Blackstone buys 125.5 mln euros of Madrid protected housing

MADRID, July 24 Wed Jul 24, 2013 12:51pm EDT

MADRID, July 24 (Reuters) - U.S. fund Blackstone has bought 18 protected rent housing blocks from Madrid city council for 125.5 million euros ($165.89 million), the council said on Wednesday, in one of the first private equity purchases of publicly owned housing in Spain.

The sale is a sign that private equity funds may be side-stepping Spain's 'bad bank', the Sareb, to snap up assets direct from sellers, such as cash-strapped city councils.

Other banks in Spain have also struggled to sell big portfolios of housing, often because they are reluctant to shed them at steep discounts.

The blocks comprise 1,860 flats, both rental, and rental with an option to buy. The rent-capped contracts attached to the flats will be honoured as part of the deal, the council said.

Sareb was created last year to take on rescued lenders' soured property assets as part of a bail-out of Spain's banks but it has yet to sell a single portfolio of housing and had just sold 700 properties as of June 1 in a piecemeal fashion.

Its target is to sell 45,000 properties in five years and to generate an annual return on equity of 13 to 14 percent over its 15 year lifespan, although property investors say it is demanding inflated prices for the best of its property and loans.

Sareb is expected to sell its first portfolio of properties, of about 100 million euros, by the end of this month. U.S. funds Lone Star, Cerberus Capital Management and Apollo Global Management are among those in the running, according to a source close to the situation.

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