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Foreign funds to buy Spanish property managers before market awakens

Source: Reuters - Wed 25th Sep 2013
Foreign funds to buy Spanish property managers before market awakens

Foreign investors are preparing bids for the property management units of several Spanish banks, hoping to break decisively into a real estate market that has brought few bargain housing deals for funds even after 5 years of a price slump.

U.S. investment firms Cerberus Capital Management, Centerbridge Partners and Lone Star are among those preparing to join a preliminary round of bidding for Santander's Altamira Real Estate, 2 sources familiar with the matter said.

The Altamira deal, which would give the successful bidder a team of managers and a contract to handle Santander's property sales but would not include real estate assets on the bank's books, is the latest of several similar moves by rivals.

Most Spanish banks are contracting out the units, or selling them, to raise cash without parting with foreclosed housing that they own, which foreign investors want to buy but only at very low prices.

The first bids for Altamira are due on Thursday, the 2 sources said. Lone Star declined to comment. Cerberus and Centerbridge did not respond to requests for comment.

Spanish lenders were hit hard by a real estate boom which turned to bust in 2008, landing the banks with soured loans to developers and forcing them to foreclose on properties.

The banks were told by the government to make steep writedowns on property exposures last year, leaving some short of capital and forcing Spain to request a €41 billion bailout from Europe for the weakest lenders.

The writedowns had sparked hopes among international investors that banks would start offloading big bundles of properties, unfreezing Spain's real estate market, but few deals have come yet through.

"Ask and offer prices (for property portfolios) are much closer now, .... but at the very, very cheap levels funds are interested in banks still think "I can't, it's a loss'," said Manuel Anguita of Aguila Capital, which brokers deals between banks and investors.

The interest shown by foreign investors was welcomed in the Spanish real estate sector as a sign of serious commitment.

"These types of deals are a very good sign - no-one buys a platform to stay in a country for a year," said Fernando Acuna of property management firm Taurus Iberica.

"These will give the funds a deep knowledge of what is going on...and allow them to manage other assets they might buy which don't belong to the bank."


Several banks have relinquished their property management operations in recent weeks, which will let them refocus on their core business.

Cerberus picked up the contract to manage properties and developer loans for state-rescued Bankia, paying between €40 - €90 million to run the property business over 10 years.

The Altamira deal - dubbed 'project bison' by bankers after prehistoric paintings at the Altamira caves near Santander - could be worth more, one source said.

Santander declined to comment.

Mid-sized lender Sabadell could look to sell its real estate arm Solvia in the coming months, according to 2 other sources familiar with that deal.

Sabadell said there was no existing mandate to sell the unit but it did not rule out studying it in future.

International investors want to buy the businesses to reap commissions from sales and gain platforms with which to manage other assets they might pick up in Spain, bankers and real estate experts said.

Real estate prices appear closer to hitting the bottom, Acuna at Taurus Iberica said, after a slump of some 40% in 5 years. That could help funds finally buy more portfolios as buyers and sellers get a clearer idea of price prospects.

A 'bad bank' created to manage real estate assets of rescued lenders is also stepping up sales of bundles of properties.

"Ultimately these (property management) platforms will probably be brought together and we'll end up with 3 dominating this market in a few years," said one Madrid-based investment banker.

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