Vulture Funds Gobble Up Spain Property Assets

Vulture Funds Gobble Up Spain Property Assets

Vulture Funds Gobble Up Spain Property Assets

Hedge funds and private equity firms have been busy in Spain, bagging distressed property assets at bargain basement prices. These “vulture funds” have been circling Spain for some time looking for acquisition opportunities amongst property and industrial assets battered by the global financial crisis.

The banking sector shakeout has been the cornerstone of their investment strategy, with reforms aimed at forcing lenders – particularly those getting public help – to set aside re-possessed property for a fire-sale.

But deals have been slow to materialise due in part to discrepancies over valuations. So what has now finally sparked the flurry of M&A in Spain?

One catalyst has been the asset disposals by Sareb, Spain’s bad bank.” Since its creation late last year, Sareb has taken on tens of thousands of troubled loans relating to developers, plots of land and buildings.

PRIME PROPERTY ENTICES INVESTORS

Top US investment funds Blackstone and Cerberus have been sniffing around Sareb’s portfolio, but they have also sidestepped the bank and snapped up assets direct from sellers.

In its maiden deal in Spain, Magic Real Estate Blackstone agreed to buy 18 apartment blocks in Madrid for 128.5 million euros from the local city council.

Cerberus has long been active in Spain, buying up non-performing loan portfolios from Spanish banks Santander and Liberbank, as well as some branches of nationalised lender Bankia. Just last month, Cerberus also bought Bankia’s property management arm Bankia Habitat for around 90 million euros. The properties and development loans – most of them already transferred to Sareb – were not part of the deal.

SAVINGS BANKS PROPERTY ON RADAR

Spain’s banking sector overhaul is well under way, and the pipeline of distressed assets is opening up. Spain’s savings banks had the greatest exposure to developers during a decade-long real estate boom and were laid low when the crash happened five years ago.

Bankia is the latest in a string of Spanish savings banks seeking to sell their real estate activities. Barcelona-based CaixaBank and Galicia-based Novagalicia are both looking for buyers for their real estate subsidiaries.

US investor Kennedy Wilson has recently teamed up with Varde Partners to purchase the real estate arm of Catalunya Bank. Varde is Minneapolis-based and made its first move into the Spanish market in 2011 with the purchase of a retail property portfolio at a hefty discount.

Vulture funds are expected to continue to flock to Spain in the coming months and some investors are setting up shop locally to take advantage of investment opportunities.

For more information on vulture funds in Spain, contact corporate law firm Argali Abogados.

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