Saturday, October 24, 2020

The Greek Real Estate Market in September

Piraeus Bank: The Phoenix securitisation process has begun

The first NPL securitization of Piraeus Bank (project Phoenix) has started with an express tender process. The information was sent in August, the confidentiality agreements were signed and, according to the schedule, binding offers were submitted. The portfolio consists of about 58 thousand mortgages, with a gross book value of €1.9 bn. The majority (about 67%) are terminated, while the rest are in arrears. The average receivable per borrower (22 thousand borrowers), is €90 thousand, while the average remaining term of the portfolio is about 20 years. The loans have been transferred to an SPV, which issued securities of three classes. The senior notes, amounting to approximately €0.96 bn, will be held by the bank, while a request for a state guarantee has already been submitted by the Hercules programme. The bank will sell to the preferred investor 30% of the intermediate and low-grade securities (mezzanine and junior notes). Another part of the above securities after the completion of the transaction will most likely be returned free of charge to the shareholders. The market estimates that most likely to win the tender is the Swedish group Intrum, which is a strategic partner of Piraeus Bank in the servicing of its non-performing exposures and has a thorough view of the securitized portfolio. According to unconfirmed information, Intrum is participating in the tender process for the purchase of 30% of the intermediate and low rating securities. If it wins the tender, the servicing of the portfolio will remain with Intrum Hellas, which closed the fiscal year 2019 with profits of €19.2 m. UBS is the financial advisor for the Phoenix project, while Alantra is the technical advisor. On another note, the kick-off of project Vega (53 thousand mortgages of all categories, of which 70% are terminated) is also expected soon. The gross book value of the loans amounts to €5 bn. Of these, loans of about €1 bn are mortgages and €4 bn are corporate (small, medium and large enterprises). Piraeus Bank estimates that the loss from the sale of the intermediate rating securities of the two securitisations will range between €1.1 to €1.4 bn. The impact from the securitization loss on the funds will be, according to the bank’s management, at the level of 180 basis points. Given that the above losses cannot be covered by this year’s profitability, Piraeus decided to proceed with a corporate transformation, so as not to activate the provision of the law, which imposes a capital increase in favour of the State. The Board of Directors of the bank decided to start the division process, by splitting the banking sector and contributing to a new banking company (new Piraeus).

Filοktitis Rehabilitation Center was sold for €1

Iaso Group announced the sale of all the shares it held in the FILOKTITIS Medical Rehabilitation Centre to Darzalas Capital Sarl, at the price of 1,00 euro.The sale of Filoktitis SA will not have a significant impact on the individual or consolidated results of the Company and the Group, given that on 31.12.2019 a provision for impairment was made for the investment of the Company and the Group in Filoktiti SA,.In addition, the Group has ceased from 31/08/2020 to consolidate the results of Filoktitis SA which were negative (losses after taxes in 2019 were €15,099,421.37 and -in 2018 were €1,637,524.02).The transaction is not expected to result in any significant financial implications for the Company or the Group.Mr. Ilian Grigorov, Chairman of Darzalas Capital Sarl, said: “We are very happy with the acquisition of Filoktiti SA. It will serve as a basis for the development of a wider platform of rehabilitation and long-term care in Greece. Darzalas Capital Sarl is an investment vehicle for investing in healthcare in Southeast Europe. It owns the majority of Blocks Health and Social Care, a regional rehabilitation and long-term care center.

Pepper completes €850m Bank of Cyprus distressed debt contract

The non-performing property-secured loans averaged delinquency rates of seven years or more. The Bank of Cyprus outsourced the book to Pepper in January 2018 initially on a 30-month contract and then extended to October 30, 2020. Pepper resolved 22.3% of the book in 2019 delivering “material value to its client”, the firm said. Pepper, which entered the Cyprus market for the first time with the contract, relocated UK staff to the island country’s capital Nicosia to develop local talent. The team was able to draw on Pepper’s experience servicing similar debt portfolios in Europe, notably in the UK and Ireland. Mark Caplan, country head at Pepper Cyprus, moved from Pepper European Servicing, based in London, to lead the Nicosia operation. “We significantly reduced the bank’s non-performing exposures in 2018 and 2019,” Caplan says. “Demonstrating our ability to mobilise a team in a new market and immediately deliver positive results directly led to further engagements in Cyprus and across Southern Europe,” he says. “This included advising on two major portfolio loan sales, totaling €5bn, which is unprecedented in the Cypriot economy, giving buy-side underwriting advice to five of the six bidders, and technical support to the seller,” Caplan adds.

Bad-bank plan in Greece to be presented by end of September

The Bank of Greece is going to present its plan for the establishment of an Asset Management Company (bad bank) by the end of September. The bad bank will operate in addition to the Hercules securitisation programme; it will undertake the disposal of a part of NPLs, while its goal is to also address the problem of the deferred tax claim of the banks. The BoG considers it imperative to support banks in their effort to meet the current challenges (mainly digital technology and financing of dynamic sectors and companies) and this requires, as a matter of priority, the immediate tackling of the NPL problem and deferred tax assets ( DTC). The BoG has been insisting on the bad bank plan for the last two years. This time, the plan has been assigned to Rothschild, Boston Consulting and Deloitte. Rothschild has investigated the terms and conditions (perimeter, pricing) under which the transfer / securitization of NPEs by banks could take place. Boston Consulting is adapting the plan to the regulatory and legislative framework, in order to comply with European and national rules, and Deloitte will study the tax issues. The BoG prefers to call the new scheme an AMC rather than a bad bank, since, as it claims, this plan will give time to the banks to absorb the losses from the transfer of the NPL. It will be able to deal with all loans that are overdue for more than 90 days, it will be supported the servicers and will operate on the condition that all banks have already entered the Hercules SPV.

Eurobank’s NPEs decreased to 15.3%

The first half of 2020 for Eurobank was marked by the successful completion of the plan to reduce NPEs to 15.3%, the lowest in the Greek banking system. At the same time, efforts continued to strengthen organic profitability and support customers during the tough times brought by the pandemic.A key priority of Eurobank in the current situation is to support customers through the provision of payment moratorium programs and new financing. In particular, during the first half of 2020, the total number of performing borrowers under instalment suspension amounted to €5 bn in Greece and €2.3 bn abroad, while performing loans increased by €1.3 billion in total compared to the end of 2019. The balances of loans amounted to €38.1 bn at the end of June or €40.6 bn pro-forma for the recognition of Cairo securitization bonds.Coverage of NPEs by cumulative forecasts increased by 610 basis points on an annual basis and amounted to 60.6% taking into account the completion of the Cairo securitization.The NPE index, after Cairo, fell to 15.3%, the lowest level among Greek banks. On an annual basis, the NPEs index fell by 17.5%. The formation of new NPEs was negative by € 77m in the second quarter of 2020.Fokion Karavias, CEO of Eurobank, said: “Despite the external challenges, we completed the agreement with doValue for the sale of FPS and the Cairo securitization, which led to the reduction of the bank’s NPEs to 15% […] We further strengthened our capital position by more than one hundred basis points and the total capital ratio stood at 15.5%. Despite the increased forecasts compared to the plan before the outbreak of the pandemic, Eurobank is proving to be resilient to the new challenges”.

Investment interest for the Institution for the Repurchase of residence properties

According to the Ministry of Finance, the institution for the acquisition and rental of homes will launch early 2021. The agency is part of the new insolvency framework that will soon be submitted for a vote in the Parliament. The institution will emerge after a tender that is estimated to take place at the end of October, while in terms of its capital adequacy, it will have to have tens of millions of euros in order to be able to buy the houses it will acquire through bankruptcy proceedings. According to information, there is great interest in the institution from both foreign and domestic investors. The borrowers that lost their homes by the banks will have the chance to repurchase their main residence at 12 years. In the meantime, they will be paying rent. The sale price will be the current commercial value of the house and the former owner will have to pay the rent for 12 years and then request the repurchase of the property he uses as his first home. The amount of rent will depend on its value and the area where the property is located.

Three bidders for Pancreta Bank’s NPEs

Pancreta Bank’s tender for the servicing of its business and home NPEs of €1.077 bn will soon be completed. Mount Street Mortgage Servicing is acting as a consultant in this tender. On September 11, Pancreta received three binding offers from doValue Greece, Qquant Master Servicer and Cepal and is called upon to decide which one will service the NPEs and buy the intermediate rating titles of the “Castor” securitization. The servicer who wins the bid will purchase up to 95% of the intermediate and low-grade securities of NPEs, with a gross book value of approximately €297 m (project Castor). Pancreta has transferred these securities to a SPV, before issuing three classes of securities: senior notes, amounting to approximately €145 m, mezzanine notes, amounting to approximately €58 m and junior notes of €94 m. The bank is going to keep all the first class bonds as well as 5% of the intermediate and low grade securities. The remaining 95% will be sold to the preferred investor. The portfolio includes mainly corporate loans of about 1,000 borrowers (mostly very small and small companies from Crete), which have mortgages on hotels, land and industrial buildings. About 50% of loans are terminated. The value of the collateral amounts to approximately €300 m and the total receivable of the bank to €351 m. The investors also bid to take over the servicing of all mortgage NPEs, which will remain in the book of Pancreta. These are loans with a total demand of €783 m of about 5,000 borrowers; most of them are self-employed and small businesses. The value of the collateral is estimated at around €600 m. Αbout 30% of the loans are terminated. This is the first portfolio of the domestic market that has collateral in one geographical area (Crete). It has, according to the teaser, a high percentage of first collateral (about 70% of loans), low dispersion (the 40 largest loans represent about 50% of the total demand), while the collateral of the 120 largest borrowers represents about 50% of the total value of the portfolio collateral. The loss from the sale of mezzanine and junior notes of the securitization is expected to be covered by the upfront fee, which will be given by the preferred investor to take over the servicing of the mortgage NPEs.

Alpha bank launched the NPE department carve-out and transfer to CEPAL

Alpha Bank has started the process of detaching its NPE activities and transferring them to CEPAL. This is an important stage before the completion of the Galaxy securitization to the preferred investor. The carve-out is expected to be completed within November. The bank’s employees transferred to CEPAL will receive a cash benefit of 10 gross monthly salaries of a minimum of €25,000 and favourable tax treatment resulting from the termination of their employment contract, ie zero tax up to 60 thousand euros. Alpha Bank recently acquired 100% of Cepal, by purchasing the share of Centerbridge (60%). The first step of the Galaxy securitization will be the sale of the new Cepal to the investor who will acquire 95% of the medium and low securitization securities. Alpha Bank announced that the transfer of Alpha Bank NPEs Management Activity to Cepal is a key stage of the large transaction. At the same time, it contributes to the further development of Cepal, and to its emergence as the most powerful NPE Servicer in Greece. The transfer of the Bank’s staff to Cepal will be carried out in accordance with all the provisions of the current legislation and with full respect of the salary and insurance rights, as well as the other benefits they currently enjoy.

B-Exclusives

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The Aging Spanish Population: a Gold Mine for the Real Estate Sector

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The Housing Market and the Spanish Population: Where Will We Need Houses in 2035?

According to data from INE, over the next 15 years, Spain will gain 954,497 inhabitants, which will represent a population increase of 2%, with decreases in 9 autonomous regions and increases in 8 and a significant impact in terms of the foreign population in Spain.

The Yields on Housing Spark Investor Interest in Madrid and Barcelona

The growing phenomenon that is rental and the scarcity of other attractive investment alternatives are causing a boom in home purchases for investment purposes in Madrid and Barcelona, with varying returns depending on the district.

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