The Sareb, Spain’s so called bad bank, has sold 51pc of a 100 million Euro portfolio of 939 homes to Miami-based private-equity firm H.I.G. Capital.
H.I.G. Capital were the successful bidder after months of negotiations between the Sareb and foreign funds including Lone Star, Apollo, Colony Capital, Centerbridge and Cerberus, in a portfolio sale called Project Bull that the Sareb was under huge pressure to get away successfully.
News of the deal has been reported in the Spanish and international press, and in a press release at the Sareb website, but as of this morning there is still not mention of it at the H.I.G website. H.I.G. reportedly purchased their stake through it Bayside Capital fund
The Project Bull portfolio is reported to include homes in popular coastal areas of Andalusia, Valencia, Catalonia and the Canaries; the homes were all repossessed by the bailed-out lender Bankia before passing to the Sareb.
The portfolio includes 343 homes in the Valencian Region, 275 in Andalusia, 129 in the Canaries, 44 in Murcia, 38 in Catalonia, and 19 in the Balearics.
Rising optimism
The deal is good news for Spain as a sign of increasing optimism amongst foreign investors. It comes soon after news that Blackstone Group bought close to 2,000 rent-controlled apartments in Madrid.
These big deals suggest that foreign investors are starting to see Spain as an opportunity, with the worst behind it. Clearly, they wouldn’t be buying if they thought the worst was yet to come.
Professionals advising foreign funds testify to the increasing interest in Spain.
“Since February, it has been very busy,” Alfonso Benavides, global head of real estate for U.K.-based law firm Clifford Chance, told the Wall Street Journal. “Assuming our competitors are doing more or less what we’re doing, the market in Spain is very hot.”
Benavides went on to say that foreign funds like H.I.G. and Blackstone are just testing the market, prior to bigger investments. “They try to do a medium to small transaction first, learn the whole process, learn the local rules, and once they feel relatively comfortable start to make bigger transactions,” he told the WSJ.
What next?
I was surprised by the structure of the deal, with the Sareb retaining 49pc. Given that they only bought 51pc of the portfolio, it will be interesting to see how aggressive H.I.G. can be with prices. Under normal circumstances H.I.G would now try to sell as quickly as possible, using juicy discounts to attract buyers (especially so if they can’t offer financing). Will the Sareb go along with aggressive pricing? We’ll have to wait and see.
Fela Hughes says:
Interesting. Of course it all depends at what discount the portfolio of properties were bought. I imagine that SAREB were under no small pressure to get the ball rolling on this if only to generate headlines- so I suspect it was pretty hefty. As you rightly say, these foreign funds are not stupid so they will have done their calculations. With SAREB only owning 49% will they have much power to veto whatever prices HIG decide?
Robert says:
There has been another big acquisition.
Spain’s Catalunya Banc sells property arm to U.S. funds.
http://in.reuters.com/article/2013/08/07/spain-banks-property-idINL6N0G83XG20130807