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Confusion reigns with Spain's bad bank property assets

Source: Reuters - Fri 12th Jul 2013
Confusion reigns with Spain's bad bank property assets

Spain's so-called "bad bank" (SAREB) not only has to sell the soured property loans and unwanted housing it took on from the country's rescued lenders - it first has to find them.

A review of the €51 bln property loans and buildings transferred to the state-run vehicle as part of the industry clean-up has uncovered swathes of incomplete records, including tens of thousands of missing addresses, 3 sources familiar with the process said.

Keys to the wrong homes have also been among the challenges faced by teams of lawyers and property experts hired to sift through the assets and value them, 2 of the sources said.

The administrative muddle risks delaying the sale of assets and ultimately how much money SAREB is able to salvage from a property crash that drove many of the country's banks to require a European bailout.

Belen Romana, who heads the bad bank, said this week the bad bank had sold just 700 properties by June 1. Its target is to sell 45,000 properties in 5 years and it is aiming for an annual return on equity of 13 -14% over it's 15 year lifespan.

"The front office of SAREB looks like a merchant bank with people in pin-striped suits and nice ties," said a real estate broker familiar with the organisation, which is trying to seal its first major sale of a portfolio of properties to investors.

"But behind the scenes ... you have an army of people in a warehouse scanning and filing documents and combing through data tapes. That's where the mess is."

SAREB declined to comment.

WRONG KEYS

The Bank's roughly 107,000 properties and 90,000 loans come from 9 rescued lenders such as Bankia and Barcelona-based Catalunya Banc, and these banks still have the contract to manage the assets.

The loans are linked to another roughly 400,000 properties or tracts of land used as collateral, 2 of the sources said, adding that tens of thousands of those lacked proper addresses, hindering the valuation process.

"We had some addresses with just '4C' registered as the address, and with the name of a very common street in Spain," one of the sources said, speaking on condition of anonymity.

"You might also get 150 assets and addresses then realise they are all one same apartment hotel," the source added.

The review of the collateral has already delayed the valuation process by some weeks, the sources said. 13 firms including law firms, property consultants and accountants, led by Clifford Chance, are working on the process.

"There were instances with one of the banks involved where people went to check out a property and were given the wrong keys, or were told there was no-one living there and walked in and there was," a third source familiar with the process said.

Binding bids for the sale of SAREB's first portfolio of properties, of about €100 million, are due in mid-July, a source close to that situation said.

U.S. funds Lone Star, Cerberus Capital Management and Apollo Global Management are among those still in the running, the source said.