Banks bring back to life the real estate companies in order to compete with Sareb.

Banks wish to open new ways to boost the sale of properties to the great international investors in order to reduce their exposure to the construction business. After many years of negotiation with funds, the institutions have thought again of the real estate investment companies (REIC) and the listed companies of the construction business (Socimis) to unblock this channel and compete with their greatest rival: the bad bank.

With this intention, the institutions have put themselves in the hands of KPMG and PwC to study different options to attract investors.

The institutions need to reopen this channel to compete evenly with Sareb. This company has the exclusivity on the Banking Assets Funds (BAF), that offer tax benefits to buyers. These funds pay 1% on company tax and do not need to pay the Spanish tax on property transfers as well as other taxes.

The BAF give Sareb the opportunity of deconsolidating great packages of properties while maintaining the participation in them, 49% in the Operation Bull, the first one closed by the bad bank. If there are future earnings, Sareb will continue benefitting from them. Sareb also forgets about the management of the properties, which is led by a foreign fund.

These are some of the aspects that awaken the envy of the executives in the financial sector. “Without being able to create BAF, we are not able to compete with Sareb”, a representative of one of main Spanish institutions declares.

Here is where the Socimis and REIC step in. “They are an option that allows us to bring together the interests of banks and funds. The first ones think there is more value in the assets they are selling, and therefore wish to participate in the future results of the company. Meanwhile, the buyer is happier investing hand in hand with the bank, as there are still uncertainties on Spain”, Amparo Solís, partner in charge of Corporate Finance for Financial Institutions of KPMG in Spain, explains.

Until now the biggest obstacle for these companies has been the Bank of Spain. The regulator was against the creation of these companies by banks and foreign funds and the deconsolidation of their real estate assets. The hindrances of the regulator were one of the main obstacles to the sale of properties for 3.000 million Euros that Santander negotiated with Morgan Stanley in 2012.

It seems that now the Bank of Spain is more receptive to this type of operations. And banks are ready to create companies with the intention of obtaining fresh capital from foreign funds. While this difficulty is solved, the financial institutions have barely managed to get rid of great packages of real estate assets.

Sareb has already closed the operation Bull, made of 1000 homes to be developed, for 100 million Euros; it has sold a syndicated loan to Colonial with a nominal value of 245 million Euros and has another six operations open. (…)

40