Casualties mount as Spain’s property bust plays out, creating problems for some of Spain’s biggest banks. Santander, the largest, has announced that it is freezing payouts from its Banif real estate fund for 2 years, as investors demanded their money back en masse.
Recently valued at 3.3 billion Euros, Santander’s real estate fund – called Banif Inmobiliario – came under intense pressure as 42,000 mainly Spanish investors demanded the return of 80% of the fund in the last redemption window ending 13 February. Santander was forced to admit that it “lacks the liquidity at the current time” to meet the redemptions, limiting payouts to just 10% of the funds value.
With the property market in the pits, this is a bad time to liquidate Spain’s largest real estate portfolio, 67% of which is in residential property, including landmark buildings such as the two tower blocks in Barcelona’s Diagonal Mar development, valued at 142 million Euros.
Santander argues it needs time to liquidate the fund in an orderly manner in order to avoid losses for investors. It plans to return 10% of the fund to investors whenever sales have generated enough cash to do so. At the end of 2 years any remaining assets will be sold and the proceeds returned to investors.
This step is a serious embarrassment for Santander, which up until the Madoff fraud scandal was having a comparatively good credit crunch. Santander was one of the banks most exposed to the Madoff scandal.