Moody’s Warns Of Higher Default Risk For Restructured Mortgages

11 November 2016 – Expansión

Yesterday, the ratings agency Moody’s issued a warning about mortgages that are being restructured, which represents an increasingly larger pool, thanks to the economic recovery and the proliferation of real estate management platforms. In the entity’s opinion, several variables may lead to an increase in the risk profile of these assets. Specifically, restructured mortgages are more risky when: the mortgage term is extended; grace periods are granted for the payment of interest or the repayment of the principal; interest charges are reduced; and other modifications are made.

This warning comes just a few weeks after Blackstone created the first securitisation fund in Europe containing restructured loans, amounting to €265 million. It created the fund using mortgages that it purchased from Catalunya Banc at the beginning of 2015. Nevertheless, it only included loans that borrowers have been repaying normally, without any help, for more than 37 months.

Analysts at Moody’s consider that foreign residents in Spain are twice as likely to default on their loans than Spaniards. “A defaulted payment by a foreigner on a Spanish loan does not have any impact on his credit history in his country of origin; and clearly, that reduces the incentive for him to seek solutions to repay his debt”, say the experts. In turn, the risk of default is 30% higher for borrowers who have restructured mortgages over secondary residences compared with those who have restructured mortgages over primary residences.

Moody’s has also conducted analysis by geographic region and in this sense, its results are clear: borrowers who have restructured mortgages for homes on the coast are almost twice as likely to default than borrowers with restructured mortgages in Madrid.

The default rate

Meanwhile, Axesor forecasts that the default rate for loans to families and companies will close the year at 8.96%, which would bring it below the 9% threshold for the first time since May 2012. The balance of doubtful debts amounted to €116,613 million in August, which represented a YoY decrease of 17.58%, and that figure is expected to continue to fall at a double-digit pace, which means that we could close the year with a doubtful debt balance of around €110,051 million.

Original story: Expansión (by D.B.)

Translation: Carmel Drake

Sareb Launches 4 New Commercial Campaigns

2 November 2016 – Cinco Días

Sareb is looking to capitalise on the final quarter of the year, typically a very busy time for real estate transactions and likely to be even more so in 2016, now that a Government has finally been formed after months of political deadlock and uncertainty.

Whilst a few weeks ago, the so-called bad bank launched Project Eloise, the sale of its largest asset portfolio to date, the firm is now preparing four new promotional campaigns to encourage the sale of its properties, focusing on: new homes, plots of land, rental properties and low priced assets.

The new commercial campaigns have been baptised as follows: “Casas de estreno”, “Suelo”, “Alquileres” and “Rebajas”, and their aim is “to complement the commercial and marketing initiatives” that Sareb has been carrying out through the four other commercial campaigns that it launched during the first six months of the year, according to a half yearly report that the company has just published.

Specifically, between January and June, Sareb launched the following campaigns: “Grandes rebajas”, through which it has generated sales of €15.6 million; “Casa Sareb”, containing residential homes, which has generated sales of €15.4 million; “Tu casa a toda costa”, focused on secondary residences, which was extended in July after it exceeded its sales target of €25 million; and “Madrid-Barcelona”, designed to offer exclusive homes for sale in Spain’s two largest capital cities, which has also exceeded its sales target, of €16 million.

The report about Sareb’s half yearly activity also highlights the commercial agreement that the bad bank has reached with the real estate portal Idealista to offer all of the properties that Sareb sells through the real estate platforms Haya Real Estate, Altamira, Servihabitat and Solvia, on a single website. By the end of June, the website was already displaying 90% of its supply.

Sareb has sold 8,930 properties during the first nine months of the year, up by 12% compared to the same period last year, although its revenues from those sales amount to just €2,270 million during YTD Sept 2016, down by 9.7% YoY. Following the blow dealt by the Bank of Spain’s new accounting circular, Sareb has just launched its largest portfolio for institutional clients: a package of loans secured by properties amounting to €1,000 million.

Original story: Cinco Días (by J. P. C.)

Translation: Carmel Drake

International Funds Reactivate Residential Development Market

7 July 2016 – El Economista

After several years away, cranes are appearing on Spain’s landscape once again. Their return has come thanks to several large international funds, which have managed to reactivate the property developer market in record time and just at the right moment. Thanks to their presence, property developer activity in Spain grew by 30% last year, with 50,000 new construction permits; and the experts are certain that the residential business is now unstoppable.

The financial capacity of the new players is overwhelming in some cases. They have liquidity surpluses that the historical property developers would have envied, but, nevertheless, they do not know the ‘ins and outs’ of the local market, and their experience in terms of land is practically non-existent. For this reason, their entry into the Spanish market has been undertaken through the purchase of property developer platforms and through partnerships with local companies (…).

In light of the high profile partnerships that have been signed in the last two years, involving players such as Lone Star, Värde and Kennedy Wilson, the experts predict that the high level of activity will continue this year with the purchase of plots of land. In fact, they confirm that sales of non-developable land are starting to accelerate and that demand for land purchases will increase, especially those in the final stages of development, due to the high level of competition that has been generated between the key players in the sector – property developers, investment funds and cooperatives.

All of these players have realised that the opportunities that the residential development business is now offering “have yields that are considerably higher than those of other investments”, according to Solvia’s Market View report, which states that transactions have grown by 8.6% and prices have risen by around 4.5%. With these positive indicators, the development figures being talked about now include 150,000 new homes and 50,000 secondary residences per year until 2020.

Most of these homes will come onto the market thanks to Neinor Homes, which is looking to become the largest property developer in Spain. This company will be one of the most active over the next few years, given that according to its own forecasts, it expects to build between 2,500 and 3,000 homes per year. The firm, led by Juan Velayos – the former CEO of Renta Corporación – is the largest residential real estate company created in Spain following seven years of recession.

Its potential was proven last year, since between its creation, in May 2015, and the end of the year, it invested own funds amounting to €800 million on the purchase of land, on which it plans to construct 10,000 homes over the next few years, bringing together the largest bank of high-quality developable land in Spain (…).

But Lone Star is not the only fund that has made a long-term commitment to the Spanish residential market. The US fund has had a major competitor for several weeks now, in the form of Värde, which after acquiring 25% of the real estate arm of San José from Banco Popular, has now created a new property developer.

The company is called dospuntos and its Business Plan for 2016-2012 forecasts an investment of almost €2,000 million in the Spanish real estate market over the next six years, to complete the construction of 2,000 homes per year on average from 2019 onwards. For the time being, the group already owns a sizeable bank of land for the construction of more than 7,000 homes across Spain.

Inmobiliaria Habitat is another company with history in the sector, which in 2015, after finding itself in a very delicate financial situation and incapable of paying its debt, ended up in the hands of a group of funds – Bank of America Merril Lynch, SP101 Finance Ireland, Capstone and Goldman Sachs, amongst others. In this case, although the commitment by the funds has been key, it is nonetheless a temporary measure, given that they plan to exit the group within two or three years.

The latest residential report from the consultancy firm CBRE highlights other partnerships between international funds and domestic developers such as: Grupo Lar and Pimco; Renta Corporación and Kennedy Wilson; Momentum Real Estate and HMC; Aquila Capital and Inmoglaciar; Mina Inmobiliaria and Eurostone; Aelca and Värde; and Q21 Real Estate and Baupost. (…).

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

Sareb Puts More Than 150 Plots Of Land Up For Sale

7 October 2015 – El Boletin

Sareb has launched a land campaign for investors and property developers, which includes more than 150 plots, according to a statement issued yesterday by the so-called ‘bad bank’. The plots have a total buildable area of over 1,500,000 m2 for the development of homes, offices, shops, hotels and industrial warehouses.

Around one third of the land is located on the coast and is aimed at secondary residence developments. The campaign is being conducted online, through the microsite, which contains information about all of the assets for sale. It also includes plots for tertiary use in the provinces of Guadalajara, Madrid, Málaga, Murcia and Valencia, intended for the development of approximately 250,000 m2 of offices and industrial warehouses. Sareb is outsourcing the marketing of these plots to its managers and servicers (Altamira, Haya, Servihabitat, Solvia).

“Sareb has identified that there is demand for developable land in several parts of Spain where it has assets, and so we think that now is the right time to launch this campaign”, explains Alfredo Guitart, General Manager at Sareb.

Almost 30% of the land included in this campaign is located in the Community of Madrid, with a buildable area of approximately 367,000 m2. Highlights include plots in Alcalá de Henares, Arroyomolinos, Madrid city, Torrelodones, Valdemoro, Leganés and San Fernando de Henares.

Sareb has also put 20 plots of land up for sale in Andalucia (with a buildable area of around 231,000 m2). These assets are mainly located in the province of Málaga, but there are also plots in Granada, Córdoba and Cadiz. All of these sites are intended for residential use, with the exception of two sites in Marbella and Vélez-Málaga, which have been allocated for hotel and retail use, respectively.

There are 39 plots in the Community of Valencia, with a combined buildability of approximately 215,000 m2, mainly residential. Two thirds of this supply is located in the towns of Moncofa (Castellón), and Gandía and Sagunto (Valencia). The latter is home to a plot of industrial land for warehouses, with a surface area of almost 16,000 m2. Meanwhile, in Cataluña, there are 17 plots with a buildability of 70,000 m2. The majority of those are located in the city of Barcelona, but the supply also includes other sites in, for example, Terrassa, Sabadell and Llinars del Vallés (Barcelona) and Ametlla de Mar and Ruidoms (Tarragona).

Finally, there are sizeable plots in Palma de Mallorca (Balearic Islands) and Zaragoza (Aragón). The first plot has been allocated for social, industrial and commercial use and is located in Estadi Balear, with a buildability of more than 10,000 m2. In the case of Zaragoza, nine plots have been selected with a combined buildability of more than 62,000 m2, both in the old town and in new developments.

Original story: El Boletin

Translation: Carmel Drake

Spain’s New Property Developer Kings – Who’s Who?

5 October 2015 – El Economista

The funds, financial institutions and real estate companies that have survived the crisis, forecast that they will construct 150,000 new homes and 50,000 secondary residences per year until 2020.

After the burst of the real estate bubble and the harsh years of the crisis, a new panorama is now emerging in the construction sector with several new players in the wings. Many funds and financial institutions have already emerged as the new stars of the residential development segment and have taken on a significant role in the sector.

Nevertheless, these banks and investment firms will have to share the market with some of the survivors from the past, namely the former property developers. A handful managed to survive the drought, as they diversified their businesses and/or made intelligent developments before the crisis, and they are now ready to become property kings once again.

Neinor Homes, will undoubtedly be one of the most active companies over the next few years, since according to its forecasts, it will construct between 2,000 and 3,000 homes per year. The company, led by Juan Velayos (former CEO of Renta Corporación) is the largest residential real estate company created in Spain following seven years of recession.

Neinor Homes is pushing down hard on the accelerator. This year alone it will invest around €1,000 million on the purchase of land, which it will add to the land worth €350 million that is already holds on its balance sheet. (…).

The banks are also entering the sector

According to the first report prepared by Solvia, to analyse the trends in the real estate market, the banks, through their servicers, have also positioned themselves amongst the main property developers. Solvia itself is playing a significant role in the new panorama. The real estate company owned by Banco Sabadell has already developed more than 3,380 homes over the last few years and has around €4,200 million in land assets under management. (…).

BBVA has also launched itself into property development, as the Commercial Director of BBVA Real Estate – Anida, Lorenzo Castilla explains. The entity is evaluating the development of 25 sites for the construction of 2,000 homes, whilst already developing another 12 for the construction of 630 properties.

The director clearly describes the new model that has now been implemented in the sector, he says that “it is not about filling Spain with cranes, but rather focusing on projects that make sense”, given that “there was a distinct lack of rationale during the boom years”.

According to the estimates published in Solvia’s Market View report, both Altamira, the real estate subsidiary of Banco Santander, and Cerberus will develop between 1,000 and 2,000 homes per year. In the case of the US fund, this development will be centred on the urban complex it purchased together with Orion from NH, in Sotogrande (Cádiz) for €225 million. (…).

The real estate companies make a return

Solvia’s report also highlights that property developers such as Via Célere, Corporación Promotors, Pryconsa and Inmobiliaria Espacio will also be developing between 500 and 1,000 homes per year. (…).

All of these projects come in stark contrast to the still very high figures for unsold housing stock (533,734 units in 2014). Moreover, the experts say that a significant volume of this stock may never be sold, however, the sector justifies the new developments. Solvia says that the business model that it applies now is more conservative than in previous years, since land purchases are generally being financed using own funds. In addition, “the lack of stock in certain areas, and the existence of pent-up demand, makes the conditions very favourable for a return to development”.

On the basis of this data, property developers estimate an annual output of 150,000 new homes and 50,000 secondary residences between 2016 and 2020.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake