Tag: vehicles

Spain’s Banks Sold Toxic Assets Worth €50.8bn to Funds in 2017

23 April 2018 – La Vanguardia

Last year, Spain led the sale of defaulted mortgage portfolios in Europe, with the sale of loans with a nominal value of €50.758 billion (of the €104.0 billion that were sold in Europe in total), according to a study on problematic real estate debt compiled by the consultancy firm Evercore. In 2017, Santander, with the sale of Popular’s property to Blackstone for €30 billion, and BBVA, with the sale of a portfolio worth €13 billion to Cerberus, were ranked amongst the top five vendors in Europe. “It is likely that we will be leaders in the sale of foreclosed properties and defaulted mortgages again this year and next”, says Íñigo Laspiur, Director of Corporate Finance at the consultancy firm CBRE. “At the moment, portfolios worth more than €8 billion are up for sale in the market”.

During the first few years of the financial crisis, it was entities in Ireland and the United Kingdom that led the sale of foreclosed real estate assets in Europe, but now the Spanish and Italian banks have taken over the baton (the latter led the ranking for the first quarter of this year). “Regulation by the ECB, which has caused provisions to soar, and above all, accounting guidelines, which have forced banks to increase their capital requirements, are accelerating the sales of toxic assets”, said Laspiur. Moreover, these sales are being boosted by the recovery of the real estate market and by the high level of provisions that the banks have now recognised. “Most sales by the banking entities these days make money, or at least, don’t generate losses”.

Laspiur explains how this means that the funds are accepting higher prices for toxic Spanish property: whilst in 2013, when Sareb began its first block sales, they were demanding returns of 15% per annum to buy assets, now the yields have decreased to just 8% when they are purchasing mortgage loans backed by high-quality properties.

Given their large size, the sales of asset portfolios are in the hands of just a few entities. “Only Blackstone, Cerberus, Apollo and Lone Star are bidding for portfolios worth more than €5 billion, whilst firms such as Bain Capital, Oaktree and Deutsche Bank are also very active in smaller operations”, said Laspiur. This lack of competition allows the funds to buy properties at prices well below market rates. “It is not only a question of size” – he adds. “The funds assume the risk of managing the debt (by negotiating with the debtor or in court) to take ownership of the property. It is a sophisticated process that appeals to few companies”. Nevertheless, for the financial institutions, “the sale of foreclosed assets and defaulted loans in large batches allows them to accelerate their cleanups and free up resources because selling them one by one would take years”.

Laspiur says that 2017 marked a turning point in the strategy of the banks to divest property. “Before, they were undertaking small operations. For example, Sareb, the most active entity, has completed more than 30 sales, followed by Sabadell, CaixaBank and Bankia. Nevertheless, last year, Santander and BBVA both created vehicles (companies) to which they transferred their bad assets, and then they sold them, but they retained a minority stake in each case, which allowed them to deconsolidate the assets but hold onto some of the ownership rights in order to benefit from the price rises being seen in the real estate sector”, said Laspiur. “It is a very good formula, and I think we are going to see more operations of a similar ilk this year”. In his opinion, Sareb, CaixaBank and Sabadell are going to be the entities that will lead property sales this year.

Together, the financial institutions in the south of Europe now account for the bulk of the foreclosed properties and defaulted loans in Europe, according to data from the consultancy firm Evercore, which forecasts that operations worth around €80 billion will be closed this year, with Spain leading the ranking once again (at the moment, it accounts for 78% of the portfolios up for sale in Europe, according to the consultancy firm) (…).

Sareb, the European bad asset leader

The Spanish bad bank or Sareb is the largest owner of toxic assets in Europe, according to Evercore, with foreclosed assets amounting to €75 billion, ahead of the bad bank of Ireland (which has €27 billion) and the UK (€20 billion). The hardest hit banks are Italian (Intesa San Paolo, Unicredito, Atlante Fund and Monte dei Paschi) and Greek (Pireus and Alpha) (…).

Original story: La Vanguardia (by Rosa Salvador)

Translation: Carmel Drake

Corpfin Buys 2 Retail Premises in Madrid & Vitoria

11 December 2017 – Eje Prime

The Socimi Corpfin is continuing to add new assets to its portfolio. The company, through its vehicles Corpfin Capital Prime Retail II Socimi and Corpfin Capital Prime Retail III Socimi, has purchased two retail premises in Madrid and Vitoria, according to a statement issued by the company.

At the end of November, Corpfin formalised the purchase of a store located at number 15 Calle Posats in Vitoria. The acquisition of that asset involved an investment of €1.06 million.

In Madrid, the company has also grown its portfolio of retail assets. In September, the Socimi acquired the store at number 68 Calle Velázquez from Banco de Madrid. That operation, whose consideration has not been disclosed, was formalised through a mortgage with CaixaBank and the company’s own funds.

Corpfin Capital Prime Retail Assets Socimi operates with the vehicles CCPR II Socimi and CCPRIII Socimi, raised in 2013 and 2014, respectively, with an estimated lifespan of between six and seven years.

According to the company, “the two vehicles will invest in around fifteen assets, with a maximum investment amount per asset equivalent to 15% of the total of the funds”. “The forecast combined total investment is €100 million, split between CCPR II, with €30 million and CCPR III, with €20 million, and a target leverage rate of 50%.

Moreover, the company also operates in the real estate sector through its vehicle CCPR Retail Parks. That fund specialises in retail assets, primarily retail parks, involving a high management component. According to the group, the estimated diversified investment for that fund is between twelve and fourteen operations, with an average investment volume of €3 million per operation, including land, capex, acquisition costs and marketing. To date, the fund has committed half of its planned investment.

Corpfin’s most recent operations through CPRP have involved the purchase of a plot measuring 4,345 m2 from the General Foundation of the Universidad Complutense de Madrid. For now, Corpfin has signed a contract to open an Aldi supermarket on that site, which will occupy a surface area of more than 1,200 m2 and which will be that chain’s first establishment in the municipality. The remaining land is still being marketed.

Other operations carried out by the fund are the Las Moruchas Retail Park in Ávila, inaugurated in June 2016, and the construction of a new retail complex in Alcorcón (Madrid), which is currently under development.

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

Madrid’s Gran Vía To Be Part Pedestrianised By 2019

10 November 2017 – Expansión

On 4 April 1910, King Alfonso XIII seized a silver pick to symbolise the start of the construction of Madrid’s Gran Vía. It took 21 years to finish the 1,306m long thoroughfare, which, as well as connecting the east and west of the capital, became a showcase for large department stores (today’s multi-nationals fashion chains), cinemas and theatres (of which less than half of the original spaces are now left) but, above all, a catwalk for passers-by of every kind; because Gran Vía is a concentrated example of the 21st century society.

And this road is going to be subject to construction once again from February next year, with the aim of restoring value for two of its major stars: the pedestrians and the historical buildings that stand tall on this street, which we barely have time to appreciate given the frenetic pace of life today.

This change will undoubtedly have consequences for the real estate market in this area, which is already quite unusual. “It is a neighbourhood with just a few, very special homes and so logically, they are going to go up in value significantly”, says Julio Rivero, real estate consultant for the central region at Engel & Völkers.

For Daniel Díaz, architect and agent at Lucas Fox in Madrid, “giving pedestrians more space is something that is being done in all of the major cities in Europe. It makes a lot of sense on Gran Vía because it has more people walking along it nowadays than it does vehicle traffic”. Díaz recalls the case of Serrano and how the reduction in the number of lanes and the widening of the pavements there has been a revulsive, improving trade in the area.

Expansive effect

Gran Vía has so much force that it magnetises the area, and almost twenty streets flow into it, with a lot of life of their own, such as San Bernardo, Valverde, Fuencarral, Hortaleza and Barquillo. The manager at Lucas Fox predicts that this reactivation will have a porous effect: “The benefits of pedestrianisation are going to expand to the adjoining streets and squares, such as Plaza de Pedro Zerolo and Calle Fuencarral, which have more homes that are going to go up in value”. For Díaz, this will attract the domestic market to the area once again, which has been dominated by tourists and young people in recent times.

Although none of the experts consulted doubts that the quality of life will improve, it is clear that some people will inevitably lose out. Ana Calderón, Director of Real Estate at Home Select, the real estate consultancy that manages several tourist apartments in the area, indicates the damage that the limitations on traffic will have for properties owners in buildings such as Gran Vía 48; they also purchased parking spaces in a large underground car park there (…).

The Town Hall’s future project has been explained in several different ways (…) and the details of the plans have not been completely defined, but it seems certain that the current six lanes will be reduced to four. In this way, the 55,000 vehicles that currently travel on this thoroughfare every day will be reduced to just 10,000, according to the Town Hall’s forecasts (…).

According to Sergio Fernández, Director of Retail at JLL, the changes will have a clear beneficial effect for shops, above all due to the plan to widen the pavements, which will be undertaken to resolve the severe pedestrian (traffic) jams that the street suffers from on the weekends and during peak shopping times (…).

The new face of Gran Vía will require an investment of €9 million and is likely to be ready by the spring of 2019.

Original story: Expansión (by Loreto Ruiz-Ocaña)

Translation: Carmel Drake

CBRE: House Prices Will Rise By 25% Over Next 5 Years

22 November 2016 – Finanzas.com

CBRE Global Investors is the real estate management arm of the CBRE group. It is dedicated to developing and designing investment strategies to reflect the risk profiles that its clients (normally institutional players) define through different vehicles, using funds or listed companies. José Antonio Martín-Borregón (pictured above) is the firm’s Managing Director in Spain.

What would a “core” investor invest in at the moment?

In the main markets, in other words, in Germany, (“core” investors are investing) in more liquid assets, as well as in those assets that generate stable revenues, in other words, the office market. This means low returns. But insurance companies and pension funds invest in property to receive a higher return than they are currently earning on bonds and shares, which means that for them a 3% or 3.5% return is very attractive. Then if they want to complement their portfolios, they can approach other markets, such as Spain, Portugal and Greece, where international investors tend to look for what they cannot find in their own countries: higher returns and attractive prices.

Are offices being replaced by more profitable assets in Spain?

Is now a bad time for the office segment? No. In fact, one of the recommendations that all of the brokers are currently making regarding investment in Spain is to invest in offices in the major cities. The market is discounting significant growth in income over the next five years: at their peak rental prices stood at almost €45-€50/m2/month, and now they are less than €30/m2/month. But it is true that some investors who are not willing to wait for those rents to grow and so they are choosing to invest in logistics warehouses, for example, which may generate returns of 6.5%, or even 10% if the investment is leveraged a little. There are a lot more investors out there now – they are more sophisticated and they are developing complementary investment strategies.

Is housing an interesting market or should we rule it out?

Lots of things are going to happen in the housing market: prices are going to increase a lot, by 25% over the next five years; what’s more, housing is becoming a kind of institutional asset – there is a sense of opportunity because prices have fallen by so much and because it is still seen as quite a safe investment; and, finally, the rental housing market is going to develop significantly. Buying a home does not make economic sense (for many people anymore): from an economic point of view, it is much better to rent, it is more flexible and carries fewer risks. Moreover, rental prices are increasing at the moment, because demand exists but the supply of high-quality rental assets is very limited. As such, although the yield on housing is less than 3%, there is a very significant appreciation component to consider.

Are Socimis competing unfairly with other kinds of firms because of the preferential tax treatment they receive?

Taxation is not a primarily element of returns, there are other more important factors, such as debt, because interest rates are so low. The Socimis have a special tax regime, but they also have some special duties (they must be listed, there are restrictions over their investments, they have to pay dividends…). On the other hand, the Socimis are very similar to Sicavs and the large real estate companies are using these instruments to optimise their tax structures and so almost all of the Socimis are being listed on the MAB and they are not fulfilling the purpose for which they were designed.

Original story: Finanzas.com (by Cristina Vallejo)

Translation: Carmel Drake

Sabadell To Invest €450M In Its Hotel Arm

4 December 2015 – Expansión

Hotel Investments Partnership (HI Partners), the hotel management and investment arm of Banco Sabadell, is backing itself forward to become one of the main players in the Spanish hotel sector. The firm wants to become one of the largest hotel owners in Spain, involving itself in the management of hotels and improving their income statements. “There is a significant opportunity in the market for the creation of large portfolios of hotel assets”, says Alejandro Hernández-Puértolas (pictured above, centre), CEO of HI Partners.

The company will invest €450 million over the next three years to refurbish and increase the value of its hotels, an amount that will be completely financed by Sabadell during this first phase.

The bank controls 99% of the company’s capital and Hernández-Puértolas and two other partners, Sergio Carrascosa and Santiago Fisas (pictured above, left and right, respectively), own the remaining 1%. Enric Rovira, Deputy CEO of the Sabadell, is the President of HI Partners, which has a dedicated team comprising 22 professionals and is managed independently of the bank.

Creation of two vehicles

Sabadell transferred 22 hotels with 1,600 rooms to HI Partners, after it had accumulated them on its balance sheet during the crisis as the result of foreclosures due to unpaid debts. Moreover, the entity has entrusted the team with the management of a portfolio of hotel debt amounting to €800 million, which as around one hundred assets associated with it. According to Hernández-Puértolas, around thirty of these hotels may be transferred to HI Partners over the next few years, increasing the number of rooms owned by the investment company from 1,600 to 8,000. Meanwhile, HI Partners is also analysing the purchase of assets in the market that are not linked to the bank.

For the management of this real estate portfolio, HI Partners has just constituted two new companies: HI Partners Holdco Value Added and HI Partners Holdco Gestión Activa. The first vehicle will be the focus of most of the company’s efforts and will receive around 90% of the investment. It will take ownership of the best hotels in the portfolio, notably the largest properties, those situated in premium areas and those capable of generating significant yields once they have been refurbished. This company currently owns three assets: the Hotel Prestige Coral Playa, located on the Costa Brava; the Silken Málaga – which HI has just purchased from Urvasco -; and the new hotel that the company is constructing on Calle Atocha in Madrid, which will be managed by the Axel chain.

The thirty-odd hotels to be transferred to HI Partners from Sabadell’s debt portfolio are also expected to be incorporated into the Value Added company. The challenge is for that vehicle to generate an EBITDA of €35 million in 2018 and of €70 million in 2021.

Meanwhile, HI Partners Holdco Gestión Activa now owns 19 hotels, the majority of which are smaller properties, located in secondary areas. The objective is to divest the majority of these establishments, although the firm wants optimise their management first. As such, it expects to sign agreements with several hotel operators to this end.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake