Election Fallout: Large Investors Rethink Their Strategies For Spain

2 June 2015 – Expansión

Election fallout / International funds are worried about the impact that the new (political) environment will have on their purchases of: social housing, problem mortgages and portfolios of homes from banks.

The rise of Podemos in the municipal and regional elections could clog the bank’s real estate drain once again. After years of provisions and foreclosures, the financial sector had started to sign large transactions in recent months, and whereby reduce the high burden of property on their balance sheets. Transactions worth more than €10,000 million are currently underway. However, some potential investors have begun to rethink their strategies and fully expecting that the projects that are already underway will be affected, at least in terms of price.

(….)

The fears of the larger international funds revolve around what might happen in three specific segments: subsidised social housing (VPO homes), where Blackstone and Goldman Sachs have been very active; the suspension of evictions; and the possibility that new measures will be taken to deal with vacant homes.

Subsidised social housing

Subsidised homes were one of the assets that the funds that first arrived in Spain expressed interest in. Blackstone and Goldman purchased more than 8,000 homes of this kind between 2013 and 2014 from the Community of Madrid, the Town Hall of Madrid, FCC, Sareb and Bankia.

Now, after a couple of years managing these real estate portfolios, the funds fear that the expected arrival of Ahora Madrid in the Town Hall will change the rules of the game and may even cause them to reverse their purchases (i.e. exit their investments) (…).

Mortgage portfolios

The second wave of concerns relates to mortgage portfolios, which were expected to generate a large volume of transactions during 2015. A priori, financial sources indicate that it would be easier if there was no legislative change until the general elections, in case Podemos gains strength as an alternative Government. However, the mere uncertainty in this regard means that funds are going to really take care with the purchase of any portfolio.

Blackstone is again the fund that is most exposed to these assets, since in 2014 it purchased a portfolio of problem mortgages from Catalunya Banc amounting to €6,400 million. This acquisition involved around 50,000 mortgage contracts, of which 57% were overdue or non-performing; and more than half were located in the province of Barcelona, where the possible arrival of BComú – which groups together Podemos, Esquerra Unida and other left-wing parties – generates real real amongst international investors.

Following this transaction, agreed in 2014, Bankia and BMN have put their own problem mortgage portfolios up for sale.

Sources close to the funds explain that eviction is the last resort used for this type of portfolio, and that the main objective is to reduce the debt so that loans become more affordable or “daciones en pago” in exchange for holding onto the home. But, they add, that the legal concept of eviction helps them to put pressure on certain delinquent borrowers, something they would have to stop doing based on the election promises of some of the political parties.

Tax on vacant homes

Given the uncertainty surrounding the general elections, a more immediate fear is the new taxes that local councils in the major regional capital cities may introduce: such as the tax on vacant homes. That would certainly have an effect of some of the loan portfolios that the banks have put on the market in recent months. (…)

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Metrovacesa To Build Homes & Hotels In Clesa Factory

28 May 2015 – Expansión

The real estate company and the College of Architects are holding a competition for ideas to renovate the main building of the complex in Madrid and develop homes, hotels and retail spaces.

Recover an industrial area that was abandoned years ago, and integrate it into the new urban plan for Madrid. That is the ambitious project that the real estate company Metrovacesa finds itself immersed in.

The company has decided to convert the Clesa factory – the former dairy brand of the Ruiz Mateos group – in Madrid, into a residential area with all sorts of amenities, as well as hotels and retail spaces. The project includes the demolition of 16 industrial warehouses that make up the complex, but one building, created by the architect Alejandro de la Sota, will be maintained. “The disused building was neglected by the former tenants, which constructed adjoining properties. We have been working on (this project) for months and in the end, last Friday, we got the green light from the Town Hall of Madrid for the classification (of the property) as a protected building”, explained Carlos García León yesterday, Director General at Metrovacesa.

The area, located on Avenida Cardenal Herrara Oria in Madrid, next to the Ramón y Cajal hospital and with 90,000 square metres of buildable area, has been empty for the last six years, when the business conglomerate owned by the Ruiz Mateos families ran into financial difficulties. Metrovacesa has been the joint owner of the factory since 2006 and in 2013, it became the sole owner of the property.

Now, and with an investment of more than €30 million, Metrovacesa will reduce the buildable surface area to 70,000 square metres, of which 9,000 m2 relate to De La Sota’s protected building; the remainder will be split as follows: 60% for homes, both unsubsidised (free homes) and subsidised social housing; and 40% for tertiary properties.

“We have listened to the requests made by people in the area, such as the families of patients at the hospital, who do not have retail areas or hotel rooms to stay in”, explains José Antonio Granero, Dean of Madrid’s Official College of Architects (el Colegio Oficial de Arquitectos de Madrid or COAM).

Competition for ideas

The first phase of this new urban development will feature the protected building. To this end, Metrovacesa has teamed up with COAM to hold a competition for ideas to renovate the property, designed in 1959 and completed in 1961, to find a new use for it. “The competition will be announced next week once the Town Hall’s approval of the change to the general plan has been published in the BOE”, explain sources at COAM. The decision to award the project will evaluate both the proposals for the provision of services in the area, as well as their technical and economic feasibility. Interested architects may submit their proposals to a panel comprising directors from Metrovacesa, architects from COAM and members of Madrid’s Town Hall.

For the renovation of this space alone, the real estate company will invest between €15 million and €20 million.

Furthermore, Metrovacesa has signed an agreement with Adif for the transfer of 1,000 square metres of space, which the railway manager will use to improve the station that is currently closest to the site. “Adif is going to build a footbridge to link the area with the Ramón y Cajal hospital, which is currently separated from the complex by the train tracks.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake