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Metrovacesa Sets Up A ‘Land Bad Bank’ To Carve Out Its Residential Business

Posted by: In: Real Estate 08 Jul 2015 Comments: 0 Tags: , , , , , , , , , , ,
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8 July 2015 – El Confidencial

Make someday today (‘Algún día es hoy’). The slogan of Metrovacesa’s new marketing campaign is a declaration of intent regarding the direction that the real estate company has decided to take now that Rodrigo Echenique has taken over as the new Chairman of the company.

In this context, and having closed the refinancing of the company, the Director has set the objective of restoring the company to its past splendour and consolidating its position as one of Spain’s largest real estate companies, capable of competing head to head with Colonial and with the large socimis, such as Merlin and Hispania, which are now establishing themselves amongst the main landowners in the country.

The first step of this ambitious strategy entails a move that the experts in the sector have been pondering for some time…and which the company is already working on: the creation of a bad bank for its land assets. Sources at Metrovacesa say that although the option is already on the table, a final decision has not yet been taken.

The real estate company’s plans involve making a similar move to the one implemented by Colonial five years ago, when it separated its land and development assets and placed them into a newly created company, called Asentia. It was the beginning of an ambitious clean-up plan that was completed last year, when the subsidiary was sold to several funds.

In the case of Metrovacesa, the idea is to separate the residential and land businesses, according to sources close to proceedings, to focus on growing its property business, especially the buildings located in prime areas, which represent 75% of its turnover. The thorniest point of this strategy are the provisions that will likely have to be made to carry out the carve-out, which will be offset when this business is sold, since that will allow it to deconsolidate all of the associated debt. (…)

In its results for 2014, Metrovacesa already included several provisions for losses on certain assets and valued its entire portfolio at €4,800 million. The portfolio comprises: 8 shopping centres and 2 more that are being constructed (one is scheduled to be opened this year and the other has been placed under review); 8 hotels in operation, as well as the hotel that Barceló will manage in the Torre de Madrid; and 34 office buildings, the jewel in the group’s crown, which have a combined gross leasable area of 520,000 m2, in Madrid and Barcelona.

In terms of housing, the real estate company owns 35 developments across ten provinces (…), whilst in terms of land, it is currently marketing plots to individuals in another half a dozen municipalities (…).

But the bulk of the group’s land business comprises developments that are underway in Alicante, where it plans to construct 300 homes in an urban development covering 48,000 m2; Sevilla, with Project Palmas Altas Sur, a plot measuring 679,223 m2 where 2,870 homes will be built; Tarifa, where it wants to build la Ciudad del Surf, with 600 hotel beds, 7,500 m2 of retail space and up to 250 homes; Hospitalet del Llobregat, close to Barcelona, comprising almost 160,000 m2 of buildable space for tertiary use; and Madrid, where the company is trying to obtain permits to build a residential development on the site of the former Clesa factory.

Following the capital increase approved last spring to capitalise the group’s bank debt, the shareholders of Metrovacesa currently include Santander, which holds a 58.67% stake, BBVA (19.42%), Banco Sabadell (13.85%), Popular (7.99%) and other small investors (0.071%).

Once the residential business has been carved out, the entities will have to agree on the best way to maximise the value of their shareholdings, from a range of possibilities that have been put on the table. These include: creating a hotel Socimi, finding a partner to buy some of the capital and listing on the stock market.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

The post Metrovacesa Sets Up A ‘Land Bad Bank’ To Carve Out Its Residential Business appeared first on Aura Real Estate Experts.

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