30 June 2015 – Expansión
The crisis filled up financial institutions’ balance sheets with property, as banks foreclosed all kinds of real estate assets in exchange for the payment of debts. Now that the economic recovery in Spain is gaining strength, those same entities are taking the lead in the property development segment – completing half-built properties and constructing others from zero – in order to obtain returns on the land that they now own.
Together, Spain’s two largest banks, Santander and BBVA, are currently involved in 600 property development projects all over Spain. Their rates of completion vary between 5% and 100%. And those figures do not include projects that the banks are financing separately.
BBVA’s real estate arm, Anida, owns 293 developments, which once complete will contain 2,418 homes in total. The majority will be finished between now and the middle of 2016. The bank has taken charge of building 21 of these developments from scratch, using land that it had both foreclosed and acquired.
Meanwhile, Santander is constructing 300 developments. The entity chaired by Ana Botín, has a policy that it only begins construction work once 30% of the homes at a given site have been sold off-plan. In this way, it ensures that the locations are appropriate and have sufficient guaranteed demand.
In both cases, the potential purchaser of a home enjoys advantages when it comes to taking out a mortgage with the corresponding bank. For example, the banks are willing to offer financing for up to 100% of the appraisal value of homes in these cases, when they would normally offer a maximum of 80%.
With this strategy, the entities seek to accelerate a reduction in the losses generated by their real estate divisions. At Santander, those losses amounted to €95 million during Q1 2015, which represented a 35% decrease YoY and the lowest negative contribution recorded since the creation of the RE arm three yeas ago. The bank sold 2,500 real estate units, including homes, offices, garages and storerooms during the first quarter of the year.
At BBVA, the losses amounted to €154 million during the same period, which represented a YoY decrease of 37%. It sold 2,100 real estate units in total. The entity chaired by Francisco González expects that its property division will emerge from its loss-making position in around two years.
Original story: Expansión (by Alicia Crespo)
Translation: Carmel Drake