Tag: Project Big Bang

Banks Sell 35,000 Foreclosed Homes In H1 2015

3 August 2015 – Expansión

An increase of 10% / Bankia, Popular and Bankinter are leading the increase in house sales, due to a rise in demand, the macroeconomic improvement and the institutions’ appetite to grant more mortgages.

The divestment of the real estate assets continues to be one of the Spanish banking sector’s main priorities. The major entities in the country have sold almost 35,000 homes during the first half of the year, an increase of 10% compared with the same period last year, according to the half year results published to date.

Leading bankers have explained that the improvement in demand, thanks to the macroeconomic recovery and the re-opening of the credit tap, has facilitated this trend. “We have noticed a significant increase in retail demand”, said Francisco Gómez, the CEO at Popular, last Friday.

Just as important for this recovery is the fact that house prices have risen and are now coming into line with the levels that the banks have accounted for them on their balance sheets, following the provisions made in recent years.

Furthermore, the entities are now realising that they can sell their assets with lower discounts and in some cases, even make small profits. In this way, José Antonio Álvarez, CEO at Santander, reported at the entity’s results presentation, that discounts have decreased from 40% to 35%; and Carlos Torres, the number two at BBVA highlighted that his entity has obtained profits of €35 million from sales made during the first half of the year. Sabadell has also seen an increase in its sales prices.

Despite this increase, the balance of foreclosed assets on the entities’ balance sheets has remained stable and even increased slightly in some cases, given that the banks are continuing to convert loans into non-performing assets. At the end of 2014, the sector still held more than €80,000 million in homes, property developments and land on their balance sheets, left over from the crisis, according to figures from the Bank of Spain.

Bankia is one of the entities that has accelerated its sales in recent months, doubling them during the first half of the year. The CEO of the bank, José Sevilla, explained that these assets represent an unnecessary cost for the entity. For that reason, in addition to the sales it is making to individuals through its branch network, it has launched an operation to get rid of all of its foreclosed assets – Project Big Bang – worth €4,800 million, for which it will receive bids in September.

New asset managers

Sources at Popular, another one of the entities that has seen the greatest increase in sales during the first half of the year, note that another one of the key changes has been the entry of new professional management firms into the sector, following the sale of several real estate managers in 2013. “Our sales management has improved significantly thanks to the Aliseda operation. And we expect that trend to continue in the future”, said Gómez. Popular is set to exceed its goal of generating €2,000 million from the sale of properties in 2015.

Ibercaja also notes a “positive trend” with a 66% increase in the sale of homes. That entity has a similar plan to that of Bankia, i.e. to sell all of its foreclosed assets in the short-medium term, just like Kutxabank did last year.

On the other hand, the three largest banks have decreased their sales in terms of the number of units. These financial groups are focusing on reducing the discounts they offer, and they are under less pressure since their real estate arms have decreased their losses over the last year: by 38% in the case of Santander and by 35% in the case of BBVA.

Meanwhile, CaixaBank generated €2,346 million from the sale and rental of real estate assets in the last twelve months, an increase of 2.5% compared with the previous twelve months, according to data from the entity.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Project Big Bang: Bankia Open To Offers For Its €4,200M Portfolio

29 July 2015 – Expansión

Big Bang. That is the name of the large operation that Bankia has launched to sell a huge portfolio of real estate assets, including foreclosed residential and commercial properties, whose gross value currently amounts to €4,200 million.

These are assets that were not transferred to Sareb back in their day because they did not fit in its perimeter.

After the summer, the entity led by José Ignacio Goirigolzarri will evaluate offers submitted by potential buyers to decide whether to go ahead with this project, which represents the largest single divestment project launched to date by the nationalised entity. Its successful completion would represent a definitive boost to the clean up of Bankia’s balance sheet. Blackstone, Lone Star and Apollo have all expressed interest in the portfolio.

“By September, we will have received clear expressions of interest”, revealed the CEO of Bankia, José Sevilla (pictured above), at a presentation to analysts of the results for the first half of the year, which showed an attributable profit of €556 million, up 11.5% on the same period last year. “Then we will decide whether the operation makes sense or not”, he added. (…)

Sources close to the operation state that the portfolio is flexible, in the sense that, it may be sold in one block or divided into several sub-portfolios based on asset type, to suit investors’ preferences.

After accounting for provisions, the net book value of the foreclosed portfolio amounts to €2,875 million. The majority of the assets, worth €2,122 million, were originally loans for house purchases, whilst those relating to real estate construction and development amount to €315 million – most related to finished buildings, but some also corresponds to land.

During the first half of 2015, the entity sold 4,135 properties, more than twice the volume sold in the same period last year (1,919), at discounts of between 30% to 35%. This may serve as a benchmark for the sales price that Bankia expects to obtain for the Big Bang portfolio. (…).

The act of managing the foreclosed assets represents a cost for the entity, whose objective is to use some of the funds it obtains from the sale to finance investments that boost its business, which is now focusing on granting credit to consumers and SMEs. (…).

In parallel, Bankia wants to accelerate the sale of its doubtful debt portfolios; and it expects to achieve the objective it has set of reducing the balance by €2,000 million in 2015. (…).

During H1 2015, the entity reduced its doubtful balances by €1,239 million, bringing the total down to €15,310 million and thus established a default rate of 12.2%, which represents a decrease of 0.7 p.p. since the end of 2014. Moreover, recoveries (€2,490 million) exceeded gross defaults (€1,720 million) during the six months to June.

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake

Apollo, Oaktree & Elliott Buy 1,000 Homes & 5,000 Mortgages

7 July 2015 – Expansión

Overseas funds are becoming the new owners of banks’ problem homes and mortgages. In recent weeks, Bankia, BMN and Bankinter have all signed deals – or are close to doing so – to transfer almost 5,000 mortgages and 1,000 homes to five international funds.

According to financial sources, Apollo, Oaktree and Elliott have invested the most in the transactions, although the funds Chenavari and Ellington are also close to finalising agreements.

These sales could just be the tip of the iceberg, since many of the banks currently have divestment projects underway, with the aim of transferring more than 50,000 homes to large investors.

The largest transaction to have gained momentum in recent days is Bankia’s Project Wind – the portfolio contains 4,300 mortgages to individual borrowers and it will be sold to the funds Oaktree and Chenavari. This sale is just awaiting its formal signing and the investors are expected to pay between €250 million and €300 million for the portfolio.

New transactions

BMN has also finalised agreements in recent days, for the transfer of two portfolios. The first is Project Coronas, which contains 550 homes located all over Spain, but primarily in coastal (beach) regions. The US fund Apollo has acquired this portfolio for €16 million. It represents the fund’s first major purchase of this kind since it purchased 85% of the Altamira platform from Santander.

Moreover, the entity chaired by Carlos Egea (BMN) has also sold a portfolio of problem loans, including almost 500 mortgages, of which three quarters relate to individual borrowers and the remainder to SMEs. This project, known as Pampa, has been awarded to a fund that has so far had little presence in Spain: the US fund Ellington Management, which specialises in the purchase of overdue mortgages. This investor bought a small portfolio from Barclays in Spain a few years ago.

Meanwhile, Bankinter has closed the sale of 300 homes to the US fund Elliott. The portfolio was initially valued at €60 million. It is Elliott’s first property-related purchase; until now the fund had focused on the NPL segment through its Spanish platform Gesif.

With these kinds of transactions, overseas funds are looking to capitalise on their purchases of large real estate platforms, for which they have so far paid around €3,100 million.

With that in mind, the Spanish financial institutions have initiated the sale of other large foreclosed asset portfolios, such as Bankia’s Big Bang portfolio, with 46,000 real estate units. Sabadell and Popular will also sell portfolios of homes in the near future.

Besides the sale of mortgages and foreclosed assets, Spanish entities are selling large portfolios of loans to property developers and hotel debt, as part of their objective to continue divesting property from their balance sheets. Financial institutions such as Santander, BBVA and CaixaBank all have sales projects of this kind underway.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Bankia Sells €1,300M Loan Portfolio To Oaktree & Chenavari

6 July 2015 – Idealista.com

As the summer approaches, many financial entities are stepping down on the accelerator to sell their unwanted real estate portfolios as soon as possible. To this end, Bankia has just sold a portfolio known as ‘Project Wind’ to the funds Oaktree and Chenavari, in a mega-transaction worth €1,300 million, which primarily contains doubtful mortgages to individual borrowers.

The transaction actually comprises three different portfolios, which have been shared between the US fund Oaktree and the British fund Chenavari, although according to financial sources, the signing of the sale is still pending:

  1. Portfolio Mast: €918 million of unpaid mortgages from individual borrowers, which has been shared between Oaktree and Chenavari.
  2. Portfolio Board: €178 million of debt backed by real estate collateral, which has been awarded to Oaktree.
  3. Portfolio Find: €216 million of unsecured debt without any real estate collateral. There are lots of lines of credit in this package. It has been awarded to Chenavari.

This transaction follows Bankia’s sale of another portfolio, containing hotel debt, to Bank of America at the beginning of June. That operation, known as ‘Project Castle’, comprised 91 operations, in total, linked to 45 assets. 56% of that portfolio related to doubtful debts.

But Bankia also has another packet of real estate assets up for sale, the so-called ‘Project Big Bang’, which includes a portfolio of residential and commercial assets, as well as land, worth €4,800 million. The bank is very keen to accelerate the sale of that portfolio, which would represent the largest sale of real estate assets since the real estate bubble burst.

CaixaBank is also selling off property

2015 is turning into the year of the large real estate transactions. CaixaBank has put several portfolios up for sale. One of those contains new-builds, known as Project ‘Tourmalet’ and it contains loans secured by 271 completed new residential developments, 160 plots of land and work-in-progress residential developments. The packet is worth close to €1,000 million.

Another package up for sale is the so-called ‘Eurostars’ portfolio containing 1,091 assets, including 807 homes, 253 parking spaces, 26 storerooms and 5 commercial premises. It is worth almost €103 million and the transaction is being managed by the real estate consultancy JLL.

Original story: Idealista.com (by P. Martínez Almeida)

Translation: Carmel Drake

Project Big Bang: Bankia Selects Contenders For Final Phase

26 June 2015 – Expansión

Bankia has launched the final phase of the sale of its remaining assets, worth €4,800 million. The process is expected to be completed in July. Blackstone, Apollo, Cerberus, Deutsche and Oaktree are amongst the investors that have been selected to proceed to the final round.

Bankia’s Project Big Bang is entering the final phase. In the last few days, the entity chaired by José Ignacio Goirigolzarri has announced the names of the investors that have passed the first round of non-binding offers. Around five funds have overcome the hurdle, including: Blackstone, Deutsche Bank, Apollo, Cerberus and Oaktree.

At stake is the largest sale of real estate assets – excluding debt operations – since the economic crisis hit: foreclosed residential assets, commercial premises and land worth €4,800 million.

From next week, the selected funds will deploy their real estate teams, and those of their consultants, to undertake a more accurate valuation of the reality. This is a highly complex project because Project Big Bang comprises 46,000 real estate assets scattered all over Spain. The funds and their advisors will select the broadest samples possible to try to obtain the most accurate valuation.

The investors are going to have to work against the clock, since the next date marked in the calendar is 31 July, when theoretically, they should submit their binding offers. According to financial sources, Bankia wants to settle the transaction as soon as possible so that it is not hampered by the political uncertainty that will only increase as the general election moves closer.

Dividing up the portfolio

Even so, the competitive auction is not expected to be finalised until after the summer, since following the receipt of the final offers, Bankia and its advisors – Credit Suisse and KPMG – will have to analyse them and prepare the documentation necessary to complete the sale.

According to various funds, all indications suggest that the Big Bang portfolio will end up being divided up, since Bankia and its advisors believe that they will maximise its value that way.

The foreclosed assets amounting to €4,800 million…are recorded on Bankia’s balance sheet at around €2,900 million. That would be the base price that Bankia would expect to receive, since a lower price would mean it would have to recognise new provisions.

The portfolio for sale mainly comprises residential assets (apartments, houses and garages) – 38,500 assets in total, covering 3.6 million square metres. Around 65% of the homes are located in Valencia, Cataluña and Madrid, and 5% of them are currently rented out. The residential portion of the portfolio is worth €3,300 million.

In addition, Bankia is selling 5,000 commercial assets (offices, shops, hotels, warehouses and industrial buildings) worth €1,100 million; and 2,600 plots of land – of which 65% may be developed – worth €400 million.

Of the candidates, it seems that Cerberus is the best positioned – it purchased Bankia Habitat – now Haya Real Estate – in 2013 and therefore, knows the portfolio first hand, according to financial sources.

Apollo is also expected to bid hard for the portfolio, through Altamira. After acquiring 85% of Santander’s real estate arm, Apollo has not yet acquired any significant asset portfolios to generate returns from its platform, although it was one of the asset managers chosen by Sareb to handle some of its portfolio.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Project Kite: Ibercaja Puts €800M RE Portfolio Up For Sale

9 June 2015 – Expansión

Project Kite / The Aragonese group has engaged N+1 to negotiate the sale of 6,900 residential units, 1,300 retail premises and industrial warehouses and 600 plots of land with large overseas funds.

Ibercaja wants to forget about its real estate legacy and focus on its traditional business. After studying a possible operation for several months, the Aragonese group has now decided to sell nearly all of its real estate business. To this end, it has engaged N+1, which has distributed preliminary information about Project Kite to large international funds over the last few days.

Through this operation, Ibercaja offers investors €800 million of foreclosed assets, according to financial sources. Based on the latest available figures, as at the end of 2014, the group held more than €900 million of foreclosure homes, land and property developments on its balance sheet.

The €800 million portfolio will include 6,900 residential units (homes, garages and storerooms); 1,300 retail premises and industrial warehouses; and 600 plots of land, almost half of which have building permits. The homes are primarily located in Zaragoza, Madrid and Barcelona.

Management contract

According to sources, the operation may include a management contract for the remaining real estate assets and the transfer of a team of specialist professionals, comprising around 50 employees. The model for the transaction will be similar to the one adopted by Kutxabank last year.

With this project, Ibercaja joins Bankia, which recently put all of its foreclosed assets up for sale, in the so-called Project Big Bang. These entities are looking to get rid of the real estate assets that are weighing them down, whereby taking advantage of the interest that large funds are showing in becoming Spain’s new property companies, and thus being able to use their resources to grant new loans once more.

The political environment following the regional and local elections has caused many funds to review their strategies, although according to financial sources, they will continue to buy assets provided the misgivings about the general election do not increase.

Ibercaja already explored the possible sale of its real estate portfolio in the middle of 2014, but in the end it backed out.

In 2014, the group also studied the possibility of an institutional investor acquiring some of its share capital; it engaged JP Morgan to assist with that analysis, but ended up ruling out the option. All indications are that Ibercaja will accelerate its IPO in 2016, in line with the philosophy of the savings bank law and the wishes of the ECB.

The Aragonese entity – the result of the merger of Ibercaja and Caja 3 – generated €42.6 million during Q1 2015, up 6% from a year earlier.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Who Are The New Advisors In The RE Sector?

8 June 2015 – Expansión

The ‘big four’ audit firms and the investment banks are starting to advise on deals in the property sector, where specialist firms, such as Aguirre Newman, CBRE, JLL and Knight Frank, have been operating for more than 30 years.

Specialisation versus multi-disciplinary teams. The real estate investment boom in Spain is attracting both specialist consultancy firms and new players from the world of audit and banking. All of them are competing to advise on the major property transactions, both on the purchase and sale of companies, as well as of individual assets. This market saw investments reach €2,500 million during Q1 2015.

The large specialist consultancy firms arrived in Spain three decades ago. Having established themselves in the Anglo-Saxon markets, they were looking for other markets to advise companies and investors in their search for properties and land.

Such was the case of Jones Lang LaSalle (now JLL), Richard Ellis (now CBRE) and Knight Frank, which still lead the market for consultancy and transaction advice, together with a Spanish company: Aguirre Newman. The latter, created by Santiago Aguirre and Stephen Newman, is the only Spanish firm that competes with the multi-nationals to advise on large transactions.

Besides these four large firms, there are other international companies such as BNP Paribas Real Estate, previously known as Atisreal, Savills, Catella and the US firm Cushman & Wakefield.

(…)

Now, the RE teams from the large auditors – known as the big four – are entering the market. They have strengthened their teams in recent months, hiring staff from the real estate consultancies, and are taking advantage of the synergies they can offer with other departments (legal, tax, financing) to secure advisory contracts….Many international investors prefer this one-stop-shop model, especially when they are in a hurry to close a deal.

(…)

In this way, PwC has just advised on one of the largest transactions in the RE sector, the sale of the Ritz Hotel in Madrid (pictured above). PwC acted on the buy-side, advising Mandarin Oriental, whilst the vendors – Omega Capital (Alicia Koplowitz’s investment company) and Belmond (formerly Orient-Express) – worked with JLL. PwC has also advised on other recent transactions, such as the sale of the Plenilunio shopping centre to Klepierre.

Meanwhile, Deloitte Real Estate advised the US fund Tiaa Henderson on its purchase of the Islazul shopping centre in Madrid for €230 million, as well as on the sale of a batch of office buildings to the largest Socimi in the market, Merlin Properties. KPMG’s RE team is working with Credit Suisse to jointly advise Bankia on the sale of its Big Bang portfolio, the largest RE asset portfolio seen to date. It also advised Cerberus Capital and Orion Capital Management of their purchase of 97% of Sotogrande, amongst others.

The investment banks are also competing well with the consultancy firms and the big four, especially on the larger deals. They tend to receive buy-side or sell-side mandates for individual buildings and companies with asset portfolios.

In this way, N+1 is currently working with Popular on the sale of a RE portfolio, known as Project Elcano, worth €415 million. It is also working with Sareb on the disposal of part of the Polaris World portfolio.

Nevertheless, although there may be cases in which an investment bank works by itself on a RE transaction, the work performed by the large firms and the consultancies is usually complementary. The banks provide the financing and structuring advice; the RE consultancies value the assets.

(…)

Original story: Expansión (by G. Martínez, D. Badía and R. Ruiz)

Translation: Carmel Drake

Bankia Sells Hotel Loan Portfolio To BofA & Hedge Fund

5 June 2015 – Expansión

Project Castle / Following the sale of Realia, Bankia has now made profits of €926 million from the transfer of its investments.

Yesterday, Bankia closed the first sale of a loan portfolio since the regional and local elections, which have been threatening to destabilise the market. Far from that, the entity has managed to attract a US hedge fund (to the market), which has not closed any deals in Spain until now, namely: Davidson Kempner Capital Management (DK Capital).

This fund and Bank of America (BofA) have won the auction for Project Castle against other large international investors. This portfolio, whose sale has been advised by N+1 and the law firm Ramón y Cajal, comprises hotel loans worth €383 million. In total, the portfolio contains 91 loans linked to 45 properties of this type.

Bank of America will take ownership of the performing loans and DK Capital the doubtful loans. These types of hedge fund are renowned for carrying out aggressive restructurings of loans to take ownership of the assets and, subsequently sell them at a profit.

Optimisation

Sources at Bankia highlight that the transaction: frees up resources for the granting of new credit; increases the bank’s liquidity; and contributes to an improvement in the quality of the assets. Moreover, it will have a positive impact on capital (at the height of the Basel III implementation) amounting to €21 million.

As well as Project Castle, Bankia is also advancing with Project Big Bang, containing €4,800 million foreclosed assets for sale; and Project Wind, with €1,300 million doubtful loans, primarily mortgages to individuals.

These divestments come after Bankia sold its 24.9% stake in Realia to Carlos Slim on Wednesday. Bankia has now made profits of around €926 million on the sale of all of its investments in listed companies, such as Iberdrola, Mapfre, Deoleo and NH Hoteles.

The transactions closed since 2013 have generated revenues for the entity of €4,879 million, according to the company’s own data.

Having exited as a shareholder of Realia, Bankia now only retains minor industrial holdings, such as in the infrastructure concession group Globalvía, in which it holds a 50% stake alongside FCC, although these two shareholders are expected to close the sale of that company to the Malaysian sovereign fund during the course of this year.

Original story: Expansión (by J. Z.)

Translation: Carmel Drake

Bankia Puts Property Worth €4,800M Up For Sale

6 May 2015 – Expansión

Project Big Bang / The financial entity has put a batch of homes, land and commercial buildings up for sale, with the objective of disposing of all of the foreclosed assets left on its balance sheet.

Bankia has decided to accelerate the process to divest its real estate assets with a ‘macro-transaction’ involving a large block sale. The financial institution has launched so-called Project Big Bang, which includes a portfolio of residential and commercial assets (including offices and shops), as well as land, worth €4,800 million.

The transaction is still in its very early stages, involving initial meetings with investors, but it will represent the largest asset sale process seen to date (excluding transfers of debt with real estate collateral).

The properties up for sale include assets that Bankia did not transfer to Sareb following its nationalisation, as well as foreclosed assets resulting from subsequent defaulted payments. Most of the portfolio corresponds to residential assets. Thus, of the €4,800 million assets that Bankia has included in the batch, €3,300 million related to residential properties at 31 March 2015. In total, the bank will transfer 38,545 residential units (flats, chalets, parking spaces and storage rooms), with a total constructed surface area of 3.6 million square metres.

Along with the €3,300 million of residential assets, Bankia is selling 4,938 commercial units worth €1,100 million.

Land at zero cost

The portfolio also includes 2,589 plots of land with a total surface area of 4.6 million square metres. This land has a value of zero, according to Bankia, having been fully provisioned.

The sale is being coordinated by Credit Suisse and KPMG. The transaction may be closed as a single deal or through the sale of several blocks. The sale value may also decrease from €4,800 million to a smaller amount, say sources close to the process.

Many of the large funds, including Blackstone, Lone Star and Apollo, have already expressed their interest in the portfolio. These investors will have to compete with Cerberus, which has a preferential right to examine Bankia’s real estate portfolio. This “preferential” arrangement forms part of the negotiations that the US fund has held with the Spanish entity in recent years. In 2014, Bankia transferred its Bankia Habitat business unit to Cerberus for a consideration of between €40 million and €90 million, together with the 400 professionals who work for the platform.

Last September, Cerberus joined forces with the Norwegian fund Lindorff to acquire some of the doubtful and substandard loans, plus those that had doubtful or substandard outlooks, worth €900 million, which the entity chaired by José Ignacio Goirigolzarri (pictured above) was selling, as part of the Somo transaction. In February, Bankia launched a campaign to accelerate the sale of its remaining properties.

The clean up

Project Big Bang represents the largest divestment initiated by Bankia to date in the foreclosed asset and doubtful debt segment. The entity chaired by José Ignacio Goirigolzarri has been one of the most active in this market, having transferred almost 80 portfolios containing problematic loans since 2013, with a nominal value of €10,000 million.

Initially, Bankia undertook these types of transactions due to necessity, since the restructuring plan agreed with Brussels compelled it to divest non-strategic assets amounting to €50,000 million.

Although it has now almost completed this plan, the entity has decided to ‘step on the divestment accelerator’ in 2015 in order to reduce its default rate and focus its resources on new productive assets that improve its financial results. As well as the foreclosed assets, Bankia is also currently negotiating the sale of problematic mortgages, property developer loans and hotel debt.

If it closes all of these transactions, the nationalised group would become the first entity to withdraw from the segments considered by the market as a burden to the sector.

Original story: Expansión (by R. Ruiz and J. Zuloaga)

Translation: Carmel Drake