Apollo Engages Goldmans to Sell Altamira for c. €600M

8 October 2018 – Eje Prime

Apollo is getting down to work to divest Altamira and, to this end, has engaged Goldman Sachs to execute the mandate. The US fund renewed its contract with the investment bank and has now distributed the sales document for the servicer to potentially interested parties for an amount that ranges between €500 million and €600 million.

The real estate asset and loan manager, Altamira, is primarily owned by Apollo, which holds 85% of its share capital, whilst the remaining 15% stake is in the hands of Santander. The intention of the fund is to officially launch the sale over the coming weeks and to close the operation during the first quarter of 2019, according to reports from Expansión.

Just over a year ago, Altamira’s portfolio was valued at close to €1 billion, but the amount has varied depending on the assets under management at any given moment. At the end of 2017, the package of assets that the company had under management amounted to €50 billion.

Similarly, the principal value of the servicer is the long-term contract that it has with Santander, as well as the contract for the management of assets owned by Sareb. Potential buyers of Altamira include funds such as Deutsche Bank, Bain Capital, Kennedy Wilson, Baupost and Castlelake.

Original story: Eje Prime

Translation: Carmel Drake

Apollo, CPPIB & ADIA Are Open to Offers for Altamira

12 July 2018 – Voz Pópuli

The ownership of the real estate company Altamira may change hands over the coming months. The company controlled by the fund Apollo has hung up the “For Sale” sign after the refinancing and restructuring of its contract with Santander, signed just a few days ago, according to financial sources consulted by Voz Pópuli.

At least 85% of the real estate firm will go on the market. The servicer currently manages assets worth €54 billion. The US fund Apollo is the entity that controls the majority stake, whilst its ownership is shared equally with two other partners: the largest Canadian fund, CPPIB (Canada Pension Plan Investment Board); and the main Abu Dhabi investment fund, the ADIA (Abu Dhabi Investment Authority) sovereign fund.

Each of them controls 28.3% of Altamira, just like Apollo, although it is the latter who leads the real estate company and chairs its Board.

Divestment

After four and a half years of investment, the main shareholders have decided that now is the right time to sell, given the strong performance of the real estate market and the appetite from large investors to enter the business.

In fact, sources consulted indicate that several international and Spanish investors have already approached Altamira. One of the candidates is Haya Real Estate, a similar platform, owned by Cerberus, which is interested in growing its business ahead of a potential stock market debut.

Another possibility being rumoured in the market is that CPPIB itself may purchase the 56% stake in Altamira currently owned by Apollo and the Abu Dhabi sovereign fund. The Canadian fund entered the market for the acquisition of toxic asset portfolios from the banks last year with a bang, by closing an operation with Sabadell; and this year, it has signed another deal with BBVA.

The possible sale of Altamira comes after the refinancing of the real estate firm agreed with the banks and the renegotiation of the contract with Santander. Thanks to this operation, the shareholders of Altamira are now going to share out a €200 million dividend, according to El Confidencial, which means that the numbers already add up for the funds.

The relationship between Apollo and Santander

Apollo and its two partners already tried to exit Altamira two years ago but failed to reach an agreement with Santander, which made a low offer that was not accepted. Since then, the real estate firm has pushed ahead with its own internationalisation by branching out into Portugal and Cyprus.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Deloitte: Residential Property Developers Set Their Sights on Consolidation

1 March 2018 – Expansión

The residential sector is on a roll. After years of significant declines in property development activity in Spain, the housing industry recorded its best year since the crisis in 2017, with a total of 500,000 transactions, of which almost 85,000 involved new homes, although the evolution of house sales is still light years away from the levels seen in 2007.

In this context, prices also recovered, recording an increase of 6.6% between 2014 and the third quarter of 2017, albeit with significant differences by province. This recovery in prices came after a cumulative decrease of 27.3% between 2008 and 2014, according to data reflected by Deloitte in its report The Residential Development Handbook. According to that analysis, there are currently 2,150 developments underway, with 114,000 homes being built. Of the total new developments, almost 80% are located in just 10 provinces.

This recovery is happening in the context of a favourable macroeconomic evolution with GDP growth of 3.1% in 2017, a reduction in unemployment and a favourable demographic makeup: Spain has 21 million citizens aged between 25 and 55 years, who may become potential buyers.

Moreover, financing is working in favour of house sales as the banks have opened the credit tap once again, although with greater demands on borrowers and more rigorous controls.

Alberto Valls, Partner responsible for Real Estate at Deloitte, explains that there is “growing unmet demand, which extends beyond the 10 main provinces”. In this sense, sources at the Deloitte have identified 272 hotspots where both demand and prices are growing, unemployment is decreasing and the market dynamics are favourable. “One third of those hotspots are not being covered by any property developers”, explains Gonzalo Gallego, Partner at Deloitte in the Financial Advisory Real Estate team.

These hotspots are located in 158 areas of the country. Specifically, Madrid and Barcelona account for more than 35% of them. In this context, funds such as Castlelake, Cerberus, Blackstone and Värde saw an opportunity in the wake of the recovery and have set up shop in the country. Others, such as Lone Star, have already completed their cycles, and with the sale of its entire stake in Neinor, which has been listed for less than a year, has collected its gains.

For Valls, the Spanish market continues to offer opportunities for investors to create value. “They are continuing to invest through alternative structures: alliances in projects, purchases of property developers and development of platforms for their subsequent debuts on the stock market”, he says.

The Partner responsible for Real Estate at Deloitte also recalls that, despite the creation of new players, the residential market in Spain is “highly fragmented”. And he predicts: “The market for real estate property developers is going to become more concentrated”.

Specifically, the five largest property developers in Spain account for just 6% of the market in terms of units handed over and 12% of the units under development. If we compare those figures with other more mature markets, the Top 5 British property developers account for 39% of the total units handed over, whilst the top five French developers account for 42%, according to data from Deloitte.

Large listed companies

Placing the focus on the large listed property developers, Metrovacesa, Aedas and Neinor, which have a combined stock market capitalisation of €5.2 billion, together, they own a portfolio of land with capacity for the development of 61,500 homes. Their French counterparts Nexity and Kaufman Broad, which have a combined market value of €3.3 billion, own land for the development of 72,100 homes. Meanwhile, the eight largest property developers in the UK, including Persimmon, Taylor Wimpey and Barratt, which have a combined market capitalisation of €37 billion, have potential land for around 300,000 homes.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Merlin Considers Creating New Hotel Socimi

15 November 2016 – Expansión

Merlin is going all out following its merger with Metrovacesa and is now busy exploring new market niches. The new real estate giant is analysing alternative options for the sale of its non-strategic assets, and now that it has set the future of its residential business on course, it is searching for a solution for its hotel portfolio – one option includes creating a new specialist Socimi to compete in the market.

“We will analyse the book value of our assets and we will determine whether a block sale from the portfolio is possible. If not, because the cost of capital of the potential buyers is very high, then we will probably opt for a solution that is similar to the one we have applied to the residential business. We will create a subsidiary, we will look for partners and we will constitute a company, in which we hold a majority, minority or equal stake, to serve as an owner of urban hotels”, explains Ismael Clemente, CEO of Merlin.

Following the integration with Metrovecesa, Merlin has gone from having 12 hotels worth €398 million, to owning 24 hotels with a gross value of €654 million. In this way, the new Merlin has multiplied the value of its hotel assets by 1.6x following the integration. By number of rooms, the union between Merlin and Metrovacesa has given rise to a giant hotel company with almost 4,500 rooms and a gross yield of 5.8%, according to the most recent data available.

In terms of its main rival in the sector, Hispania, Clemente says that “if there are any solutions that we can find together, we would be delighted to explore them”.

Merlin is now beginning a new phase in its journey, having created a business with assets worth €9,500 million in just two years. (…).

The listed real estate company, the only one to feature in the Ibex 35 following Colonial’s departure in 2008, faces a difficult year ahead with the major task of integrating Merlin and Metrovacesa’s teams. “By the end of the first quarter, the integrated team will work together in one location, which will not be where either of them are currently based”.

In addition, one of Merlin’s other challenges for 2017 is to dramatically improve the occupancy rate of the offices that it has inherited from Metrovacesa, as well as to perform a “significant” intervention in the shopping centres of both companies. (…).

Growth in housing

In terms of its plans for Testa – the subsidiary that owns the Socimi’s rental homes – Clemente says that, at the moment, the firm is holding conversations with other companies, as well as with its shareholder banks, with the aim of increasing its portfolio by incorporating new assets.

“We think that this vehicle has the potential to become a major player in the professional market for residential rental properties in Spain. The vehicle could own between 9,000 and 10,000 homes by the end of 2017”. (…).

Original story: Expansión (by R.Arroyo and R.Ruiz)

Translation: Carmel Drake

Aguirre Newman Puts Large High Street Portfolio Up For Sale

21 April 2016 – El Confidencial

Aguirre Newman has decided to put the “For Sale” sign up on one of the largest assets that it owns through its fund, Zaphir. The asset in question is a portfolio of retail outlets spread across Spain, all of which are located on major high streets. Moreover, unlike the operations carried out by the banks and El Corte Inglés, this portfolio has lots of different tenants.

The firm, which has engaged Arcano to lead the process, considers that this multiplicity of clients is an advantage, along with the €32 million of prior year tax losses recorded by the holding company that owns these premises, which mean that the operation carries tax advantages of around €8 million.

Zaphir has already started to show the 32 assets that comprise this operation to a restricted number of interested parties, mainly core investment funds, Socimis and large family offices, on the basis that the estimated sales price amounts to €80 million, according to sources familiar with the process.

Although the portfolio is spread across Spain, almost half of the premises (15) are located in Madrid and they account for 56% of the rental income, together with some first-rate properties, such as number 82 on Calle Serrano, which houses the Trussardi store.

Despite the interest that some of these premises may awaken individually, the operation has been structured as a “share deal”, in other words, the company will be sold in its entirety, which will allow the new owner to avoid paying taxes on the gains generated by these assets, and any others than it already owns, until the prior year tax losses have been offset.

The average yield of the portfolio is estimated to amount to 4-4.5%, whilst its historical occupancy rate stands at 90%, with clients ranging from retail giants such as Zara Home, Vips, Trussardi, Cortefiel and Punt Roma, to pound shops and newsagents.

The sales process

Aguirre Newman’s decision to sell this portfolio forms part of its divestment plans for the Zaphir fund, which just two months ago completed the transfer of its logistics assets to Neinver and Colony for €87 million.

But, this divestment also comes at a particularly sweet time for the sector, given that interest in investing in profitable real estate assets is at its peak, due to the environment of zero and negative interest rates and the recovery of the Spanish economy.

In fact, last year, according to several studies, almost €1,200 million was spent on transactions in the retail sector, and some establishments in prime areas were sold with yields of around 3%.

This year it is expected that operations involving this kind of asset will multiply, both on the high streets of major capitals, as well as in secondary cities. These operations are beginning to address the recovery in consumption and the growing interest for a presence in our country, from both major fashion firms (Inditex, Primark, H&M and Uniqlo) as well as from players in the restaurant world (the hamburger chain Five Guys has arrived in Spain, opening its first property in Madrid).

The calendar communicated to potential buyers allows for the presentation of non-binding offers within the next two weeks, with the aim of closing the operation before the summer. Aguirre Newman and Arcano both declined to comment on the operation.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake