Spanish banks investing in properties once again

It appears that Spanish banks are turning to investment in property in the middle of the crisis in the property market in Spain. The decision to inject money into properties and estate agents’ is partly a result of an effort to keep the property sector from crashing further and a worsening of the situation. It is also an attempt to prevent large numbers of companies linked to the construction industry and the property sector from falling further into arrears.

Nearly a third of all credit conceded by Spanish banks is used for purchasing properties and companies in the sector owe 313.176 million euros to the banks. Some banks like Banc Sabadell or La Caixa are injecting money into their affiliated estate agents’ and others like Banesto are creating societies linked to property promoters while the majority such as Santander or the Banco Popular are buying up properties.

The biggest injection of capital into the property sector has come from the Banco Santander, which in the first quarter of this year invested 1,200 million euros in the adquisition of property.

Sources speaking on behalf of the bank say that it is a strategy aimed at reducing non-payment of loans. It says that before a company has to call in the administrators it prefers to acquire assets and give the company breathing space.

Josep Prats, director of the patrimonios de Ahorro Corporación, has estimated that between 15 and 20% of all credit conceded by banks has gone to estate agents’ or construction companies. He says that there are now around 1.5 to 2 million flats unsold on the property market and half of them are in the hands of investors and the other half in the hands of promoters. He says that when an property investment company goes to the bank for help the bank can refinance the total amount of the debt but often opts for acquiring assets which do not render a profit until they are resold.

For example, the property investment company Fbex, is hoping to refinance 600 million of the 1,500 million euros that it owes and it has been selling off its assets. According to some sources in the sector the Santander bank has recently bought a property belonging to Fbex in the centre of Barcelona for around 30 million euros.

Caixa Catalunya has also admitted to acquiring assets from Fbex. Habitat, another property investment company has also been selling off its assets to banks.
Banco Popular and Banc Sabadell have also acquired assets valued at over 300 million euros. Furthermore, Sabadell is rebuilding part of its former affiliated estate agents’, Landcape, which is sold to Astroc. Sabadell has reinstated the former director of Landscape, Salvador Grané, andi s now looking for a new name for the new company.

Banesto has entered into a joint venture with Reyal Urbis in order to give a helping hand to Promodomus which lost 331.75 million euros in the first quarter. On the other hand, La Caixa, has decided to come to the aid of its affiliate, Servihabitat, by increasing its capital by 500 million euros.

It is becoming more and more common for banks to help out their clients by buying their land or property and forgetting the credit.