BBVA will be Twice as Profitable Following its Property Sale to Cerberus

11 June 2018 – Expansión

BBVA is going to double its profitability once it has completed the sale to Cerberus of its €13 billion real estate exposure, scheduled for the third quarter of the year. According to a recent report from Alantra, the ROTE ratio (Return on Tangible Equity) will leap from 7% to 15% in 2020. In addition to the aforementioned operation, which will eliminate in a flash the hefty maintenance costs associated with those properties, there will also be a positive impact resulting from the first upwards movement in interest rates (…).

The main advantage of removing the non-performing assets from its balance sheet is that it will allow the bank’s returns to flourish, which would otherwise be blocked. The key to being able to do this is having sufficient provisions to ensure that the sale of a large package to a specialist fund does not lead to significant losses on the income statement.

The operation between BBVA and Cerberus was the second largest of its kind in Spain last year. The largest was the deal involving Santander and €30 billion in property from Popular, which was sold to Blackstone.

BBVA created a company with Cerberus, controlled 80% by the US fund and 20% by the bank, to which it transferred 78,000 properties. Cerberus appraised them with a discount of 61%.

Cataluña

47% of those assets are located in Cataluña, historically the region covered by CatalunyaCaixa and Unnim, and absorbed by BBVA during the crisis. The Catalan political crisis, which reached its peak in October 2017 with the holding of an illegal referendum, came close to thwarting the operation. These homes will be managed by Haya Real Estate, the real estate management platform owned by Cerberus.

BBVA granted Cerberus a €800 million loan to finance part of the acquisition.

Following the deconsolidation, the bank’s real estate risk will be reduced to €11.4 billion. It barely has any doubtful property developer debt.

Original story: Expansión (by R. Lander)

Translation: Carmel Drake

BBVA Reduces the Property Portfolio that it will Transfer to Cerberus by 12%

17 May 2018 – Expansión

BBVA is not holding back in its strategy to reduce its exposure to the real estate sector ahead of putting the finishing touches to its agreement with Cerberus. The entity has already cleaned up some of the portfolio that it will transfer to the US fund in September.

Between the reference date for the operation – the end of June 2017, and March this year, the date of the most recent audited accounts -, the bank has decreased its foreclosed assets by 12% – those assets proceed from unpaid residential and property developer mortgages.

The bank is going to create a joint venture with the US fund to reduce its real estate exposure in Spain to almost zero. BBVA will sell 80% of that joint venture to Cerberus for an estimated price of €4 billion. But that amount may vary, depending on the volume of foreclosed assets that end up being transferred.

Initially, a portfolio with a gross asset value of around €13 billion was defined. By March, the entity’s foreclosed assets balance had decreased to a gross value of €11.541 billion. Most of the portfolio comprises finished buildings and land, which are easier to sell now thanks to the recovery of the real estate sector.

To cover its gross risk, BBVA has recognised provisions amounting to €7.073 billion, which reduces its net exposure to €4.468 billion. The coverage ratio of the foreclosed assets amounts to 61%.

Sources at BBVA explain that the portfolio that is going to be transferred to Cerberus also includes the ‘other real estate assets’ caption. The bank’s gross real estate exposure, including both concepts, amounted to €12.472 billion in March compared with €14.318 billion in June 2017.

Until the close of the operation, which is scheduled for September, the assets to be transferred to the joint venture will not be finalised. “Under no circumstances will transferring fewer assets result in a loss to the income statement. In fact, this operation is not expected to have a significant impact on the income statement”, explain official sources at the entity.

Solvency

The agreement with Cerberus will improve BBVA’s solvency. In March, the bank saw its core capital fully loaded ratio worsen to 10.9%. But the transfer of the real estate portfolio to the fund and the sale of its business in Chile will improve that metric to 11.5%.

BBVA has loaned Cerberus €800 million to finance part of its purchase of the real estate portfolio from the bank. The loan has a term of two years and will not accrue any interest. The fund will repay the debt in a single payment on the maturity date.

Spain’s financial institutions have stepped on the accelerator to clean up property from their balance sheets following Santander’s macro-operation to deconsolidate real estate risk amounting to around €30 billion proceeding from Popular (…).

Original story: Expansión (by R. Sampedro)

Translation: Carmel Drake

Santander Values its Stake in the JV with Blackstone at €1.566bn

16 May 2018 – Expansión

Santander has recorded on its balance sheet its 49% stake in the company that it has created with Blackstone for a value of €1,566 million. The stake has been recognised in the portfolio of investments in joint ventures and associated companies. The bank and the US fund, which controls the remaining 51% of the JV’s share capital, constituted the company on 22 March. The alliance, a conglomerate of companies grouped together under the parent company, Project Quasar Investments 2017, brings together the former real estate portfolio of Popular. It contains gross assets worth €30 billion, which have been appraised at €10 billion net under the framework of the transaction.

Meanwhile, the two partners have now agreed on the configuration of the Board of Directors for the joint venture. The governance body will comprise seven members. In line with the distribution of the share capital and its control of the management of the assets, Blackstone will have a majority of four positions on the Board, including that of Chairman.

Santander will be represented by three directors. One of them is Javier García Carranza, the executive to whom the entity chaired by Ana Botín has entrusted the process to clean up Popular’s balance sheet. García Carranza is the Deputy CEO of Grupo Santander and a member of Popular’s Administration Board, a transition body that will disappear once the legal merger of the two banks has been completed. García Carranza also represents Santander on the boards of Sareb, Metrovacesa and the real estate manager Altamira, amongst other companies.

The other directors linked to Santander that will sit on the Board of the joint venture are Carlos Manzano and Jaime Rodríguez-Andrade, specialists in real estate investments and asset recoveries, respectively.

Meanwhile, Diego San José, Head of Blackstone’s Real Estate division in Spain is going to be the Chairman of the company. Eduard Mendiluce, Jean Francois Bossy and Jean Christophe Dubois are the other directors who have been appointed by the fund.

In order to launch the company, Santander and Blackstone have subscribed a syndicated loan amounting to €7,332 million. Several banks have participated in the loan, which is led by Morgan Stanley and Deutsche Bank, including Bank of America Merrill Lynch, JP Morgan and RBS, as well as Blackstone itself, which has contributed €1 billion. The financing has been signed over a 5-year term and matures in 2023.

The sale of Popular’s real estate portfolio and the deconsolidation of the assets have resulted in a 10 point improvement in Santander’s core capital ratio. Its solvency now stands at 11%, the target for 2018.

Original story: Expansión (by M. Martínez)

Translation: Carmel Drake

Santander & Blackstone Inject €300M into their Real Estate Company

11 May 2018 – Eje Prime

Banco Santander and Blackstone are starting put the finishing touches to the bank’s sale of Popular’s real estate assets to the fund. As part of this process, both companies have decided to inject €300 million into Project Quasar Investment, the jointly owned real estate firm that they created in March to receive the €30 billion in assets transferred by the bank in the summer of 2017.

Blackstone owns 51% of the real estate company, whilst Santander owns the remaining 49% stake. The constitution of the company was undertaken with a minimum share capital of €3,000 and forms part of the commercial steps that both entities need to perform to close the operation, according to El Economista.

In addition to purchasing the majority of Popular’s real estate assets, the US fund also purchased Aliseda, the extinct bank’s servicer, from Santander, through which it will pilot the sale of the assets acquired. Part of this portfolio management process explains why Quasar has appointed Diego San José as its President, a strong man from Blackstone’s real estate department in Spain.

The following directors will work alongside San José to lead the real estate company: Eduard Mendiluce, CEO of Anticipa Real Estate, the US fund’s own asset manager; Christophe Dubois, Director General of Real Estate at Blackstone in London; and Jean François Pascal, the President of Fidere Patrimonio.

Meanwhile, on Santander’s side, it will be represented by the bank’s Head of Real Estate, Javier García Carranza Benjumea; its Director of Non-Performing Assets, Jaime Rodríguez Andrade; and the Metrovacesa board member appointed by Santander, Carlos Manzano.

Original story: Eje Prime

Translation: Carmel Drake

Blackstone Includes its own RE Manager in the Popular Divestment Deal

3 May 2018 – La Información

Blackstone’s real estate platform, Anticipa, is going to collaborate with Aliseda – founded at the time by Popular – in the management of its voluminous property portfolio. The US fund acquired Anticipa in 2014 when it was awarded Catalunya Caixa’s portfolio, and it has just taken control of Aliseda, as part of the mega-operation signed with Santander. The Cantabrian group included the real estate platform, together with a dozen real estate companies, in the €30 billion gross portfolio of properties that it transferred to the new company, in which Blackstone owns 51% of the capital and Santander held onto the remaining 49%.

Blackstone decided not to merge the companies but they are going to collaborate together, according to information submitted to the market about the syndicated loan signed to close Popular’s transaction. The toxic exposure divested by Santander in the deal known as “Project Quasar” has been valued at €10 billion net, given that there was a provision cushion amounting to 63% of the original value in the case of the foreclosed assets and 75% in the case of the loans.

The transaction was structured with the contribution of 30% in capital and 70% in debt. The bank and the fund are going to contribute almost €3 billion in capital and the remaining almost €7.333 billion will proceed from a financial structure led by Bank of America Merrill Lynch, together with Deutsche Bank, JP Morgan, Morgan Stanley, Parlex 15 Lux, The Royal Bank of Scotland and Sof Investment. The operation has been advised by the law firm Allen & Overy, amongst others.

The “Neptune” portfolio constituted to obtain the financing includes Aliseda in the perimeter along with numerous real estate companies and stakes held in them by Popular, including Tifany Investments, Corporación Financiera ISSOS, Pandantan (Mindanao), Taler Real Estate, Vilarma Gestión, Marina Golf, Popsol, Elbrus Properties, Cercebelo Assets, Eagle Hispania, Las Canteras de Abanilla and Canvives. A large proportion of the assets transferred are plots of land, together with residential homes, industrial warehouses, commercial properties, offices, garages and almost €1 billion gross exposure in hotels.

This operation is going to allow Santander to dramatically reduce its exposure to foreclosed assets from €41.1 billion to €10.4 billion – a figure that is reduced to a net of €5.2 billion thanks to the provisions it has recognised amounting to 50% of the initial value – but enabling it to benefit from the divestments as a shareholder of the company receiving the portfolios with a 49% stake.

The plan includes the use of Socimis

The fund’s divestment plans include constructing or transferring some of the assets to Socimis, a vehicle that Blackstone has made use of for previous operations because it offers tax benefits such as avoiding the need to pay Corporation Tax if they distribute dividends. In gross terms, residential assets accounted for almost one-third of the perimeter of the original properties involved in the transaction.

After leaving the Popular portfolio in the hands of Blackstone, Santander still has €4 billion net in foreclosed assets and €1.2 billion in doubtful financing that it wants to get rid of soon. The bank plans to repackage the assets by batch and put them on the market, where half a dozen entities and Sareb are exploring how to get rid of almost €48 billion gross – the bad bank alone is looking for a buyer for the €30 billion whose sale is being managed by Haya Real Estate, and Sabadell has several batches up for sale amounting to almost €11 billion.

The Cantabrian group acquired Popular when it had closed the chapter to clean up its real estate and now it wants to return to that position quickly. It was its real estate division to leave behind the “red numbers” this year or by the early stages of 2019 at the latest.

Original story: La Información (by Eva Contreras)

Translation: Carmel Drake

Blackstone Lends Fidere €543M to Pay a €120M Dividend

23 April 2018 – Eje Prime

Blackstone is going to refinance all of the debt owed by Fidere, its rental home Socimi. The US fund has signed a €543 million loan with an international finance company for its Spanish subsidiary. Thanks to this operation, the company is going to be able to distribute a dividend amounting to €120 million, as reported by the group to the Alternative Investment Market (MAB).

In addition to undertaking the refinancing of this debt, Blackstone is planning to use this new loan to tackle Fidere’s investment plans and to manage the distribution of the group’s reserves. In this sense, the objective of the fund, as the majority shareholder, is to raise funds to pay a mega-dividend.

Currently, Fidere has a financial debt with the fund that owns it of €117 million, in addition to the €270 million that it holds in mortgage loans with several Spanish financial institutions such as BBVA, Sabadell, CaixaBank, Popular and Bankia.

The capital injection that Blackstone has made into its real estate subsidiary has a term of two years, with the option of being extending to five years in the event that certain conditions are fulfilled. The payment of interest has been set quarterly at a rate of Euribor plus 2.5%.

This operation follows others that have been completed in the real estate sector in recent times involving international investment funds and real estate companies. Blackstone itself purchased most of the now extinct Popular’s toxic assets, worth €30 billion, from Banco Santander. BBVA also sold a large portfolio to another fund, Cerberus, whilst, recently, Testa managed to sign a €800 million loan without any mortgage guarantee.

Fidere owns 10,000 residential assets for rent, after starting operations four years ago with 1,860 homes, acquired from the Municipal Housing Company of Madrid (EMVS). Most of the Socimi’s homes are located in Madrid, although the company also owns properties in other cities, most notably, Barcelona.

Original story: Eje Prime

Translation: Carmel Drake

Cerberus, Blackstone & Lone Star Ask Sabadell to Sell Solvia with its Real Estate

23 April 2018 – Bolsa Mania

The large opportunistic funds are setting their sights on Banco Sabadell to close one of the major operations in Europe of 2018. The sounding out process initiated by the Catalan entity to transfer around €7.5 billion in real estate assets, as published by this newspaper, is generating a lot of interest amongst the large international funds, according to Vozpópuli.

At least three of them are examining the portfolio carefully: Cerberus, Blackstone and Lone Star, according to financial sources consulted by Vozpópuli. The third is the only one that was left out of the major operations signed in 2017 involving: Popular’s real estate – Project Quasar – which Blackstone purchased; and BBVA’s property – Project Marina, which Cerberus acquired, and which is pending final approval. For the time being, the other ‘usual suspect’ Apollo is not involved in the latest operation.

The same sources add that the funds have suggested that Solvia should be included in the sale. That would achieve several objectives: it would retain the managers that know the assets and add volume to their real estate platforms in a sector that is in the midst of consolidation. Cerberus owns Haya Real Estate, which is in the process of making its stock market debut; and Blackstone owns Anticipa and Aliseda. Meanwhile, Lone Star has experience in the sector as it was the inspiration behind Neinor.

Original story: Bolsa Mania

Translation: Carmel Drake

Blackstone Increases Volume of Spanish RE Acquired During the Crisis to €20bn

6 April 2018 – Voz Pópuli

With €20 billion, all of Bankia’s pending aid could be returned and the extra pension increase announced by Cristóbal Montoro last week could be applied. That figure is how much Blackstone has committed to the Spanish real estate sector during the crisis.

That €20 billion includes the most recent major investment announced by the US fund, one of the largest in the world, in Hispania. Blackstone has acquired a 16.5% stake in the Spanish real estate company, worth €315 million, and has launched a takeover bid for the whole company, worth €1,900 million.

Even if that operation does not prove successful, Blackstone has already placed €18 billion on the table in real estate acquisitions in Spain in recent years. That figure, which includes debt, represents 7% of the €300 billion that the fund manages in the real estate sector around the world.

At the European level, Spain is one of the fund’s favourite destinations, together with Germany, Italy, the United Kingdom and Scandinavia.

It is already managing Quasar

Of that €18 billion, the bulk corresponds to the recent acquisition of Popular’s property, which is worth €10 billion. Blackstone controls 51% of the new company that owns the €30 billion in real estate assets inherited from the bank that was sold to Santander.

Another recent operation was Blackstone’s purchase of Sabadell’s hotel subsidiary, HI Partners, for €630 million.

An acquisition in 2014 also stands out involving Catalunya Banc’s problem mortgages, for which it paid €3.6 billion. Moreover, Blackstone has been purchasing assets from CaixaBank, BBVA and Sareb, amongst others, in recent years, and has also made investments in logistics centres through Logicor.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Blackstone Wants to Create a Hotel Leader with Hispania

5 April 2018 – Expansión

The investment fund Blackstone is considering a corporate operation involving the real estate group Hispania, as revealed by the online edition of Expansión yesterday. Financial market sources indicate that the fund is interested in the group’s real estate assets, rather than in Hispania’s company structure, and may make an offer shortly. Half an hour before the close of trading yesterday, Spain’s National Securities and Exchange Commission (CNMV) decided to suspend trading of the company’s shares when they had risen by 1.65% to €18.50 per share.

In the statement, the regulator indicated that trading would remain suspended “whilst the relevant information is communicated”. The Socimi’s asset portfolio amounted to €2.5 billion at the end of last year, of which €600 million corresponds to the 25 office buildings that it is looking to sell as part of its strategy to focus on the hotel management business. The transfer of that real estate portfolio is already on track and could materialise soon with its sale to the fund Tristan Capital. That portfolio would have to be excluded from the bid that Blackstone is considering, which would amount to around €1.7 billion, according to sources in the real estate sector.

Blackstone’s objective is to acquire Hispania’s hotel portfolio, the largest in Spain, taking advantage of the interest from its existing shareholders, including George Soros, to close their investments in Spain, which were initiated in 2014 and which are expected to be liquidated in 2020. To this end, the price set in the negotiations would have to come close to the valuation of the hotel portfolio, estimated at €1.638 billion as at December 2017, compared to its current market capitalisation of around €2.0 billion. The valuation of the portfolio reflects an important appreciation with respect to the purchase cost of the assets contained therein, in which Hispania invested just over €1.069 billion, and 42% more than the total allocated, including spending on renovations and updates to the properties.

At the end of last year, the Socimi reached an agreement with its until then partner in Bay, the hotel group Barceló, to acquire 100% of that subsidiary. According to the most recent accounts, Hispania’s hotels generated revenues of €129.67 million in 2017, up from €117.8 million recorded the previous year. Of that amount, €77.9 million was generated by properties in the Canary Islands, followed by €22.1 million contributed by hotels in the Balearic Islands and €8.7 million by hotels located in Madrid.

Blackstone is the international fund with the greatest exposure to the Spanish real estate sector, following several record-breaking operations. It owns assets worth €15 billion, including 51% of Popular’s real estate business, with a gross value of €30 billion, but acquired for €5 billion. Last year, it also purchased HI Partners, the hotel subsidiary of Sabadell.

Original story: Expansión (by R.Ruiz/R.Arroyo/M.Á.Patiño)

Translation: Carmel Drake

Popular’s €10bn Portfolio Sale Was The Largest RE Operation in the World in 2017

26 March 2018 – Cinco Días

Spain was the setting for the largest real estate operation in the world in 2017. The stars were Santander, as the vendor, and Blackstone, as the buyer. The object of desire was the property portfolio that took down Popular. The price: no less than a valuation of €10 billion.

The purchase of Popular’s property portfolio (containing real estate assets and loans with real estate collateral) led last year’s ranking of the largest operations in the sector involving a single asset or portfolio, compiled by Real Capital Analytics (RCA). Of the largest transactions, those undertaken in China stand out in particular, as well as a handful of deals completed in the United Kingdom. The classification excludes operations involving the purchase of companies.

The operation to sell Popular’s portfolio, announced in August, after Santander took control of the entity in June, was structured into a company worth €10 billion, in which Blackstone controls 51% and the rest remained in the hands of the bank chaired by Ana Botín.

Following that purchase, as well as others, such as Catalunya Caixa’s portfolio, Blackstone is now one of the largest owners of real estate assets in Spain. Another major operation of this nature was closed a few months later when Cerberus purchased 80% of BBVA’s real estate portfolio worth €5.5 billion (…).

In total, around the world, last year, deals worth USD 143.2 billion were closed, which represented an increase of 14% compared to the previous year.

China starred in the majority of the largest operations last year. China Vanke acquired an enormous land portfolio for real estate developments in Cantón for €7.1 billion, which constituted the second largest transaction of 2017. The next largest sale in the Asian country was the purchase of part of an office and retail development in Shenzhen by the company Kingboard, which is headquartered in Hong Kong (…).

In Europe and the USA, the focus was on alternative investments, such as student halls of residence, hospitals and logistics warehouses.

In fact, the third largest transaction in the world last year involved an alternative investment. Specifically, the sale of a stake in a portfolio of hospitals and 200 nursing homes in the USA and UK, which was purchased by the Chinese insurance company Taikang Insurance Group.

In Europe, in addition to Popular’s portfolio, the next largest deal saw the sale of the Bluewater shopping centre in the United Kingdom, worth €2.1 billion, in which Royal London Mutual Assurance acquired a stake.

In terms of office buildings, the sale of the Leadenhall Building in London, popularly known as the “cheese grater”, also stood out; it was acquired by the investment group CC Land, from Hong Kong, for more than €1.3 billion.

Typically, the large buyers include the largest investment managers, such as Blackstone, Brookfield, Deka, THI, Axa, Invesco and Morgan Stanley, whose clients tend to include sovereign funds from Norway and Abu Dhabi, as well as universities (for example, the Harvard investment fund) and workers’ unions or pension funds (German doctors, public sector workers from Korea and Ontario…).

In terms of 2018, for example in Europe, Borja Sierra, Executive Vice-President of Savills Aguirre Newman, believes that the clearest trend will be investment in the residential rental sector as a form of institutionalised real estate investment. “With the scenario of rising interest rates and measures from Trump that favour the renewal of infrastructure in the USA, I think that we will see a migration towards infrastructure funds, a move that will somewhat reduce investment pressure on the real estate sector. Nevertheless, the year has started with volumes that exceed those recorded in 2017, and so we expect a good year”.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake