Sareb: the mother of all real estate companies.

It has arrived to stay for fifteen years. It will be the biggest real estate company in history based on the volume of assets with properties, plots and credits once the assets from the other candidates are transferred. There are voices who say it will be a huge management company or a financial entity created by political imperative in order to park properties. At the end of December, the four nationalized institutions transferred 270000 mortgaged properties and 85000 properties, apart from loans. During this first semester there will additions from four other institutions.

Management agreements have also been signed for the sale and cession of those assets and there will be a conferring of powers to finalize sales because, in order to search for liquidity as soon as possible, they continue with the “retail sale” of properties, through traditional real estate agencies or specialized companies which will have the green light, only if they adjust to prices and established requirements.

(…) Selling over the established price will have a bonus, but selling below that price will require the authorization of a committee within Sareb, still being organized.

As for the commissions to be charged for the management of the assets, the nationalized institutions would earn 0,1% of the transfer value of each asset, while they would receive between 2% and 5% for their sale.

It will depend on the type of asset and those percentages could vary if the sale has been for a price over the established limit. The commission will also increase slightly if the sale is done through a third party.

(…) Some experts point out that the destruction of jobs and the insolvency proceedings will continue within the real estate sector until Sareb can reach its cruising speed after 12 or 18 months.

If the management is not quick enough, credits with no risk could turn into toxic ones simply because they do not find a reliable speaking partner (…). The awaited foreign investment funds are waiting for more discounts and they seem more interested in managing than in investing. There is also the danger that when they acquire credits they will accelerate the insolvency proceedings more than negotiating refinancing.

Another disadvantage is the ban from Brussels for the nationalized financial institutions: they will not be able to lend to the real estate sector. The risk linked to the construction business is supposed to disappear from their balances.

Another question mark is that institutions are transferring their properties and credits in exchange for debt guaranteed by the State, a debt which generates financial costs. Sareb has started with a limited capital. It does not reach 1000 million Euros and 45% comes from Frob.

The cash is only 2,6%, while 89,6% is debt guaranteed by the Spanish public debt or even subordinate debt which does not have preference if a non-payment occurs (7,8%).(…)

Source: El País