The management commissions have been one of the biggest problems for the managing team at Sareb in the last few months. After hard negotiations with the financial institutions, Sareb has fixed an annual fee of 0,15% on the managed patrimony which will be paid to those banks which have received public aid, that can be increased to 0,22% depending on some incentives.
Should these objectives, established in the annual budget, be fulfilled, the bad bank will pay 112 million Euros annually to the nine institutions which have transferred their damaged assets: BFA-Bankia, Catalunya Banc, NCG Banco, Banco Gallego, Banco de Valencia, BMN, Liberbank, Caja3 and España-Duero. In total, Sareb manages 50.800 million Euros in toxic loans and awarded properties.
These institutions managed to convince the managers from the bad bank so that they increased the minimum commission by 50%. Initially, the offer of the institution was of 0,1%.
Sources close to Sareb explain that the gain obtained by the banks with these 112 million Euros will be a minimum one “as it barely helps to cover costs”. “They can really earn some money with the sale, rent, financing or recovery of those assets”, they added.
In total, the commissions earned by an institution that manages, sells and finances an asset could reach up to 6%, depending on various objectives.
Among them, the selling price is the most important one. The commission for sale could reach 3,5%, provided that they sell the property at a price 25% higher than the transfer price.
Sareb acquired the real estate assets with a discount of 52% on their value in books. In order to obtain the commission of 3,5% the institutions have to sell the properties with discounts 40% under the initial value.
Along with this fee, the bad bank offers an additional commission in case the selling institution finances the operation, in what is known as vendor finance.
Apart from the incentives, Sareb has also established minimum objectives of management and sale. If the nationalized and group 2 institutions do not comply with them, they could lose even the 0,15% established as a management minimum.
The institution designed this management and sale structure in order to be able to start working as soon as possible. The Frob created the bad bank in August and on the 2nd January it was already in operation. It has therefore had to turn to the institutions that know the assets best, the same ones that transferred them, to manage them provisionally. They should do it for one or two years.
Sareb still has to decide what it will do once this period is over. Its decision will depend on the conclusions of the due diligence work lead by the law firm Cliffford Chance, with a team of 600 professionals from law firms, real estate agencies, technology and audit companies.
One possibility which is being looked upon within the sector is the creation of one sole managing team which depends from the top executives from Sareb. Another possibility would be for the purchaser of Bankia Habitat to coordinate the task.
The institutions started to market a batch of 13000 properties among individuals in February. This will not be the priority channel, as most of the assets within Sareb (non developed properties and credits) should find an acquirer in the institutional market. (…)