Santander fund seeks to halt redemptions

Spanish bank Santander has sought regulatory permission to freeze payouts from its main real-estate fund after investors sought to withdraw 80 per cent of the vehicle’s capital at once.

The bank, the biggest in the eurozone by market value, said in a regulatory filing on Monday that the Santander Banif Inmobiliario FII fund, the country’s biggest, “currently lacks the necessary liquidity” to meet redemption demands worth €2.62bn ($3.35bn), or 80 per cent of the fund’s value at the end of January.

Santander is seeking authorisation to suspend full reimbursements from the fund for two years, while it “starts an orderly programme of disposals”.

The fund, which was 67 per cent invested in residential rental properties at the end of December, lost about 15 per cent of its value between the end of the third and fourth quarters last year as asset values were adjusted to reflect difficult market conditions.

This, coupled with investors’ need for cash, triggered a run on the fund during a two-week redemption window that closed on Friday.

Spain’s residential property bubble burst almost two years ago, leaving at least 1m new houses unsold.

According to figures released on Monday, total sales of homes in the country in December 2008 were 26 per cent down on the same period of 2007.

There have been high-profile corporate collapses in the sector, while banks have been increasingly swapping their credit exposure to real-estate companies for control of the distressed developers.

Majority shareholders in Metrovacesa, among the country’s largest property groups, on Monday formerly handed control to creditors after falling into arrears.

Bad loans at Spanish banks were 3.38 per cent of the total at the end of December, according to data released on Monday, compared with less than 1 per cent at the end of 2007.

Although housing rents have held up against the downturn, Santander will now be forced to sell residential assets into a rapidly deflating market.

Property groups report price falls of 30 per cent in some sectors.

The value of commercial property is also declining as company downsizing hits rental values, and a lack of investors drives down prices.

According to its latest quarterly report, Banif Inmobiliario FII holds residential properties around Spain, with heavy concentrations in Madrid, the Balearic Islands and the country’s north-west. Offices and commercial premises, mainly in Madrid and Barcelona, make up about 30 per cent of the portfolio.

Santander said on Monday that investors would receive an initial 10 per cent of their redemption claims, followed by 10 per cent tranches whenever asset disposals allowed.

Shares in the bank on Monday closed down 3.3 per cent, at €5.53, amid a broader market sell-off in Madrid.

16 Feb 2009 5:51pm
By Mark Mulligan in Madrid

Source: Financial Times

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.