Värde Buys San José’s RE Arm & Will Build 1,500 Homes

7 August 2015 – El Confidencial

After months working on the sidelines, the private equity firm Värde Partners has finally taken control of San José Desarrollos Inmobiliarios, the real estate arm of the Galician group. The US fund has purchased a 25% stake in the company from Banco Popular for €90 million, in a deal signed on Wednesday, taking its ownership stake to 51%.

From this position of power, Värde expects to immediately carry out a €60 million capital increase, in a move aimed at shoring up the company and laying the necessary foundations to start developing properties. The aim of the fund, which will invest €150 million in the company in total, through its purchase from Popular and the subsequent capital injection, is to start the construction of 1,500 homes across Spain, clearly underlining its commitment to the Spanish property market.

The US firm is one of the most active foreign investors in the sector, where it has now made three major investments. It all began in the Summer of 2013, when it partnered up with Kennedy Wilson in an agreement to acquire Catalunya Banc’s real estate management platform for almost €30 million, although the two parties ended up breaking that pact a few months later.

The two firms crossed paths once again at the end of 2013, when they pipped Centerbridge at the post, to acquire Aliseda, the real estate arm of Banco Popular, for €815 million. That operation allowed them to take over the management of mortgage-backed loans with a net value of €9,350 million and foreclosed assets worth €6,500 million.

Far from being content with that transaction, Värde then began to acquire stakes in San José Desarrollos Inmobiliarios through the back door, by purchasing loans from its creditor entities. It signed those purchase agreements with discounts of around 90% and whereby became the company’s main creditor, just when the parent company of the Galician group was finalising the refinancing of its €1,600 million debt with the banks.

The final agreement was signed at the end of 2014 and involved dividing the company chaired by Jacinto Rey (pictured above) into two: on the one hand, the construction business, and on the other hand, the real estate company, which it was agreed would pass into the hands of the creditors to repay €743 million of the debt.

Sources state that Värde does not currently have any plans to integrate Aliseda with its recent purchase of San José Desarrollos Inmobiliarios…(…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Sacyr Sells Its Subsidiary Testa To Merlin For €1,793M

9 June 2015 – Expansión

Strategy / The construction company cleans up its balance sheet with this transaction and improves its financial position, with a view to growing its international construction and concessions businesses.

Yesterday, Sacyr agreed the sale of its property subsidiary, Testa, to the Socimi Merlin Properties for €1,793 million. The group chaired by Manuel Manrique (pictured above right), which has been advised by the bank Lazard, has opted for Merlin’s proposal after rejecting the bids made by other investors such as the US fund Blackstone and the real estate company Colonial.

The agreement forms part of an “accordion operation”, in which Testa will simultaneously make a contribution to its shareholders of €1,196 million, through an ordinary dividend of €527 million and a reduction in share capital of €669 million. Through this transaction, Sacyr and Testa will normalise their balance sheets.

The sale comes just two days before Sacyr’s AGM, to be held on Thursday, where the Chairman of the group, Manuel Manrique, will reveal the foundations of the new industrial plan based on international construction and the development of concessions.

The largest Socimi

Merlin is the largest Socimi (listed real estate asset investment company) on the Spanish stock exchange, with a market capitalisation of €2,208 million and a portfolio of assets worth €2,594 million. The company debuted on the stock exchange on 30 June last year with €1,250 million of share capital from investors such as UBS, Marketfield and Gruss Capital.

Merlin, the real estate company controlled and chaired by Ismael Clemente (pictured above left), wanted to expand its assets with the purchase of a significant stake in a company in the RE sector and set its sights on Testa a while ago. Sacyr’s subsidiary closed yesterday with a market capitalisation of €2,906 million.

Sacyr holds a 99.93% stake in Testa; the remaining shares are listed on the stock exchange. The company has been looking for a partner for several months, to inject capital into its subsidiary. The search for an ally led Sacyr to consider an IPO of Testa’s shares aimed at institutional investors in order to strengthen its subsidiary’s balance sheet. The initial objective was to place 30% of the shares, but the construction company increased the option to 100%, once it had assessed the appetite of investors.

Merlin has more than enough financial muscle to handle this operation. In April, the company announced a capital increase amounting to €613.7 million. The real estate company, which earned €19.2 million during the first three months of 2015, has already invested the €1,250 million it secured from its debut on the stock exchange.

Testa owns real estate assets valued at €3,180 million, according to the most recent appraisal completed on 31 December 2014. Its properties include the Torre Sacyr, in the Cuatro Torres Business Area in Madrid, and Diagonal, 605 in Barcelona. It also owns two office buildings on Paseo de la Castellana, at numbers 193 and 83, where the construction group has its headquarters. Furthermore, it is the owner of several shopping centres in Malaga and on the Balearic Islands, and also owns residential blocks for rent. In 2014, Testa recorded turnover of €187.9 million.

(…)

Original story: Expansión (by R. Ruiz and C. Morán)

Translation: Carmel Drake

KKR Considers Buying One Third Of Acciona’s RE Subsidiary

18 March 2015 – El Confidencial

The group owned by the Entrecanales family is looking for a partner to allow it to ‘ride the wave’ of the real estate recovery and has invited the US fund to be its travel companion.

KKR. The acronym of Kohlberg Kravis Roberts has become Acciona’s most important partner in recent times. Last June, the private equity giant purchased a third of the international renewable energy business owned by the Entrecanales family’s group for €417 million, and in a stroke, that allowed the Spanish group to clean up its accounts, fulfil its divestment plan six months early and rethink other sales that it had on the table, such as Bestinver and Acciona Inmobiliaria.

The sale of the latter became more attractive after the company was strengthened through the hiring of Walter de Luna, who was until then the number two at Sareb, as the CEO, and Luis Moreno, who was his right hand man at the bad bank; they joined the company with the clear challenge of designing a plan for growth. Nevertheless, that plan requires resources and, once again, Acciona’s American friend seems to be willing to help out.

According to knowledgeable sources, KKR is considering buying share capital in Acciona Inmobiliaria; and if the negotiations between the two parties go well, they will culminate in a third large transaction between the fund and the Spanish group, because, as well as having acquired the international renewable energy business from the construction company, KKR has also created a joint venture with the Spanish group, containing wind assets, the famous ‘yieldco’, which it expects to list on the Nasdaq soon.

In recent official presentations, Acciona itself has formally acknowledged the badly-kept secret that it is looking for a partner to inject the money it needs to reinvigorate its real estate subsidiary and thus be in a position to benefit from the recovery that is emerging in the sector, now that it has managed to sort out the direction of the parent company.

The book value of Acciona Inmobiliaria amounts to c. €1,500 million and market sources indicate that the goal of the Entrecanales family would be for the new partner to take ownership of around one third of its share capital. Nevertheless, other alternatives have also been put on the table (in the discussions with KKR), such as tackling projects together, since the Spanish group has (lots of) projects (in the pipeline) and the American fund has cash.

KKR’s commitment to Spain

Spain has become a priority market for KKR in Europe, where its Operations Director, the Spaniard Jesús Olmos, has been the main driver behind the firm’s growth in our country in recent years. He has led the investment of more than 2,400 million dollars in companies such as Saba, Telepizza, Uralita, Grupo Alfonso Gallardo, Port Aventura, T-Solar and, of course, Acciona. These transactions have been strengthened by the fund’s decision to open an office in Madrid and recruit Alejo Vidal-Quadras, who was the CEO of 3i España until last December.

Now, one of KKR’s next goals in our country is to position itself as a player of reference in the real estate sector, as well as to open its sphere of operation to investments in credit and to continue its growth in infrastructure.

Meanwhile, after seven years of crisis and various failed sale attempts, Acciona Inmobiliaria managed to recover in 2014 to record positive results; it closed last December with an EBITDA – earnings before interest, tax, depreciation and amortisation – of €3 million, compared with losses of €2 million a year earlier.

The group owned by the Entrecanales family values its subsidiary at €1,529 million, of which it considers around 70% (€1,199 million) to be gross gains by the group. By geographical region, 87% of the subsidiaries’ assets are located in Spain and only 13% are overseas; whereas if we analyse the subsidiary in terms of turnover, 45% relates to property (primarily residential), 37% corresponds to land in Spain, 8% is land overseas and development activity accounts for the remaining 10%.

Original story: El Confidencial (by R. Ugalde)

Translation: Carmel Drake