Spain revs up

Spain’s distressed real estate market is beginning to pick up with Miami’s H.I.G. Capital suggesting it has made the first acquisition of a property portfolio from Spain’s ‘bad bank’, Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria (Sareb).

The €100 million deal is just one of a number being struck across the country, with Los Angeles-based Kennedy Wilson and hedge fund Varde Partners jointly buying the property management unit from nationalized Catalunya Caixa. The bank was the recipient of a government bailout alongside several others that required a total of €41 billion to repair their balance sheets last year. For the Kennedy Wilson transaction, the bank said its property management unit had €8.7 billion of assets under management, including property transferred to Sareb.

Meanwhile, The Blackstone Group is said to be making an investment in the country. A spokeswoman told Bloomberg that it had agreed to a deal to buy a group of 18 Madrid apartment blocks from the Municipal Social Housing Company for €125.5 million. Of those units, 1,208 are rented to tenants and 652 are leased with an option to buy.

And, just yesterday, it was reported that Goldman Sachs and Azora have agreed to buy 3,000 apartments for €201 million from the regional government of Madrid.

H.I.G.’s deal has been made via credit affiliate Bayside Capital and involves a portfolio of nearly 1,000 homes in locations such as Valencia, Andalusia, Murcia, the Canary Islands and Madrid. In a statement, the Miami firm said it had struck “a definitive agreement for the acquisition of the first pool of real estate assets sold by Sareb, known as Project Bull.” In selecting the bid submitted by H.I.G. Capital, Sareb “took into account the proposed business plan” to manage the properties, which would provide it with a greater potential for return on investment, it added.

Spain increasingly is being seen as a legitimate hunting ground for private equity firms now that the perceived macro risk of a serious further weakening of the country’s economic base has receded. “Sareb’s president, Belén Romana, has assessed the keen interest that this transaction has sparked amongst institutional investors worldwide,” the statement continued. “The quality of the bids submitted shows the confidence that investors have in Sareb and in the recovery of Spain’s real estate market.”

Sareb’s director of real estate assets Juan Barba, who was formerly the head of Spain for Doughty Hanson Real Estate, said Project Bull “allows us to be optimistic with regards to the portfolios we plan to put on to the wholesale market over the second half of the year, which also will involve creating investment vehicles.”

Chris Zlatarev, head of European nonperforming loans at Bayside Capital, who joined the firm in February after having been with Varde Partners Europe since 2009, added: “This transaction demonstrates H.I.G.'s commitment to investing in Spain and growing our real estate and NPL business”.

H.I.G. Capital has a significant presence in Spain, led by Jaime Bergel, who heads its Madrid office. It said this was the first Sareb real-estate asset portfolio to be put on the wholesale market since Sareb was set up at the end of last year to divest the portfolio of loans and real-estate assets transferred by banks, which had received government funding.

The Project Bull portfolio is comprised of residential developments, with 939 homes being in Andalusia, the Canary Islands, Cantabria, Catalonia, the Balearic Islands, Madrid, Murcia, and Valencia. The portfolio also includes 750 ancillary premises such as parking spaces and storage rooms and one retail unit.

The transaction has been structured via the creation of a Bank Asset Fund (FAB), a first in Spain. Sareb will retain a 49 percent share in the FAB, while H.I.G. Capital will own 51 percent. The properties in the hands of the FAB will be managed by an independent servicer selected by H.I.G., which is Monthisa, a Spanish company.

H.I.G. has made the investment via a credit fund, but the company also has a dedicated real estate wing, H.I.G. Realty Partners. In April, it announced the hiring of Ira Weidhorn as s co-head and managing director to make opportunistic investments in real estate across all property types, with a specific focus on special situations. Before joining H.I.G., she was a managing principal and head of the New York office for Lubert-Adler Partners.