When it comes to local real estate, Spain’s biggest bank (Santander, run by Emilio Botin, pictured above) and foreign property investors are still way apart on price
A big story in recent weeks has been Santander’s attempt to off-load a portfolio of properties – mainly residential – with a book value of 3 billion Euros. It now seems that negotiations with the only interested parties – Goldman Sachs and Morgan Stanley – have come unstuck on price.
The story first broke in mid-October with news that Santander was planning to dump a huge 3-billion Euro portfolio ‘whatever’ the cost. 29,000 properties had to be sold before year end, and Santander were expecting to take a significant hit on the sale, reported the Spanish press.
The news caused a stir in business circles, and sent a shiver down the spine of other Spanish banks who know that where Santander goes, the rest have to follow. Dumping so much property on the market at a discount would be bound to drive down prices for everyone.
According to one expert cited at the time in the Spanish press “Santander is going after liquidity even if that means losses in the short term. And that can only mean that it forecasts 2012 and 2013 will turn out to be anni horribiles.”
News then emerged that the offers on the table from foreign investors (the only ones with money today) were a long way from Santander’s 3-billion Euro price tag. Foreign investors were asking for a discount of 60pc, though some press reports said as much as 70pc.
Last week brought the news that Santander had decided to put its sale on ice for now. It wasn’t ready to accept a 60pc discount to book value, so the deal fell through. Bearing in mind that the book value is already written down, the overall discount from peak values would be have likely been more than 60pc.
Today we learn that Santander has decided to write off another 1.5 billion Euros on its property portfolio, which it can afford to do thanks to gains it has made in North and South America. That will make it easier for Santander to do a deal when they try again. But for now it is fair to say that Spanish banks and foreign investors can’t agree on the value of Spanish property. Sound familiar?