Spain’s Banks Prepare for a Mass Sale of Refinanced Mortgages Ahead of a European Regulatory Change

14 January 2020 – Expansión

Spain’s large banks are preparing for the mass sale of refinanced mortgage portfolios to opportunistic investment funds over the course of this year, ahead of a European regulatory change that will come into effect from January 2021. The new rules will require most refinanced debt to be classified as non-performing loans, which will impose more onerous capital requirements on the entities holding those assets.

Refinanced mortgages are those whose borrowers are currently up to date with their repayments but whose terms (economic conditions or duration) have been adjusted to avoid defaulted payments.

In the year to September 2019, Spain’s eight listed banks (Santander, BBVA, CaixaBank, Bankia, Sabadell, Bankinter, Unicaja and Liberbank) removed problem loans amounting to almost €37 million from their balance sheets. No detailed figures are compiled about refinanced mortgages, but sources in the sector estimate that a new market worth thousands of millions of euros could be generated as a result of the upcoming legislative change.

According to the new criteria to be introduced by the European Central Bank, refinanced loans will be classified as non-performing if the associated income generated by them falls by more than 1% as a result of the new terms of the loan. With such a strict threshold, almost all such loans will, therefore, be classified as non-performing.

In this context, a new market is expected to emerge whereby the banks try to divest portfolios of refinanced mortgages that are still considered healthy, but at lower prices.

The likely winners will be opportunistic funds, such as Cerberus, Blackstone and Lone Star, which typically buy doubtful assets with average discounts of 70%, and go on to generate double-digit returns through a combination of synergies and economies of scale.

Original story: Expansión (by R. Sampedro)

Translation/Summary: Carmel Drake

Addmeet: Investment in RE in Madrid Exceeded that in Barcelona by 2.5x in 2019

7 January 2020 – El Confidencial

According to the real estate portal, Addmeet, real estate investment in Spain amounted to €35.0 billion in 2019, of which 70% was concentrated in Madrid and Barcelona (€18.0 billion and €6.8 billion, respectively). The data compiled reflects all real estate operations amounting to more than €3 million in all sectors of the professional real estate market.

In the Community of Madrid, investment broke all records (€18 billion), exceeding the figures recorded in 2018 (€15 billion) and in 2008 (€10 billion). There, the office sector was the main driver, accounting for 61% of the total figure (€11 billion). The star transaction was the sale of Santander’s Ciudad Financiera, which the financial entity repurchased from Marme Inversiones for €3.2 billion 11 years after selling it to that same firm.

Other office-related deals included the sale of the La Finca business park to the Socimi owned by the Cereceda family for €423 million; and the purchase by Allianz Real Estate of Castellana 200 (comprising 20,000 m2 in office space and 6,500 m2 in retail area) for €250 million.

The next main drivers were the residential sector, which accounted for 11% of investment (€2 billion), boosted by the build to rent segment, and the retail sector, which accounted for 11.5% of the total investment.

Meanwhile, record figures were also recorded in the province of Barcelona (€6.8 billion) despite the “procés”. In fact,  the investment volume almost doubled that recorded in 2008 and far exceeded the total recorded two years ago (€5.6 billion).

Like in Madrid, the office sector in Barcelona accounted for most of the real estate investment (46% or €3.1 billion). The retail sector represented 11.5% (€0.8 billion), whilst the hotel segment attracted almost €1 billion (14%) and the residential segment just €0.5 billion.

Major deals in the Catalan capital in 2019 included the sale by Telefónica of Diagonal 00 to the Philippine magnate Andrew L. Tan for €150 million, amongst others.

Original story: El Confidencial (by E. Sanz)

Translation/Summary: Carmel Drake

Meridia Takes €83.5-Million Loan to Build Project in Barcelona’s 22@

21 November 2019 – A socimi controlled by Meridia has arranged an up to €83.5-million syndicated loan with CaixaBank and Santander to build the future headquarters of Everis in Barcelona’s 22@ district.

The firm’s real estate vehicle, Meridia III, requested the loan, which will be guaranteed by the plot of land located at Avenida Nova Icària 213, as well any future construction on the site. The loan will last until seven years after the end of construction.

Original Story: Expansión – Marisa Anglés

Adaptation/Translation: Richard D. K. Turner

Aliseda Offering Finalist Land With Just a 5% Down-Payment

6 November 2019 – Aliseda, the real estate company controlled by Blackstone and Santander, has launched a new campaign aimed at both local developers and individuals looking to build new homes but currently, lack access to the necessary financing. The firm announced that it would allow potential buyers to buy land with just a 5% deposit from now until the end of the year.

After that point, those buyers would have 12 months to raise the rest of the cost of the land and finalise their purchase by the end of 2020. Investors would lose their 5% down-payment if they are unable to raise the rest of the funds.

The developer is currently listing 2,115 plots of land on its website. That land bank represents about 30% of Aliseda’s entire portfolio of finalist land, worth an estimated 300 million euros. The firm expects potential buyers to reserve 15% -20% of that by the end of the year.

Original Story: El Confidencial – Ruth Ugalde

Adaptation/Translation: Richard D. K. Turner

Spain’s Banks Look to Sell €19 Billion in Real Estate Assets and NPLs in 2019

21 October 2019 – Although the pace of sales has fallen in recent years, Spain’s banks are continuing their efforts to reduce their exposure to non-performing loans and foreclosed real estate assets left over from the financial crisis of the first half of this decade. In the year to date, those banks have sold portfolios of toxic assets worth a total of more than €7 billion. Another twelve other transactions worth approximately €11.7 billion, however, are on course to conclude by the end of this year.

Sabadell has been particularly active, having sold €2.55 billion in portfolios such as Greco and Rex. Unicaja and Ibercaja have also sold assets worth more than €1.5 billion. Santander is currently negotiating the sale of another two portfolios.

Spain’s financial institutions are expected to end the year with total sales of nearly €19 billion, compared to 41.7 billion euros last year, down by more than half.

Original Story: El Español – María Vega

Adaptation/Translation: Richard D. K. Turner

The Student Hotel Raises €90-Million in Financing for New Investments

14 October 2019 The Netherlands-based student hotel group The Student Hotel (TSH) announced that it had obtained €90-million in bank financing Santander, Sabadell and HSBC. TSH will use the funds to build two new hotels in Madrid and Barcelona as well as to refinance its existing debts in Spain. The investments are part of a €2-billion investment strategy that the group plans to implement over the next five years in Europe.

TSH is currently working on three projects in Spain: Madrid La Imprenta (340 rooms), Barcelona Provençals (300 rooms) and the TSH San Sebastian (328 rooms).

Original Story: Hosteltur

Adaptation/Translation: Richard D. K. Turner

Santander Studying €12-Billion Sale of NPAs

20 August 2019

Banco Santander is considering a potential sale of a €12-billion portfolio of real estate loans by the end of the summer.

The bank is looking to improve its capital ratios in Spain, which are still weighed upon by assets the bank took over from Banco Popular, in spite of a €30 billion sale of assets to Blackstone in 2017, Project Quasar.  On Tuesday, the bank reported that its NPL ratio stood at 7%, above rival banks such as BBVA Spain (-4.9%) and CaixaBank (-4.6%).

Original Story: El Confidencial – Jorge Zuloaga

Adaptation/Translation: Richard D. K. Turner

Spain’s Banks Continue to Suffer from High Levels of Exposure to Non-Performing Real Estate Assets

13 August 2019

Spain’s largest financial institutions still have more than 37 billion euros worth of non-performing real estate assets on their books, not counting non-performing loans, even after a series of major disinvestments over the past two years. The bank with the most significant exposure, Santander, sold €30 billion in assets to Blackstone; while BBVA sold another €13 billion to Cerberus. CaixaBank unloaded a €12.8 billion portfolio to Lone Star as Banc Sabadell sold assets totalling €10.1 billion to Cerberus and Oaktree.

EU banking regulators are pressuring the banks to quickly reduce their exposure even further, setting a high bar for the expected pace of disinvestment over the coming years.

Santander still has €10.132 billion in foreclosed assets, over 16% more than the bank with the second-highest exposure: Sabadell (€8.732 billion). Santander’s exposure to land is especially high, with a portfolio with a gross value of €4.37 billion. Thus, the bank recently created a company to prepare the portfolio for an eventual sale. The new company, Landmark Iberia, has 400,000 square meters of developable land for sale.

Original Story: El Confidencial – Jorge Zuloaga

Adaptation/Translation: Richard D. K. Turner

Insur Refinances €100 Million in Outstanding Debts

20 July 2019 – Richard D. K. Turner

Inmobiliaria del Sur (Insur) took advantage of favorable market conditions to refinance its outstanding debt this week. The firm refinanced 100 million euros of debt, equal to 60% of its total net liabilities, at significantly better conditions, freeing up over 35 million euros over the next five years. Insur owns rental properties, including offices, commercial premises and car parks.

Insur Patrimonial arranged the refinancing in an operation involving a total of 11 banks, led by Santander. Those banks include Caixabank, BBVA, Unicaja, Sabadell, Bankinter and Novo Banco. In addition to the €100 million, the firm also borrowed another €10 million to acquire an office building in Seville for redevelopment into a hotel to be leased to Hotusa.

Original Story: El Confidencial – Carlos Pizá de Silva

Photo: F. Ruso

The FROB Recorded a €382M Provision Against its Stake in Sareb in 2018

20 May 2019 – El Confidencial

The Spanish Fund for Orderly Banking Restructuring (FROB) presented its accounts for 2018 this week revealing that it decided to recognise a €382 million provision against its stake in Sareb last year.

In this way, the FROB has now written off 92.3% of its initial investment in the entity chaired by Jaime Echegoyen (pictured above), up from 75% in 2017. If the rest of the investor entities, namely all of the large Spanish banks with the exception of BBVA, do the same, then they will have to recognise losses of around €450 million.

In absolute terms, the FROB’s stake in Sareb is now worth €169 million compared with its initial investment of €2.192 billion. The FROB is Sareb’s largest shareholder with a 45.9% stake, followed by Santander (22.3%), CaixaBank (12.2%), Sabadell (6.6%) and Kutxabank (2.5%).

As the bad bank’s largest shareholder, the FROB typically sets the tone of the provisions for the other entities. Last year, after the FROB increased its cumulative provision to 75%, other shareholders such as CaixaBank and Sabadell recognised extraordinary provisions in their accounts for Q2. This year, the average provisioning rate is expected to increase from around 70% to 90%.

Sareb closed 2018 with losses of €878 million (up by 55%) due to the strong competition in the institutional market and the real estate crisis that still affects much of the country. The bad bank sold 21,152 properties last year and its income from property management soared by 19% to €1.4 billion, but its income from the loan portfolio fell by 16% to €2.2 billion and so total income fell by 5% to €3.7 billion.

The outlook for the bad bank for the next few years is not great and many experts forecast that not even a single euro will be recovered from Sareb.

Original story: El Confidencial (by Jorge Zuloaga)

Translation/Summary: Carmel Drake