10/30/2020

Sareb increases housing sales by 10.4% in Q3 despite the impact of COVID-19

Sareb increases housing sales by 10.4% in Q3 despite the impact of COVID-19

According to the company's own data, Sareb sold 1,260 homes in Q3 2020, a 10.4% y-o-y increase. The combined price of these sales amounted to €114 million, unchanged on 2019.

Business is gradually picking up during this time of great uncertainty, following a difficult first half of the year which was heavily impacted by the pandemic and the subsequent halt in sales. This caused a 48.6% y-o-y decline in revenue, which fell to €540.6 million, according to the company's H1 2020 Business Report published today at www.sareb.es. During this period, the sale of all property types offered by the company fell to €223.8 million, down from the €492.7 million recorded last year. This decline was primarily caused by the standstill in sales between March and May of this year.

Despite a slowdown in business over the first six months of the year, Sareb managed to continue to reduce the size of its property portfolio, which at the end of June stood at €32,246 million, down 4.1% on the previous year.

The company also managed to bring its overall costs down by 25% y-o-y (excluding financial expenses) to €261 million at the end of H1. This was primarily due to a drop in the cost of marketing its properties, but also thanks to the implementation of the first measures set out in its Efficiency Plan launched earlier this year, which aims to save over €45 million during 2020 and over €70 million annualised.

Along with other actions, this cost reduction allowed Sareb to bring its losses down to €399 million between January and June 2020, compared to €502 million in H1 2019.

Despite this reduction in losses, the current impact of the COVID-19 pandemic on the real estate sector and on Sareb's business is likely to prevent the company from repaying any debt this year, as it had been doing for the last seven and a half years since its inception. During that time, Sareb has repaid €15,683 million (31%) of the debt that it issued in 2012 to acquire the distressed assets from nine financial institutions that received state aid.

Measures to adapt to COVID-19

Right from the outset of the pandemic, Sareb adopted measures to avoid business grinding to a halt, ensure the health and safety of its employees and suppliers and, where possible, to cooperate with Public Authorities in order to provide its buildings for healthcare or logistics purposes. The company has also been working closely with its clients, granting rent abatements for 191 homes and 43 commercial properties across Spain.

Measures taken by the company to keep business moving include a drive towards new ways of collaborating with its debtors to reach agreements, including deeds in lieu. Between January and June, Sareb continued to transform its financial assets into properties by adding 7,452 properties to its balance sheet, which were previously held as collateral against unpaid loans. However, the value of these properties has fallen 31% y-o-y to €585.8 million, primarily due to delays in foreclosure and insolvency procedures, following the suspension of the courts during lockdown.

Meanwhile, during H1 the company completed its business restructuring process, creating seven functional business areas which report directly to Javier García del Río, the company's new CEO.

At Sareb's latest General Shareholders' Meeting this week, García del Río was appointed Executive Director. Javier Torres was also appointed to the Board to represent the FROB (Fund for Orderly Bank Restructuring) and Alberto Valdivielso was appointed Independent Director. These three new members will occupy the vacant positions left on the Board of Directors by Proprietary Directors Joaquín Vilar and Francisca Ortega Hernández-Agero, and Independent Director Antonio Merino.

This week, the General Shareholders' Meeting also approved a motion to reduce External Director salaries by 15%. This reduction forms part of the company's commitment to responsible management to mitigate the health and economic crisis caused by the COVID-19 pandemic. This move follows the decision made by Sareb's senior management team a few months ago to waive their variable remuneration payments for both 2019 and 2020.

Social housing assignment during H1 2020

During the first six months of 2020, Sareb continued to work with Public Authorities to alleviate housing problems in Spain. For instance, Sareb's Board of Directors agreed to boost its number of properties assigned for social housing from the previous 4,000 to 10,000, while also approving a new strategy to help smaller town councils with housing problems.

As of June 2020, Sareb had signed 12 temporary housing assignment agreements with autonomous regions and 17 agreements with local councils since it began doing so in 2013. At the end of H1, the company had allocated over 2,400 homes, helping close to 9,500 people.

Taking stock of the past seven and a half years

Since 2012 when the Spanish and European authorities granted Sareb the mandate to dispose of the non-performing assets from the banks that received state aid, Sareb has reduced its portfolio by €18,535 million (36.5% of the total), and has cancelled €15,683 million (31%) of the debt issued to acquire the assets when it was founded.

In seven and a half years, the company has received more than €27,000 million and has paid almost €2,785 million in interest to the banks that transferred their assets to it. At the same time, it has forged ahead with its real estate development and between now and 2027 expects to develop more than 17,350 homes via Árqura Homes and 4,050 homes itself.