Banks clear out 72.6 billion in Real Estate around the clock to get Europe satisfied
In the last year, the banks have dropped real estate asset for a 72 billion value, around the clock to get the regulators satisfied and stop being a liability so that the EU progresses in the banking integration. The countries in Northern Europe are reluctant to create a European Deposits guarantee fund, a key structure to do steps forward in the banking union, due to the high-risk positions of the Mediterranean banks. Apart from problems with Italian entities, the countries being wayward when having to feed that fund, wielded as an excuse the high real estate risk of the Spanish banks.
All the clean up faced by the national systemic bank in the last twelve months take away that argument and also returns the sector to a context more similar than before the crisis; which was guilty of balances racking up to 100 billion in toxic real estate assets, at their worst time. After those deinvestments, the figure would have dropped to 25 billion or 130 if all non-performing assets are considered. At their worst moment, distressed investments managed to be over 300 billion.
In this multi-million cleanup, the necessary collaborators were funds and investment managers. The last large operation just featured Cerberus, that acquired two real estate debt portfolios from Sabadell, called Challenger and Coliseum, with a gross value of 9.1 billion Euros.
The US fund will set up one or two new firms with the Spanish entity, to inject the assets and will hold 80% of them. It is the same structure that was carried out when it purchased a 13 billion-worth portfolio from BBVA at the end of 2017. With these two operations, Cerberus takes place as the most active fund in the last twelve months in the debt market, as it adds assets acquired for a gross value of 17.6 billion.
These two transactions are among the four largest happened in Spain, where the fund landed in 2013, with the purchase of Bankia Habitat (now Haya Real Estate). Since then, it hasn’t stopped, seizing a large part of the real estate pie. Thus, apart from the servicer, it seized in 2015 of Gescobro, Miura’s default debt recovery agency. It also counts with Haya Securitizations (formerly AyT) that it purchased from Cecabank and Ahorro Corporación At the end of last year, Cerberus landed the purchase of the RE Developer Inmoglaciar, seizing 75% of the capital of the firm controlled until then by the Moreno family.
Despite the last transaction closed with Sabadell, Cerberus doesn’t topple Blackston as the largest Real Estate owner in Spain. A title the US fund holds also globally, with a total of 184 billion under management at the end of 2017.
Blackstone featured last year the largest operation in Spain, as it seized 51% of Popular’s toxic assets, until then in Santander’s hands. This has led to creating a joint venture with the entity led by Mrs. Ana Botín, christened as Quasar Investment.
Also, Blackstone owns the servicer Anticipa Real Estate, that has one of the largest portfolios of homes for rent in Spain, with 12,000 apartments and several socimis. The fund will know, possibly by next Friday, the result of its takeover bid for Hispania, which will place it as the largest hotel owner in Spain. Among its purchases, the most recent are the HQ of Planeta in Barcelona, for 210 million and the logistics portfolio from the Socimi Lar, for 119 million.
The volume of operations they’re landing is the first half of the year, predict a year of record-setting figures. That’s Carlos Rubí’s opinion, the partner responsible of the portfolio sale area at KPMG in Spain, one of the most active firms in this market, who ensures “2018 is being a very dynamic year for this kind of operations, which volume can be over 100 billion in Spain alone, which would allow to improve the default rate of entities and drop awarded assets, as the ECB is suggesting”.
With the fervent activity of the past two years and a half, a few experts are pointing out that the cycle of opportunity in Spain is coming to an end. Nevertheless, Mr. José Masip, partner of Financial Services and Real Estate at Axis Corporate ensures Spain keeps the interest of this type of investors. “Spain keeps getting the necessary indicators to keep attracting investors”.
Thus, he points out that even if they are in other countries in Europe that are attractive enough, like Cyprus, Greece, Italy, and Portugal, don’t cast a shadow on Spain where investors stress the importance of GDP growth above the Eurozone, the improvement in homes´ rents, the drop in financing costs to firms and families, among other factors.
The closing of the sales of the different portfolios Sabadell put on the market this spring leaves only Santander´s as the last large pending operation. The entity has put on the market a non-performing assets portfolio of gross value between 5 and 6 billion, that it’s hoping to close before September starts. The closing of this operation would mean leaving almost at zero the non-performing assets in Santander´s balance. The group started, as of last June, with toxic assets for a gross value of 41.1 billion Euros. In August 2017 it sold to Blackstone 51% of the distressed debt and properties from Popular for a gross value of 15.5 billion, although it transferred 100% of those assets to the joint venture Quasar. The operation dropped the distressed assets of the bank to 10.4 billion, half of which was covered by the entity’s provisions.
Source: El Economista. Translation by Miguel Vinuesa Magnet
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