Revised Legislation: Socimis to Pay Tax of 15% on Retained Profits

11 January 2019 – Expansión

The General State Budgets for 2019, which are going to be approved by the Council of Ministers today (Friday) and which are going to be presented to the Congress on Monday, will include a tax charge on the undistributed profits of Socimis, to which a tax rate of 15% will be applied, according to reports made by sources speaking to this newspaper. The measure was agreed between Podemos and the Tax Authorities although the Government did not include it in the Budget Plan that it sent to Brussels in October or in the draft bills that are already being processed. The General Secretary of Podemos, Pablo Iglesias, blames the Socimis for the “rental bubble”.

This measure follows other initiatives agreed with Podemos, which cause the greatest impact of the increase in taxes set out in the budgets to fall on companies: they include a tax of 5% on overseas dividends and the imposition of a minimum taxable base of 15% in terms of Corporation Tax, which will be added to the draft bills to create the Google tax and the Tobin tax.

Socimis (Listed Public Companies for Investing in the Real Estate Market) were created by Zapatero’s Government in 2009 to revitalise the real estate market. They enjoy a very beneficial tax regime. The rate of Corporation Tax applicable to them is zero, provided they fulfil a series of requirements: their minimum capital stock is €5 million, which may be invested in a single property; a minimum of 80% of the profits obtained from rental must be distributed in the form of dividends; and a minimum of 80% of the value of the assets in urban buildings must be leased for three years. For the rents received from other types of activities, the Socimis have to pay tax at a rate of 25%.

From now on, a tax rate of 15% will have to be paid on all of the profits not distributed by these types of entities.

“We need to discourage the promotion of these types of companies that promote the bubble model, undermine the public coffers and represent a grievance for competition. We consider that the special regime afforded to the Socimis, whose main feature involves a tax rate of 0% for Corporation Tax, needs to be reversed”, said Podemos in a recent document. It regards it as “necessary to reverse Government policy, based on forcing tax regulation to create a tax haven for companies that promote a new housing bubble”.

Original story: Expansión (by Mercedes Serraller)

Translation: Carmel Drake

Sánchez’s Government Lets Socimis & Sicavs Off the Fiscal Hook Despite Podemos’s Efforts

16 October 2018 – El Independiente

The Government has managed to dodge two demands from Podemos that had raised concerns in the financial community: the taxation of Socimis and the conditions of Sicavs, the companies that wealthy fortunes use to manage their assets.

The Budget Plan for 2019 approved on Monday at the extraordinary council of ministers does not allude to these two vehicles, despite the contumacious struggle by the purple party to put an end to their benefits. In fact, the Government led by Pedro Sánchez and Podemos had signed an agreement for the budget plan for next year, which included modifications to the conditions of both companies, but, in the end, that has been ruled out.

The aforementioned agreement, published on 11 October, included increasing the tax on Socimis (…), which currently operate under a special tax regime for collective investment institutions (funds and Sicavs).

For the income obtained during the exercise of their main activity (rental and leasing of properties), Socimis pay tax at a rate of 0%. And for income that they receive from other types of activities, they pay tax at a rate of 25%.

The pact between the Executive and Podemos was going to mean applying a tax rate of 15% on the profits not distributed by those entities. In the end, that measure does not form part of the budget for 2019.

The other victory earned by Sánchez over Pablo Iglesias stars Sicavs. Both parties had agreed to tighten control over these vehicles to avoid their fraudulent use. In the end, they will be subject to the same supervision that has applied to them until now.

The agreement had involved granting the inspection bodies of the Tax Authorities the competence to declare, for exclusive tax purposes, the breach of the requirements established for the Sicavs in the financial legislation. In other words, it gave powers to the institution to ensure that the vehicles had, as required by that law, 100 genuine shareholders, to combat the typical practice whereby a single investor controls most of the capital (…).

Similarly, the Government and Podemos had reached an agreement to “establish additional requirements for application by the Sicavs of a reduced tax rate aimed at ensuring their nature as collective investment instruments, for example, the establishment of a maximum capital concentration in the hands of a single investor (including the stakes of related individuals and legal entities). However, that measure, although it may reduce the volume of capital that these entities receive, would objectify the collective nature of these investment vehicles, facilitating their regularisation by the Tax Agencies in the cases of fraudulent uses of Sicavs”.

Taxes on the banks

The entities that have, for the time being, not managed to free themselves from the tax blow are the banks. The Government wants the next budget to include a specific tax that targets financial transactions. The so-called Tobin tax has already met firm opposition from the banks and regulators, which warn of the risks that its implementation would have for the growth of the economy.

The Government’s forecast is that the proceeds raised from such a tax would reach €850 million, according to the Minister for Finance, María Jesús Montero (…).

Original story: El Independiente (by Ana Antón)

Translation: Carmel Drake

Marina d’Or’s Real Estate Company Capitalises Debt Amounting to €11.1M

7 October 2018 – Valencia Plaza

On Friday, the Official Gazette of the Mercantile Registry reflected a capital increase amounting to €11.1 million undertaken by the company Comercializadora Mediterránea de Viviendas SL. In other words, Comervi, the real estate company behind Marina d’Or, which said no more by way of explanation to this newspaper than: the manoeuvre came as a response to a “conversion of debt into capital” – without offering any more details -.

This possibility had been contemplated in the agreement signed by the company and its creditors to emerge from the bankruptcy proceedings, as explained by this newspaper. Specifically, the agreement gave the creditors a choice between collecting the debt with a discount of 65% over a period of 10 years and the option of capitalising their loans and going on to become shareholders of the company.

Depending on who has signed this capital increase for the real estate firm behind Marina d’Or – controlled in its entirety by Jesús Ger to date – a new shareholder may have joined the fold. Nevertheless, the possibility that the capitalisation has been subscribed by a company owned by the Catalan businessman himself has not been ruled out.

In fact, as stated in Comervi’s most recent financial statements – corresponding to 2017 – the company has debt amounting to €55.8 million with “related companies”, as detailed in note 13 of the annual accounts.

When asked about this, sources at Sareb – which according to Marina d’Or is Comervi’s main private creditor – explained to Valencia Plaza on Friday that the entity agreed to apply the aforementioned discount of 65% to the amount owed by the company and that, as a result, the bad bank is not the entity that has capitalised the €11.1 million.

In the same vein, Banco Sabadell explained to this newspaper that its agreement with Comervi was written off following the handover to the financial institution of 40 apartments and one warehouse, as this newspaper revealed.

It has also been ruled out that the capitalisation has been carried out by the Tax Authorities or Social Security – the other two major creditors of Comervi – given that the State does not make a habit of becoming a shareholder in private companies that have filed for creditor bankruptcy.

Original story: Valencia Plaza (by Dani Valero)

Translation: Carmel Drake

Podemos & the Tax Authorities Negotiate a Stricter Fiscal Framework for Socimis

11 September 2018 – Expansión

Podemos and the Government are studying measures to put a stop to the “rental bubble in Spain’s largest cities”, which Pablo Iglesias argues is being caused by the tax advantages being afforded to the Socimis.

The Tax Authorities and Podemos are negotiating a stricter fiscal framework for Socimis. That is according to sources at the negotiations, and to an announcement made by the leader of Podemos, Pablo Iglesias (pictured above, right), after his meeting with the President of the Government, Pedro Sánchez (pictured above, left), on Thursday.

Iglesias spoke of an “understanding” on this point and of advances in the negotiations. Although the fiscal framework of these real estate investment companies has always been under Podemos’s spotlight, it did not mention it in the document that it sent to the Tax Authorities in August detailing its requests, in exchange for its support of the Budgets. But, that was not a question of “limited demands”, according to sources at Podemos, who are now negotiating measures with the Executive to put a stop to the “rental bubble in Spain’s largest cities”. And, in Podemos’s opinion, the beneficial legislation afforded to Socimis explains this bubble, and it needs to be addressed urgently. Iglesias will spend tomorrow questioning Sánchez in the control session of the Government in Congress regarding the “measures that the Executive plans to adopt to put an end to the rental housing bubble”.

“We need to discourage the promotion of these types of companies, which foster the bubble model, undermine the public coffers and represent an affront to competition. We think that the special framework for Socimis, whose main feature consists of a Corporation Tax rate of 0%, needs to be reversed”, said Podemos recently in a document (…).

In this latest document, Podemos therefor, therefore, to put an end to this zero tax rate for Socimis, compared with the nominal tax rate of 25% (…). The negotiations with the Tax Authorities are based on the premise that Podemos wants to bring the tax rates for Socimis in line with those applicable to other companies. However, it does not rule out that the measures agreed will be aimed at having more control over their tax framework.

Zapatero’s Government created Socimis in 2009 in an attempt to revitalise the real estate market, inspired by the REITs (Real Estate Investment Trust) from the Anglo-Saxon world. They enjoy a very beneficial tax framework. Their Corporation Tax rate is 0%, provided they fulfil certain requirements: the minimum share capital must amount to at least €5 million (…); the funds must be invested in properties; a minimum of 80% of the profits obtained from rental must be distributed as dividends; and at least 80% of the value of the assets in urban buildings must be leased for at least three years.

Unlike the Sicavs, there is no requirement for Socimis to have a minimum number of shareholders, but their shares must be admitted for trading on a regulated market (…).

Following the economic recovery and the boom in the real estate market since 2013, the Socimis are enjoying a golden period (….).

Original story: Expansión (by Mercedes Serraller)

Translation: Carmel Drake

Marina d’Or’s RE Company Reaches Agreement with Creditors to Emerge from Bankruptcy

12 April 2018 – El Economista

Marina D’Or has managed to convince the creditors of its real estate company, Comercializadora Mediterránea de Viviendas (Comervi), to give their approval to an agreement that will allow it to emerge from bankruptcy, which began in 2014 with a liability of around €600 million. In the case of the ordinary loans, two options are being offered: a discount of 65% and the payment of the balance in 10 years time; or the capitalisation of the debt into shares in the company.

The group led by Jesús Ger has already reached an agreement with Sareb and is going to negotiate another specific deal with the Tax Authorities.

The agreement must be ratified by the judge, a process that is expected to take between two and three months. On 6 May 2014, the Judge of Mercantile Court number 1 in Castellón accepted Comervi’s voluntary creditor bankruptcy, following the suspension of sales and of the construction plans for new apartments.

Thanks to this new agreement with its creditors, the firm “faces a future with positive prospects”, highlight sources at the entity.

Original story: El Economista (by Olivia Fontanillo)

Translation: Carmel Drake

Madrid’s Most Indebted Town To Pay €3M More Due To Fraudulent Ex-Mayor

20 October 2017 – El Confidencial

The political legacy of Baltasar Santos (pictured below), who served as the mayor of Navalcarnero for 20 years (between 1995 and 2015), is still taking its toll on the public coffers. According to the Ministry of Finance, Navalcarnero is the most indebted town in the Community of Madrid (and number 24 in the ranking for the whole of Spain). Each one of its 27,000 residents owed more than €3,700 as at the end of 2016. Then, the tax authority based its calculation of financial debt of €101 million, although the current Government estimates that the figure is more like €230 million. And that amount is expected to increase gradually due to the steady trickle of legal rulings that are going to be made against the previous Town Hall due to mismanagement by the former PP-party mayor.

The most recent ruling, issued by the Provincial Court of Madrid on 28 September, ordered the Town Hall to pay €2.8 million (plus legal interest) to around fifteen local residents and companies because the local Government, led then by Santos, sold them land that was not actually owned by the Town Hall (…).

This is the first ruling of its kind, but José Luis Adell, the current (socialist) mayor, expects that more will follow, unfortunately, against the Town Hall due to the “disastrous management by Santos” (…). We estimate that we are going to pay around €70 million in relation to these types of rulings, which will increase the municipal debt to €300 million (…).

Nobody knows where Baltasar Santos is now. He was expelled from the PP in 2015, after hiding from the party that he had been charged for several legal misdemeanours. Santos participated in the municipal elections that year with another political party, URCI (…) but resigned just a few months later, in October 2015, just like he had done previously. Nobody has replaced him. The Town Hall has created an investigation committee to analyse his management. Moreover, it has engaged legal counsel so that all of the irregularities that have been detected can be brought to justice and it has asked the Chamber of Accountants to audit Navalcarnero’s accounts for the financial years from 2007 until 2015.

Original story: El Confidencial (by David Fernández)

Translation: Carmel Drake

The Banks & Rifá Negotiate Future Of Gran Hotel Almería

7 September 2017 – La Voz de Almería

The future of the Gran Hotel Almería, the most iconic hotel in the city, which has been closed for almost three years, has been in the hands of a US investment fund since August.

The fund in question is Blackstone, the financial group chaired in Spain by Claudio Boada, which, based on a decision by Banco Santander, has been awarded the entire real estate portfolio that it inherited from Banco Popular, including Aliseda. The portfolio contains, amongst others, the legendary Almería hotel, which has housed many stars from the spaghetti westerns, amongst others.

The portfolio sold to the fund by Ana Botín includes 100% of the sales platform that it received from Popular just a few months ago. The ownership of Aliseda will now be shared between Blackstone (51%) and Santander (49%), in a deal that saw Botín’s bank receive €5,000 million from its new North American partner. Previously, Santander had purchased that stake from the private equity funds Värde Partners and Kennedy Wilson Holdings.

Altogether, the properties transferred – including the Gran Hotel Almería – have a book value of €30,000 million, which is whereby removed from Banco Popular’s balance sheet. The portfolio contains a range of assets from retail premises to homes, industrial warehouses, hotels and plots of land, the majority of which are located in Andalucía.

Miguel Rifá, the Tax Authorities’ largest debtor in Almería, with an overdue balance of €27.5 million, is still the official owner of the Gran Hotel. The property has remained closed for more than two years, during which time Banco Popular decided not to execute the embargo order because, according to financial sources, it did not have a clear project or a solvent buyer (…).

Aliseda spokesman

A spokesman for Aliseda in Madrid declared yesterday to La Voz de Almería that “the Gran Hotel Almería file is still with the loan management department; it is no longer on the balance sheet of Banco Popular; and negotiations are being held with the owner to find a solution for the property”.

All indications are that the role of Blackstone is going to be key over the next few months if the Gran Hotel Almería is to be unraveled from this financial web in which the establishment is immersed. Stars of film and music have stayed there including Sergio Leone, Harrison Ford, Claudia Cardinale, Steven Spielberg, Brigitte Bardot and Ringo Starr.

Santander’s aim is for the weight of Popular’s real estate ballast to be insignificant within two years. Blackstone has extensive experience in Spain in the management of delinquent mortgages.

In 2014, it was awarded a portfolio containing 40,000 contracts by Catalunya Caixa. On 3 December 2012, Miguel Rifá filed for voluntary creditor bankruptcy for the companies Hotel Almería S.L.U., Predios del Sureste and Vosges due to insolvency. Nevertheless, he excluded the Gran Hotel Almería asset from that procedure, of which Banco Popular was the principal creditor.

The combined debt of the Miguel Rifá’s bankrupt companies amounts to €54 million.

Original story: La Voz de Almería (by Manuel León)

Translation: Carmel Drake

Reyal Urbis Files For Spain’s Second Largest Bankruptcy

21 June 2017 – Cinco Días

The long-awaited death of Reyal Urbis is approaching. The real estate company has failed to convince a majority of its creditors to accept the proposed agreement presented by the entity chaired by Rafael Santamaría, which included significant discounts of between 80% and 90% of a total debt balance amounting to €4,600 million. It is the second largest liquidation ever in history, following that of the property developer Martinsa-Fadesa, which folded with a debt of around €7,000 million.

The proposed agreement presented by the company has not received sufficient backing given that in the case of the ordinary debt, it only obtained favourable votes from 32.7% of the creditors; another 37.79% voted against the proposal and the remaining 29% abstained, according to legal sources. In the case of the syndicated loan, the votes did not reach the 75% threshold either.

The bankruptcy administrator, namely, the audit firm BDO, is obliged to communicate the result of the vote that takes place in Commercial Court number 6 in Madrid, where the judge will issue the proposed liquidation ruling, with an equity black hole of €3,436 million.

The liquidation of Reyal Urbis was finalised after its major creditors, including Sareb and the opportunistic funds that had acquired some of the liabilities in recent weeks, rejected the proposed agreement, as disclosed by Cinco Días at the end of May.

The company has liabilities worth more than €3,200 million corresponding to a syndicated loan, in which Sareb holds a crucial stake, with more than €1,000 million proceeding from loans from the former savings banks. In addition, Reyal Urbis owed almost €900 million in ordinary debt and more than €400 million to the Tax Authorities. In fact, the real estate company is the largest debtor on the list of overdue debtors published by the Tax Authorities.

The property developer is dying just a decade after its merger which saw it become one of the large real estate companies in the country, together with Martinsa-Fadesa, Colonial and Astroc. Its President, Rafael Santamaría, a technical architect by training, has spent his whole life working for the family business. He was appointed CEO in 1985 and took over from his father as President in 1997. In 2006, he starred in one of the largest deals in the sector, after acquiring Urbis from Banesto for €3,300 million.

But that joy was short-lived. The burst of the real estate bubble dragged him down, just like it did Martinsa, Habitat and Nozar. The company filed for voluntary creditors’ bankruptcy in February 2013 after Sareb, BBVA and Santander refused to refinance its debt.

Santamaría’s last ditch attempt to save the company came with an aggressive liquidation proposal. That plan included discounts of 90% on the ordinary loans. In the case of the syndicated loan, the offer included the “dación en pago” of assets, which would have meant accepting discounts of around 80%. In turn, the Tax Authorities negotiated a unilateral payment plan for the €400 million owed.

That aggressive plan did not seduce the creditors, who have seen the possibility of recovering their capital go up in smoke, choosing instead the option of liquidating the company’s remaining assets, which are currently worth almost €1,200 million.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Värde Sells Reyal Urbis’ Debt & Launches Bid For Habitat

7 June 2017 – Expansión

Corporate movements / The US fund is selling its stake in the debt of the property developer to the firm Taconic Capital after failing to reach an agreement ahead of the liquidation. In exchange, it will strengthen its commitment to Habitat.

After several intense weeks of negotiations, Värde has put an end to its relationship with Reyal Urbis. The US firm’s first dealings with the real estate firm saw it purchase a package of debt at the height of the process to negotiate an agreement that would allow the property developer to emerge from the bankruptcy proceeding in which it has been immersed since 2013. In a repeat of the deal struck with the real estate arm of San José, the final objective of the US fund was to obtain access to Reyal Urbis’ portfolio of assets (primarily land) by exchanging it for debt. To this end, Värde had started to negotiate with some of the most high-profile creditors, to buy up loans and propose an orderly liquidation plan, according to sources in the sector.

Nevertheless, Värde’s plans were thwarted by the Tax Authorities. Reyal owes the Public Administration more than €400 million (…), which was not willing to accept Värde’s proposal. As such, the US fund opted to sell its stake to another fund, specifically, to Taconic Capital.

According to sources in the sector, in addition to Taconic, some of Reyal’s other creditors include other funds such as Aurelius and Morgan Stanley. It will be them, along with the banks such as Santander, the Tax Authorities and Sareb who will now decide the future of the company.

Habitat

The decision to sell its debt in Reyal Urbis does not represent a setback in Värde’s commitment to the Spanish real estate sector and, in fact, the fund has already placed its focus on another one of the country’s large real estate companies: the Catalan firm Promociones Habitat.

Controlled by several funds such as Bank of America, Melf, Goldman Sachs and SP 101, the owners of Habitat put the company up for sale in March, through a process organised by the consultancy firm Irea.

These funds acquired stakes in Habitat’s share capital in 2015, after exchanging the debt that they acquired months earlier from the creditor bank. Although a longer period of continuity in the company was established at the time, in the end, the investors have decided to exit two years early, in light of the interest that investors have expressed in the Spanish real estate company. Although the process is still in its initial phase, Värde seems to be the best-placed candidate to purchase it, according to sources close to the process. The sale of the company is expected to be completed before the end of the year.

Sources in the sector indicate that other possible candidates in the running to acquire Habitat include Apollo, Cerberus, Bain Capital and Bank of America Merrill Lynch.

Habitat is one of the most highly regarded Catalan real estate companies in the sector. Led by Bruno Figueras, the company filed for voluntary creditor bankruptcy at the end of 2008, a process that it then emerged from in 2010 (…). After a series of negotiations with the creditors (…), the banks that had financed Habitat back in the day agreed to give way to the international funds that specialise in debt purchases. Two years later, those same funds have started to look for their exit route.

The real estate company has convened a General Shareholders’ Meeting to be held on 21 June 2017, where it will present the results for last year. In 2015, the most recent year for which results are publicly availabe, Habitat recorded revenues of €10.53 million, compared to €27.7 million in 2014. (…), which translated into gains of €1,073 million in 2015, compared with losses of €370 million the year before (…).

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Reyal Urbis Faces Key Week In Its Effort To Avoid Liquidation

29 May 2017 – Expansión

Reyal Urbis is facing a key week for determining whether or not it will receive sufficient backing from its banks and creditors to allow it to emerge from the bankruptcy in which the real estate company has been immersed since 2013 and whereby avoid liquidation.

The deadline for the creditors of the company, which is controlled and chaired by Rafael Santamaría, to communicate whether or not they accept the debt payment plan proposed by the firm, is this Wednesday 31 May.

The Tax Authority is one of Reyal Urbis’ largest creditors, given that the company owes around €400 million to the public purse, as well as to Sareb and the main financial institutions.

In the event that the real estate company does not obtain sufficient backing from its creditors, it would be forced to file for liquidation. That would constitute the second disappearance of a large real estate company after Martinsa Fadesa’s demise.

Reyal Urbis owes debt amounting to €3,572 million to the banks alone, and at the end of the first quarter of this year, it reported negative equity of €3,436 million.

The plan through which the company hopes to ensure its viability involves agreeing a unilateral payment plan with the Tax Authorities, different from the one offered to the other creditors.

The real estate company is proposing paying off the debt it owes to the financial institutions using real estate assets, an offer that, given the depreciations in values, would represent a discount (on the debt).

Overcoming paralysis

By emerging from bankruptcy, Reyal is also looking to overcome the paralysation that it has been immersed in for the last four years, during which time it has not constructed a single home and has barely managed to sell any assets or manage the hotels for rent in its real estate portfolio, covering 123,000 m2.

In this way, at the end of 2016, the company reported losses of €155 million, similar to the previous year.

In addition, Reyal Urbis’ bankruptcy procedure has been delayed, given that, at the end of 2015, Commercial Court number 6 in Madrid rejected the proposed agreement that had been presented by the company at the beginning of that year. After appealing to the Provincial Court, the real estate company managed to get the proposal agreed and processed more than a year later, at the beginning of 2017.

Original story: Expansión

Translation: Carmel Drake