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Pontegadea, Deka & CPPIB Submit Bids For ‘Torre Espacio’

8 July 2015 – Expansión

Amancio Ortega’s investment company Pontegadea, the German investor Deka and the Canadian pension fund CPPIB have all submitted bids to acquire the Madrilenian skyscraper from Villar Mir.

The sales process for Torre Espacio, the skyscraper owned by Villar Mir in the Madrilenian Cuatro Torres complex, is progressing according to plan. Yesterday, one month after the property was first listed on the market, Villar Mir received offers from some of the companies it had selected to participate in the process.

Villar Mir, which owns the building through its real estate company Espacio, worked together with the real estate consultancy Aguirre Newman to select and invite around a dozen investors to participate in the sales process, rather than opting for a mass tender, in order to close the deal as soon as possible. Those selected included the German funds Deka, Reef and Patrizia, the Abu Dhabi fund Asia, the Socimi Merlin Properties, the real estate company Colonial, Amancio Ortega’s investment company Pontegadea, the sovereign fund Singapur GIC (which invests in Spain jointly with the real estate company GMP) and the Canadian pension fund CPPIB.

Of those, Deka, Canada Pension Plan and Pontegadea all submitted proposals yesterday. Indeed, the investment arm of Amancio Ortega has been one of the favourites to take ownership of the property since the process was launched, on the basis that the company has access to immediate liquidity and the building would be a perfect fit with its existing portfolio, which includes other large office and commercial buildings in major European capitals, such as London and Madrid, as well as in the USA.

The aim of the group controlled by Juan Miguel Villar Mir was to sell the property for between €650 million and €700 million, and whereby benefit from the investor boom that is taking place in the Spanish real estate market. The company invested €400 million on the construction of the building, including the amount it paid to Real Madrid for the land (€187 million). Nevertheless, according to sources close to the process, the offers received range between €500 million and €600 million. (…).

Tenants

Torre Espacio opened in 2007 and has office space of c. 60,000 m2, distributed over 57 floors. The tower is 236 metres high and its tenants include large international corporations, such as British American Tobacco and Red Bull. It has an occupancy rate of 85% (84.3% at the end of 2014). Other tenants include the embassies of Australia, Canada, the Netherlands and the UK.

Furthermore, 55.1% of the building is occupied by the Villar Mir Group. OHL occupies around ten floors.

To make the purchase more attractive, the owner of OHL has offered to continue as a tenant and guarantee the new landlord rental income of €34/m2/month. However, the market does not believe that such a rental price can be maintained considering that the maximum rent in the best buildings on the Castellana barely exceeds €30/m2/month. (…).

Following the receipt of the bids, one or two candidates will be chosen to participate in exclusive negotiations, with a view to closing the transaction in October. Nevertheless, the proposed structured of the transaction, as well as the difference in terms of price expectations between the vendor and the buyers, may hamper the completion of the transaction. (…).

Original story: Expansión (by R. Ruiz and D. Badía)

Translation: Carmel Drake