4 May 2017 – Expansión
The Spanish real estate sector is smiling again. After years of crisis and an on-going cleanup, the main listed companies in the property sector have reported more positive figures: the earnings of these firms tripled in 2016 with respect to the previous year and their operating profit rose by 64%, driven by an increase in the number of sales and an appreciation in asset values.
Two factors are converging to generate the improvement in the real estate sector: an acceleration in the number of sales – both in the residential sector, as well as in the office and retail segments – and an increase in transaction prices and in rental costs. In 2016, 404,421 operations were registered in the housing sector, up by 13.7% compared to the previous year, but nevertheless, just over half as many as in 2007. In the same way, average house prices rose by 11% from the minimums registered in 2014, but they are still 30% cheaper than in the year prior to the burst of the real estate bubble. (…).
The combined profit of all of the companies in the RE sector – Socimis and traditional real estate companies alike – reached €1,395 million last year, compared with €407 million in 2015. In other words, their earnings tripled in just twelve months and came close to the combined profit recorded in 2007 of €1,592 million, albeit generated by very different players.
Only 29.6% (€414 million) of the total amount was generated by traditional property companies, in other words, those that managed to emerge intact from the worst years of the crisis: Colonial, Realia, Inmobiliaria del Sur, Quabit, Renta Corporación, Grupo Urbas and Montebalito. If we take into account Reyal Urbis – which filed for creditor bankruptcy in 2013 – and Neinor Homes, the latest property developer to debut on the stock market, that percentage decreases to 18.98%, in other words, €264.8 million.
Therefore, most of the profits (70.4%) were generated by activity carried out by the Socimis, which multiplied their earnings almost five-fold in one year, from €244.6 million in 2015 to €1,131 million in 2016. (…).
The tax benefits that the Socimis enjoy, their obligation to distribute dividends annually and the attractive returns they generate compared to other investment options, have boosted their number and weight in the market.
In Spain, shares in four Socimis are traded on the main stock market and together they generated a gross operating profit of €388.5 million in 2016, up by 85.4% compared to twelve months earlier (…), with the largest, Merlin, accounting for the lion’s share of that figure (€260 million).
Large family fortunes are increasingly choosing this investment vehicle in recent times. In total, 17 Socimis debuted on the stock market in 2016 and there are currently 32 companies on the Socimi-specific segment of the MAB. (…).
The future strategy for all of these entities involves rotating their non-strategic assets and specialising in non-residential segments, specifically in: offices, retail and logistics. According to a recent report form the real estate management company Laborde Marcet, Spain closed Q1 2017 with investment in non-residential real estate assets amounting to €3,520 million.
The retail sector accounted for 42.5% of that figure and whereby recovered the high profile that it had previously ceded to the office segment; hotels accounted for 22.2% and logistics assets for 10.6%. Given these proportions, the plan that Merlin has just presented (to invest €200 million over five years on the renovation of its office and shopping centre portfolio) makes sense. Hispania is also planning to sell off its offices to concentrate on its hotel business.
Original story: Expansión (by María Hernández and Víctor Martínez)
Translation: Carmel Drake