Sareb Will Create A Restricted-Access Platform For Loan Sales

8 May 2017 – El Economista

(…). Sareb has been led by Jaime Echegoyen for the past two years, and has fulfilled its task of stabilising the financial system in Spain. Now, it is serving as an example for the European bad bank model.

Q: How do you think Sareb has performed since its creation?

A: (…). We are satisfied with what has been achieved over the last five years. We have managed (…) to give confidence to the sector and to serve in the restructuring of the financial sector and the reactivation of the real estate sector (…). If we had started selling off assets really quickly, we would probably not still be here. Everything has been done in a logical way and we have returned approximately 20% of the debt that was materialised in bonds with Treasury backing.

Q: Based on your experience as the President of Sareb, would you create a new bad bank in the same way?

A: (…) I think we have done a really good job, albeit a little late. (…). At the time (Sareb was created), bank delinquency amounted to more than €400,000 million and we decided to resolve one quarter of that balance, which in our case amounted to €107,000 million. That is the nominal value of the assets that were transferred to Sareb, which we purchased and which we paid for using €50,700 million in bonds. (…).

Q: What is Sareb’s main business?

A: The primary focus of our business, which takes up 95% of our resources, is managing the assets for sale through the four servicers: Altamira, Haya Real Estate, Servihabitat and Solvia. (…). We started with €50,700 million and at the end of 2016, we had €40,100 million.

Q: What other new activities are you going to undertake?

A: Of the revenues generated last year (€3,900 million), €2,800 million came from loans and the rest was generated by property sales. Therefore, the activity in terms of loans is very important. The number one source of our revenues in that branch comes from the repayment and cancellation of loans, and then from interest and in third place, from loan sales, and we are now going to focus on that third activity. We are planning to create an internal platform within Sareb, access to which will be restricted, and to which we will invite professionals who know what they are buying and who are qualified to be able to choose a range of loans. We are starting development now and we hope to conduct the first trials at the end of the summer, with an initial volume of loans amounting to €10 million. Depending on how well it is received, we will add more volume.

Q: Sareb’s accounts don’t add up, there are losses. How are you going to approach the next few years?

A: The mandate that we have is to be capable of returning the money that was given to us at the time to buy those assets and to do so in an orderly manner, without having to ask for more money. Our mandate has never been to make money (…). What we do is look at the market value of the assets we have and, whenever we can, we sell them. We only hold onto some of them within our portfolio for future development when we consider that that is the best course of action for the shareholders. Currently, we have own funds amounting to €4,000 million and we have to make those last until 2027.

Original story: El Economista (by Luzmelia Torres)

Translation: Carmel Drake

Axis: Spain’s Servicer Sector Is Being Redefined

23 December 2016 – El Mundo

In order to understand the current situation in the Spanish real estate market, beyond the reactivation of the construction of homes in certain specific areas, it is worthwhile looking at the amount of debt and real estate assets, left over from the bubble, that are still sitting on the balance sheets of financial institutions and other major owners, such as investment funds.

This real estate indigestion, which led to the restructuring of the financial system, the creation of Sareb (popularly known as the bad bank) and the launch of the bank’s servicers (which are now mainly owned by funds), has drawn a new real estate reality. The involvement of these new players has changed the rules of the market. They have and will continue to play a key role.

The Asset Under Management Report, which the consultancy Axis Corporate has just prepared and presented, is an extremely useful tool for understanding this business, which is being completely redefined. Axis Corporate specialises in advising these new players in the sector.

Regarding the role of the servicers, the study explains that, once each one has established itself in the market and following the Íbero tender whereby Sareb awarded the management of its assets, they must consolidate or adapt their respective models.

In this sense, and taking into account what is happening in other countries, Luis Fernández, Managing Partner of Financial and Real Estate Services at Axis believes that “over the medium term, the number of servicers will be reduced to two or, at the most, three”. Corporate movements forecast not only the “inevitable” concentration process, but also the repurchase of these platforms by financial institutions, their sale to industrial partners and international growth.

This will happen in a context in which the major investors, which are currently their main shareholders, will have their interest diverted to other problem economies such as those of Greece, Cyprus and Italy, where financial restructuring processes, such as the one undertaken in Spain, are still pending and where they may try to replicate the asset management model as servicers.

“The funds entered this business three years ago and their perspective as investors tends to be fixed for four years, which means that we are now approaching the divestment phase”, said Fernández. In this process, sources at Axis expect that the exit of funds with a more opportunistic profile will make way for others, with a more industrial focus”, who are committed to creating value more over the long term”.

In this regard, José Masip, Partner at Axis, draws our attention to the rental market, which is going to be “highly attractive” over the next few years and he predicts that we will see a “clear commitment” from the latter type of funds to obtaining profitability, not only from the value appreciation of their assets, but also from their rental.

“Both banks and funds are going to continue removing assets from their balance sheets through Socimis or by means of other vehicles specialising in rental”, said the expert. In this context, sources at Axis estimate that “over the medium term, it will not be unusual to see companies managing volumes of up to 50,000 homes for rent”.

Original story: El Mundo (by L.M.C.)

Translation: Carmel Drake