Quabit Issues 4-Year Bonds Amounting to €20M

29 March 2019 – Valencia Plaza

The property developer Quabit Inmobiliaria has issued bonds amounting to €20 million through its wholly owned subsidiary Quabit Finance. The bonds have a maturity of 4 years and a coupon of 8.25%, which will be paid annually.

The success of the placement represents a great boost to the company’s strategy and confirms investors’ confidence in its management capacity. The funds raised will be used to undertake new investments, finance new projects and whereby continue with the firm’s growth and expansion plan.

Original story: Valencia Plaza

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

Grupo Iffe Acquires Promorent & Implements a Change in Strategy

25 February 2019 – Eje Prime

Promorent, the second Socimi to enter the Alternative Investment Market (MAB), is changing hands. The company has been acquired by the Institute of Financial and Business Training (“el Instituto de Formación Financiera y Empresarial” or Grupo Iffe), which has purchased a majority stake through a capital increase amounting to €33.7 million, according to confirmation provided by David Carro Meana, CEO of Iffe, speaking to Eje Prime.

Following the operation, the company will cease trading as a Socimi and it has already filed a request with the MAB to enter the segment of expanding businesses under the name Iffe Futura. The group has also approved an increase in its share capital, at an extraordinary shareholders meeting, to take the leap into the field of property development.

Until now, Promorent was a Socimi with a real estate disposition. Now, with the entry of Grupo Iffe, it will also be a property developer. Moreover, the company’s new statutes provide for the possibility of acquiring and administering shares in other companies, even if they are not Socimis.

The new Board of Directors of Iffe Futura will be led by David Carro Meana. The President of Grupo Iffe will become the President and CEO of the company (…).

With this operation, Grupo Iffe is taking control of a listed company and consolidating its business as a property developer. The company, which is headquartered in Oleiros, A Coruña, already operates three other main lines of business: a business school, a financial consultancy and a business incubator.

Promorent, constituted in November 2011, has been a real estate company until now. It was promoted by the Pavón Olid family group and it was the second Socimi to make its debut on the MAB in December 2013. The company has a diversified portfolio comprising 18 assets: 11 homes in the centre of Madrid, 4 commercial premises and 3 plots (…).

Original story: Eje Prime (by Roger Arnau)

Translation: Carmel Drake

Lennar Corporation Sells 30 Homes for €14M

22 January 2019 – Eje Prime

Lennar Corporation is continuing to squeeze its Socimi. Since October, Al Breck has sold thirty assets from its portfolio for €14 million. The operations have generated an accounting profit of approximately €5.8 million, according to a statement filed yesterday with the Alternative Investment Market (MAB).

This series of sales follows that of another 41 assets that the Socimi divested between June and October, whose volume amounted to €26 million and which generated a profit of €10.5 million.

The bulk of the divestments have been homes, together with storerooms and parking spaces. The plan forms part of the MAB entry strategy, which the company established when it made its debut. Then, the real estate firm owned around 639 rental homes, all located in the centre of Madrid. The Socimi formed its asset portfolio through a purchase operation from Segurfondo Investion in December 2014.

Original story: Eje Prime 

Translation: Carmel Drake

Bankia Signs Property Developer Loans Worth €450M in 2018

2 January 2019 – Eje Prime

Bankia is consolidating its return to the property development sector. The bank signed loans worth €450 million for the construction of homes during 2018, its first year back in the real estate business after the restrictions imposed by the European Commission, as a condition for saving the company from bankruptcy, came to an end.

During the year that just ended, Bankia signed several financing operations with real estate developers to construct 2,200 homes in total in Madrid, Cataluña, the Community of Valencia, Andalucía and the Balearic Islands. With these figures, the bank doubled the expectations that it had set itself when it re-launched in the real estate sector, according to reports from the entity in a statement.

Following the results of the first year, the entity chaired by José Ignacio Goiriogolzarri says that it is carrying out its activity “in accordance with the new standards of prudence in the real estate sector, which includes a requirement for adequate marketing stages and the comprehensive control of the development of projects”.

The €450 million financed in 2018 forms part of Bankia’s strategy to try to re-conquer the property developer sector and achieve a market share of 8% by 2020.

Bankia was rescued in 2012 with public aid and sanctioned by Brussels to refrain from participating in the real estate market for five years as a condition for receiving some of the capital that was used to rescue it from financial crisis.

Original story: Eje Prime

Translation: Carmel Drake

Sareb Searches for an Ally to Develop Land Worth €2.5bn

3 January 2019 – Eje Prime

The bad bank is looking for a partner to increase its profitability through the development of its land. Sareb owns plots throughout Spain worth €5 billion, but almost half (€2.4 billion), lack building permits. For this reason, the company is combing the market to reach agreements with companies that specialise in converting plots into buildable sites.

The company is thus planning to turn the tide in its strategy for the management of its portfolio when the contracts that it has signed with several Spanish real estate servicers come to end, which they will do soon, according to El Economista.

At the end of the first half of 2018, Sareb’s buildable land had a value of €2.15 billion. The rest of the portfolio owned by the publicly owned company comprises rural plots, worth €450 million.

Sareb, with €36 billion on its balance sheet, is also working on the creation of a fund with a residential property developer in which it will own a large stake. By way of consideration (payment for that stake), the bad bank will grant land worth €800 million for the development of new homes. Aelca is currently the favourite in the running to be awarded that contract.

Original story: Eje Prime

Translation: Carmel Drake

Blackstone Obtains a c. €2bn Mega-Loan for Testa

19 December 2018 – Expansión

The Socimi Testa held an extraordinary General Shareholders’ Meeting on Tuesday, where it reduced the number of members of its Board of Directors from 11 to 5. The new governing body includes three people proceeding from the new majority shareholder, the investor group Blackstone.

Testa Residencial is going to sign a mega-loan amounting to €1.943 billion, which it had already agreed in principle after the US fund Blackstone takes control of the rental home Socimi with the purchase of 80.6% of its share capital within the next few days.

The loan, equivalent to the amount that the purchase of the firm has cost the fund (around €1.52 billion) along with the debt held by the Socimi, has been agreed with Bank of America Merrill Lynch, Société Générale and Santander itself, Blackstone’s partner in Testa with 18% of its share capital.

This bank financing was agreed during the first meeting of Testa’s new Board of Directors following the restructuring of the management body conducted hours before, at the General Shareholders’ Meeting, when entry was granted to Blackstone.

By virtue of this restructuring, Testa’s Board has been reduced to five members, from the previous number of eleven. The fund has appointed three representatives to the Board, one of which, Diego San José, will also be the President of the Socimi, a role held until now by Ignacio Moreno.

The other two chairs at the table will continue to be occupied by the current CEO, Wolfgang Beck, and the director Miguel Oñate. In this way, the Board seeks to ensure continuity in the management of the real estate firm and to continue benefitting from Oñate’s experience and knowledge.

New strategy

Despite this continuity in management, at the first meeting of Testa’s Board, with Blackstone in the driving seat, a resolution was taken to approve a new strategy for the company, which had been planning to invest €550 million in the purchase of new rental homes to add to its existing portfolio of 10,700 flats.

The new strategy involves “analysing the eventual purchase of new homes depending on the circumstances at play in each case”. Moreover, Blackstone has raised Testa’s current leverage limit, situated at 35% of its asset value, and has reduced the dividend payment to the “legal minimum”.

In terms of the super-loan, it is being guaranteed by the assets of the Socimi itself, worth €2.3 billion in May when it was considering making its debut on the main stock market, and which will be signed with a two-year term, with the possibility of three annual extensions.

Dividend

Before changing the dividend policy, the Board also agreed to distribute a payment to the shareholders leaving the Socimi as well as to the new shareholders.

Specifically, it is going to pay €7.612 per share to the shareholders that leave the company after selling their stakes to Blackstone, in other words, to BBVA, Acciona and Merlin and to Santander for the proportion of shares that it has also sold.

Moreover, Testa will pay €0.035 per share to those players that will be its shareholders once the sale and purchase agreement has been signed within the next few days, in other words, to Blackstone and Santander, as well as to a group of minority shareholders who own 0.5%.

With the acquisition of this Socimi, Blackstone is strengthening its position as the largest owner of rental homes in Spain, with around 24,000 homes through its various firms and Socimis. Moreover, it is consolidating its position as one of the largest real estate owners in the country, with an asset portfolio worth more than €20 billion.

Original story: Expansión

Translation: Carmel Drake

Ghost Towns Still Haunt Spain in Property Rebound a Decade After

25 November 2018 – Bloomberg

Juan Velayos’s biggest headache these days is getting licenses fast enough to hand over new homes such as the upscale condos his company is building in the northern suburbs of Madrid.

Less than 60 miles away, Ricardo Alba’s neighborhood tells a different story about Spain’s property market. The fencing instructor is one of only two occupants at a block of apartments whose development was frozen in its tracks when banks pulled the plug on credit.

“The real estate sector’s recovery in Spain is developing at two clearly different speeds,” said Fernando Rodriguez de Acuna, director of Madrid-based real-estate consultancy R.R. de Acuna & Asociados. “While one part of the country is consolidating the recovery of the sector and even expanding, another part of the country is stagnating and is showing few signs of returning to pre-crisis levels in the medium- and long-term.”

A decade after the financial crisis hit, Spain’s real estate recovery is a tale of two markets. Key cities and tourism hot spots are enjoying a fresh boom, fueled by interest rates that are still near historic lows, an economic recovery and a banking system that’s finally cleaning up its act. Private equity firms such as Blackstone Group LP are picking up once-toxic assets worth tens of billions of dollars and parsing out what’s still of value, often using their playbook from the U.S. real estate recovery to convert properties into rentals.

But travel a little beyond the bustling centers, to the outskirts of smaller villages, and ghost towns still litter the landscape — once ambitious developments, often started on agricultural land that was converted into building lots just before the crisis hit. They still stand half-finished, unable to find a buyer.

The “Bioclimatic City La Encina” where Alba began renting an apartment two months ago is one such development. Situated on the edge of the village of Bernuy de Porreros, about 10 kilometers (6 miles) from Segovia, it promised to be Spain’s first environmentally-friendly town, providing solar energy and recycled water for 267 homes, comprised of two-, three-, and four-bedroom chalets and apartments. A faded billboard speaks of the dreams that were sold, including communal swimming pools and gardens for residents who would “live… naturally.”

Today, only about a dozen of the homes are occupied. One street has finished homes but half have their windows bricked up to discourage break-ins, locals said. Alba does have solar panels heating his water, but his electricity comes from the local network. On the far side of the development, trees sprout out of the middle of a street that was never paved. Brightly-colored pipes and cables protrude from the ground. Bags of plaster on a pallet have long hardened.

Spain’s housing crash was fueled by a speculative frenzy combined with loose restrictions and corruption that allowed plots of farmland in rural villages to be converted to feed a demand for homes that never truly existed, said Velayos, who is chief executive officer of Neinor Homes. At the height of the boom in 2006, authorities approved 865,561 new home licenses when even in an economic boom demand is no greater than 250,000 homes, he says.

Banks were handing out loans to developers who had little to lose if a project didn’t find a buyer because the money wasn’t theirs. The result was an almost total collapse of the market and close to $200 billion of soured assets.

About half of them were bought in 2012 by Sareb, a bad bank set up by the government to help lenders. Sareb spent about 50 billion euros to acquire assets that were once valued at twice that amount, mostly loans to developers and real estate. Among the latter are also 97 of the 267 properties at La Encina. None of them are currently for sale as Sareb works through legal issues and construction of many isn’t finished.

Other assets were picked up by deep-pocketed investors such as Blackstone, which has 25 billion euros invested in Spain, according to Claudio Boada, a senior adviser at the firm. The New York-based company — the world’s largest private markets investor — is doing what it did at home after the financial crisis: renting out homes instead of selling them in a bid that fewer people can afford to own. Spain had a relatively high home ownership rate before the crisis but it has since come down.

Blackstone’s Bet

“We’re holding most of what we own and looking to rent it out for the foreseeable future,” said James Seppala, head of real estate for Europe at Blackstone. “There’s a meaningful increase in demand for rental residential around the world, including in Spain, driven by home ownership rates coming down.”

Private equity investors also backed a new breed of real estate developers that are bringing a different rigor to the industry. Companies such as Neinor and Aedas Homes S.A.U. are more tech-savvy when assessing markets, and emphasize industrial production techniques to improve efficiency. They’re behind a surge in licenses for new homes to 12,172 new homes in July, the highest monthly total in a decade.

But demand is uneven: Madrid is enjoying its most robust year of home construction since 2008 with an average of 2,151 licenses awarded per month in the first seven months of the year. In Segovia, just 27 minutes from Madrid on the state-run bullet train, an average of 25 homes licenses have been approved per month in 2018, compared with an average of 180 homes a decade earlier.

The volume of residential mortgages sold in Spain peaked in late 2005 before hitting a low in 2013. Since then they have gradually picked up, with 28,755 sold in August, a seven percent annual increase.

Velayos, chief executive officer at Neinor, said business is starting to pick up beyond Madrid and Barcelona to smaller cities and the coast. His company plans to hand over 4,000 homes by 2021, more than 12 times as many as in 2017. The biggest challenge has been getting licenses approved on time. Velayos had to cut his delivery target for 2019 by a third as often understaffed local councils cause bottlenecks in the production process.

More significantly, Spain’s real estate is now funded by investor’s equity and not credit, said Velayos. Neinor was bought by private equity firm Lonestar Capital Management LLC from Kutxabank SA in 2014 and went public in March 2017. Aedas is backed by Castlelake, another private equity investor, and was floated the same year. Metrovacesa SA, owned by Spain’s biggest banks, held an initial public offering earlier this year.

Shares of all three developers have declined this year at more than twice the rate of the local stock index, a reminder that the market’s recovery remains fragile, with higher interest rates and an economic slowdown on the horizon.

For the Bioclimatic City La Encina, that means it may take longer still until Alba gets new neighbors. Prices for half-finished chalets were slashed by half, according to residents. Some now sell for as little as 16,700 euros, half the cost of a mid-range car.

Alba doubts such cuts will lure buyers. Then again, that may not be a bad thing, he says in summing up the development’s advantages: “It’s very peaceful.”

Original story: Bloomberg (by Charlie Devereux)

Edited by: Carmel Drake

Cerberus Plans to Create a Real Estate Giant by Acquiring Altamira & Solvia

10 November 2018 – Expansión

Cerberus is increasing its commitment to the Spanish real estate market. The US fund is the favourite candidate to take over the reins at Altamira, the manager of property loans and foreclosed real estate assets currently owned by Apollo and Santander. Moreover, Cerberus is battling it out with the fund Lindorff (now Intrum) and other investors to purchase Solvia.

As Expansión revealed on 8 October, Apollo renewed its contract with the investment bank Goldman Sachs at the beginning of the summer and distributed the teaser (the sales document containing a general description) to potential interested parties to dispose of this asset for between €500 million and €600 million. Although it is not alone in the process, Cerberus is the candidate that has the best chance of acquiring that company.

But Cerberus is not going to settle for that asset only. Financial sources assure that the US fund is also bidding for Solvia, in a process in which it is also competing with Lindorff. The CEO of Sabadell, Jaume Guardiola, noted, during the presentation of the results on 26 October, the “good appetite” in the market for Solvia, “whose sale will close “soon”. He whereby confirmed the sale of Solvia Servicios Inmobiliarios (SSI) and Solvia Desarrollos Inmobiliarios (SDI). For the sale of SSI, in which it is being advised by Alantra, the bank hopes to receive up to €400 million.

Concentration of the market

If Cerberus ends up being the winner of both processes, it will become the clear leader of the servicer sector and a proponent of concentration between the servicers. These companies, created from the former real estate subsidiaries of the banks, have become some of the stars of the new real estate cycle.

Currently, almost all of the assets under management of the banks are in the hands of a few companies such as Altamira, Servihabitat, Haya Real Estate, Aliseda, Anticipa, Solvia and Divarian (previously Anida). These firms are mainly responsible for the management and recovery of debt and transformation of loan obligations into foreclosed real estate assets, as well as the sale and rental of assets.

If Cerberus ends up taking control of Altamira and Solvia, it will control almost 65% of the market for servicers, which will allow it to mark a differentiation in its strategy. Currently, the US fund controls Haya Real Estate, one of the large servicers with €40 billion in assets under management. Moreover, it took over the reins at Anida, which was in the hands of BBVA, and which manages €13 billion.

If it adds Altamira and Solvia to its portfolio, the volume of assets under management will soar to €138.9 billion, with a market share in the servicer segment of 65%. According to numbers managed by the consultancy firm Axis, the other two dominant funds are Blackstone, with Anticipa and Aliseda (also from Santander) and LoneStar, which controls Servihabitat after purchasing that company from La Caixa in the summer.

Other assets

In addition to the servicers, Cerberus is also the owner of the property developer Inmoglacier; the online estate agency between individuals Housell; and the debt recovery company Gescobro (…).

Original story: Expansión (by R.Arroyo and D.Badía)

Translation: Carmel Drake

Meliá Sells 3 Hotels to Socimi Atom for €73.4M

13 July 2018 – Expansión

Meliá Hotels has announced an agreement with the Socimi Atom Hoteles, in which Bankinter holds a stake, for the sale of three hotels in Sevilla, Santa Cruz de Tenerife and Fuerteventura for €73.4 million.

The transaction, which will generate a net accounting profit of €6.6 million, includes the hotels Meliá Sevilla, Sol La Palma (Santa Cruz de Tenerife) and Sol Jandía Mar (Fuerteventura), respectively.

The establishments will continue to be operated by Meliá by means of variable rental contracts (25% of the total revenues) for periods of 5 years, with a maximum of 4 extensions at the discretion of Meliá and up to a maximum of 25 years.

The operation values each room at €66,000 and represents an EBITDA (result before depreciation and amortisation) multiple of 13.9 times.

As part of the agreement, Atom undertakes to invest €20.2 million in the three hotels, whereby allowing their “repositioning”. Thus, the price per room after the investment will amount to €83,000.

The hotel chain has said that this sale forms part of its “strategy to adapt the attributes of the brands of all of the establishments operated by the company”.

Original story: Expansión (by D. B.)

Translation: Carmel Drake