March 27, 2014 / 5:02 PM / 6 years ago

UPDATE 1-Spain's 'bad bank' aims for higher margin sales after 2013 loss

(Adds details, background)

By Sarah White

MADRID, March 27 (Reuters) - Spain’s “bad bank”, created to help clean up the country’s finance sector, said on Thursday it would spend 100 million euros ($138 million) this year on finishing half-built properties to try to sell assets at higher prices.

The bad bank, known as Sareb, which is partly backed by the government, last year took on about 50 billion euros of housing, land and loans from Spain’s bailed-out banks, which were crippled by a 2008 property crash.

Sareb’s success in selling off assets over a 15-year timeline will be key to helping Spain draw a line under the property crash that tipped the country into recession.

It made about 1.56 billion euros last year from selling flats and soured loans to investment funds and individuals. Total revenues, which also include interest earned on loans, reached 3.8 billion euros.

But Sareb reported a 2013 loss of 261 million euros after taking into account its own debt payments and running costs.

Sareb has to find ways to make its most problematic assets attractive to potential buyers in a market that is still weak. Some of these include plots of undeveloped land in rural areas and unfinished apartment blocks.

House prices in Spain have fallen about 40 percent from a 2007 peak. Sareb Chairwoman Belen Romana said property values had dropped an average 4 percent in 2013 but she said there were signs prices were stabilising as Spain emerges from recession.

“International investors don’t start coming in and buying until the market is close to the bottom,” she told a news conference.


Property specialists have credited Sareb with drawing international investors to Spain in the last year - a trend that became more noticeable when big names, such as billionaire financier George Soros, bought into banks and other companies.

“Sareb did a good job of drawing funds’ attention, which was great marketing not just for themselves but for Spain, and it’s partly what’s behind the bullishness of investors looking for assets there now,” said Wynn Williamson, managing partner at Aura Asset Management in Madrid.

Sareb’s management said they had met with over 600 foreign funds in the past year.

Sareb also said it had agreed about 12 sales to specialist investment funds looking to buy big packages of loans or properties and that it had raised 900 million euros from portfolio sales in 2013.

Private equity firm H.I.G Capital, banks such as Deutsche Bank and Bank of America Merrill Lynch, or funds like Fortress Investment Group have been among buyers of these portfolios. But some property consultants and investors said they had been told by Sareb to expect fewer sales of big packages this year.

Sareb said on Thursday it had no intention of necessarily reducing the flow of such deals. But Romana said the timetable of disposals did depend on competition in the market. ”Other entities may be selling more than in other years,” she said.

Commerzbank is in the process of selling a package of over 4 billion euros of property loans, one of the biggest portfolios of its kind to hit the market in Spain.

Sareb said it wanted to grow property sales to individuals by about 15 percent in 2014, after selling 9,000 homes through that strategy last year. This could help improve margins on sales, as big investors want to buy at steep discounts.

“You get a much better price selling to private, individual buyers than to a fund,” Williamson said.

Sareb did not give a profit goal for 2014. ($1 = 0.7254 Euros) (Reporting by Sarah White, Editing by Sonya Dowsett and Jane Merriman)

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