19 May 2017 – Expansión
Sareb is preparing to create a Socimi through which it will manage its rental business. That is according to Luis de Guindos, the Minister for the Economy, Industry and Competitivity, who made the announcement yesterday. He stated that the Government is considering creating a real estate investment company, which it would “place on the market before the end of the year”. De Guindos made these declarations at a symposium about Spain’s role in the reworking of the EU, organised by the Association for the Advancement of Management (APD).
The objective of this strategy is three-fold. On the one hand, Sareb would obtain new income, through the dividends that its Socimi would generate from renting out its assets. On the other hand, the debut of this subsidiary on the stock market would allow the entity to raise capital, which could be used to reduce Sareb’s indebtedness. According to De Guindos, we should take into account that Sareb has already divested more than 20% of its assets. Finally, through the Socimi, Sareb would have a structure to accelerate its sales, given that it could place entire blocks of flats in the hands of the Socimi.
The Minister of the Economy said that this strategy is supported by “the current, strong performance of the market”, which is turning its focus towards the rental segment, and as such, Socimis are generating significant returns from their assets. Nevertheless, the new Socimi presents several unknowns, such as how many assets may be transferred to the new entity. It is also worth remembering that the majority of the properties that Sareb manages are located in peripheral areas or in new urban developments, where the rental market is complicated. Nevertheless, the regulations governing this type of company require 80% of the revenues to come from rental properties, and so Sareb would have to be very careful when it comes to choosing the assets to transfer. De Guindos did not indicate how much private capital he hopes to raise through this initiative, how much weight individual shareholders would have in the Socimi or what percentage take would be assumed by institutional investors.
Sources at Sareb indicate that the entity has 4,600 homes, but has still not decided how many of those would be transferred to the Socimi, aside from stating that “it would be a small percentage”.
Over the last five years, since it was created, Sareb has divested 20% of its assets. That percentage is small still and makes it difficult to fulfil the entity’s mandate, which requires it to liquidate all of the assets that were transferred to it by the banks in a period of 15 years and in an orderly manner. Moreover, it is worth noting that Sareb has already sold the properties that were easiest to place, with the aim of boosting the market, which means that now it is left with those properties that have the least possibilities.
Although the volume of real estate transactions grew at an annual rate of 16.1% during the first quarter, according to data from INE, and the stock of unsold homes is starting to run out in certain areas, prices are still falling in certain segments of the market and sales are not being closed.
Finally, the launch of the Socimi would come in parallel to the decision taken by Sareb to start building an average of 1,500 homes per year until its liquidation, even through it estimates that the figure would be much higher during the next three years, reaching up to 4,000 homes.
Original story: Expansión (by Pablo Cerezal)
Translation: Carmel Drake