Tag: valuations

Tinsa & Sociedad de Tasación are the Banks’ Preferred Appraisal Companies

17 May 2018 – Expansión

Last year, the banks commissioned appraisals for properties worth €200 billion. The valuation of these assets was performed by a well-nourished group of entities that have been authorised by the Bank of Spain to undertake these types of operations.

Tinsa and Sociedad de Tasación swept the board in this sector, with market shares of 28.7% and 13.9%, respectively, according to the total revenues for the sector for 2017, which amounted to €284 million, according to data from AEV, the main trade association.

The appraisal sector was particularly badly hit by the consequences of the real estate crisis, given that their valuations, which in some cases did not reflect the reality, contributed to the inflation of the real estate bubble which then burst.

The appraisals performed last year represent one third of those recorded in 2007 when the figure reached €600 billion according to data from the Bank of Spain.

There was also a lack of professionalism in this sector, on which the Bank of Spain has imposed several sanctions in recent years, in some cases on firms that have now disappeared.

More control

Following the crisis, the banks also liquidated their own appraisal companies and, since then, independence and professionalism have reigned.

“The Bank of Spain has increased its control over the sector in the last three years, something that is good news and that works in our favour”, says Juan Fernández-Aceytuno, CEO at Sociedad de Tasación. By way of example, he comments that the supervisor now “requires us to provide 350 information fields for every appraisal”. (…).

In another change, Santander commissioned its appraisals from half a dozen different companies last year, namely: Tinsa, Eurovaloraciones, Ibertasa, Tasaciones Hipotecarias, Krata and Hispania de Tasaciones.

The group explains in its accounts for last year that its strategy, when it comes to choosing these entities, is governed by “the requirements of independence, neutrality and credibility to not undermine the reliability of their valuations” (…).

BBVA works with fifteen appraisal companies including Tinsa and Sociedad de Tasación. The bank confirms that it engages these entities due to “their reputation, independence and recognition in the market, given that they are capable of providing valuations that most appropriately reflect the reality of the market in each region” (…).

Bankia is the entity that engaged the fewest appraisal companies in 2017. It hired Tinsa, Gesvalt, Tecnitasa, UVE and Arco Valoraciones. Sabadell, by contrast, reports in its accounts for last year that it worked with around 30 firms.

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake

ABC Serrano’s Owners’ Socimi Gets Green Light for MAB Listing with €105 Million Valuation

28 March 2018

The socimi Serrano 61 is controlled by Banca March, which holds 19.2% of its capital. 40.8% is in the hands of minority shareholders, and another eight partners hold 5% each.

There’s going to be a new socimi debuting on the alternative market. Serrano 61, controlled by Banca March and owner of the ABC Serrano shopping centre in Madrid, will be listed on the Alternative Stock Market (MAB) at 21.10 euros per share, valuing the socimi at 105.5 million euros, according to BME.

The complex is located in the capital’s golden mile, the main commercial area of ​​the city, and is located in a historic building dating to the beginning of the last century. The asset has a lettable area of ​​about 15,000 square meters spread over seven above-ground floors, together with four floors of underground parking.

The Socimi Serrano 61, which has the complex as its sole asset, is controlled by Banca March, which holds 19.20% of its capital. 40.8% is in the hands of minority shareholders, and another eight partners hold 5% each.

The firm is listing itself on the MAB to attract capital and undertake a strategy designed to “maximise” the income generated by the centre “in the medium term”, to “monetise their investment,” according to a prospectus regarding the listing on the MAB.

At the end of 2017, ABC Serrano had an occupancy rate of 86.2% of its total surface area, with fifteen of its 46 stores vacant. Last year, the centre registered losses of 990,000 euros, after taking in 5.30 million euros in rents. Its owners expect to reverse the losses this year, forecasts profits of €2.4 million. To do this, the investors plan to increase revenues to €5.6 million and reduce expenses and amortisations.

Original Story: EjePrime

Translation: Richard Turner

 

Charme & Miura Finalise Purchase Of Valtecnic & Ibertasa

25 May 2017 – El Confidencial

A major new operation is brewing in the property appraisal sector in Spain. The private equity firms Charme Capital Partners and Miura Private Equity are about to close the purchase (to acquire a majority stake) of the appraisal companies Valtecnic and Ibertasa, according to sources close to the operation. Some finishing touches still need to be completed, such as obtaining approval from the Bank of Spain.

Charme and Miura are joining forces to acquire these two real estate services firms, which will continue to operate independently in the domestic market. In other words, the investment funds will co-invest in and take control of both companies, but will not merge them. In addition, the management teams of the two appraisal companies will continue at the helm as well as in their roles as minority shareholders.

Last year, Charme came very close to acquiring Tinsa, the largest company in the property appraisal sector in Spain, but that firm ended up being purchased by another private equity firm, Cinven, which paid Advent €300 million. Meanwhile, Miura invested in Group BC through its first fund until the end of 2015 – that company is dedicated to the outsourcing of services from financial institutions (mortgage advisory, recoveries…).

These operations represent the indirect entry of private equity firms into the real estate sector and their clear commitment to an upwards cycle. According to data from the Spanish Association of Value Analysis (AEV), the number of property appraisals grew by 13% during the first quarter of 2017, to 228,879 in total, worth €75,620 million, up by 3.1% with respect to the same period a year earlier. (…).

The number of appraisal companies has been cut in half

The appraisal sector was hit hard by the burst of the real estate bubble although, like in the property development sector, to the extent that the mortgage activity is resuming, so the volume of appraisals is also showing signs of recovery. Nevertheless, the crisis took a serious toll and led to the disappearance of lots of companies. Whilst in 2011, there were 58 appraisal companies, by the end of 2016, that figure had fallen to 37.

Nevertheless, in recent years, several companies, above all in the real estate consultancy sector, have broken into this market with their own appraisal businesses. Such was the case of CBRE Valuation Advisory, Aguirre Newman Valoraciones and UVE Valoraciones in 2011. More recently, another consultancy firm, JLL, obtained approval from the Bank of Spain for its appraisal business, which operates under the JLL brand.

Valuations

On the other hand, like in the property development sector, the activity of the appraisal companies has not been without controversy, especially for the role that they played in the real estate bubble. The appraisal companies have been repeatedly accused of producing inflated appraisal values at the height of the boom and of continuing to do so even in the face of a depressed market.

In addition, concerns regarding the transparency and independence of these entities caused the Bank of Spain to force the banks and savings banks to disassociate themselves from the appraisal companies in terms of ownership. That decision resulted in the disappearance of several players, such as Tabimed (Banco Sabadell) and TVG (Abanca). Others changed activity, such as Sivasa (Banco Santander), whilst others still, such as Tasamadrid (Bankia), were sold.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

RE Broker Aguirre Newman Goes Up For Sale

20 February 2017 – El Confidencial

Spain is experiencing a real estate boom once again and brokers want to take advantage of the situation to make money.

Whilst last year, the private equity fund Cinven acquired Tinsa, the largest appraisal company in the country, and in 2015, Apax Partners took control of Idealista, this year, Santiago Aguirre Gil de Biedma, the brother of Esperanza Aguirre, has decided to put Aguirre Newman, the largest real estate broker in the sector, up for sale.

According to financial sources, Santiago Aguirre has engaged Atlas Capital to sell his majority stake in the consultancy firm. The firm will target both individual and institutional investors, as well as public and private corporations. Aguirre Newman caters for all real estate investment-related matters and offers a complete set of services including valuations, feasibility studies, appraisals, attending compensation boards, leases, property management and technical architectural services.

The company generates annual revenue of around €80 million, with an operating profit of EBITDA of almost €12 million. As such, the financial sources consulted consider that Aguirre Newman could be sold for between €80 million and €100 million. Other sources consider that some of the parties that may be interested in purchasing this real estate broker include the private equity funds Cinven and Apax Partners, which could enlarge the businesses of Tinsa and Idealista, respectively, with this acquisition.

However, the same sources also consider that this could be a good opportunity for some of the main domestic competitors, which would result in a certain degree of concentration in what is a very fragmented sector. In addition to Aguirre Newman, the other large consultancy firms include CBRE, Knight Frank, JLL, BNP Paribas Real Estate, Cushman & Wakefield and Savills. These seven firms account for 90% of the sector’s revenues in Spain and employ 2,200 professionals in total. Almost 400 people work for Santiago Aguirre and his minority shareholder partners.

Low interest rates, the collapse in prices following the crash, the enormous volume of liquidity and the recovery of the Gross Domestic Product (GDP) in Spain have created a cocktail that has led to investment figures not seen since the era of the bubble. According to a report from JLL, non-residential real estate investment (offices, retail, logistics and hotels) amounted to €8,707 million in 2016. That figure represents a decrease of 8% compared to 2015, when operations worth €9,407 million were closed. Nevertheless, the figure recorded in 2016 was still higher than the maximum recorded in 2006 (€7,800 million).

Golden years

Last year, the most active market in terms of investment volume was the retail premises and shopping centre segment (retail), with €2,977 million, down by 3% compared to 2015. (…). Moreover, Aguirre Newman highlights that this figure exceeded the €2,000 million threshold for the third year in a row, which is clear proof of the boom in the real estate sector, especially in retail, which accounts for 35% of all tertiary investment.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake

New Tax Rules Increase IBI Charge In 11 Provincial Capitals From 2017

5 December 2016 – Expansión

Property owners in some of Spain’s largest cities will start the new year with a tax blow. The Royal Decree that was approved by the Council of Ministers on Friday and published in the BOE on Saturday contains…a measure that will significantly increase the Tax on Real Estate Assets (IBI) in hundreds of towns, including in eleven provincial capitals, specifically: Valencia, Alicante, Badajoz, Cádiz, Córdoba, Teruel, Granada, Jaén, Huelva, Tarragona and Huesca.

This tax will accrue from 1 January 2017 and will depend on the cadastral values, given that they form the taxable base for the IBI calculation. The Tax Authorities have approved updates to these values in 2,452 towns, i.e. in almost one third of the towns in Spain.

The Town Halls set the cadastral values on the basis of value proposals performed by the Catastro. However, all of the property values (homes, garages, premises, offices, hotels, etc) affected by proposals made prior to 2004 will be revised upwards, with coefficients ranging from 1.03 to 1.08, according to the Royal Decree from the Tax Authorities.

For example, in Córdoba, whose valuations were last reviewed in 1995, the update will be 1.06. Thus, if a home had a cadastral value of €100,000 in 2016, it will have a cadastral value of €106,000 in 2017. The IBI payments will increase without the need to raise the tax rate. In Valencia, whose valuations were last reviewed in 1998, the coefficient will be 1.04.

Most of the towns that requested the review, which seeks to reflect property values to 50% of their market price, did so to increase their coefficients and, ultimately, to increase the IBI raised without changing the tax rate . Many of the affected towns have not reviewed their values since the real estate boom, or even earlier. In fact, numerous town halls have not updated their valuations since the 1980s.

The valuations last performed between 2005 and 2011 will be updated with a coefficient of less than one, of between 0.87 and 0.92. They include four provincial capitals: Almería, Santander, Lleida and Ávila.

The reason for the measure

(…) For the avoidance of doubt, the Royal Decree explains that the measure “is necessary given that it contributes to strengthening municipal financing, tax consolidation and budgetary stability for local entities”. In other words, it is a necessary measure to balance the deficit. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

How Will Sareb Value 250,000 Homes In 3 Months?

2 December 2015 – Cinco Días

Value around 2,778 properties per day. Broadly speaking, that was the contemporary Herculean task that the Bank of Spain entrusted to Sareb when, after more than a year and a half of deliberations, it published legislation on 2 October to govern the accounts of the bad bank.

The new regulations gave the firm until the end of the year to re-appraise at least half of its portfolio – it must complete 100% of its re-appraisals by the end of next year – to value its assets at market prices.

The exercise involves the valuation of 250,000 properties, some of which are physically owned by Sareb and others, which serve as collateral for the problem loans that the bank inherited, in just three months. The company expects to complete this milestone by block booking the sector’s largest appraisal companies and taking advantage of a couple of valuable concessions to the rules.

The first, and perhaps most important, is that not all of the appraisals require an expert to actually visit the properties to perform the valuations in situ. These, known as ECO appraisals, are typically used when granting mortgages, and in this case are only compulsory for the valuation of Sareb’s assets worth more than €1 million.

Next, for completed residential properties, the bad bank may rely on statistical valuation models. The company is hoping to use this option whenever possible, according to sources close to the process, which will allow it to quickly re-appraise 43% of the value of its foreclosed real estate assets and 36% of its loans. In total, around 40% of the total value of the €45,000 million assets that it holds.

Finally, the regulations allow Sareb to develop its own methodological models to establish the price of very specific non-residential assets worth less than €1 million.

The option of avoiding thousands of visits and appraiser measurements in the field will allow Sareb, which finds itself in a race against the clock, to save precious time.

Extra time

Nevertheless, the race is a bit more relaxed than it might seem a priori. Although in theory, Sareb must comply with the obligation to re-appraise half of its portfolio before the end of 2015, in reality, it will be sufficient for the bad bank to request that the appraisals be completed before 31 December, even if some of them are not actually completed until January 2016.

In any case, the task must be completed before the company presents its results for the current year, given that it must recognise provisions in its income statement for the losses that it detects.

As a result, Sareb has commissioned almost all of the appraisal companies approved by the Bank of Spain that have coverage across the country and that invoice more than €1 million per year, in response to the mandate issued by the financial supervisor.

Beyond the small concessions described above, Sareb expects to achieve its objective thanks to the fact that it has already completed some of the work. On the one hand because its everyday commercial activity requires it to value all of the assets it puts up for sale, which has enabled it to accumulate a significant number of updated appraisals during the year.

On the other hand, given that the first draft of the accounting legislation was published a year and a half ago, Sareb’s team has been preparing itself for the consequences that it knew would arise when it was finally approved. In this way, the firm led by Jaime Echegoyen has created a cross-company working group to boost the rate of appraisals being performed and to make use of them to speed up its sales at the same time.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake