Spanish Banco Popular to Sell-Off €450m Bad Property Assets

In evidence of growing investor confidence in Spain’s property markets, Banco Popular is to sell its portfolio of Spanish real estate assets worth a total of more than €450m.

The portfolio is comprised of 1,473 homes in Madrid, Barcelona, Toledo and the Costa del Sol worth €300m; land plots in different Spanish regions to the value of €103.4m and includes 13 hotels, worth €47.2m, according to Bloomberg.

Documentation for the offer was prepared by investment firm N 1 and was sent out to potential investors last month.  The Spanish bank’s strategy is to sell the first half of its portfolio this year and is at the core of its divestment programme of non-strategic assets.

So far in 2015, sales of Banco Popular’s real estate assets have reached record-breaking levels with the bank closing deals on €534m worth of homes in the first three months of the year, representing a whopping 115% increase for the same period in 2014.

Banco Popular has been anxious to stress that properties are not being sold at bargain basement prices to accelerate sales.  On the contrary, it maintains that transactions are being closed at prices similar to their book value which backs current levels of portfolio valuations.

The bank joins others in selling its unproductive assets during a time when currency weakness is attracting wealthy foreign investors, mainly from the UK and US.  In recent weeks, Spanish banks have offered unpaid debt and foreclosed assets worth €10,000m to international investment funds.

The most active financial institution in the rush to offload bad assets has been Bankia, with its ‘Big Bang’ project placing 38,000 residential units on the market including apartments, garages and storage worth €4.8bn.  Bankia was also the first to bring to market a portfolio of outstanding mortgage loans despite concerns over repeating mistakes from the past.

With many of Spain’s banks holding property assets in areas sought-after by investors both before and after the global financial crisis, recent transaction activity looks likely to impede price growth over time.  There has been a significant upward shift in interest from foreign investors in Spain’s property markets, mainly on the back of significantly increased purchasing power due to euro weakness.

When the euro inevitably finds a more advantageous level in FOREX markets, investment may start to fall slightly in Spain as investors digest the considerable choice of property that will become available over the next few months.  With supply likely to outstrip demand, property prices could stagnate or even decline a little.

Nevertheless, if you’re an investor in dollars or pounds, it’s definitely advisable to make hay while the sun shines and you’ll almost certainly see some fantastic returns over time.