Sankaty Buys CAM’s RE Companies From Sabadell

4 December 2015 – Expansión

The fund Sankaty is finalising the purchase of a large package of real estate subsidiaries from Banco Sabadell, which the entity inherited from CAM. The US investor, which is itself a subsidiary of Bain Capital, has won a competitive auction held as part of Project Chloe, which will be signed before the end of the year, according to market sources.

The operation includes stakes in the companies’ shares, as well as debt, together worth €800 million. According to various sources, the sales price will range between €200 million and €250 million, which represents a discount over the nominal value of around 30%.

By purchasing the companies’ shares and debt, the fund will exert direct control over their real estate assets: land, work-in-progress property developments and finished properties.

This is Sankaty’s second major operation in Spain in 2015. In May, the fund acquired 40 large real estate loans from Bankia, worth €500 million.

Like many other overseas investors, Sankaty is committing itself to the acquisition of land and work-in-progress property developments in the hope of benefitting from the recovery of the Spanish economy, with an improvement that is already taking shape in the real estate market. These funds are joining forces with local property developers and, by purchasing at deep discounts, are hoping to obtain returns on their investments of up to 20%.

For Project Chloe, Sankaty will delegate the management of the assets to Altamira Inmuebles, the management platform owned by Apollo (85%) and Santander (15%), which has advised the fund during the process.

For Sabadell, this divestment is the latest in a series of similar deals undertaken in recent months, such as Project Cadi, which involved the transfer of €240 million of property developer loans to the US giant Pimco and the platform Finsolutia. In addition, it sold a portfolio of written-off receivables worth €800 million to the Malaysian fund Aiqon and it is negotiating the transfer of 3,000 rental homes, as part of Project Empire.

Exposure to real estate

Just like the rest of the Spanish financial sector, Sabadell is trying to reduce its exposure to real estate by combining the sale of homes through its network – its subsidiary Solvia is responsible for this – with the sale of portfolios to large international funds.

The bank, led by Josep Oliu, has one of the highest degrees of exposure to the real estate sector, due, in large part, to its purchase of CAM in 2011, although that was partially covered by an asset protection scheme (un ‘esquema de protección de activos’ or EPA) of up to €14,000 million. The entity has been working for several quarters now to reduce its volume of problem assets, which amounted to €22,350 million in September, and in recent months it has managed to stabilise its balance of foreclosed assets at €9,200 million, i.e. it has reached the point where the amount of (newly foreclosed) properties being incorporated onto its balance sheet is lower than the amount (of previously foreclosed properties) it is selling.

As the entity explained when it presented its results for the third quarter, it sold 7,654 foreclosed assets between January and September 2015, which represented an increase of 6% compared with the same period in 2014, and it achieved this even though it offered lower discounts on those properties compared with prior year.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Santander & Popular Save Their RE Subsidiaries

14 October 2015 – Expansión

Santander and Popular have cleaned up the own funds of their respective real estate companies (Altamira and Aliseda) and whereby avoid the bankruptcy of both subsidiaries. They are the last of the major banks to save their fully-owned subsidiaries, which group together their own real estate assets.

Until now, all of the real estate companies have been enjoying more flexible treatment in terms of their compliance with the regulations that establish the share capital levels that the entities must maintain.

At the end of 2008, in the middle of the real estate crisis, the Government approved a royal decree containing financial measures to improve the liquidity of small- and medium-sized companies, along with other complementary economic measures.

This meant that the real estate companies were left out of the obligation that corporations of all shapes and sizes have to decrease their share capital when their losses reduce their net equity positions and take them below two thirds, in which case, the company must be dissolved.

The exception was initially designed for a period of two years and was extended on four occasions until the end of 2014, which means that the real estate companies must reflect their true situations at the end of 2015.

Santander and Popular were the last two major banks to resolve this situation. The process is dynamic since each year the entities must bring their own funds up to date if they have been weighed down by the results of that year.

The bank led by Ana Botín (pictured above) has opted to reduce the share capital of Altamira Santander Real Estate to re-establish the equilibrium between its capital and net equity, whereby reducing the cumulative losses as at 31 December 2014.

The real estate company designed the capitalisation of the share premium and voluntary reserves and the subsequent reduction in share capital to offset the cumulative losses recorded in 2014, which amounted to €1,845 million, according to its accounts. The operation will be completed before the end of the year through the repayment of 9.04 million Altamira shares, which will result in a reduction in share capital of €2,641 million. As a result, it will be left with share capital of €605 million.

Popular’s alternative to avoid the bankruptcy of its real estate company Aliseda involves converting ordinary loans amounting to €1,500 million into equity loans “to restore its equity balance”.

This does not mean the injection of new funds into Aliseda, but rather a transformation (of existing funds), since the equity loans are classified as own funds and therefore increase the company’s net equity. These assets are classified below common creditors for the purposes of the repayment ranking.

Popular recorded negative net equity of €892 million at the end of 2014 and cumulative losses of €1,742 million.

Other banks, including CaixaBank, BBVA and Bankia, have already carried out similar operations to re-establish their own funds.

Original story: Expansión (by Elisa del Pozo)

Translation: Carmel Drake