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Boost for Dutch market as bad bank pays back more

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The Dutch equivalent of NAMA was given as long as a decade to dispose of assets

THE Dutch bad bank created to dispose of €5.7bn of soured real estate assets will probably return more money to the government than expected as a stagnant market revives, its chief executive officer said.

"We've seen this year that we'll be able to meet and very probably exceed the targets the state gave us," Hans Copier, said chief executive of Propertize.

"We expect to return the capital we received, and more, without calling on the state's funding guarantees."

Propertize was split off from SNS Reaal, the fourth- biggest Dutch bank, to sell poorly performing property and loans that led to the nationalization of the bank last year.

The bad bank - a Dutch equivalent of NAMA - was given as long as a decade to dispose of the assets, which are mostly in the Netherlands and also include property in the rest of Europe and the US.

The goal may be reached within about seven years, depending on liquidity in the market, he said. He expects disposals this year to beat the bank's target by about 25pc.

Propertize set goals for the timing and pricing of assets last year, when commercial transactions in the Netherlands had dried up.

The market has become more active since January, especially for offices and housing. The bank expects to put a portfolio of 1,000 rental homes on the market soon, after values reached the disposal target price two years earlier than it expected.

The properties may be sold this year, Copier said. Propertize is also in talks with six potential buyers for a plot of land near Utrecht, once designated for a gated residential community, that hadn't attracted any offers for years, he said.

"At the moment, there is equity, little high-quality supply and very low interest rates," he said. "Money will have to find a place to go and real estate, with its cash flows, is an interesting target."

Dutch commercial property values have been slow to recover from the credit crisis as oversupply and job cuts by companies subdue demand.

Office vacancies stood at 12.8pc in the first half, according to a presentation by ABN Amro.

Home values dropped more than a fifth from a 2008 peak, aggravated by government caps on mortgage values and a reduction of tax breaks. Prices are recovering from a low reached in 2013 and transactions are up more than 40pc in the first seven months of the year, according to the Dutch Central Statistics Bureau.

Propertize, split off from SNS Reaal on December 31, owns properties including The Wall, a shopping and office centre along the busiest Dutch highway; Hamburg's HafenCity shopping hub as well as empty offices in undesirable Dutch locations. Copier decided to get the bad bank's most difficult disposals out of the way first, so he's focusing on selling the 13pc of assets identified as the worst performers by 2015.

He said that goal is achievable.

"We're currently benefiting from a bit of tailwind and we'll see whether that's fundamental or not," he said. "It also depends on the general Dutch economy."

Of the rest of Propertize's assets, 23pc are considered "healthy" and 64pc have scope to retain or create value, possibly with additional investment, according to the company's 2013 annual report. The government took over SNS Reaal after it failed to meet a deadline to increase its capital or provide an acceptable alternative. The state immediately moved to set the property finance unit aside in a bad bank.

The Dutch government made provisions of €2.8bn for potential losses generated by the SNS Reaal assets, of which €1.83bn has already been recognized as impairments, the annual report said. The state bolstered the bad bank's capital by €500m and put in place funding guarantees of as much as €4.05bn. (Bloomberg)

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