Lone Star Appoints Donald Quintin to Lead its European Business

27 February 2018 – Eje Prime

Lone Star is reordering its management team across Europe, including in Spain. Following the departure from the fund of one of its strong men, Juan Pepa, the company has appointed Donald Quintin to lead its business in the old continent (Europe). Mr Quintin, a former director of Hudson Advisors and Vinson and Elkins, is now going to take over the role of CEO for Lone Star in Europe.

Despite this change in its leadership, Lone Star is nevertheless pushing ahead to close operations that it had open in the Spanish market, and is also undoing positions in the real estate business in the country. Those include the sale of the last major asset of Project Octopus, a portfolio comprising more than €4 billion in real estate loans from Eurohypo in Spain and Portugal, which the US fund acquired together with JP Morgan three years ago.

Also, at the end of last year, the fund sold the former headquarters of Fecsa-Endesa in Cataluña, a building measuring 35,000 m2, whose three chimneys form part of Barcelona’s skyline and regarding which it is negotiating exclusively with the Tramway group and the German vehicle Indigo Capital.

That property has been empty for five years and has both environmental and change of use problems, which have conditioned its sale. Constructed on the site of a former coal generation plant dating back to the beginning of the twentieth century, it may be converted into an office building in the short term and could attract attention from coworking giants or large groups looking to set up their headquarters in Barcelona, according to sources in the sector.

But the move that caught the most attention in the real estate sector was Lone Star’s exit from the share capital of Neinor Homes following that firm’s debut on the stock market. The US fund completed the accelerated placement amongst institutional investors of 9.85 million shares in Neinor Homes in January, representing 12.5% of its share capital and worth €174 million.

After concluding that operation, Lone Star’s presence in Neinor Homes, a company that it had controlled in its entirety prior to its stock market debut, was reduced to a token 0.4% or 350,918 shares in total, which it held onto in order to agree the terms and conditions of the incentive plan for “certain directors and key employees”.

In practice, this sale represented the exit of Lone Star from the real estate developer that it had constituted just three years ago, in 2015, with assets purchased from Kutxabank. The divestment was completed before Neinor had the chance to celebrate its one year anniversary as a listed company, after it made its stock market debut at the end of March 2017.

Original story: Eje Prime

Translation: Carmel Drake

Lar España Buys Rivas Futura Shopping Centre for €62M

6 February 2018 – Expansión

The Socimi in which Pimco holds a stake has purchased the Rivas Futura shopping complex, in the Madrilenian town of the same name, for €62 million.

Lar España has completed its first investment of 2018. The Socimi, whose largest shareholder is the fund manager Pimco, has completed the purchase of the Rivas Futura shopping complex, located in the Madrilenian town of Rivas.

Inaugurated in 2016, this complex was promoted by the real estate firm Avantis, and became a reference in Madrid, with a surface area spanning more than 55,000 m2 and first-class tenants such as Media Markt, Conforama and Toys R Us. Next to the retail park, the same real estate firm constructed a large office complex and a shopping centre called H2Ocio. Recently, that shopping centre also changed hands, with the manager CBRE Global Investors acquiring 70% of the property.

In 2008, Avantis’ liquidity problems meant that it had to find a new owner for the complex. The real estate subsidiary of Axa spent €81 million to buy the centre at that time. Years later, the fund Lone Star was awarded the park as part of Project Octopus, formed by loans from the German bank Eurohypo.

Now, the Socimi managed by the real estate group Lar has become its new owner, after paying €61.6 million to the most recent owner: Credit Suisse.

With this new investment, Lar España has become the largest operator of retail parks in Spain, with more than 150,000 m2 in its portfolio. Its flagship assets include the Megapark complex in Barakaldo, where the Socimi owns both the Megapark shopping centre and the factory outlet (acquired for €170 million), as well as the leisure area; that operation was closed at the end of October.

This purchase also represents the first acquisition of a commercial asset by the Socimi in Madrid, where it already owns a luxury housing development, Lagasca 99, as well as two office buildings. At the end of last year, Lar España put its office portfolio, comprising four assets and worth €170 million, up for sale. Since then, it has sold two of the assets, both located in Madrid and both sold to the same buyer: the real estate firm Colonial.

During the first nine months of 2017, Lar España generated profits of €72.2 million, up by 55% compared to a year earlier, after earning €57.2 million, up by 36%.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Operación Neo: Lone Star Negotiates Sale of Former Fecsa-Endesa HQ in Barcelona

28 November 2017 – El Confidencial

Lone Star is on the verge of closing another chapter in its history, with the sale of the last major asset that forms part of Project Octopus, a portfolio comprising more than €4,000 million in real estate loans from the bank Eurohypo in Spain and Portugal, which the US fund acquired three years ago, in conjunction with JP Morgan.

The asset in question is the former headquarters of Fecsa-Endesa in Cataluña, a building with a surface area of 35,000 m2, whose three chimneys form part of Barcelona’s skyline and regarding which, it is holding exclusive negotiations with the joint forces of the Tramway group and the German vehicle Indigo Capital.

The conversations are now in the home stretch and may even be closed this afternoon, according to sources familiar with the process, although they also indicate that a second finalist is waiting in the wings, which could take over if these negotiations do not end up proving fruitful.

This operation marks another step forward in Lone Star’s strategy to unwind its positions in the Spanish real estate market, following the sale of the rest of Project Octopus and of the property developer Neinor Homes. That company debuted on the stock market in the spring and following several share sales, the US fund now only controls a 13% stake. Moreover, it goes against the grain of the current situation in the real estate market in Cataluña, which has all but come to a standstill due to the ‘independentista’ challenge.

This property, which has been empty for five years, has both environmental and change of use problems, which have certainly conditioned its sale. Constructed on the site of an old coal generation plan at the beginning of the 20th century, the subsoil of the plot contains impurities from the former coal and gas operations, which constitute the main risk to this operation and which have convinced other interested parties to withdraw from the process.

Impact of the sovereign challenge

In addition, the property has a key 4 urban planning rating, which restricts its use to public services with a technical component. In fact, its former owner, Grupo Sanjosé, which acquired the building from Endesa in a “sale & leaseback” operation, did not manage to resolve the change of use, which allowed Lone Star to execute the debt linked to the building in 2015.

And so on and so forth, because the sovereign crisis in Cataluña was about to bring down the process, launched in September and managed by JLL, in which firms such as Meridia, Colonial, Oaktree, Tristan, GreenOak, Värde and Stoneweg expressed an interest, according to sources.

In the end, only two candidates have submitted bids, for around €20 million, and the winner will likely have to double that investment figure in order to be able to carry out all of the renovation work that this asset requires to be in a position to generate value again.

Original story: El Confidencial (by R. Ugalde)

Translation: Carmel Drake

Juan Pepa Leaves Lone Star For Pastures New

7 November 2017 – El Confidencial

Juan Pepa was the first person to seriously back the Spanish property development market and, having reaped the rewards, the Argentinian director has decided that now is time for a change of scenery. Mr Pepa (pictured below left), leader of Lone Star in Spain, will hand over control of the US fund next month, to undertake new projects in the country from January onwards, according to sources familiar with his decision. The man himself declined to comment on the news.

With Mr Pepa’s departure, a cycle closes in the real estate market. Having starred in many of the large property-related operations in the Spanish market in recent years, the jewel in his crown was the creation of the property developer Neinor. It was the first firm of its kind to debut on the stock market in almost a decade, and it has seen its share price appreciate by 9% since it first listed in March.

Lone Star created that housing giant after acquiring Kutxabank’s real estate business, in December 2014, for €930 million, an operation that represented the largest sale of a real estate company in Spain since 2007. A year later, the company debuted on the stock market with a capitalisation of €1,300 million.

Mr Pepa’s commitment to the Iberian peninsula has allowed Lone Star to become one of the major players in the economic recovery, a prize that came after it had dared to buy assets at the height of the crisis when most other funds were withdrawing.

Project Octopus

It was in this context that Mr Pepa managed to secure another one of his key milestones, the purchase of Eurohypo’s Spanish real estate together with JP Morgan. Baptised as Project Octopus, this portfolio comprised more than €4,000 million real estate loans in Spain and Portugal.

One of the assets that the firm ended up controlling as a result of this purchase was the Adequa office complex, which was owned by Bami until Lone Star executed the debt that it held and opened a process to sell the property. The buyer was another one of the main players that has turned the sector around, Merlin, with an offer of €380 million.

In Portugal, Lone Star has just completed the purchase of 75% of Novo Banco, another one of the legacies that Mr Pepa will leave behind. Many investors expect to soon see a recovery in Portugal similar to the one already being enjoyed in Spain.

In fact, in addition to the assets from Octopus, in recent years, the fund has taken other positions in the neighbouring country, such as a 2,000-hectare plot of land that it acquired from Catalunya Banca in the Algarve for €200 million.

Despite all of these achievements, Juan Pepa leaves Lone Star with the bitter taste after he was unable to win his last big battle: the €30,000-million portfolio of toxic assets from Banco Popular that Santander sold in the summer. His fund had featured amongst the favourites but the portfolio ended up being awarded to another investment giant: Blackstone.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Popular Puts €1,500M Macro RE Portfolio Up For Sale

6 June 2017 – Voz Pópuli

(…). The entity chaired by Emilio Saracho (pictured above) has launched an express plan to sell its problem assets and one of the key elements is the sale of the largest real estate portfolio to come onto the market in Spain since 2015. The portfolio of properties has been designed by KPMG, and has an initial value of between €1,500 million and €2,000 million, according to financial sources consulted by Vozpópuli. This is part of the plan that the entity is presenting to the ECB today to regain the confidence of the regulators. (…).

In addition, Saracho has spent the last few days meeting with investment banks to see how to accelerate the unblocking of Popular’s problem assets. (…).

The sale of problem assets is critical for Banco Popular regardless of its future. The heavy weight of those assets (worth €37,000 million) is the source of this entity’s problems, which have been further compounded in recent months by its capital and liquidity troubles and the risk of claims. (…).

For this reason, Banco Popular needs to accelerate the sale of the €36,800 million that it owns in toxic assets as soon as possible. Above all, it needs to focus on its foreclosed assets, which have the lowest level of coverage (38.5%) and which most concern the market and potential buyers. To bring the provisioning level of its properties in line with the levels adopted by BBVA and Santander, Popular would need to recognise (additional provisions of) around €1,500 million to €2,000 million.

Under the spotlight

With the sale of portfolios such as the one being advised by KPMG, Banco Popular would reduce some of its problems. Even so, financial sources doubt that the short term future of the entity is going to be determined by operations such as this one (…). Rather, they add, that this is a way of getting ahead with the work, regardless of the solution.

In this sense, the banks that are considering submitting a bid for Banco Popular have been making contact with opportunistic funds and investment banks over the last few weeks to work out how to share out the Spanish entity: the good bank could go to Santander, BBVA and Bankia, and the problem assets could go to overseas investors.

The key to accelerating the unblocking of the real estate assets is the prices that Banco Popular can accept on the basis of its provisions. Currently, the foreclosed assets are recognised on the balance sheet at 60% of their initial values, well above the values demanded by the opportunistic funds, which are closer to 30-40% of their initial values (…).

The portfolio that Popular is preparing represents one of the largest currently up for sale in Europe and the fourth largest to go on the market in Spain ever, after: Project Hércules, involving €6,400 million in problematic mortgages from Catalunya Banc, which was acquired by Blackstone; Project Octopus, containing €4,500 million in Eurohypo loans, which were purchased by Lone Star and JPMorgan; and Project Big Bang, which saw Bankia put most of its foreclosed assets up for sale, in a deal that it negotiated to the end with Cerberus, but which failed to close.

The two main favourites to acquire this latest portfolio are Blackstone and Apollo, the two funds that have been buying Popular’s other portfolios to date, albeit smaller ones, averaging around €400 million to €500 million. The entity currently has another process underway, involving a €500 million portfolio, which is being coordinated by Irea, and in which the following entities are competing: Oaktree, Apollo, Bank of America and Bain Capital.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Lone Star Puts ‘Rivas Futura’ Retail Park Up For Sale

9 July 2015 – Cinco Días

The opportunistic fund Lone Star has put the Rivas Futura retail park, in the Madrilenian town of Rivas Vaciamadrid, up for sale. The retail space covers an area of more than 40,000 m2 and includes around 30 large stores, such as Toys’r’us, Leroy Merlin, Media Markt, Decathlon, Kiab and Prenatal.

The retail park opened in May 2006. In 2008, the insurance company Axa Reim purchased it from Avantis for €81 million. Subsequently, it was included in Eurohypo’s secured loan portfolio.

The asset was subsequently included in the so-called Project Octopus, loans that were sold by Commerzbank (after its acquisition of Eurohypo), which Lone Star ended up purchasing.

This retail park currently has an occupancy rate of 80% and market sources say that the sales price could stand at around €70 million. The transaction has been brokered by Knight Frank, which has declined to comment on proceedings.

In Spain, Lone Star also acquired Kutxabank’s real estate arm, Neinor, last December, for €930 million and obtained control over the former Basque cajas’ property management platform. This fund, led by Juan Pepa in Spain, is committed to the residential market, through Neinor, and has plans to invest up to €1,000 million in land.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake