Spain’s ‘bad bank’ Sells its First Real Estate Assets
08 August 2013
Posted by: Author: Miles Johnson
Author: Miles Johnson (FinancialTimes)
Spain’s "bad bank,” established last year to clean up the country’s real estate collapse, has sold its first package of real estate assets, to private equity group HIG Capital, in a transaction expected to set a precedent for a string of other deals.
Sareb, the Spanish state run management company that houses assets transferred from the country’s bailed out banks, said it had sold 51 per cent of a portfolio including 939 homes to HIG, in a deal valuing the assets at €100m.
Senior executives at Sareb have said they hope the closure of the sale, known as "Project Bull”, will pave the way for several larger but similarly structured sales to take place later this year and in 2014.
Spain has taken far longer than other EU countries to clean up the legacy of a decade-long housing bubble that pulled down the majority of its savings banks when it burst, and has pushed unemployment up to 26 per cent.
The deal, which includes 750 other premises such as car parks and storage units and one retail unit, will be the first in Spain structured using a low tax financial vehicle known as a Bank Asset Fund (FAB), established to attract foreign buyers to invest in Sareb’s assets.
FAB vehicles will pay only 1 per cent corporation tax in Spain, and allow non-resident investors to avoid paying tax altogether. The policy could prove contentious in a country that has seen bank repossessions of residential property trigger protests and campaigns to change mortgage rules.
By retaining a 49 per cent stake in the assets, Sareb is following a stated policy of wanting to hold on to what its management believe will be significant upside in the coming years, while completing its mandate to offload its €50bn of assets within a 15-year timeframe.
Sareb was created by the Spanish government at the end of last year as a condition of the memorandum of understanding it signed with European authorities to receive bailout money for the troubled part of its banking sector, principally Bankia, which received the largest state banking rescue in the country’s history.
Sareb in March said it was aiming to sell almost 42,500 housing units, about half of its current portfolio, within the next five years, but revised down its annual return pledged to investors from 15 per cent to 13-14 per cent.
HIG Capital, with €10bn of assets under management and with headquarters in Miami, said the transaction demonstrated its desire to invest more in Spain and to increase its real estate business.