by Albert Castro

Property sales have turned to a "buyers’ market" as banks rush to dispose of their idle assets before the SPV Law, which allows for staggered take-up of losses, expires on May 14, real estate consultant CB Richard Ellis yesterday said.

Trent Frankum, general manager of CBRE, said banks are getting competition from asset management companies, which have bought soured properties from the banks through special purpose vehicles and are now selling the assets after turning them around.

"What we see in the market now is substantial competition in terms of letting go of these properties (idle assets). Some of the valuations have gone back to 2002- 2003 before the SPV law has been enacted and today, we see discount of between 60-90 percent from the valuation price," said Frankum.

"So what we are seeing now is a shift from a seller’s market to a buyers’ market for some of these properties," he said.

Citing the Bangko Sentral ng Pilipinas’ estimate, Frankum said about P350 billion worth of real and other properties acquired (Ropa) have remained with banks. Since the special purpose vehicle’s inception, only an estimated 60 percent or P150 billion of the banks’ pre-SPV Law stock of non-performing loans have been transferred to special purpose vehicle, he said.

"Right now, the SPVs are auctioning off their properties and they are looking at their big-tickets assets, developing them and selling them back to the market," Frankum said.

He said this disposal competes with the banks’ own effort to unload their Ropas using the SPV. Sale of bad assets through this mode ends on May 14.

Post May 14, banks would have to improve their capitalization to accommodate the buffer for their non-performing assets required by Basel 2, he said.

The banking accord raised the risk weight for NPAs, making it more costly for banks to hold soured assets.

"Under Basel 2, there will be a risk weight for these idle assets of 150 percent from 100 percent previously," Frankum said.

Frankum said banks "cherry-picked" the assets they have unloaded to SPVs, which these buyers are now selling to the market.

"So what we’ll see is even more price depreciation in value as some domestic banks continue to unload assets. You will see SPVs, after dressing the portfolio they have acquired, now unloading these through auctions. At the same time, there are companies that also have properties to unload themselves," he said.

The SPV Law allows banks to transfer their bad assets to asset buyers at a discount but without the pressure of posting an outright write-off of their losses.

The law also grants tax exemption and price discounts of 1-8 percent and fee privileges to SPVs that acquire or invest in NPAs.

Frankum said he supports another extension of the SPV Law, which was already extended for another two years in May 2006.

"You don’t want to send the message to the market that we will keep on accommodating you time and time again but to see it extended one more time, that would be all right," Frankum said.