MADRID--Spain's "bad bank" is set to change how it markets and
sells around EUR50 billion ($68.5 billion) worth of properties and
real-estate loans, a move that could open the door for
international investment funds to deepen their involvement in the
country's real-estate market.
No more than four investment firms will be selected in coming
months to market and sell the pile of properties and real-estate
loans held by the bad bank, according to an executive at the
company, known by its Spanish acronym Sareb. The executive declined
to be named. Sareb recently said it made a loss of EUR261 million
last year.
The bad bank was created in November 2012 as a depository for
the most troubled Spanish banks to unload EUR51 billion in risky
real-estate loans, residential foreclosures, unfinished commercial
properties and undeveloped pieces of land.
The country's lenders transferred nearly 200,000 real-estate
related assets to the bad bank. Now, the nine banks that unloaded
those assets to Sareb also market and sell the properties and loans
on behalf of the bad bank. Sareb paid those banks--including Bankia
SA, the country's largest bailed-out lender--EUR200 million in fees
to sell properties last year. The new servicers will be selected
based on price and experience, the executive added.
The current set-up creates a potential conflict of interest, the
executive said, since the banks that are managing Sareb's assets
are also trying to unload their own real-estate assets that weren't
transferred to Sareb. The contract with those nine banks ends
December 2014.
Sareb will launch a bidding process in coming weeks to find
firms to replace the banks, the bad-bank executive said, and a
winner will be named before September. New servicing contracts
would resolve that potential conflict of interest, he added.
Fifty-five% of Sareb is privately held by most of Spain's major
banks, such as Banco Santander SA and Caixabank SA. Those
shareholder banks offer mortgage deals to clients who purchase
homes sold by the bad bank, which Sareb says helps it sell more
properties while bringing the banks new clients. Some analysts have
said it is a potential conflict of interest that Spain's biggest
banks--that are also trying to sell off thousands of
properties--are on the board of the bad bank. Sareb says it manages
those potential conflicts of interest through strict rules about
who can know about and participate in board votes.
The remainder of Sareb's shares are held by Spain's bank
restructuring fund, known by its Spanish acronym Frob.
The shake-up of Sareb's marketing and sales process comes as
international investors have stepped up their presence in Spain's
property market through purchases of banks' real-estate servicing
units. Banco Santander, Spain's largest banking group, sold its
Altamira unit to Apollo Global Management LLC in January while
Caixabank SA, Banco Popular Español SA and Bankia have also
recently sold their real-estate-servicing units.
Sareb has sold an average of 60 homes a day since the beginning
of the year--a pace that could slow, the bad bank executive
cautioned. That is up from a daily average of 25 homes last year
and above the bad bank's goal of an average of 30 a day for
2014.
Eighty per cent of Sareb's portfolio is loans to real-estate
developers, the executive said. The remainder is residential homes,
land and commercial properties. The bad bank is also planning to
hire construction firms to start building on some of the empty
plots of land in the hopes of increasing the sale prices of those
plots, he added.
The bidding process comes amid a personnel shift at Sareb. Jaime
Echegoyen, the former head of Barclays PLC's retail banking unit in
Spain, took over as the chief executive of the bad bank in
February. Before Barclays, Mr. Echegoyen was chief executive of
Bankinter SA, Spain's sixth-largest bank by market
capitalization.
The European Union required the creation of Sareb as a condition
for Spain to receive EUR41 billion in bailout funds after a
property boom-and-bust threatened to bankrupt Bankia and other
lenders.
The International Monetary Fund said in a February report about
Spain's financial sector that Sareb must "devise and implement
effective liquidation strategies geared toward supporting its cash
flow and profitability, and adjusting nimbly to changing macro and
market conditions."
Write to Jeannette Neumann at jeannette.neumann@wsj.com
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