* Sareb close to auctioning 350 mln euro portfolio - source
* Sales aimed at professional investors pick up
* Sareb close to year-end 1.5 bln euro revenue target
* But still has thousands of land plots, some hard to sell
By Sarah White
MADRID, Oct 4 Spain's "bad bank" is about to
start its biggest sale so far of land taken over from bailed-out
lenders, as property prices in some of the countries worst hit
by the euro zone crisis show signs of recovery.
The Sareb agency, set up to cleanse troubled Spanish banks
of real estate holdings that went sour in the crisis, is taking
advantage of growing interest from professional investors to
catch up from a slow first six months of operations.
The government-backed vehicle, known by its Spanish acronym,
aims to put a package of about 80 plots of developed land up for
auction, according to a source familiar with the matter.
Sareb values the portfolio at around 350 million euros ($477
million), which will be the starting point for price talks, the
source said, adding: "It is close to coming onto the market,
likely in the coming days."
Sareb declined to comment. But one private equity investor
said: "It's got the market excited in that they are going to set
the floor on a lot of asset classes."
Investors said Sareb, created as a condition of a 41 billion
euro rescue for Spanish banks with European money, was selling
off its best assets first and may struggle to get rid of its
poorer quality properties ever, especially undeveloped land.
Nevertheless, the private equity investor praised its "Herculean
effort" following Spain's banking crisis, brought on by a 40
percent dive in property prices from a 2007 peak.
The planned sale includes land ready for construction in the
Madrid area as well as in the northeastern region of Catalonia,
Galicia in the northwest, and in coastal areas.
In recent weeks Sareb put at least seven portfolios on the
market. These contain stakes in tourist resorts and a shopping
centre, seven prime office buildings, over 2,000 homes and
chunks of syndicated loans to property developers.
Investors' interest in property is rising again across
Europe as many countries emerge from recession. Ireland's bad
bank is speeding up sales of real estate loans, and in August
house prices there rose at the fastest pace in six years.
Real estate companies have flocked back to the markets this
year, with LEG Immobilien's (LEGn.DE) German stock exchange
listing in January the biggest float in Europe for 2013 so far.
British property agents Foxtons (FOXT.L) and housebuilder Crest
Nicholson (CWD.L) have also listed.
Sareb started life earlier this year with 51 billion euros'
worth of assets transferred from state-rescued lenders such as
Bankia (BKIA.MC), at varying discounts. It is 51 percent owned
by private investors, aiming to reduce the burden on stretched
The private equity investor, who declined to be named, said
sales so far had been small. "They've sold a lot more in a
shorter time span than any other bad bank I've seen," he said.
"Still, there are a lot of assets there that they will never
sell ... and will still be there in 15 years."
Sareb is aiming for a 13 to 14 percent annual return over
its 15-year life. Some investors and bankers believe this is too
ambitious, and have warned it could face losses on some of its
worst assets which could eventually leave it short of capital.
However, Sareb is now close to reaching this year's revenue
target of 1.5 billion euros, having already raised 1.2 billion,
largely through selling homes piecemeal.
Sareb closed its first property portfolio deal in August
with investment firm H.I.G. Capital, which took a 51 percent
stake in a package of close to 1,000 homes around Spain, worth
about 100 million euros.
Investors, who had been frustrated until then with the slow
pace of disposals targeted at property funds and distressed real
estate specialists, said these were now picking up.
"There will be plenty more in the coming months. They took
their time to do the first portfolio deal but at least they did
some good work structuring it," said one Madrid-based fund
manager, who declined to be named.
The joint-venture structure used with H.I.G. Capital, which
has tax advantages for foreign investors, is one Sareb wants to
repeat with other housing portfolios on the market.
International investors such as Cerberus Capital Management,
Lone Star and Centerbridge Partners are among those interested
in assets as they start building up businesses to manage soured
loans and real estate in Spain. [ID:nL5N0HK3PY]
Sareb started with nearly 15,000 plots of land on its books,
bought at an average discount of nearly 80 percent. It is likely
to get better offers for land in urban or coastal areas that is
ready for construction than for undeveloped plots which may turn
out to be worthless. About 80 percent of its land are plots that
have been prepared for building and have the necessary permits.
It is also trying to sell just over 30 plots of undeveloped
land all over the country. This disposal is aimed at large
investors as well as local buyers, including farmers, who can
browse for the parcels on Sareb's website.
A portfolio of 2,000 properties, containing many second
homes, could be among other deals to close in the next few
weeks, two sources familiar with that deal said.
($1 = 0.7358 euros)
(Additional reporting by Sonya Dowsett in Madrid and Kylie
MacLellan in London; Editing by David Stamp)
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Keywords: SPAIN PROPERTY/SAREB
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