Tag: vulture funds

Ana Botella & 7 of Her Officials Sentenced to Pay €22.7M for the Sale of Flats to Vulture Funds

28 December 2018 – Voz Pópuli

The Court of Auditors has sentenced the former mayor of Madrid, Ana Botella (pictured below) and six high-ranking officials of her municipal Government to pay €22.5 million for the sale of 1,860 publicly owned flats to two companies owned by Blackstone, considered to be a vulture fund, for a price below that stipulated by the market in 2013. Another senior official, Fermín Osle, has been sentenced to pay more than €3 million for his role as the “accountant directly responsible” for the operation.

The ruling, revealed by Cadena Ser, concludes that the eight people now condemned “engaged in serious negligence” by not preventing “damage to public property” by selling the homes for €128.5 million when, according to the calculations of the Court of Auditors, Botella’s Executive could have received proceeds of more than €151 million.

The sentence is based on a claim filed a year ago by the current Government of the Spanish capital, led by Manuela Carmena, through the Municipal Housing and Land Company (EMVS). The ruling determines that the operations carried out by the Municipal Housing Company that reported into the Government “led to an unjustified impairment of public property”, which they estimate amounted to €23 million.

The other condemned officials are Enrique Núñez Guijarro, Diego Sanjuanbenito, Paz González García, Dolores Navarro, Pedro Corral and Concepción Dancausa, former delegate of the Government of Madrid.

They will appeal the sentence

The former mayor and her then municipal government team are going to appeal the sentence, according to sources, after hearing the content of the ruling, since “they do not agree with it”. They also noted that the Prosecutor of the court has already requested the dismissal of this claim “for not having any accounting responsibility”.

In the same way, they have indicated that the previous Governing Board of the Town Hall of Madrid “did not intervene directly or indirectly in the operation to sell the homes” to which the decision by the Court of Auditors refers. “Only, and in its capacity as the General Shareholders’ Meeting of the aforementioned company, did they ratify the feasibility plan that the EMVS’s Board of Directors had already approved”, they highlighted.

Original story: Voz Pópuli (by Carlos Frías)

Translation: Carmel Drake

Town Hall of Barcelona Buys a 114-Home Social Housing Block

27 December 2018 – La Vanguardia

On Thursday, the Town Hall of Barcelona announced the completion of the purchase of a building located at number 7 Calle Encuny containing 114 protected homes. The property, located in the heart of the Marina del Prat Vermell neighbourhood, belonged to the entity Proviure CZF Parc d’Habitatges, a company formed by BBVA and the Consorci de la Zona Franca de Barcelona (Consortium of the Zona France of Barcelona). “With this operation, we ensure that the housing block will not be sold to vulture funds”, said the mayor of the city, Ada Colau, who referred to the purchases that such investment groups have been carrying out in various cities.

The acquisition has involved an investment of €5.8 million by the Town Hall. This building is the largest that Ada Colau’s government has purchased to date, which so far in its mandate, has acquired another 21 entire blocks. In total, including this new property, the Town Hall has acquired 661 flats since 2015, which has involved a total disbursement of €64.12 million. “It takes a long time to build social housing units. And we have to respond to a problem that is worrying a lot of citizens”, said the mayor.

According to Colau, of the 114 flats that are going to be incorporated into the Town Hall’s public stock, around 59 are empty, but in a very good condition (the development was built in 2007), and so it is expected that around 30 will be incorporated into the social emergency pool in January, where around 480 family units are still waiting to be assigned a home.

“We need the Generalitat to start making housing policies in Barcelona”, said the mayor Colau, who has accused the regional government of not fulfilling its obligations in this regard. “The Town Hall takes care of 78% of the demand from the social emergency pool when it should be covering 40%. It is assuming a responsibility that corresponds to the Generalitat”, said Colau.

Original story: La Vanguardia (by Raúl Montilla)

Translation: Carmel Drake

Solvia: Sabadell Puts its Real Estate Subsidiary Up For Sale

17 October 2018 – El País

Sabadell is going to listen to offers from several real estate vulture funds that are interested in acquiring its subsidiary Solvia, the manager of its properties. The entity, which declined to comment, has now entrusted the sales process to an investment bank. In the summer, Jaime Guardiola, CEO of Sabadell, justified holding onto Solvia due to “the great contribution it makes to the bank”, but now he is taking a step towards selling it. Sources in the sector indicate that Sabadell wants to strengthen itself and take advantage of the good climate still being enjoyed in the real estate market.

The banks are getting rid of properties before the booming market deflates. They are selling not only portfolios, but also the companies that specialise in the management of those real estate assets, known in the sector as servicers. Until now, it was typical for the banks to include their servicers in the package of asset sales: that is what CaixaBank did with Servihabitat and BBVA with Anida.

But, Sabadell wanted to get more mileage out of its subsidiary and so decided not to sell Solvia when it divested around €12.2 billion of its properties to Axactor, Cerberus, Deutsche Bank and Carval. Nevertheless, Sabadell has now taken the definitive step and is open to offers from the interested vulture funds. According to sources in the market, the interested parties include Cerberus and Oaktree.

148,000 assets under management

Based on data as at May 2018, Solvia is one of the leaders in the real estate services market in Spain, with a portfolio of 148,000 units in assets under management, whose value exceeds €31 billion, according to the entity. In a report from Goldman Sachs, Sabadell indicates that Solvia’s annual profit amounts to €40 million.

The company has extensive experience in the marketing of new build developments, given that it has placed more than 10,000 homes in new developments on the market since 2015. At the moment, Solvia has 55 developments up for sale. In terms of rental, as of October, the firm was managing 32,000 assets, of which 74% belong to Sabadell. Solvia also works with other clients, including Sareb.

The report from Goldman Sachs noted that Sabadell could sell Solvia as a way of raising its capital ratios, with little detriment to its income statement.

Market sources agree with these arguments to explain the step taken by Sabadell. On the one hand, as the European Central Bank has indicated, entities must accelerate the sale of all businesses relating to the real estate sector. The banks are aware that times of lower economic growth will come and understand the importance of taking advantage of the appetite that the large international funds still have for Spanish property.

On the other hand, the sale of Solvia will also result in cost savings, a reduction in the workforce and, above all, lower capital consumption. In the last quarter, between March and June, Sabadell’s capital ratio decreased by one point, from 12% to 11% for its CET 1 fully loaded capital ratio (the highest quality indicator). The limit on the basis of which the ECB applies severe measures is 10.5%.

This decrease was due to the problems that Sabadell has been facing with its British subsidiary TSB, which was left without a service for weeks. Between March and June, the bank lost €138 million in provisions against real estate portfolios and the problems at TSB.

Original story: El País (by Íñigo de Barrón)

Translation: Carmel Drake

Spain’s Government Wants to Prohibit the Sale of Public Housing to Vulture Funds

12 September 2018 – El Mundo

The Government wants to give a new impetus to the housing policy in Spain and has placed social housing at the centre of its strategy. In this context, the President of the Executive, Pedro Sánchez (pictured below), has announced to the Congress of Deputies, that the new law he is preparing will configure social housing as a public service to ensure access to it for all citizens and moreover, to put a stop to the sale of public homes to the so-called venture funds.

During his speech at the control session of the Government, Sánchez announced that the State Attorney will appear in court regarding a criminal case into the investigation of the sale of 5,000 public rental homes undertaken by PP governments in the Community of Madrid and the Town Hall of the Spanish capital to private equity funds in 2012 and 2013.

The Institute of Housing in Madrid (Ivima), of the regional Government of Madrid, sold 2,935 public rental homes in 2013, whilst the Town Hall of Madrid, through the Municipal Housing and Land Company (EMVS), sold 1,860 homes of the same kind in 2012, according to Efe.

“We are not going to stop until the administrations that are behind this intolerable abuse, which has affected so many people of limited means, assume their political and economic responsibilities”, said the President.

The demands of Iglesias

Sánchez responded in that way to the Secretary-General of Podemos, Pablo Iglesias, who has also called for other measures to put a stop to the rise in residential sale and rental prices in Spain, including, “ending the privileges afforded to Socimis, the commercial companies that operate in the real estate market and which are taxed at 0%”.

The leader of Podemos also requested that “large owners and venture funds, who own more than ten homes” be forced “to put those properties on the market”, and he proposed that “it is fundamental that the Town Halls be given authority to declare certain urban areas as “stressed markets” so that rental prices there can be regulated”.

Original story: El Mundo (by María Hernández)

Translation: Carmel Drake

Spanish Hotels Change Hands As Tourism Booms

16 August 2018

Spain is a tourist country par excellence: beaches, sun, good weather and hotels. It is a country where tourists can find a comfortable place to spend their holidays, while at the same time, investors see an interesting potential for profits. In this manner are the parallel tales of the splendour of Spain’s tourism interwoven with the non-stop action in the local hotel sector real estate market.

Last year, investments reached 3.750 billion euros, according to real estate consultancy CBRE, a record figure that gives an idea of the market’s momentum. The frenetic pace of acquisitions didn’t stop for a rest this summer either, as the sector awaits the result of the Thai International’s takeover bid for NH Hoteles.

The hotel scene is undergoing a paradigm shift and the business model that has been used since the 1980s, where the property owner and hotel operator were the same, is moving towards a more Anglo-Saxon profile, where the owner is an investor, and lifelong hotel sector professionals are primarily responsible for management. The sector is still highly fragmented and dominated by individual owners and independent managers (55%), although their relative participation is decreasing. Funds, socimis and family offices have gained prominence in recent years and are responsible for most of the operations currently being executed, to the detriment of traditional groups. Consequently, 57% of the total invested in the year up to June corresponded to that group of investors, compared to 40% for the traditional hotel chains.

The reason for the change is, again, the bursting of the real estate bubble. Many hotel owners experienced difficulties and, in some cases, were unable to cope with their debts to banks, which in many cases took over the assets; then came the venture capital funds that, honouring their nickname – vultures –, took advantage of the situation to snap up those hotels at firesale prices. The funds then follow a familiar path after that, and the same story is repeated in other segments of the real estate market: the funds invest in the completion of moribund projects or to upgrade older assets, run the businesses at a good profit until they find an opportunity to unload their investment, obtaining attractive returns in the process.

“[The funds] obtain annual yields of around 6.5-7% and aim to achieve between 12% and 15% with an eventual sale of the asset,” says Bruno Hallé Boix, founding partner of the consultancy Magma Hospitality Consulting.

Divestment will be the next phase of the current cycle, but for now, market players are focusing on repositioning the businesses and their subsequent consolidation. Investment forecasts for 2018 are positive, although they are not expected to return to the highs of last year. In the first semester of this year, the total volume invested shrank by 55%, to 960 million euros. In that same period, 70 hotel assets were transacted, 8,500 rooms were built, together with another 1,800 in as yet incomplete buildings, lots and projects sold.

“It is becoming harder every day to find good assets, that’s why it’s a good time for skilled opportunity seekers,” Mr Hallé Boix stated.

Mergers and acquisitions

One of the most important transactions this year starred Blackstone, which has established itself as Spain’s hotel giant after finalising its takeover bid for Hispania. The US fund already owned more than a dozen assets stemming from a previous real estate transaction with Banco Santander and HI Partners. With its acquisition of Hispania, Blackstone added another 46 hotels and more than 13,100 rooms to its portfolio.

With that operation over, all eyes are now on NH Hoteles. The chain has been on the block for months after an unsuccessful attempted merger with Barceló, and so far, Minor International seems likely to take the prize. The Thai company, also planning on creating a hotel sector behemoth, is offering 6.4 euros per share the Spanish chain, which had a relatively cool reception.

While awaiting the outcome of this latest page-turner, almost no one is ruling out additional transactions in the coming months. 83% of Spanish and international chains surveyed for Magma Hospitality’s Hospitality Hotel Management 2018 study demonstrated an interest in moving ahead with possible mergers or acquisitions with other hotel groups in Spain during 2018 and beyond. At the same time, the growth of specialised socimis will continue to add dynamism to the sector.

For investors, including both socimis and the traditional operators, holiday resorts are seen as the next big bet, accounting for 78% of investments in the first half of the year, compared to the 22% that went to urban hotels. Baleares (27%), Canarias (26%) and Andalucía (9%) were the main targets of regional investment, with others such as Madrid (5%) and Barcelona (4%) following far behind, according to CBRE.

In 43% of the cases, the average sale price for the assets valued the hotels at between 60,000 and 120,000 euros per room, according to the report. At the same time, there was an increase in acquisitions where buyers paid more than €120,000/room, another example of the boom in the sector.

Original Story: El Mundo – María Hernández

Translation: Richard Turner

 

Town Hall of Barcelona Buys a Building in the City Centre for Social Housing Use

7 June 2018 – Eje Prime

Ada Colau is continuing with her plan to increase the portfolio of residential property owned by the Town Hall of Barcelona for social housing purposes. In this case, the Town Hall is going to invest €2 million in the purchase and renovation of a building in the centre of the Catalan capital.

The property, located in El Eixample, at number 317 Calle Aragó, has been acquired through a right of first refusal arrangement, a preferential purchase that the Town Hall of Barcelona is allowed to exercise by law. The building contains eleven homes, four of which are empty. Moreover, the asset has a commercial premise on the ground floor, which will be allocated for “residents’ use”, according to comments from municipal sources.

The councillor for El Eixample and spokesman for the Town Hall, Gerardo Pisarello, explained that the goal of the purchase is, in addition to increasing the stock of social housing rental properties as Colau promised during her election campaign, “to avoid residents from ending up in the hands of financial institutions and vulture funds that want to acquire properties for speculative purposes”. Since becoming the mayor of Barcelona, Colau has purchased 500 flats that have been subsequently destined to rent.

At the beginning of 2018, the municipal government announced that it would invest up to €36 million in the purchase of seven private plots for the construction of public housing developments, primarily for social housing purposes, which are in constant demand in light of the rising rental prices in Barcelona, which increased by 18% in 2017.

Original story: Eje Prime 

Translation: Carmel Drake

Social Housing Tenants Can No Longer Buy Their Homes In Madrid

22 June 2017 – El Confidencial

The Community of Madrid will abolish the framework that allows tenants of social housing properties to be granted an option to buy their homes. In other words, those who wish to access a subsidised home may now only do so on a rental basis or as owners, but they may not rent and then subsequently purchase the home that they have lived in as tenants, in a change to the legislation applicable until now. That is according to the draft bill that will be presented today in the plenary session of the Assembly of Madrid and which will grant tenants greater guarantees in the event that their homes are transferred or sold to a third party.

According to José María García Gómez, Director General of Housing and Renovations at the Community of Madrid, this decision is motivated by “the change in the cycle that the housing market in Spain has experienced, which means that in some areas of Madrid, the price of private housing is less than the price of social housing. Nowadays, this option is not as attractive, it is a system that has been made obsolete and which goes against the real estate cycle, hence the decision to eliminate it”, he added.

In fact, according to data from the Community of Madrid, “only 10%-15% of those who choose to rent with the option to buy end up exercising that right. In some cases, this happens because the tenants are unable to obtain financing, but in other cases, it is because they prefer to continue to rent”, he said. “The majority are renewing their rental contracts, whilst others have left their homes”.

According to sources at the Community of Madrid, the new measure will enter into force once it has been published in the Community of Madrid’s Official Gazette – the plenary session will be held today, where the measure is expected to be approved – but the same sources clarify that it will not affect those developments or plots of land that have already been granted that classification.

No more sales of subsidised homes to vulture funds

The new rules will also include two changes that are intended to protect tenants. To understand them, it is necessary to explain that although some subsidised homes are owned by the town halls and regional governments, others are owned privately (…).

When homes are owned by the Community of Madrid, they may not be sold to third parties other than the tenants or their successors. However, according to José María García Gómez, “the intention of the government led by Cristina Cifuentes (pictured above) is that not a single social housing property be sold. Nevertheless, in the event that a decision is taken to sell, then the tenants would have the right of first refusal. In other words, they would have preference over any other buyer”, he explained. “The idea is to avoid selling off public assets”.

By contrast, in the case of homes that have been constructed by private developers, the new law establishes a preferential acquisition right for legal entities with “a recognised commitment to the management of subsidised housing for social purposes, with the obligation for the new owner to abide by the conditions, terms and maximum rents established, subrogating the rights and obligations (…)”.

These measures will prevent these subsidised homes from ending up in the hands of the so-called “vulture funds”, for example, like has happened in the past (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

New Housing Plan Will Include Aid For Renters & Evicted Families

14 December 2016 – El Mundo

On Tuesday 13 December, the Minister for Development, Íñigo de la Serna (pictured above), said that the future Housing Plan 2018-2021, which his department is currently working on, will seek to continue to support rental housing through a specific program of aid, and will add other assistance for families evicted from their habitual residences.

De la Serna emphasised that the draft plan includes financing for a program of aid for families evicted from their habitual residences that find themselves in vulnerable situations, through the constitution of social funds for rental housing.

Similarly, he expressed his intention for the new housing plan to continue to offer support for rental housing thanks to a specific program.

The Ministry of Development has already started the process to approve this new housing plan and to this end, it has invited the Autonomous Regions to a conference, which will be held on Thursday 15 December, where some of the overarching premises are expected to be discussed.

The Minister for Development recalled that last Friday, the Council of Ministers approved an extension of the Housing Plan 2013-2016 to ensure that its beneficiaries will not lose their aid from 1 January 2017 onwards.

In terms of the sale of social housing to vulture funds, De la Serna reminded the Podemos party Senator María Pilar Garrido that the Government will not carry out any sale in this sense because the duties in terms of housing are assumed by the Autonomous Regions.

“We have to comply with the law and not encroach on the regional duties that are not our responsibility”, he added.

He also said that the State can only influence the regulation of economic planning, specifically, the definition of safeguarding actions and the regulation of financing structures through the contribution of state resources.

Based on this, he explained that the Government approves the state housing plans, which are then managed through agreements with the different autonomous regions.

Original story: El Mundo

Translation: Carmel Drake

Blackstone Creates Europe’s First Restructured Loan Securitisation Fund

4 October 2016 – Expansión

The US giant Blackstone is doing great business in Spain with the problem assets that it bought from Catalunya Banc at the beginning of 2015. And it is now going to set the cat amongst the pigeons with an operation that looks set to represent a golden solution for its competitors and Spain’s banks in general.

The firm has just created the first securitisation fund in Europe from restructured loans. It is a pilot test, involving €265 million of credits, but it will likely open the way for other Spanish entities to dispose of the majority of their problematic loans without having to sell them to vulture funds at knockdown prices.

Blackstone completed the purchase of Catalunya Banc’s problematic mortgage portfolio for almost €3,600 million in April 2015 – the portfolio had a nominal value of more than €6,000 million – that sale was a condition for BBVA to acquire the Catalan group. The purchase was structured through a fund to which Blackstone contributed €3,598.4 million and the FROB the remaining €524.9 million.

The well trodden path

Now Blackstone, which has spent almost a year “negotiating” with the CNMV to obtain approval for this operation’s prospectus, is selling these mortgages to qualifying investors through a traditional securitisation fund, like the ones created in Spain to finance the credit boom until the outbreak of the financial crisis, but with the difference, given that this time the fund involves restructured loans. In other words, it contains credits whose conditions have been altered to allow the borrowers to afford the repayments.

Financial sources explain that, rather than discounts of 70%, such as those being applied to the direct sale of portfolios through bilateral contracts between entities and the funds who are active in this niche of the market – such as Apollo, Lone Star and Centerbridge, as well as Blackstone – these mortgages may now be placed on the market with discounts of less than 10% for the most subordinated (higher risk) tranches.

Nevertheless, these portfolios contain loans that borrowers have been repaying for more than 37 months without any help, thanks to the economic recovery, in other words, they contain “high quality” problem loans. In total, they will generate returns of more than 100 basis points above Euibor and so represent an interesting alternative for investors looking to take on more risk in the almost-zero interest rate environment.

Original story: Expansión (by Daniel Badía)

Translation: Carmel Drake

Carmena Is Set To Build 1,000 Rental Homes For €60M

19 September 2016 – Voz Populi

The rebirth of the real estate market will soon have a new, unusual, player in its midst: the Town Hall of Madrid. The capital’s Town Hall is getting ready to fire the starting gun for the construction of the first rental homes that it plans to build during its legislature. For the time being, it will put out to tender the construction of almost 1,000 homes, with an initial investment of more than €60 million.

Social housing was one of the key pillars of Ahora Madrid’s election campaign during the municipal elections to govern the largest town hall in Spain, which were held in 2015. For the first few months, the municipality’s new team focused on getting to know the financial circumstances of the ‘Empresa Municipal de la Vivienda y el Suelo’ (EMVS), which starred in spectacular asset sales during Ana Botella’s reign at the Town Hall, all intended to alleviate the city’s economic difficulties.

The Town Hall’s plans now include constructing 4,000 new social housing homes in Madrid before the end of its legislature. Work will begin on a quarter of them within the next few months, once the ten contracts that the mayoress’ team is currently preparing have been awarded (…).

The Town Hall’s property development activity will be launched once the role of the EMVS to contract and put homes on the market has been activated again, following the restrictions imposed on it in recent years. Previously, the company was in a very delicate financial situation due to the collapse in value of the large volumes of land that it had acquired at the end of the real estate bubble and, therefore, at exorbitant prices.

Those circumstances meant that the company had to divest assets, including packages of homes sold to vulture funds, which generated a lot of controversy, which has now been declared void in the courts and by the investigation committee created to try to determine the legal nature of the operation.

In April 2016, the Town Hall injected €17 million into the EMVS, through a capital increase, an amount that was intended to allow it to continue cancelling its debt but which, at the same time, allowed it to relaunch the public company’s construction activity. The developments are located in the district of Vallecas and in the areas of Rosilla and Nuestra Señora de los Ángeles, although the Town Hall’s also plans to construct homes in other areas of the capital too.

This is undoubtedly an unprecedented move and not only in the public sphere, but also in the private. Many real estate companies have cancelled their development plans due to the collapse of the market and the lack of demand, together with the problems generated by the large volume of empty homes in Madrid. The contracts that the Town Hall will put out to tender mean that almost 1,000 new homes will be constructed within two years of them being awarded.

Original story: Voz Populi (by Raúl Pozo)

Translation: Carmel Drake