Sabadell’s Board Evaluates 3 Offers Amounting to c. €850M For its Property Developer

28 May 2019 – El Confidencial

On Monday, Banco Sabadell received three binding offers for its property developer, Sabadell Desarrollos Inmobiliarios, from the funds Cerberus, Oaktree and a third unknown candidate, amounting to between €800 million and €900 million.

The board of directors of the Catalan entity chaired by Josep Oliu now needs to decide whether to accept one of them and thereby pave the way for the creation of a new major player in the Spanish property developer sector to compete alongside the likes of Neinor, Metrovacesa, Vía Célere and Aedas.

Oaktree has been the favourite in the bidding for the last few months given its good relationship with Sabadell and with the property developer itself, with which it already operates at least one joint venture. It would represent the US investor’s first operation of its kind in Spain, where it currently has a small platform with just 20 employees.

Nevertheless, Cerberus has been gaining ground. Unlike Oaktree, the US giant already has a property development platform in Spain, Inmoglacier, to which it wants to supply new land (which SDin owns). Cerberus could also benefit from synergies between the two firms.

Meanwhile, the identity of the third candidate remains confidential, but possible contenders include Habitat (Bain Capital), Aedas and the Canadian fund CPPIB, which were all reported to be evaluating the purchase during the preliminary phase.

Initially, Sabadell was hoping to receive more than €1 billion for its property developer, but following uncertainty in the sector in recent months and the sale of several assets, it will have to accept a more modest price if a sale is to be agreed.

Original story: El Confidencial (by Jorge Zuloaga)

Translation/Summary: Carmel Drake

Savills Values Solvia’s Property Developer Land at €1.3bn

12 December 2018 – El Confidencial

The banks are starting to benefit from the recovery in the real estate sector. Such is the case of Banco Sabadell, which has seen its portfolio of prime land appreciate by €300 million, or 30%, in recent months, ahead of its firing of the starting gun for the sale of its property developer, Solvia Desarrollos Inmobiliarios.

That is the result of an appraisal of the land that the consultancy firm Savills Aguirre Newman has performed for Sabadell. Initially, the plots were valued at €1 billion. They are the best quality plots of land that Sabadell has left since the outbreak of the crisis, and many of them are in areas with high demand in Madrid and Barcelona. For Savills, the chosen plots are now worth almost €1.3 billion, according to financial sources consulted by this newspaper.

Now that the appraisal has been performed, Sabadell and its chosen advisor for this operation, Rothschild, will launch the sale of the property developer SDI and the plots worth €1.3 billion, imminently.

This operation will result in the creation of one of the largest real estate companies in Spain. It will be even larger than Neinor when it was purchased by Lone Star.

The bank does not expect to close the sale of Solvia Desarrollos Inmobiliarios before the end of the first quarter of 2019. By contrast, Sabadell has also launched the sale of Solvia Servicios Inmobiliarios (the management platform), which is on the market for €300 million and whose sale it hopes to close in 2018. According to Expansión, Haya Real Estate (Cerberus), Intrum and Centricus are participating in that process.

Candidates

There are several funds amongst the candidates to acquire the property developer SDI including: Cerberus, Oaktree, Blackstone, Apollo and Lone Star. The first features in everyone’s list of likely contenders because of its good relationship with Sabadell in recent major operations. Moreover, it owns a property developer, Inmoglacier, with which there could be synergies following the operation.

Meanwhile, Oaktree is one of the candidates that would start with an advantage, given that it is Sabadell’s partner in similar businesses, and so it knows the team at SDI: they have a platform for the joint development of land and they have purchased land from Iberdrola. Nevertheless, according to sources close to the operation, that fund still needs to confirm its presence in the process.

Other candidates that still need to define their strategies include Blackstone, which is studying all of the operations with Aliseda, but which has opted more for rental assets until now; Apollo, which has wanted to enter the development segment for years; and Lone Star, which since its exit from Neinor has purchased Servihabitat and has as much appetite for Spanish property as it did before the crisis. ‘A priori’, the operation seems large for Bain Capital, owner of Habitat.

Original story: El Confidencial (by Jorge Zuloaga)

Translation: Carmel Drake

Sabadell Could Receive up to €400M for Solvia

24 October 2018 – Expansión

Change of tack for Sabadell. The bank has put Solvia up for sale, its real estate subsidiary, which it owns in its entirety, to try to earn €400 million, according to sources familiar with the process. Sabadell has awarded the mandate to sound out offers to Alantra, although other investment banks may also be advising the entity. Sources at the bank preferred not to comment in this regard.

Sabadell has activated the sale of Solvia three months after cleaning up its balance sheet to remove €11.5 billion in toxic assets. At that time, it decided to go against the trend in the sector and not divest its real estate platform, taking advantage of the sale of the portfolios.

Sources at the entity defend that the real estate platform holds significant latent value.

Other sources in the sector estimate that a reasonable price that the bank could obtain for divesting this asset is €200 million. That figure is equivalent to four times its EBITDA, a reference that the market has used for the sale of the property management arms of Servihabitat (CaixaBank) and Aliseda (Popular).

Sabadell’s strategy of separating the sale of the two portfolios from that of Solvia is to maximise revenues.

As is typical in these types of transactions, the final price will depend on whether the management of future toxic loans, known in the financial jargon as NPLs, are included in the sale.

Appetite

Alantra has already received interest from three opportunistic funds. One of the best positioned is Cerberus, according to various financial sources. In fact, the US fund acquired two large portfolios of foreclosed properties (Challenger and Coliseum) from Sabadell in the summer, with a combined gross value of €9.1 billion.

The US fund’s Spanish platform, Haya Real Estate, could gain muscle with the operation to accelerate its plans to debut on the stock market. And it could also benefit from important synergies, given that it already manages almost €40 billion in assets.

Sources at the sector also point to Intrum, the new brand that the Norwegian fund Lindorff is operating under, following its merger with the Swedish firm Intrum Justitia, and a new international player that wants to enter the European market with this operation, whose name has not been revealed.

In theory, the deadline for firm bids for Solvia, through binding offers, will close this month. Nevertheless, Sabadell is already holding very advanced negotiations with a single fund to sign the sale of Solvia, according to sources in the know. Sabadell has been weighing up the sale of its real estate platform for months. Jaime Guardiola, CEO of the bank, admitted at the beginning of the year that it was considering putting it on the market in light of the appetite from the funds for real estate and these platforms.

Solvia manages 148,000 assets, with a value of more than €30 billion. Since 2015, the company has focused on the marketing of new build developments and has put more than 10,000 homes on the market. It has 36 franchises and 18 own centres, which together make 54 offices located all over Spain (…).

Original story: Expansión (by R. Sampedro & S. Saborit)

Translation: Carmel Drake

Cerquia’s Directors Launch New Hotel Development Company: Xpandia

14 February 2018 – Eje Prime

The managers of Cerquia have set their sights on achieving five stars. Carlos Cercadillo, Javier Pérez Picallo and Jesús Salinero, all senior members of the Spanish company, have teamed up with a group of investors to leap into the hotel sector. The executives have launched Xpandia Projects, a company specialising in hotel development with a focus on Spain and Portugal, according to Pérez Picallo, CEO of Cerquia, speaking to Eje Prime.

Picallo will be in charge of the new project, although he will also continue in his position at Cerquia, as will Cercadillo, who is the President of the company and Salinero, who leads the expansion department.

“The hotels will be urban properties and they will be handed over turnkey-style to the operators”, explains the CEO of the company (…). The objective of the property developer is to hand over 800 rooms over the next three years. For the time being, the company is going to work on three projects, two in Lisbon and one in Valencia. The latter, located on Calle Guillem de Gastro, is on the verge of being granted its licence, with the aim of being completed and ready for delivery in 2020. In the case of the Portuguese assets, the delivery will take place in 2018 and 2019, respectively. In total, these three hotels will place 386 rooms on the market. Some of the major operators for which the firm is going to work include groups such as Accor, Iberostar, Hotusa, Vincci and B&B.

The development of the assets will be undertaken through both the renovation of buildings, as well as the construction of new build properties. The first project in Valencia and one of the projects in Lisbon involve the complete renovation of two properties. In addition, during this first phase, the company has pre-agreements to develop hotels in Madrid, Valencia, Alicante, Sevilla, Málaga, Bilbao and Donostia.

Xpandia is not planning to accumulate assets itself. “We will not hold onto the assets, instead we will sell them to investors who will operate them after we complete the building work”, explains Picallo, adding that “in some cases, we will hand over the hotels completely decorated and furnished”. The only hotel that the new company will own is a property in Lisbon, currently owned by Cerquia, which will be transferred from one portfolio to another. Despite the obvious synergies between the group and the property developer, “this is a project that will operate outside of Cerquia”, said its CEO.

The property developer will work on all stages of the projects from the location and selection of the properties to the drafting of the technical plans and the organisation of the construction work. Location wise, the properties will always “be in cities, primarily in central areas, to respond to the tourist interest that operators demand”, says Picallo. The property developer will study 100 potential projects per year.

The company is not going to work in Barcelona for the time being. Although the Catalan capital is the most touristic city in Spain, the property developer considers that “there is too much uncertainty around obtaining hotel licences in the city” (…).

During this first phase, the hotel operators that Xpandia is working with are expected to invest around €30 million. The hotels that the company is going to develop will be 3- and 4-star properties.

The group driving the project, Cerquia, is a company dedicated to the management and operation of its own real estate assets. The company, created in 2006, has offices, hotels and homes for rent in a portfolio that spans a surface area of approximately 20,000 m2 in the office sector alone across the Iberian Peninsula.

The firm’s clients include companies such as Banco Santander, Uria Menéndez, Garrigues, Catalana Occidente, Hoteles Vincci,  Bausch & Lomb, Intermoney, Worx, Lycamobile and Shine Ibérica, amongst others. For 2018, the group’s roadmap is to maintain its activity and continue with the progress of its three residential developments.

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake

Santander Could Earn Up To €630M From The Sale Of Popular’s RE

14 July 2017 – Expansión

Santander will make a profit from the clean-up of Popular’s balance sheet. The bank may earn up to €630 million from the sale of its foreclosed assets and doubtful real estate loans, which have a gross value of €30,000 million. The bank’s real estate risk, according to the European authorities, amounts to almost €37,000 million, including the stakes in real estate companies, which amount to around €7,000 million.

These profits will be obtained in the best of the possible scenarios considered by Citi in a report published this week. The North American investment bank was responsible for advising Santander during its purchase of Popular, which ended up being closed for the symbolic price of one euro.

Santander plans to divest all of Popular’s non-performing assets within three years. But Citi thinks that it will have to offer discounts of between 15% and 20% on the net value of the assets to incentivise bids from investment funds and private equity firm, amongst others. The net value of the assets amounts to around €9,300 million with a provisioning level of 69%.

Financial sources believe that Santander will accelerate the sale of Popular’s more impaired properties to clean up that part of the balance sheet before the end of this year. In this way, it may recognise juicy accounting profits, according to the sources. Popular’s real estate portfolio contains €10,500 million in land, hotels and more than 25,000 homes, according to the latest available figures. Half of the properties are located in Andalucía and Valencia.

Ana Botín has set the goal of getting rid of half of Popular’s non-performing assets within a year and a half.

Clean up

To clean up Popular’s toxic assets, Santander is undertaking a capital increase amounting to €7,072 million. The bank will recognise a provision against €7,900 million of Popular’s non-performing assets to increase the coverage level of the real estate risk from 45% to 69%. The average coverage level in the sector is 52%, which is why financial sources say that Santander is likely to mark a milestone that has not been seen in the Spanish banking sector for years: it looks set to sell property at a profit.

Santander is negotiating with the funds to divest Popular’s non-performing assets. It is studying the possibility of creating one or more vehicles to separate the risk linked to property from the acquired entity. Morgan Stanley is advising the bank on the clean-up plan. Some funds, such as Blackstone, Apollo, Bain Capital and Lone Star have approached the bank to understand its strategy.

Santander forecasts that its purchase of Popular will generate cost synergies of around €500 million from 2020 onwards, although Citi elevates that figure to €606 million. The investment bank considers that Santander is being too conservative in its calculations of the return on investment and its impact on earnings per share.

According to Citi, the purchase of Popular will generate a return of 24% for Santander in 2020 in the best-case scenario, above the 13-14% forecast by the entity. And it estimates that the operation will allow Santander to increase earnings per share by 6% in three years, compared to the forecast of 3%.

Leader in Spain

The resultant entity will rise to the top of the market in terms of assets (almost €470,000 million), deposits (€255,000 million) and loans (€249,000 million). (…).

Original story: Expansión (by R. Sampedro)

Translation: Carmel Drake