Cerberus, Apollo & TPG To Bid For Bankia’s Remaining RE

17 June 2015 – El Confidencial

Bankia will receive non-binding offers for its final real estate portfolio this week. (…)

Cerberus, Apollo, Texas Pacific Group (TPG) and Oaktree are four of around ten candidates that have asked for information to submit their proposals for this portfolio, however, they are expected to demand a discount of close to 35%.

According to sources close to the transaction, Credit Suisse, the bank advising the deal, expect to receive the first non-binding offers for the final part of the property portfolio that still sits on Bankia’s balance sheet. Initial assessments indicate that the cheques will amount to around €2,500 million, which would represent a discount of 40% with respect to the €4,213 million gross valuation of the portfolio, reported in Bankia’s results for Q1.

However, the bank led by José Ignacio Goirigolzarri already recognised provisions, amounting to €1,308 million, against the initial figure at which the finished properties, assets under construction and land were valued when they were put on the market several years ago, and so the net value of the portfolio on the balance sheet is currently €2,905 million. The majority of that amount (€2,161 million) relates to funding to buy homes, i.e. from flats and homes foreclosed due to non-payment.

But, despite this recognition of losses by Bankia’s management team, the potential buyers consider that the value of this portfolio may be lower. According to their calculations, the portfolio is worth around €2,500 million, which would represent a discount of 40% on the original amount and an additional 14% below the price at which the public bank has the assets recorded on its balance sheet.

As such, if that were to be the final sale price, Bankia would have to recognise additional provisions amounting to €400 million. Nevertheless, sources close to the bank point out that these initial valuations are only an approximation, a reference for investors who are going to bid to purchase the portfolio, and in fact, bidders may have to offer a premium in order to win the auction.

Furthermore, the same sources indicate that Goirigolzarri is not going to accept any offers below the valuation performed by an independent advisor (€2,905 million net), since in his opinion, that valuation already reflects the drop in homes and property prices since the burst of the real estate bubble.

The situation may be read in two different ways. The first is that the portfolio comprises what is considered to be “absolute rubbish”, in which case the assets would be worth much less. The second is that, given the great interest from institutional funds to invest in property, one of them may approach the €3,000 million asking price that Bankia has set.

Sources close to the transaction say that the current owners of the portfolios sold by Santander – Apollo -, Bankia – Cerberus – , CaixaBank – TPG, plus other funds, such as Oaktree, Starwood, Goldman Sachs and Blackstone will submit bids this week. Loan Star, which recently purchased Kutxabank’s real estate arm for €1,900 million, has also requested the documentation, but sources say that it will not bid in the end.

Nevertheless, if the bids do not meet the figure expected by Bankia, the portfolio may be divided up to obtain the highest possible revenue from it. (…)

Original story: El Confidencial (by Augstín Marco)

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