Project Macarena: Sareb Sells 1,300 Homes & 30 Plots

16 October 2015 – Expansión

The company has put up for sale one of the at least three portfolio that it plans to sell before the end of the year.

Sareb has officially started its busiest season of the year. The company, led by Jamie Echegoyen, has now begun to put large asset portfolios on the market, aimed at overseas funds. It hopes to increase its annual sales as a result. According to financial sources, over the last few days, the entity has distributed information about Project Macarena, a portfolio comprising debt amounting to €410 million, which is secured by residential assets.

The portfolio has been divided into three tranches: the higher quality debt tranche, which is backed by 810 homes – including 11 complete developments – and 2 plots of land; one unpaid debt balance, which has 450 home as collateral; and overdue credits, with 29 plots of land as guarantees, located primarily in Madrid, Tarragona, Barcelona and Málaga.

Aside from the land, the majority of the portfolio is located in Madrid, which accounts for 24.5% of the portfolio’s nominal value; Barcelona (21.4%); and Málaga (16.3%). The sale is being advised on the financial side by Irea and on the legal side by Ashurst. According to the information distributed to investors, this project offers “a potential upside resulting from the macroeconomic improvement and in particular, the current recovery in the Spanish residential market”.

According to financial sources, this portfolio has been designed specifically for the large overseas funds operating in Spain, since it contains residential properties only and the assets are clustered together in a handful of areas – this makes the portfolio more manageable for these investors.

In the case of the unpaid loans, Sareb reports in the sales brochure that around 70% of them are already in the process of asset foreclosure or debt recovery. Meanwhile, the tranche of higher quality credits is secured by homes with an occupancy rate of 95%, which increases the chance of recovering the debt.

Other portfolios

In addition to Project Macarena, Sareb has two other portfolios ready to launch, which it will bring onto the market very soon: one contains debt from a few property developers, worth €600 million; and the other contains credits backed by tertiary sector assets – hotels, offices, retail premises and logistics sites – amounting to €200 million. And the entity has not ruled out the possibility of launching further operations before the end of the year.

These three portfolios join two others that were launched over the summer. The first, at the hand of Sareb’s asset manager Haya Real Estate. That was Project Silk, advised by N+1, whose portfolio comprises €1,000 million of overdue loans to small property developers. The second was Project Vega, through which the company hopes to get rid of €180 million of debt, backed by land.

If Sareb manages to complete the sales of these five portfolios only, then it will reduce its balance sheet by €2,400 million between now and the end of the year. These operations are even more important in 2015, given the slowdown experienced in the retail sales channel, caused by the migration of assets to new managers: Haya, Altamira, Solvia and Servihabitat.

Sareb also needs to strengthen the top half of its accounts to be in a better position to deal with the provisions that it is going to have to recognise following the new accounting circular, approved two weeks ago. And all of this, with the aim of continuing to repay debt -€3,000 million in 2015 – which Echegoyen has committed to and which is key to enabling it to reduce the financial costs of the company.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Project Silk: Sareb Puts €1,000M Debt Portfolio Up For Sale

12 August 2015 – Expansión

Sareb is getting ready to increase its revenues during the last few months of the year. The first half of 2015 saw a slow down in the bad bank’s property sales, as it focused on migrating assets across to new managers. However, the company chaired by Jaime Echegoyen (pictured above) is now going to concentrate on selling portfolios to large funds.

In this context, Sareb is currently preparing its largest transaction to date: Project Silk, comprising small unpaid loans to property developers, amounting to €1,000 million in total.

The project is being led by Haya Real Estate, the real estate manager heir of Bankia Habitat. The firm, which is owned by Cerberus, is responsible for administering the loans transferred by the group chaired by José Ignacio Goirigolzarri.

Initially, property developers will be offered the option to buy up their own debt. Then, any loans that have not been sold will be packaged up and sold in a competitive tender process, to be managed by N+1.

At the end of 2014, the company chaired by Echegoyen held assets amounting to €44,263 million, of which three quarters related to loans.

Revenue drivers

Sales to institutional investors are going to be key for Sareb in 2015, given the slowdown in terms of house sales. Since the end of last year, the company has been focusing its efforts on the process to migrate assets from the former managers – i.e. the entities that transferred €50,000 million worth of problem homes and loans – to the four chosen firms: Haya Real Estate, Solvia, Servihabitat and Altamira.

This migration is due to be completed at the end of the year. Meanwhile, Sareb sold 5,400 homes during the first half of 2015, i.e. one third fewer than during the same period in 2014.

In this context, it is critical that the bad bank increases its revenues from the institutional channel, since its main objective is still the repayment of its debt; and it has set itself the goal of repaying €3,000 million at the end of this year. Currently, the company still needs to return c. €45,000 million of bonds guaranteed by the State.

Sareb has at least two other portfolios, besides Project Silk, up for sale at the moment. Project Birdie is in the most advanced stage of the three – whereby the bad bank wants to sell assets inherited from Polaris. That portfolio comprises three golf courses, two five-star hotels and several residential complexes in Murcia, with a nominal value of €500 million. Sareb inherited them from loans to property developers granted by Banco de Valencia and Bankia.

In addition, the company has launched the sale of a €180 million debt portfolio, secured mainly by land, as part of Project Vega, according to Idealista News.

Many expect Sareb to put new portfolios up for sale after the summer, just like it has done in previous years. During 2014, the company transferred 11 large portfolios for €1,115 million, which accounted for 20% of its revenues. That figure is expected to be higher in 2015. (…).

Upcoming challenges

In addition to its objective of increasing revenues, Sareb faces several other challenges between now and the end of the year, including: completing the migrations to the new managers and adapting to the new accounting circular that the Bank of Spain is preparing for the company.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake