreclosed assets, which represents a reduction of 13.1% compared with a year ago, but its default rate has risen to 57.1%, when at the end of the first quarter, it stood at just 50.5%. (…).

Meanwhile, the group chaired by Ángel Ron (Banco Popular) still holds more than €11,000 million in foreclosed assets on its balance sheet and the creation of its real estate area does not represent the creation of a bad bank, as Popular’s Finance Director, Francisco Sancha, explained during the presentation of the bank’s half year results.

CaixaBank managed to reduce its foreclosed asset balance to just over €7,000 million during the first half of the year. The entity combined the sale of properties with the rental of properties, although its default rate was also weakened by the weight of property.

Bankinter is enjoying the least problematic time, with just €554 million in foreclosed assets, almost half of which are residential properties, whilst land accounts for 27%. Its lower exposure to the real estate sector enabled it to navigate better than its competitors through the fallout from the burst of the real estate bubble.

Original story: Capital Madrid (by José Luis Marco)

Translation: Carmel Drake

CaixaBank Puts 144 Hotels Up For Sale Worth c. €1,000M

20 May 2016 – Expansión

CaixaBank has launched a mega hotel operation. The Catalan entity wants to sell off the majority of the hotel assets that have come into its possession during the course of the crisis, as well as some that it will soon foreclose. To this end, it has brought Project Sun onto the market, advised by N+1, whereby it is looking to sell its exposure in 144 hotels, valued at almost €1,000 million, according to financial sources.

The operation is divided into two portfolios: one with unpaid loans secured by 112 hotels; and the other with 32 hotel assets already foreclosed by the entity. In total, the properties that CaixaBank wants to sell contain almost 11,000 rooms.

This is the largest financial operation involving the divestment of hotels launched to date in the Spanish market. Bankia undertook a similar operation in 2014, with Project Amazonas, containing hotels worth €800 million, which were awarded to the specialist fund Starwood; and another one in 2015 for €400 million – known as Project Castle, which was sold to Davidson Kempner Capital and Bank of America.

Market trend

Santander and Sareb also wanted to join the party. Last year, the entity led by Ana Botín launched Project Formentera, containing 17 hotels worth €170 million. Meanwhile, Sareb, put a portfolio up for sale containing assets inherited from Polaris World, which were worth €500 million before they were transferred to the bad bank. Both operations have been postponed until this year.

The operation launched recently by CaixaBank has been distributed amongst investors. The entity hopes to close the deal during the month of July. Of the 144 hotels, two thirds are located in Andalucía (37), Cataluña (22), the Canary Islands (19) and the Balearic Islands (17), with an average value of almost €7 million. Both Andalucía and the Canary Islands are regions were CaixaBank increased its presence thanks to the acquisition of Banca Cívica. The other assets are distributed all over Spain.

85% of the hotels are four- and five-star properties, and more than half are holiday properties, situated on the coast. The portfolio also includes rural and urban accommodation. This type of portfolio mainly attracts large international opportunistic funds, such as Cerberus, Apollo, Oaktree, Starwood – specialists in hotels – and Blackstone.

Once they have been awarded such portfolios, investors try to make profits from the operation by selling the hotels to large specialist groups or to local property developers; and by restructuring the debt. Project Sun contains 108 loans, of which 35 are up to date and 75 are overdue. (…).


For CaixaBank, this type of operation allows it to reduce its default rate, obtain profits – depending on the price paid – and release provisions. The Catalan entity held €9,500 million of problem assets (net of provisions) linked to the real estate sector at the end of the first quarter 2016. This figure had decreased by 11% in the last year thanks to the sale of portfolios and foreclosed assets through Servihabitat.

In addition to this portfolio, the Catalan entity has another group of assets up for sale, Project Carlit, advised by PwC, through which it hopes to sell of €790 million in doubtful loans to property developers.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake