Financial Institutions See 2015 As “Year Zero” Of The Recovery

9 February 2015 – El Mundo

Many banks (49%) believe that financing will return to normal between 2016 and 2018

Although many large banks are already taking positions in the real estate sector to benefit from its recovery, with transactions such as Operation Chamartín led by BBVA, or Santander’s increase of its stake in Metrovacesa, the financial sector does not believe that 2015 will be the year that marks the full recovery of the real estate sector. That is the conclusion of a study conducted by the consultancy KPMG, based on the views of more than 200 sector experts in the Spanish market.

According to the document, 2015 is going to be “year zero” in terms of the start of recovery of the Spanish real estate sector in Spain – 80% of Spanish banks and Sareb do not expect credit for housing and other real estate activities to flow normally this year, despite the fact that according to data published by the Bank of Spain, consumer loans and mortgages recorded a slight increase towards the end of 2014, for the first time since 2007.

Many financial institutions (49%) expect that financing will return to normal between 2016 and 2018, whilst 31% do not expect that it will happen for more than two years.

By that time, i.e.. from 2018 onwards, 79% of the banks surveyed (plus Sareb, the bad bank) expect that the stock of real estate assets, which is still being accumulated in Spain and which continues to weigh down on the results of the financial sector, will be absorbed.

Nevertheless and despite the high levels of unemployment, demand could increase significantly from 2016, according to 51% of the financial institutions that have participated in the study.

The sector is divided in its assessment of how this demand will behave and there is no consensus as to whether there has been a change in the mindsets of young people following this economic crisis. 50% of the banks surveyed (plus Sareb) believe that young people (aged less than 35 years) in Spain will continue to prefer to buy a home rather than rent one and most of the rest (44%) think that there will be a change in the home buying trend and that young Spaniards will chose to rent rather than buy as we learn from the past.

Nevertheless, there is complete consensus amongst respondents as to the involvement of financial institutions in supporting the recovery of the real estate market and the importance of their role as lenders, given that the other methods that are currently being used to close transactions – such as direct lending or investment by specialist funds – are necessary but not sufficient for the sector to fully recover.

There is also strong consensus (85%) that the old financing model of high leverage, which generated the property boom in Spain will not be repeated.

Construction reduces its weight over total GDP

According to estimates by the National Construction Confederation (Confederación Nacional de la Construcción or CNC), the construction sector accounted for around 23% of Spain’s GDP in 2007; by 2013, that weight had decreased by more than half (to 10%). The study, conducted by KPMG’s Real Estate team, concludes that 82% of the players involved in this business (banks, Sareb, companies, investors and the public sector) believe that construction’s contribution to national wealth will exceed 10% within five years, however it will have to reach 15% for it to really constitute a recovery. The majority of the participants in the survey agree that employment will be generated in the sector over the next five years. More than half think that the construction sector will provide work for more than 7% of the active population and more than a third believe that this figure will amount to 10%. But everyone agrees that the figure will not reach the level (14%) seen before the crisis.

Original story: El Mundo (by María Vega)

Translation: Carmel Drake

Irea: Real Estate Transactions Tripled In 2014

5 February 2015 – Cinco Días

A study conducted by Irea validates renewed interest in the sector

More than €23,000 million was invested in the real estate sector in Spain in 2014, of which 84% was dedicated to direct investment in assets and the acquisition of real estate-backed debt portfolios. The remaining 16% related to transactions involving shares in real estate companies and servicers.

At a press conference on Wednesday, the CEO of Irea, Mikel Echavarren, explained that the increase in activity in 2014 “has helped to unclog the pipes of the financial sector and bring the sector out of its coma”. It is interesting to note that most of the investors that have shown interest in the Spanish real estate sector, are foreign: on the one hand, the main players included large funds, such as Blackstone and Lone Star, and on the other hand, listed real estate investment companies (Socimis) also played an active role, in particular Merlin Properties, which have a significant percentage of foreign capital.

In the specific case of investment in assets, Irea said that shopping centres accounted for 26% of all of the capital invested in assets in 2014 (€2,501 million), followed by offices (24%) and hotels (11%), with these last two segments in full ascent. Residential assets accounted for barely 8% of total investment, including both land and finished homes. Furthermore, 85% of those transactions related to finished assets, with land representing only 4%.

With all of this, Echavarren highlighted the “merit” of this low percentage of land sold, since it is an asset that will have to be sold at a later date. In the current context, 4% seems like an achievement, since although many developers “want to purchase land, they do not have sufficient capital to do so and it is very difficult for them to obtain financing”.

Irea’s CEO repeated that international investors accounted for 53% of all investment activity in assets, followed by Socimis, which were responsible for 24%. Developers accounted for only 3%. On the vendor side, investors sold 24% of all assets, whilst financial institutions disposed of a further 22%.

The appeal of debt portfolios

Although residential assets were not sufficiently attractive for investors in 2014, that was not the case for debt portfolios linked to residential assets. Overall, the volume of debt portfolio transactions amounted to €9,683 million, of which 48% related to the residential segment. Nevertheless, the majority of this amount related to the portfolio sold by CatalunyaCaixa to Blackstone. In this segment, international investors acquired 100% of the debt portfolios sold, and 91% were purchased by investment funds. On the opposite side, 90.6% of the vendors in this case were financial institutions and 9.3% were other entities. In addition, shares in Metrovacesa and Colonial (both listed) amounting to €820 million (22%) changed hands during 2014, whilst the remaining €2,866 million of shares in real estate companies that changed hands were not listed.

Original story: Cinco Días

Translation: Carmel Drake

Sareb Sold 15,000 Assets In 2014

5 February 2015 – Expansión

The Asset Management Company for Bank Restructurings (Sareb) sold around 15,000 real estate assets in 2014, in addition to the 9,000 properties it sold in 2013, according to provisional data released by the company.

Sareb’s Secretary General, Óscar García Maceiras, provided this information on Wednesday during a conference entitled “Sareb’s role in the economic recovery” held in Valladolid, organised jointly by the Business Forum of Castilla y Leon and the Schola Foundation.

In his speech, García Maceiras highlighted the “full capacity” that society has shown to contribute to the clean up of the Spanish banking sector and the reactivation of the real estate sector.

In the two years since it was created, Sareb has generated turnover of more than €8,000 million and has sold more than 24,000 properties (homes, land, adjoining garages/store-rooms and tertiary assets), of which more than 15,000 were sold in 2014, according to provisional data released by the company.

García Maceiras said that this “dynamism” has allowed the company to fulfil “its primary mission”, namely the repayment of the debt issued by Sareb and backed by the State.

In this regard, he added that during its first 24 months, Sareb has repaid €5,000 million and has paid interest amounting to €2,400 on that debt, “and so has reduced the cost to the taxpayer of the financial restructuring by €7,400 million”.

During the conference, Sareb’s Secretary General reiterated the company’s commitment to the real estate sector and noted that in two years, Sareb has handled “more than 18,700 developer proposals, including the sale of collaterals, deeds in lieu, restructurings, disposals and other transactions”.

García Maceiras also highlighted the main challenges facing the company today, including the culmination of the change in its commercial managers, which, once the process for migrating assets has been completed, will be Altamira, Haya Real Estate, Servihabitat and Solvia.

Sareb is a private entity, created in November 2012, to help with the clean up of the Spanish financial sector and of the institutions that received state aid, explained the Company in a press release.

Sareb is committed to proceeding with the liquidation of the properties and loans it has purchased before November 2027.

Original story: Expansión

Translation: Carmel Drake

Iberdola Injects €617m Into Its Real Estate Arm

3 February 2015 – Cinco Días

The company has conducted a capital increase of €154 million.

Iberdrola has recapitalised the debt that it held with its real estate subsidiary, Iberdrola Inmobiliaria. The energy group has injected €616.7 million into its subsidiary through a capital increase of €154.2m and an issue premium, explained the company. In this way, Iberdrola Inmobiliaria “cleans up its balance sheet and is made stronger to face its new challenges”.

The group’s real estate subsidiary, chaired by Ignacio Sánchez Galán, recorded losses of almost €70 million in 2013 and turnover of more than €45 million, according to the most recent company accounts filed with the Companies Registry. The company held debt, primarily with its parent company, amounting to more than €500 million, according to those accounts.

Iberdrola Inmobiliaria was created in 1993 from the merger of Iberdrola’s real estate companies. During the 1990s, it grew its business as a residential developer. By the end of the decade, it had focused on three main areas: the development of housing; the development and operation of rental property; and the management and development of land.

During the years leading up to the burst of the real estate bubble, the company undertook some major investments and also launched businesses overseas. In 2006, it invested €240 million in the construction of a shopping centre in Valencia, together with local constructors, Gesfesa and Valencia Residencial. That same year, it approved a €200 million investment in the Porta Firal project, located at the entrance of the Gran Via Fair (in l’Hospitalet), which was in the middle of its own enlargement program.

In 2007, it recorded turnover of almost €400 million and approved a €300 million investment in a geographic expansion plan. In July of that year, it acquired a 35% stake in the tourist resort Puerto Peñasco (in the state of Sonora, on the west coast of Mexico) for €43.12 million. In 2008, it bought residential land in Bulgaria for €44.6 million for the development of a tourist resort.

The economic crisis thwarted the expansion plans of the energy company’s real estate subsidiary, which nevertheless continued to operate throughout the worst crisis to hit the Spanish real estate sector in decades. In 2010, Iberdrola injected €400 million into the subsidiary, in a similar operation to the one just undertaken. In 2013, it acquired a minority stake in Sareb.

Original story: Cinco Días (by Alberto Ortín Ramón)

Translation: Carmel Drake

Alfa Inmobiliaria’s Branch Network Grew By 4% In 2014

20 January 2015 – El Mundo

Alfa opens 12 new estate agencies in Spain and seven overseas.

Madrid and Valencia are the regions with the highest demand for new real estate agencies.

Alfa Inmobiliaria has announced that its estate agent network grew by 4% in terms of office numbers in 2014. The chain has 184 agencies, of which 108 are located in Spain and 66 overseas.

The new offices are mainly located in Madrid and Valencia, the areas in which demand for housing has increased over the past year. Jesús Duque, Vice President of the Company, says that “the sector has began its recovery. 2014 was the first year of net growth in terms of office numbers since 2009”.

Currently, Alfa Inmobiliaria employs 265 workers in Spain across its office network. Alfa Inmobiliaria provides real estate “packs” to self-employed people looking to start a business; the packs include 35,000 homes, both for sale and for rent, a methodology for working, the support of the brand and the ability to agree joint operations to facilitate work.

In this way, the company facilitates the entry into the business of any entrepreneur willing to risk the minimum capital, supplying him/her with all of the knowledge and tools necessary. And, when the time comes, Alfa supports his/her transfer to an office. The franchisee him/herself determines the speed of each step, which may vary depending on previous experience and the business skills acquired, but he/she will always be supported by the team at Alfa Inmobiliaria.

Original story: El Mundo

Translation: Carmel Drake