unique approach. Spanish
Residential Property Opportunities.
Unique real estate
SRPO is pursuing a unique investment strategy of recurrently acquiring, repossessing and reselling residential properties in well populated Spanish regions. The properties may be subject to adverse possession, which is resolved by reaching an amicable settlement with the occupant.
The Fund is able to cherry-pick residential assets offered by Spanish financial institutions looking to clean up their balance sheet, lower their risk weighted assets and improve their capital ratios. More stringent supranational regulations are pushing banks to offload risk-assets (such as foreclosed real estate or REOs) more quickly. The COVID crisis has led once again to an increase in non-performing loans (NPLs) and real estate owned properties (REOs).
Frequently Asked Questions
- The Fund’s partners are the largest occupied real estate institutional specialists active in this niche in Spain and employs well over 250 Full Time Equivalent employees including trained negotiators who personally visit all the assets, real estate appraisal experts and specialised lawyers.
- Proprietary appraisal software and database: including over 20 million properties with relevant parameters such as asking/selling price, surface, floor, elevator, location, etc. This enables the fund to analyse and bid on hundreds of occupied assets every week. The more assets the Fund and local Asset Manager can accurately bid on, the more likely some bids will be successful.
- Exclusive sourcing: The Fund’s advisors have over the years become trusted counterparties for banks, who are only willing to sell to reputable & ethical counterparties they know.
- Strict buying & selling discipline: Once an asset is up for sale, all activity (web, visits) is monitored and we only accept offers for repossessed assets that are higher than our internal market appraisal.
The Fund aims to work exclusively with local partners that upholds very high compliance and ethical standards. The local partners adheres to a very strict and well documented approach when repossessing occupied residential assets. The repossession manual, translated to English, is available upon request. The Fund will only work with advisors who are trained and experienced negotiators that approach and deal with occupants in ways that are respectful and non-threatening.
Because occupied properties are of such sensitive nature and they are sold by national banks who are under strict supervision, it is very important to maintain a good reputation to be an ‘accepted’ buyer in this market. Because most occupants agree to leave voluntarily (often in exchange for compensation) they cannot claim they were ever forced. In the remaining minority of cases standard legal procedures will be pursued. There will absolutely be no use of any force, threats, or any other verbal aggression to convince occupants to vacate.
While risk of fraud can never be 100% avoided, the risk here is minimal as the Fund owns the real estate properties outright via 100% owned SPVs (i.e. Spanish companies). All the properties are verified with the land registry or cadastre by our service provider and purchased via local and registered notaries who make additional verifications. The AIFM (Alternative Investment Fund Manager) makes the final decision to purchase the properties, based on due diligence of the service provider and an independent third-party appraisal. The Fund is the sole owner of the SPVs, set-up and registered with an official notary, and the SPVs are the sole owner of the properties. Purchases deeds and proof of ownership will be held and verified by the Fund’s independent custodian.
The Fund has at its disposal fully equipped teams of experienced appraisal analysts in Madrid as well as an internally developed appraisal software and database.
Once the relevant data (cadastral references etc) is received in the adequate format, the assets are uploaded in the appraisal tool. The program allows to automatically appraise up to 50.000 assets a day. The appraisal is based on comparable assets from the same neighbourhood.
Once the desktop appraisal is created, the analysis teams exclude from the benchmark all the assets for which valuation quality is substandard. This means that all the assets that do not have enough available comparable assets to produce a comfortable valuation are discarded.
Next the teams review each asset, potentially revising the appraisal up or downwards based on their expertise and knowledge. Moreover, they value elements of the asset that are extraordinary, like views, nearby services, quality of the street, etc. Each asset receives at least 3 valuations from 3 different in-house analysts, in addition to the automated valuation.
In addition, the properties are appraised by an independent third-party appraisal firm immediately before or at the time of purchase.
The AIFM (“Alternative Investment Fund Manager”) values the assets held by the Fund in a 2-step re-valuation process. Please refer to the PPM for the full description of the valuation process. The fair value is based on the appraisal of a local independent third-party appraiser at or around the time of the purchase. The third party appraises the property as if it were vacant. The AIFM next applies discounts to this appraisal based on projected costs for refurbishment, security improvements, repossession and sale, taxes and fees for lawyers, notaries and other service providers. If the AIFM deems the third-party appraisal to be overly optimistic, we may use our more conservative internal valuation as the base appraisal to which we apply discounts.
All investments, including an investment in the Fund are subject to a variety of risks and the potential loss of capital. This is an illiquid investment strategy, properties cannot be readily converted into cash, so investors should be aware that redemptions may take up to one year or longer to fulfill. Past performance is not a guarantee of future performance.
The Fund commenced operations at the end of Q2 2021. Q4 2023 has proven to be an exceptionally busy quarter for us. We successfully finalized the acquisition of three new portfolios in the last days of December 2023, comprising respectively 337 assets, 80 assets and 60 assets, totaling a market value of ca. €52 million, which, as always, we bought at a significant discount. Assets worth approximately €15 million from these portfolios have already been transferred to the Fund during Q4. During this quarter, the Fund successfully repossessed 75 assets through amicable agreements with occupants. These repossessed assets will be available for sale in the upcoming quarters. Presently, the Fund holds ownership of a total of 500 repossessed residential properties ready for sale, surpassing our business plan projections. Sales momentum remained consistent this quarter, with 61 residential assets sold in Q4 and another 82 sales agreements signed in November and December 2023, with transfers scheduled for Q1 2024 (excl. garage units).
We hold strong confidence in future returns, as we achieve sales at or above target prices in a resilient market. On the supply side, market dynamics that prompted Spanish banks to divest persist today, even more with the current interest rates environment. This quarter, we capitalized on numerous new portfolios entering the market, which will positively impact upcoming quarter performances.
As we enter the Fund’s 4th year, we are pleased that our all-weather strategy has allowed us to generate returns across turbulent cycles. In 2023, we strengthen our teams and continued to scale our network, operations and infrastructure. Thank you to our investors for your trust and partnership during the last year.