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

S&P Encourages Spain’s Banks to Divest More Property & NPLs

18 April 2019 – Ya Encontré

Spain’s banks got rid of €90 billion in foreclosed assets and doubtful loans last year, almost doubling the transaction volume recorded in 2017 (€52 billion) and setting a new annual record. But they still have a lot of homes left to sell and Standard&Poors is encouraging them to divest more of those properties, with a view to restoring their pre-crisis risk levels of 4% within two years.

According to the ratings agency, the banks still hold properties worth €80 billion, representing one of the highest stocks in Europe and accounting for 7% of the balance sheets of the domestic financial sector. In this context, S&P considers that the banks still need to get rid of another €30 billion in assets, at least, if they are to properly clean up their accounts.

The active buyside players in the market include many overseas investors and funds, such as Lone Star, TPG, Apollo, Blackstone, Bain Capital and Cerberus, which have played an important role in reducing the stock of major financial institutions, such as Santander, BBVA, CaixaBank and Banco Sabadell.

S&P is not alone in its stance. Both the European Central Bank (ECB) and the International Monetary Fund (IMF) are also urging Spain’s banks to divest the last of their property portfolios as quickly as possible to ensure financial stability ahead of the next recession.

Original story: Ya Encontré

Translation/Summary: Carmel Drake

Blackstone Prepares a Series of Portfolio Sales Following its 6-Year Spending Spree

27 March 2019 – El Confidencial

The US fund Blackstone, which has been so busy on the buy side in recent years, is getting ready to put the for sale sign up, over some of its assets at least. It is preparing the sale of several portfolios, including the Socimi Corona, the homes of Fidere and also some of the former assets of Popular that it acquired from Santander.

Several sources have confirmed that the US fund is currently designing portfolios for sale in order to rotate some of the €20 billion in property that it now owns in Spain. Most of the portfolios are expected to be small, between €50 million and €300 million, although the fund is reportedly also working on some larger deals that could reach €600 million. The plan is to put the portfolios on the market before the summer.

Blackstone’s target market includes pension funds and insurance companies, which operate with lower costs of capital and which, therefore, can afford to pay more. It already trialled that strategy with the sale of Hispania’s offices to Zurich, to great success. But Blackstone will also target other funds looking to grow or complement their existing investments.

Despite this vendor activity, the US giant is still committed to buying assets in Spain. It simply wants to rotate its most mature assets, given that it started making investments in the country in 2013.

Original story: El Confidencial (by R. Ugalde and J. Zuloaga)

Translation: Carmel Drake

Blackstone to Raise €8bn for its European Real Estate Fund

25 March 2019 – Idealista

The US fund Blackstone wants to raise funds to continue growing in Europe. The fund manager expects to secure up to €8 billion for its next European real estate fund, which is going to be called Blackstone Real Estate Partners Europe VI.

The new vehicle’s investments will have tickets starting from €75 million and will include portfolios of properties and corporate operations as the target assets.

Spain is very much on Blackstone’s radar following its purchase of 51% of Popular’s real estate business from Santander for €5.1 million, in one of the largest operations signed last year.

Moreover, the fund has purchased the property of CatalunyaCaixa, the shares of Hispania (including its large hotel portfolio) and the shares of Testa, the rental home company.

Original story: Idealista 

Translation/Summary: Carmel Drake

Santander Transfers Land Worth €4bn to a Newly Created Land Manager

18 March 2019 – Cinco Días

Santander is making history once again. The entity has created a company to which it is going to transfer all of the land proceeding from its exposure to property, which has a gross book value of around €4 billion (and a net value of around €2 billion).

The purpose of this new vehicle, known as Landmark Iberia, will be to advance with the urban planning procedures required to generate value from these plots and to continue selling the land, with the ultimate goal of selling the whole company if an attractive offer is received.

Landmark is not like any of the bank’s previous projects given that it is not a servicer. Its job is to generate value from the plots that it receives from Santander – it is the first entity of its kind in Spain.

The operation forms part of the group’s overall strategy to reduce its exposure to real estate, in accordance with the instructions of the Bank of Spain. Last year, Santander decreased the value of its exposure by 55.9% in gross terms to €15.1 billion, according to the entity’s annual accounts, thanks to its operations with Blackstone (project Quasar) and Cerberus.

Landmark will likely become the largest landowner in the country, alongside other major companies in the sector such as the property developer Metrovacesa and the fund Cerberus.

Original story: Cinco Días 

Translation/Summary: Carmel Drake

Metrovacesa Explores Entering the Rental Home Sector

21 February 2019 – El Confidencial

Selling new build homes is still proving to be too much of a challenge for the times that are approaching. As such, another of the listed property developers, Metrovacesa, is evaluating its entry into the rental home sector, an option that its competitor Neinor (advised by Goldman Sachs) also has on the table. According to market sources, it is the first of the large players determined to take that step to fulfil its business plans.

Since the end of last year, the large owners of residential land have acknowledged that they are open to entering the rental market, either as owners or as turnkey suppliers for investors. The challenge, nevertheless, is disembarking in this segment without their margins being affected and therefore being forced to revise their business plans, like Juan Velayos already had to do with Neinor.

For the time being, the real estate company controlled by Santander (49%) and BBVA (21%) has recognised that it is considering rental housing as “a valid strategic option”, although it has not made any firm decisions in this regard, according to public declarations made by the property developer’s Head of Corporate Development. In its case, it will always be as a business to sell to a specialist third party operating in the residential property business.

This strategic reflection affects everyone, although the speeds of adoption will vary. In the case of Aedas, it has been working for some time on different scenarios that may open the door following the end of the current cycle, in which property developers with large land portfolios have been constituted, boosted by investment funds, because its not all about land in the main markets, nor are there infinite buyers for flats costing more than €400,000.

In the case of Metrovacesa, its numbers are the most chunky, since it has the largest liquid land portfolio in Spain, worth almost €2.7 billion, on which it estimates that around 38,000 homes could be built, according to official data. In its case, like with the rest of the listed firms, the largest volume of homes will be handed over in 2020, a short-term horizon, for which conservative estimates are beginning to be made.

The lower economic growth in Spain (2.8% in 2018 and 2.2% in 2019, according to the Bank of Spain) is another indicator of the macro-economic environment that is looming. In this situation, the potential impact that it may have on sales forecasts means that “many value alternative (rental) products as options for offsetting a likely slowdown in sales”, say sources at one of the large real estate consultancy firms.

Original story: El Confidencial (by C. H.)

Translation: Carmel Drake

Lone Star & Cerberus Increase their Commitment to Spanish Property

21 February 2019 – Expansión

The need for the banks to reduce their exposure to property and the funds’ appetite for the Spanish real estate sector have converged in recent years leading to the transfer of portfolios of debt and foreclosed assets worth millions of euros. Blackstone, Cerberus, Lone Star, the Canadian pension fund (CPPIB), Bain, Axactor and Lindorff are the funds that have been behind most of the major transactions involving portfolios of bank debt secured by real estate collateral during that period.

Emilio Portes, Director of Quantitative & Risk Management at JLL for Southern Europe, said that, following a frantic 2017 when more than €55 billion was transacted, last year saw portfolios sold with a gross value of more than €45 billion (…).

In 2018, the indisputable star was Lone Star, which took control of a portfolio worth around €12.8 billion from CaixaBank. Specifically, CaixaBank sold that portfolio along with Servihabitat to a company called Coral Homes in which Lone Star owns an 80% stake. Cerberus was also active last year with the purchase of several portfolios from Sabadell, Santander and CaixaBank with a total gross value of €12.5 billion. Behind it, came CPPIB, Axactor, D.E. Shaw and Lindorff, according to data provided by JLL.

“The sum of the transactions recorded over the last two years exceeds €100 billion, which places Spain as one of the countries with the largest transaction volume in Europe and the most liquid in terms of real transactions”, says Portes. In those portfolios, there are various types of assets, mainly residential, but also land, offices, premises and hotels.

The year ahead

During 2019, the banks will continue to divest assets, although with smaller portfolio sales. “In 2019, we expect a transaction volume of €20 billion, in addition to whatever Sareb ends up doing”, revealed Portes. He explains that most of the large Spanish banks have now reduced their NPA (non-performing asset) ratios to below 5%.

Following the activity undertaken by the large banks, all eyes are now focused on the medium and small-sized entities, particularly those with the greatest property exposure and therefore most pressure, as well as on Sareb, which has assets worth more than €35 billion still left to sell (…).

The heirs of the banks’ property, having purchased at significant discounts, have an average investment horizon of five years before they undo their positions (…)

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Countdown to Los Berrocales: Investment of €4.4bn Over 20 Years

18 February 2019 – Eje Prime

More millions for Los Berrocales. Joaquín Gómez, manager of the Los Berrocales Compensation Board, expects investment of up to €4.4 billion from the owners and future housing developers over 20 years. That amount will be added to the €200 million that has already been invested by the owners in pipelines, collectors, infrastructures, service roads and earth movement work.

The proposal that has been reached with the owners of Los Berrocales is that the neighbourhood will be constructed in phases. First, phases I and III, which are expected to involve the construction of 10,000 homes over 10 years. The rest of the construction work will be carried out in the following decade. Up to 100,000 homes from the plan, located in Los Cerros and Valdecarros, will be suspended due to the requests filed for compensation against the Town Hall, according to reports from Cinco Días.

Nevertheless, the approval of the agreement does not mean that the construction work is going to begin immediately. In fact, Gómez expects that construction of the homes could begin in 2022 or 2023. For now, there are no threats of suspensions for political reasons given that Ahora Madrid, Ciudadanos and the PP are all in favour of the project. The position of Pepu Hernández, the likely socialist candidate, if he is elected mayor, remains to be seen.

The owners of the 8.3 million m2 of land include Habitat, Pryconsa, Santander, Caixabank and Liberbank. Another of the major landowners is the Town Hall of Madrid, which holds almost 8% of the plots.

Original story: Eje Prime 

Translation: Carmel Drake

Apollo Returns to Spain with the Purchase of Properties from Santander for €200M

13 February 2019 – Expansión

The US fund, which barely has any financial assets left in Spain, is acquiring offices in secondary areas of Madrid and Barcelona.

In recent years, Apollo has dedicated itself almost exclusively to the sale of assets in Spain, which caused experts to speculate that it might be leaving the country. But the fund led in Spain by Carlos Colomer and Pablo Crespo is still present and is very much backing Spanish assets once again.

According to reports from financial sources speaking to Expansión, Apollo reached an agreement with Santander in December (…) to purchase a portfolio of so-called tertiary assets (commercial properties) worth €200 million. The transaction, according to the same sources, will be definitively closed at the end of February.

A large part of these assets are offices located in secondary areas of Madrid and Barcelona. “Half of the value of the portfolio acquired corresponds to large office buildings located in secondary locations. All of the assets are in Madrid, except for one building that is in Barcelona”, they said.

Apollo is acquiring this portfolio because it considers that rental prices in secondary markets have not recovered yet. The sources consulted believe that “the rental prices of core (higher quality) buildings are recovering, but, as prices in the city centres rise, so tenants will consider moving to more secondary locations”.

The fund’s plan goes beyond this purchase. In fact, it wants to acquire new assets to incorporate into a new vehicle to generate value from them, through capex investment, with the aim of selling them a posteriori.

The rest of the portfolio

The rest of the portfolio that Apollo has purchased from Santander comprises a mix of more heterogeneous properties, some with an industrial component, other smaller offices and other premises that they intend to sell to retail investors.

This purchase is the first that Apollo has undertaken with its latest fund called European Principal Finance III, which it raised in December 2017 with USD 4.6 billion (almost €4.1 billion). It is also the first investment that it has made since the departure of its main executive in Spain, Andrés Rubio (…).

Apollo, led by Andrés Rubio, the executive who left the firm in September last year, arrived in Spain in 2011 to take advantage of the opportunities that were emerging as a result of the financial crisis. Since then, the fund has made purchases in Spain amounting to more than €1 billion (plus debt), such as the acquisition of 85% of Altamira, Evo Banco, the credit cards of Bank of America, the mortgage business of Citi and General Electric, and the hotels that had been awarded to CaixaBank and Popular (…).

Original story: Expansión (by Daniel Badía)

Translation: Carmel Drake