On Monday the Bank of Spain said property loans would be moved into the bad bank at an average discount of 45.6 per cent in the hope of attracting investors. The figure would be 63.1 per cent for foreclosed assets and 79.5 per cent for empty land.
Madrid hopes private investors will own at least 55 per cent of SAREB, which was created as a condition of the European aid for the banks and is due to start operating by the end of November. About two-thirds of the assets transferred in an initial wave of 44 billion euros will be loans and the rest foreclosed properties.
“A large majority will be bad loans and a discount closer to the foreclosed asset price would have been more realistic. I wouldn’t expect more than 20 per cent of the loans to survive.”
Only 10 per cent of SAREB’s assets will relate to commercial property while housing will account for the rest, both real estate advisers said. The commercial property that goes in will be “medium to poor quality” and not what investors are looking for, Powley said.
Like Cordea Savills, JP Morgan is looking for income-producing bargains in the bigger Spanish cities. Valente is raising equity to buy assets outside of safe markets such as London and Paris, which he believes to be overpriced, but the CBRE and JLL figures show there will be slim pickings.
Morgan Stanley and private equity groups Lone Star, Cerberus and Apollo are also hunting for Spanish bargains.
They will be attracted to large portfolios of completed housing in areas such as Malaga and Alicante, boosted by Russian, British and German tourists and their proximity to major airports, Powley said.
Areas to avoid due to “a huge oversupply” of housing include Valencia, Murcia and Almeria in southeast Spain, said Patricio Palomar, head of research at CBRE in Spain, who made the bad bank forecast for Reuters.
Loans backed by rented-out commercial real estate will be the other bright spot but the fact that the good is so outweighed by the bad renders the 15-year disposal time meaningless, property experts said.
REUTERS – (Additional reporting by Jesus Aguado in Madrid; editing by David Stamp) – Gulf News and Globaledge