WL Ross & Co: “We Have a Vehicle to Invest in Spanish Residential RE”

28/04/2014 – Expansion

The fund chaired by Wilbur L. Ross has been looking into Spanish market for the last year. The CEO met on talks with Sareb, Frob (Spain´s Banking Restructuring Fund) and stove to purchase NCG, however it has not closed any transaction in Spain so far.

WL Ross & Co has conducted restructuring for companies and financial entites with $300 billion debts and soured assets. At a recent interview in Barcelona, Ross confirmed that he decided to gamble on Spanish property because of the economic recovery and praised creation of Sareb and Frob. “We have created an investment vehicle highly specialized in the real estate – Investco and based it in Madrid”.

He also pointsat the residential property as the main target of the newly established vehicle. Although in Ireland we aimed at single-family houses, in Spain we want to buy apartments, blocks of flats and cooperatives.

Additionally, the company is pondering sending an offer for Catalunya Banc.

Moreover, WL Ross & Co does not rule out buying other firms in financial trouble as it acquired International Automotive Components with a manufacture in Logroño. “Low costs of production and utterly specialized workers make investment in Spanish industry truly interesting”, he assured.

 

Original article: Expansión (by Cristina Fontgivell)

Translation: AURA REE

The vulture funds that fly over the Spanish construction sector.

There is a business in the bruised Spanish real estate sector. In the last few months, the real estate subsidiaries of the nationalized savings banks, some of the assets that have been transferred to Sareb and “packages” of properties of those banks that have not been rescued will change hands. The buyers will be ten foreign companies, known as vulture funds, specialized in acquiring real estate bargains, as they have done in other countries.

Their names, Apollo, Cerberus, Lone Star, Lindorff…..where do they come from? Who are they? What will they do with the properties they sell? Most of them have a U.S. and British capital and are related to businessmen who are more or less known in Spain, such as the tycoon Donald Trump, the former vice president of U.S.A. Dan Quayle, the former Secretary of the Treasury of U.S.A., John W. Snow or the Mexican Carlos Slim.

The game is on. In November one of them, Centerbridge took the first step and acquired the awarded properties from Banesto (mostly second hand ones). Now it´s the turn of La Caixa, who appointed an investment bank for the sale of Servihabitat; Bankia has just received offers for its subsidiary Bankia Habitat. Catalunya Banc also studies who will get its real estate subsidiary Catalunya Caixa Inmobiliaria, and Novagalicia Banco has also ten offers on the table.

These are the vulture funds who aspire to dominate the Spanish real estate market in the next few years:

Apollo Global Management

The U.S. company is one of the main investment businesses on a global scale specialized in operations related to the acquisition of credits, real estate investments and the “private equity”. It was founded in 1990 by the Jewish businessman Leon Black, who acquired in 2012 one of the four versions of “The cry”, by Munch, for nearly 120 million Dollars (92 million Euros), the firm also has a subsidiary focused on the real estate operations.

In Spain, the Apollo group acquired the platform Finanmadrid from Bankia for 1,6 million Euros. The real estate subsidiary of this company, Apollo Real Estate is one of the main candidates to acquire CX Inmobiliaria from Catalunya Bank.

Cerberus Capital Management L.P.

With its headquarters in New York, Cerberus is one of the main investment companies in the world. It is presided over by two heavy weights U.S. Republicans: The former vice president in the USA during the presidency of George Bush Sr., Dan Quayle, and the Secretary of the Treasury between 2003 and 2006 during the presidency of George W. Bush, John W. Snow.

The acquisition of default credits from Banco Santander for 350 million Euros in April 2012 is the most important operation in Spain until now. The company has been positioning itself as one of the funds with more relevance in the acquisition of default assets, having acquired several packages of credits and properties from Bankia. Cerberus hired the son of former president José María Aznar at the beginning of the year with the intention of receiving counseling on the possible acquisition of assets from the “bad bank”.

Lone Star Funds

The Texan investment funds Lone Star are another of the potential buyers of assets of the Spanish “bad banks”. In 2012, the company acquired default credits of the Banco Santander for 150 million Euros and at the end of that year opened its own platform for credit recovery with the former manager of Apollo in Spain, Luis Cebrián.

These investment funds manage a total business volume focused on making capital added obligations more profitable with a volume of 33 bilion American dollars (25352 million Euros). One of its more important operations was the acquisition of 90,8% of the shares of the semipublic bank IBK which was affected by the subprime crisis.

D.E. Shaw & Co

Founded in 1998 by the scientist specialized in computer studies David E. Shaw, this investment and technological development company has its headquarters in New York. According to the figures of the company in April 2013, the company has an investment capital of 30 billion dollars (25.345 million Euros) and branches in the United States, Europe and Asia.

In the United States, this company is one of the main economic agents specialized in investment funds of security of mortgages that do not have the backing of the government. D.E. Shaw is also one of the main investors in pension funds in the city of New York.

Lindorff

The Norwegian company Lindorff is present in 11 European countries and has a business core specialized in the collection of debts. This company owns the companies Aitor and Investor AB at 50% each.

Lindorff has already carried out several businesses with Spanish financial institutions. We can highlight the acquisition of the platform of recovery management Reintegra from Banco Santander and the bid they are currently carrying out for the acquisition of default credits of NCG.

Aktiv Kapital

This Norwegian company  specialized in the acquisition of toxic assets at bargain prices was founded in 1991 in Oslo and currently operates in eight European countries and in Canada.

Aktiv Kapital has worked with the group BFA-Bankia in two occasions in 2012. It acquired around 100.000 default credits for consumers and another portfolio related to default credits in the car industry made of 16000 agreements and valued at 126 million Euros.

Oaktree Capital Group LLC

Founded in 1995, the company Oaktree has a staff of 600 employees mainly made of financial executives. It is among the 25 main investment management companies specialized in alternative assets such as the venture capital. It also has a real estate subsidiary called Oak Tree Reality that operates in the U.S. Its president, Howard S. Marks is considered one of the main authorities in Wall Street and according to the Forbes magazine is one of the richest financiers in the world.

In Spain, Oaktree is the main individual creditor of the company Panrico thanks to the acquisition of 20% of its debt and is the main shareholder from the company Campofrío.

TPG

TPG, previously Texas Pacific Group is one of the main financial investment groups in the world with its headquarters in California and Texas. Its business activity ranges from telecommunications to travel, the technological and industrial sectors, health services and banks.

One of their main operations was the rescue of Bradford and Bingley, the greatest mortgage bank in the United Kingdom, after the acquisition of 20% of its capital. This group also negotiated with the owners of Iberia in order to take on the control of the company.

WL Ross & Co. LLC

Lead by the millionaire Wilbur Ross, WL Ross & Co. LLC is an investment company specialized in taking over companies with financial problems with the aim of restructuring them. Energy, financial services, health services, heavy materials and transport are the main areas where this tycoon develops his business, with a fortune around 2,6 billion Dollars (1996 million Euros) according to the Forbes magazine.

This American millionaire who declares “his love for mortgages” which bring him a lucrative business in the States has winked at the “bad bank” and declares that Spain “is, in many ways, a very interesting country”.

Fortress Investment Group LLC

Founded in 1998, this company specialized in investments develops its activity in different sectors that range from the real estate sector, with a subsidiary specialized in castles, to the financial sector, energy or infrastructures.

In 2012, Fortress acquired a package of aprox. 1000 million Euros in default credits from Santander, most of which were consumer credits.

Centerbridge Partners

Centerbridge is a multistrategic investment company with more than 15 billion dollars (11523 million Euros in assets. Its headquarters are in New York and it has branches in London.

Centerbridge Partners acquired at the end of 2012 Aktúa, the subsidiary from Banesto specialized in management and recovery of credit portfolios, for around 100 million Euros.

Donald Trump

The eccentric millionaire Donald Trump is another candidate to acquire a great number of Spanish properties. Its name sounds among the potential investors that could arrive to our country after he declared in 2012 that in Spain “they were giving land for nothing” and that as “country was ill, it was the time to take advantage of that”.

Carlos Slim

The richest man on earth for the fourth year in a row according to Forbes magazine, bought through its Mexican real estate subsidiary, Carso, properties from Caixabank for 428,2 million Euros.

The 439 properties acquired by Slim are intended for bank branches and the operation was a “sale and lease back” as after the sale, a long term lease with a purchase option was signed, which allows Caixabank to continue using the sold branches.

Otto Group/EOS Group

The German group Otto with more than 50000 employees and presence in Europe, America and Asia is one of the firm candidates to take a big piece of the Spanish real estate market.

Through its subsidiary EOS Group, Otto acquired at the beginning of 2013 the recovery business from Banco Popular for ten years and 135 million Euros.

Source: El Mundo

Fortress, Appollo and other funds wish for the business liquidated by the nationalized institutions.

Credit portfolios, recovery businesses, real estate divisions and now, the business in liquidation. The restructuring imposed by Brussels to the nationalized institutions – Bankia, NCG Banco and Catalunya Banc – has turned out to be a substantial business for foreign funds and banks. Some of these investors have met in the last few weeks showing an interest in the business being liquidated: credits, branches and staff.

If there are no last minute changes, the first serious offers will arrive in the next few weeks. A public tender cannot be dismissed in view of the growing interest.

These are potential operations that offer great advantages for both parties. The nationalized institutions can maintain part of their staff, avoid the economic and social cost of layoffs. The funds have the opportunity of acquiring credits and commercial and recovery teams at bargain prices, as well as some agreements on the provision of services.

The three bigger nationalized institutions are obliged by Brussels to reduce the credit volume in nearly 100.000 million Euros in the next few years (until 2017); its staff in more than 8000 workers; and its commercial network in more than 2000 branches. These cuts provide a business that the funds do not want to lose.

The reductions which interest the foreign investors most are the ones to be carried out in the expansion areas, entered by the savings banks in the last years of the real estate boom.

In the case of NCG Banco, the Galician institution has around 200 branches far away from the area considered strategic by Brussels. Nearly 120 of these belong to EVO Banco and would not be included in the type of operations sought by funds and 60 are included in the Management Unit of Single Assets (MUSA). The Galician group has received a lot of interest on this unit, which would also include 60 branches, 900 professionals and credits for 20.000 million Euros. Nevertheless, sources from the institution declare that their initial priority is to sell EVO Banco. Out of these 20.000 million Euros, half of them would be healthy credits and the other half default credits.

Some funds prefer to concentrate on the recovery teams and the default credit portfolios. They would then continue providing a recovery service to NCG Banco and they would acquire some of the default credit portfolios included in the unit MUSA.

Other funds are preparing offers for those healthy credits awarded outside the strategic region of NCG: Galicia, Leon and Asturias. Should these operations be closed, the acquirer would be in charge of managing the current credits, but would not grant further loans or deposits.

Along with NCG Banco, the funds and financial institutions are studying the possibility of acquiring part of the commercial network of Catalunya Banc. Brussels imposed the closure of 400 branches, 35% of all it had at the end of 2011. It also has the obligation of closing any business outside Catalonia and part of the one within the region, mainly in the provinces of Lerida and Gerona, according to financial sources.

Bankia has already closed the sale of non strategic assets. It has been done partly to save jobs, such as with the sale of Finanmadrid to Appollo, with the transfer of 124 people, or with Bankia Habitat, on sale with a staff of 500 employees. The troika has allowed Bankia to maintain part of its network in its natural area of influence. It was national since the very beginning, and therefore it will not need to leave any region. But Bankia still has to close 1100 branches and get rid of 4500 employees. The institution already has requests for early retirement buyouts for 3000 employees.

Source: Expansión