Spanish Property Deals Grab Investor Interest

At least a dozen large international investors are lining up to look at a large Spanish property-loan portfolio sale that will take the temperature of one of Europe's most distressed real-estate markets.

Commerzbank AG CBK.XE -2.28% recently began shopping around the portfolio—code named Project Octopus—that includes loans with a face value of €4.4 billion ($6 billion) that are backed by shopping centers, hotels and offices. 

The loans were originally extended by Eurohypo AG, a unit of Commerzbank that is being wound down after suffering large losses in recent years. 

The deal is expected to be one of the biggest of its kind in Europe this year and will be a key test of investor faith in Spain's budding economic recovery. Any buyer of the loans likely would pay a discount to their face value. Still, they would be making a multiyear bet on the euro zone's fourth-largest economy, which late last year emerged from more than two years of recession. 

Investors looking at the deal include Blackstone Group BX +0.67% L.P., Cerberus Capital Management L.P., Värde Partners, Apollo Global Management APO -0.81% LLC, Lone Star Funds, Kennedy Wilson, KW +1.64% Pacific Investment Management Co., Starwood Capital Group LLC, CarVal Investors, Colony Capital LLC and Centerbridge Partners L.P., according to people familiar with the deal. Some of these funds have teamed up with large lenders such as Deutsche Bank AG DBK.XE +0.56% and Wells Fargo WFC -0.02% & Co.

Commerzbank, which is among a number of European banks that have been unloading loan portfolios to align with new banking regulations, hired investment bank Lazard Ltd. LAZ +2.96% to run the sale. Commerzbank declined to comment. 

European banks still are digging out from an avalanche of bad real-estate debt that crushed them when the financial crisis hit. In 2014, more than €40 billion in European real-estate loans could be put on the market, a 32% increase from 2013, according to a report last week from real-estate broker Cushman & Wakefield.

Big sellers include so-called bad banks that were set up in Spain and Ireland to manage soured real-estate assets. Those banks are increasing their disposal activity, while sales in Italy also are expected to pick up, said Andrew Sim, head of European investment at Knight Frank in London.

Spain's real-estate market has seen a revival of late. The government, through its bad-bank structure Sareb, is expected to put several large property portfolios up for sale in the first quarter, and local banks also are looking to reduce their exposure to real estate.

However, there are reasons to be cautious, say some analysts. A shock to the economy would be a "particularly big problem" for the property market, where asset values have fallen far less than in other troubled countries like Ireland, said Matthew Richardson, European real-estate research director at Fidelity Worldwide Investment in London.

"If you're an institutional investor running third-party money, it's a heck of a risk to take," Mr. Richardson said.

Last week, Commerzbank sold €710 million of nonperforming Spanish property loans to hedge funds. In December, it sold €280 million of shipping loans to a buyer affiliated with Oaktree Capital Management L.P.

The latest Commerzbank Spanish portfolio sale is expected to be completed this summer. Interested investors will participate in the first round of bidding within the next four to six weeks, a person close to the deal said.

The deal could be structured similarly to Commerzbank's £4 billion ($6.6 billion) U.K. real-estate portfolio deal last year, said people familiar with the ongoing process. About half the Spanish portfolio consists of performing loans, while the other half is split between nonperforming and subperforming loans, these people said.

The U.K. sale was broken into two parts, with Wells Fargo taking control of £2.7 billion in performing loans, while Lone Star took on £1.3 billion of nonperforming loans.

There also is a chance one investor could buy the whole portfolio, said Adolfo Ramírez-Escudero, managing director in Spain at CBRE Group Inc., which is representing one of the bidders. He noted only a handful of bidders have the resources to consider this option.

Large asset managers such as Lone Star and Kennedy Wilson have opened local offices in the Spanish capital, and funds including Apollo Global Management and TPG Capital LLP have purchased real-estate servicing units from local banks, giving them a platform to manage the assets they buy.

On Tuesday, a portfolio of seven shopping centers in Spain was sold to U.K.-based GreenOak Real Estate Advisors L.P. and Spanish investor Grupo Lar Real Estate Investments SA for €160 million by Dutch property fund Vastned Retail VASTN.AE -0.25% NV.

The rising number of investors looking at distressed Spanish assets also may drive prices higher, increasing risk. A person familiar with Project Octopus noted the deal was "extraordinarily" well bid.

"You look at the bigger picture and it sounds pretty good. But on second look, you're thinking the good news might be priced in," the person said.

Source: online.wsj.com

Foreign investors even more confident about Spanish property investment

FOREIGN INVESTORS have done a dramatic U-turn on Spanish property investment, with two thirds now believing Spain has attractive buying opportunities.

A total 67% of participants in an Urban Land Institute and PwC survey said they were feeling more confident about investing in the country.

Marc Pritchard, Sales and Marketing Manager for leading Spanish home builder Taylor Wimpey Espana comments, “It is very encouraging to see the experts such as the Urban Land Institute and PwC highlighting the turnaround which Spain has undergone and the vast potential which remains. We have been saying for some months now that the situation, especially within the second homes market, is steadily improving.

“Last year we at Taylor Wimpey Espana recorded our best year since 2006 in terms of sales volume and you only have to look at the vast sums being invested into real estate by both private individuals such as Bill Gates and large investment funds, to see that ‘good opportunities’ still do exist in Spain.“

Source: theolivepress.es

Spanish firms plan property REITs fundraising push

Two Spanish firms are approaching investors to raise up to 900 million euros ($1.2 billion) for listed property funds, a type of vehicle that is taking off as more foreign investors pile into the country in search of real estate bargains.

Six years into a property market slump, buyers are starting to clinch more deals for distressed assets as banks clean up their books and prices come closer to bottoming out after falling around 40 percent from their peak.

That is encouraging funds to try out investment paths that have been rare in Spain until now, including through real estate investment trusts or REITS - listed vehicles that typically invest in income-producing assets, such as rental properties.

Private investment firm Azora is close to launching a fundraising drive for a vehicle of this type and aims to bring in up to 500 million euros ($683.3 million) from investors, two sources with knowledge of the plans said.

It has hired Goldman Sachs and UBS to market the listed fund, which will be known as Hispania, the sources said.

Azora declined to comment.

It will follow a similar move by family-owned real estate company Grupo Lar, which on Thursday published a prospectus for a listed property vehicle of up to 400 million euros, which will be placed among investors by JPMorgan.

The deals mark the biggest fundraising push of its kind to date, as Spain only has a handful of smaller REITs - or SOCIMIs in Spanish - which are not listed on the main stock exchange.

RENTAL MARKET

An overhaul of Spain's rigid rental laws last year has partly opened the door to these vehicles, officially introduced five years ago. The government made rental contracts shorter and made it easier for landlords to evict non-paying tenants, making the market more attractive for investors.

At present only about 17 percent of Spaniards live in rental homes, much lower than the European average of 30 percent.

REITS have taken off recently in other European countries such as Ireland, which also suffered a property market collapse and is seeking to attract foreign investors back to the country. The vehicles carry tax advantages and attractive returns.

"We've looked at these kind of things in Ireland before," said a London-based investor who had been approached for the Grupo Lar and Azora vehicles and said his fund would likely participate in the fundraisings.

"These types of listed real estate cash boxes usually give returns of around 10 percent," he said, adding they could be used in Spain to invest in everything from hotels to commercial properties and real estate being sold by Sareb - a government-backed 'bad bank' set up to house 51 billion euros of soured property assets taken off bailed-out banks.

Foreign investors, including many U.S. funds specialised in distressed real estate, have started to notch up acquisitions in Spain in recent months. These were elusive in the early years of the property slump as buyers struggled to agree on prices with banks selling their foreclosed assets and wary of making losses.

Spain's government forced banks to take hefty provisions against such losses in 2012, helping to ease deals, while Sareb last year began to offload portfolios of properties or debt to investors such as private equity group H.I.G Capital and U.S. investment firm Fortress.

Grupo Lar has also bought properties off Sareb, while Azora teamed up with Goldman Sachs last year to buy a package of 3,000 Spanish residential flats from the regional government of Madrid, for about 200 million euros.

Foreign banks are also making a push to sell soured Spanish property. Germany's Commerzbank has hired Lazard to sell a portfolio of around 4.3 billion euros in performing and non-performing real estate loans, one of the biggest of its kind on the market so far.

Source: http://in.reuters.com