Spain's "Bad" Property Bank
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Spain's "Bad" Property Bank

The recently formed and Spanish ‘Banco Malo’ or ‘Bad Bank’ which is due to take over the stock of property owned by the 16 major Spanish banks involved in the scheme from December 31st will have a portfolio of foreclosed assets initially valued at €18.193 billion), this figure is before any discount applied to potential purchase by individuals or other entities, of these about half have their location on the east coast of Spain, with Cataluña having €3.817 Billion (21%) of the value of such property and Valencia with €3.354 Billion, just over 18%, another worrying figure is that 75% of the real estate assets of the nationalized banks are classified as difficult to sell. These include part constructed developments and land.


The east coast of Spain has a huge significance within the current transfer of foreclosed assets to the ‘bad bank’ mainly due to the banks with properties on their books in that area having transferred their stock in this first phase of the operation so it doesn’t therefore necessarily represent the proportional percentage of the overall stock to come relative to location. Bankia, Cataluña Bank and Banco Valencia all had a strong presence in east of Spain and so now the ‘bad bank’ has taken over many properties in that area from these banks


A publication issued 5 days ago and circulated among potential investors of ‘bad bank’ said it has accumulated property assets of €2.712 billion located in Madrid (15% of the overall stock), €2.122 billion in Andalucia (12% of the overall figure) and the recent inclusion of the bank Novacaixa has meant that Galicia now is the area with the 5th highest proportion of the stock with a total of €1.295 billion (7%) these figures always not including any discounts that the ‘Bad Bank’ might apply for sales purposes, after taking into account suggested discounts and distributions to creditors which hold an interest in certain properties then the overall eventual figures would be reduced from €89,000 billion to €43.964 billion in transferred (including loans), this equates to a reduction of 63.1%



With respect to apartments only the ‘Bad Bank’ stock will be less than 5% for all other areas including Cantabria, Balearic Islands, La Rioja, Basque Country, Asturias, Ceuta, Extremadura and Navarra some of which have less than 1%. Despite the discounts achieved by the ‘Bad Bank’ to obtain these properties from the other main banks involved its recently published document itself recognizes that the management of the distribution of these properties will not be easy since 75% of all foreclosed properties are listed as "illiquid" or "low liquidity " and difficult for them to sell.


December 2012


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