Spain’s Banks Vie To Sell Property Management Businesses

Spain Banks Vie To Sell Property Management Business

Spain Banks Vie To Sell Property Management Business

Santander and Banco Popular are the latest lenders to dispose of their property management businesses, as they strengthen capital ahead of a Europe-wide review of assets next year.

Several Spanish banks have sold or contracted out their real estate servicing units this year, taking advantage of foreign investor interest following Spain’s five-year property slump. Santander, Spain’s largest bank, agreed last week to sell its real estate management division Altamira to US private equity group Apollo Global Management in a deal slated to be worth about 700 million euros.

Hot on the heels of its bigger rival, Banco Popular revealed on Monday it will offload its Aliseda property servicer to US investment firms Kennedy Wilson and Varde Partners. The sale could raise around 800 million euros.

Perhaps the most interesting element of these transactions is that both banks have kept control of the properties on their books.

BANKS HOARD PROPERTY AHEAD OF RECOVERY

Spanish property prices have sunk around 40 per cent since 2008, when a decade-long sector bubble burst. Banks were saddled with soured loans and had to manage property piling up on their balance sheets. A government-driven overhaul of the financial industry forced lenders to take provisions against their troubled property assets.

The country’s savings banks – most exposed to the property crash and unable to meet the provisioning requirements – were obliged to transfer their assets to Spain’s bad bank Sareb for subsequent fire sales.

Banks like Santander have been reluctant to sell their real estate assets at the steep discounts demanded by many investors. Expectations that property prices are beginning to bottom out have underpinned this strategy. But by selling or contracting out the platforms which manage the real estate assets, banks have found a way of raising cash while handing investors a business they can use to service other troubled debt portfolios.

US INVESTORS DOMINATE DEALS

US investment funds have been the main buyers of banks’ real estate servicing units, becoming important players in Spain’s financial sector as a result of these deals. The Cerberus group has been buying up non-performing loan portfolios from Santander and smaller lender Liberbank. In September, it won the bid to manage nationalised lender Bankia’s property business.

US-based TPG recently bought 51 per cent of Caixabank’s property management unit, while Catalunya Banc sold its platform to Kennedy and Varde Partners. Around 25 foreign investors eyed that transaction.

With Barcelona-based lender Sabadell’s property manager Solvia likely to come under the hammer in the short-term, foreign funds are seen gaining greater prominence in the market.

For more information on Spanish banks’ property business, contact corporate law firm Argali Abogados.

 

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