24 April 2017 – Expansión
Realia, the real estate company owned by Carlos Slim is finalising the refinancing of a debt agreement, amounting to €678 million, linked to its real estate business, which matures on 27 April 2017. This liability represents 75% of the company’s total debt and is linked to its real estate portfolio.
Original story: Expansión
Translation: Carmel Drake
29 March 2017 – Cinco Días
Speculation about the future of Banco Popular has not dissipated following Emilio Saracho’s arrival as the entity’s new President on 20 February, although it is true that it has tempered slightly. The bank’s low solvency ratios, after it completed a major cleanup effort in 2016, are fueling those rumours and it seems that until the entity shows the market that it is capable of resurrecting itself like Ave Fénix, through some kind of major sales operation, then the market will not stop seeing it as an easy target.
Popular’s level of regulatory capital stood at 8.17% in December, below the 10.5% required by the ECB in January 2019 and also below the average for the sector. Most of its capital consumption is due to its high-risk level, itself a consequence of its large property portfolio, the main problem in all of this. However, a substantial number of the solutions designed by the former President, Ángel Ron, have now disappeared or have been modified. (…)
One project that has been buried almost completely, although it has barely been acknowledged that it is not going to be carried out, is Sunrise. That was Ron’s star project, to eliminate a large part of the entity’s real estate portfolio.
The idea was to transfer around €6,000 million in real estate assets to this vehicle, which was going to be deconsolidated from Banco Popular’s balance sheet, after securing a complex financing structure, and its subsequent debut on the stock market.
It seems that Saracho has not approved of that project since he arrived at the bank and has decided to shut it away in a drawer, never opened. Now questions are being asked about what will happen to Remigio Iglesias and Roberto Rey, two executives hired by Popular last year to serve as the President and CEO of Sunrise, respectively.
Another option still open to Popular is to turn to the European bad bank, which the ECB is expected to create, according to market sources. In fact, Popular’s share price was the most bullish on Tuesday, with an increase of 3.24%, after the European Banking Authority said that it was in favour of creating a European bad bank to solve the problematic loan phenomenon, a project that is also supported by the ECB.
Original story: Cinco Días (by Ángeles Gonzalo Alconada)
Translation: Carmel Drake
9 February 2017 – Cinco Días
A new company is getting ready to join the fruitful world of the Socimis. Grupo Ortiz, a Madrid-based construction company founded in 1961, is working with the financial group Arcano to prepare for the debut of its real estate business on the Alternative Investment Market (MAB). The new company will own the Group’s real estate assets, which are all rented out, according to sources familiar with the operation.
Through this transaction, the company is looking to bring assets amounting to around €150 million to the market, along with associated debt amounting to €55 million. Moreover, the company chaired by Juan Antonio Carpintero is looking to take advantage of the future listed company to secure other investors for his business, and Arcano will act as advisor. Both companies declined to comment on the operation.
The intention of the construction group is to open up the Socimi to other investors and whereby partially sell off part of the new company, but to retain ownership of at least 30% of the capital. The company is currently undergoing a process of internationalisation, and sources close to the group indicate that these resources could be reinvested in new opportunities.
The market expects the new Socimi to be constituted within the next few months. Experts in the sector say that the objective, given Grupo Ortiz’s portfolio of assets, is to offer to pay a quarterly dividend, which could exceed 5% p.a.
The portfolio will initially comprise several office buildings, plus more than 340 rental homes, a parking lot on Calle Ortega y Gasset in Madrid with 800 parking spaces, as well as retail premises and warehouses, most of which are located in Madrid and the surrounding area. According to the Group’s website, Ortz has 36,000 m2 of tertiary assets leased out and 1,445 social housing properties, owned by Madrid’s Housing Institute (Ivima) and the Municipal Housing Company (EMV).
It also has 24,000 m2 of office space leased out in Madrid, primarily in the area around La Gavia (Ensanche de Vallecas). According to its annual accounts for 2015 (the latest available), the real estate business generated revenues of €55.34 million.
The group’s total turnover amounted to €376 million in 2015, with an EBTIDA of €41.22 million. Although the firm started out as a construction company, it has since diversified and now operates four divisions: concessions, energy, services and real estate.
The Socimi structure allows those who adopt its tax regime to enjoy exemptions from corporation tax in exchange for the compulsory payment of dividends to their shareholders each year (who do pay tax). The structure has served to boost the Spanish real estate market, with the backing of international funds, and many large property owners have also benefitted from these structures. Around 30 Socimis are currently listed on the MAB.
Grupo Ortiz launched its international activity in Peru in 2010. It currently has operations in Colombia, Peru, Mexico, Panama and Algeria, with energy projects in Italy and France, photovoltaic solar plants in Guatemala, Honduras, Chile, El Salvador and Japan and other integrated water management projects in Romania.
Original story: Cinco Días (by Alfonso Simón Ruiz)
Translation: Carmel Drake
17 January 2017 – Invertia
Banco Popular has launched a new network of 40 branches, four regional teams and a workforce of 400 people to manage its newly carved out real estate business.
According to a statement made by the entity, 12 of these branches will be located in Cataluña and Levante, 10 in Madrid and the Centro region, 10 in the North and the Pastor region and 8 in Andalucía.
The objective of this network, which will report directly into the General Director of Real Estate Business and Asset Transformation is to manage the bank’s real estate business and to manage collections in a holistic way “with the perspective of optimising capital, in line with the bank’s overall objective to reduce non-productive assets”.
The creation of this network forms part of the restructuring process that the bank is currently carrying out and which has involved the separation of its core and real estate businesses.
Original story: Invertia
Translation: Carmel Drake
4 November 2016 – Expansión
Banco Popular is in the eye of the storm. The bank’s senior officials are facing the future by effectively placing a firewall between the entity’s normal banking activity and its real estate risk, however, the markets do not seem to be able to trust that they will succeed in finding their way out of the tunnel the entity entered when the real estate bubble was about to burst.
Following two major capital increases, amounting to €2,500 million each, and a third, smaller, capital injection of €450 million, as a result of which a Mexican investment group, led by the Del Valle family, became a shareholder of the group, the value of the bank (based on its share price) currently amounts to less than €4,000 million, making it the domestic financial entity that has seen its market capitalisation decreased by the most this year.
Popular has two lives: one afforded by its traditional business, which focuses on rendering financial services to individuals, self-employed people and SMEs, and where its efficiency and profitability ratios are high; and the other one, linked to the real estate sector, where the cumulative losses due to the impairment of its assets represent a real threat to the rest of its activity. (…).
Although the bank has received several offers to join a larger and more powerful financial group, the Board of Directors and the main shareholders who serve on the Board have categorically rejected them all, preferring instead to continue to lead the entity along its own path. “We do not want Popular’s intrinsic value to benefit others”, the entity has said time and time again, in order to justify its negativity towards a corporate operation in which it would fail to take over the reins. (…).
The two capital increases (the first one was carried out in December 2012 and the second one at the start of the summer) were accompanied by the appointment of Francisco Gómez (a man who has worked at the bank for his entire life) as the CEO (in the case of the first) and by his replacement by Pedro Larena, previously from Deutsche Bank and Banesto (in the case of the second). The aim was the same in both cases: to try to convince the market each time that the change in management was going to effectively deal with the recurrent problems, in other words, to eliminate the real estate risk.
Popular has tried to resolve its problems in the traditional way…by selling off its damaged assets at significant discounts, offset by growing provisions…but this has not proved sufficient, not least because the entry of damaged assets onto the balance sheet has been higher than the volume it has managed to sell through individual sales. (…).
Now, Popular is pursuing a strategy to segregate a substantial part of the real estate risk that it holds on its balance sheet (€6,000 million in book value), by placing it into a company that it will also endow with sufficient capital (around 20% of its liabilities). This capital will distributed free of charge amongst Popular’s existing shareholders in a way that will completely dissociate the entity from the transfer/sale. (…).
However, even once Popular has managed to eliminate a significant part of its real estate risk, the bank’s problems will not be over. That is reflected in the ERE that it is currently negotiating with the trade unions (which should be finalised by Sunday 6 November at the latest), which proposes the closure of 300 branches and a reduction in personnel of around 1,600 people through early retirement and voluntary redundancy packages. (…).
Original story: Expansión (by Salvador Arancibia)
Translation: Carmel Drake
2 November 2016 – Expansión
The property sector in Spain is recovering. Most of the indicators are showing increases in house sales, greater activity, rising prices and even shortages in the supply of properties in certain areas. Nevertheless, this improvement is not been reflected in the income statements of the banks so far; they are still trying to digest the excesses of the bubble, which they are struggling to shake from their balance sheets.
Spain’s banks recorded losses of more than €2,072 million in their respective real estate businesses during the first nine months of the year. Banco Popular led the loss ranking: the entity chaired by Ángel Ron recognised a cumulative loss of €723 million between January and September.
Beyond these huge losses, the problem for Popular stems from the fact that a small part of its business, which accounts for just 18% of its asset volume, has managed to erode almost all of the profits generated by the remaining 82% of its assets (which the entity considers to be its “core” business and which generated profits of €817 million between January and September 2016).
Behind Popular, the bank with the second largest losses in its real estate business was CaixaBank. The Catalan entity recorded losses of €517 million between January and September. It was followed by BBVA and Banco Sabadell, with losses (in their real estate businesses) of €315 million and €300 million, respectively.
Meanwhile, Bankia and Bankinter have chosen not to disclose profit and loss data about their real estate divisions.
Improvements in the market
Despite the continued losses, these aggregate figures do actually reflect the improvement in the real estate market in Spain, since they show a significant reduction with respect to the losses recorded just one year ago, according to data provided by the financial institutions themselves. CaixaBank is the entity that has managed to reduce its losses the most: the bank chaired by Jordi Gual recorded losses of €1,014 million during the third quarter of 2015, which means that the losses from its real estate business fell by 49.1% YoY in 2016.
BBVA was the second ranked entity in terms of loss reductions, although the decrease was less significant in this case. The bank chaired by Francisco González succeeded in decreasing the losses from its property activity by 24.4% in September 2016 with respect to the third quarter of 2015. The third ranked entity in terms of the reduction in losses was Banco Santander, which cut the losses from its real estate business by 22.5%, according to its own data. (…).
Profits in 2017?
“We never expected to see a full recovery this year, but it is true that the improvements are happening more quickly (than we’d expected)….sales are accelerating and the losses will no longer be as significant in the not too distant future”, according to José Antonio Álvarez, CEO at Banco Santander. (…). And with just two months to go before the end of the year, Álvarez and the heads of Spain’s other major banks are now cautious about the timing of the full recovery, prefering not to comment on whether or not 2017 will be the year when the sector finally generates profits, albeit minimal.
Original story: Expansión (by Nicolás M. Sarriés)
Translation: Carmel Drake
Portugal 
Italy 
Greece 
