Foreign Funds Competing for ‘Bad Bank’ Assets

Sareb_new crop (1024 x 738)Sareb, Spain’s “bad bank,” has reportedly narrowed the competition to manage its €50 billion in property to five firms, including four companies controlled by U.S. private equity funds.

The winners of the competition will earn the right to manage Sareb’s portfolios of distressed property, the black cloud hanging over Spain’s property recovery. Until the financial institutions can clear the bad property from their books, lending and prices will continue to stagnate, industry experts say.

Finalists to manage Sareb’s portfolio include real estate service companies controlled by U.S. funds Centerbridge Partners, Apollo Global Management, TPG and Cerberus Capital Management, Reuters reports. All four funds have been active in Spain in the last year, dredging for bargains in the wreckage of the bank-controlled industry.

The other leading contender to get a chunk of the Sareb portfolio is Solvia, the real estate arm of Sabadell, the Spanish bank.

In a twist, Sareb officials are reportedly demanding upfront fees from the winning firms, which Sareb says will be used to bolster its own operations. Sareb could generate up to €1 billion by outsourcing the management of the assets, according to media reports.

Sareb’s assets, which are now managed by the banks, are split into four packages, and at least three or four entities will be chosen to manage the different assets, Reuters reports. The bad bank controls more than 200,000 assets, primarily loans, in addition to housing developments and commercial property.

Sareb hopes to name winners in the next few weeks, but the process is complicated by the wide variety of assets in different portfolios, as well as the fees, according to media reports.

“It’s not an easy thing to negotiate how the fees work for every contract, that is still taking some time,” one source told Reuters.



Leave a Reply