Month: August 2015

Santander Will Bring Metrovacesa To Profit For The First Time Since 2007

31 August 2015 – Expansión

THE COMPANY EXPECTS TO GAIN 20.2 MILLION IN 2015 / The bank increases its commitment to a property company, that is being reborn from the ashes, with the purchase of 13.8% stake from Sabadell for about 130 million.

Santander believes Metrovacesa can recover to being one of the leaders in the Spanish real estate. For this reason,it just increased its commitment to the company, with the purchase of 13.8% of its holding by Sabadell, “for an amount of one euro per share,” according to sources familiar with the operation, which amounts close to 130 million, an operation advertised by EXPANSIÓN on July 23.

With this new acquisition, the bank headed by Ana Botin will have 72.5% of the capital. In fact, the shareholding will be shared only with BBVA, which has 19.4%, and Popular, which holds 7.9%. The agreement between Santander and Sabadell comes just six months after a similar operation between Santander and Bankia, when the 19.07% stake in Metrovacesa was bought. Bankia, which had to free itself from all its holdings received 100 million euros for its share.

Strategic plan

Santander trusts, therefore, in the revival of the Spanish real estate company, currently chaired by Rodrigo Echenique, vice president of the bank since 6 May. According to the strategic plan of Metrovacesa for the period of 2015-2020, to which EXPANSIÓN has had access, the company expects to earn 20.2 million euros this year, mainly due to the sale of assets. This would mean the end of a negative streak since 2008, when its losses began.

In fact, last year, it earned revenues of 134.9 million euros compared to 104 million in the previous year. In this period, the company recorded a loss of 185 million compared to 349 million in 2013. “The company has potential in the medium term. That’s why Santander bet on it before, certainly, reselling it. With a package already above 70%, it could attract other real estate operators, such as mutual funds, “noted financial sources.

However, the same sources indicate that to accomplish this business plan, “it is likely that new cash injections will be needed.” For now, the company has already begun to work on new projects such as development of housing, hotels and shops, in the old Clesa factory in Madrid.

To December 31, Metrovacesa had some assets valued at 4,8 billion euros, which included almost 1 billion in land and residential product. This part of the assets may exit the company’s portfolio.

On the other hand, the company faces a major debt restructuring, amounting to 2,4 billion euros. For this it has hired Goldman Sachs. In fact, the debt that was included in the Sabadell’s sales package, of about 300 million euros, was also counted in this process.

Restructuring

The efforts to reduce the liability and make the company viable have been constant. In May 2013, when Metrovacesa was delisted from Exchange, it’s worth amounted to 5 billion. But it has already carried out three processes of restructuring. After refinancing in early 2014, Metrovacesa divided its syndicated loan into two sections. The first one, called Tramo (Segment) A, was reduced by 80%, to 213.9 million euros, with revenues generated from the sale of Gecina (obtaining 1.546 million for its 26.67% in this French real estate company).

In the case of Tramo B, Metrovacesa repaid in advance 651 million, a deal that included a debt reduction of 156 million euros, as recorded in the latest company report. This transaction, closed on January 20, was completed in April when three of the four shareholding banks, BBVA, Santander and Sabadell, canceled this credit after conducting a capital increase of 751 million euros.

Original story: Expansión

Translation: Lee La

The New TH Real Estate Fund Plans To Buy Offices In Madrid

31 August 2015 – Expansión

This transaction will create an asset portfolio of 4 billion in Europe

TIAA-CREF, owner of TH Real Estate, considers entering Madrid office market with a new investment fund that it created along with two Swedish pension funds. This undertaking, which will focus on different European cities, aims to create a portfolio of assets worth more than 4 billion.

For now, the fund already has an initial platform valued at 2.2 billion euros, which consists of assets given by the three investors and totals 258,000 square meters of core office space  in UK, France and Germany.

Among the 15 current assets (nine provided by TIAA General Account and six by the Swedish public funds, AP1 and AP2), stand out buildings like the One Kingdom Street in London, Paris and Tour Areva in Atlantic Haus in Hamburg.

Thus, the company will start an active investment program with new capital to make an additional investment of around 2 billion euros over the next three years.

The new deal will mainly focus on core investments in first-tier cities such as London, Paris, Munich, Hamburg, Frankfurt and Berlin. In addition, the investment program will focus on value-added opportunities, such as leases, reforms and developments in this classification of cities. On the other hand, they will also seek core investments consolidated in cities such as Madrid, Milan and Amsterdam, among others.

The aim of these operations by the financial services firm and the two funds, is to create “one of the most important in Europe investment platforms.”

TH Real Estate, responsible for bringing the parties together, has created the platform and will manage the transaction on behalf of the investors, providing investment services and asset management.

The investment fund manager specializing in real estate, which started its journey in April 2014 after merging with TIAA-CREF manages approximately 25 billion euros in 50 funds investing in retail, office, logistics and real estate debt.

Original story: Expansión

Translation: Lee La

Axiare Wins 31 Million in Full Upturn Of The REITs

28 August 2015 – Cinco Días

The real estate company increases its portfolio after investing 806 million.

The Real Estate Investment Trust (REIT) Axiare Patrimonio has closed its first year in operation with a profit of 31.3 million euros.

The company, which went public in July 2014, ended the first half of 2015 with a net profit of 31.3 million (including 27.6 million of revaluation of assets) thanks to a portfolio that makes rental income of 18.7 million.

During the first semester of 2015, the company has acquired five new buildings, mainly for offices. Since its flotation, Axiare has invested 806 million in real estate assets. Among the investments of 2015 is an advance payment of 17 million euros for the purchase of an office building on the street Manuel de Falla, in Madrid, the acquisition price of which amounts to 31 million.

The REIT, that went public with the capital of 360 million, went to the market in June only to double in size and reach 395 million to keep buying assets. In the past two months Axiare has already invested 60% of the proceeds.

Only in July, the real estate has completed the purchase of an office building in Madrid,  two logistics warehouses in Les Puntes Constantí (Barcelona) and business premises in Velázquez (Madrid).

Moreover, the company has closed several financing agreements worth 264 million.

Among the shareholders of Axiare stand out international funds such as Perry Partners, with a 19.44% stake; Taube Hodson, with 9.98%; T. Rowe Price, with 9.78% and Citigroup, with 9.16%. Yesterday, in exchange, Axiare fell by 5% to 10,365 euros. Its market capitalization totals 745 million.

Original story: Expansión

Translation: Lee La

Upsurge In Construction: New Businesses And Jobs

27 August 2015 – Cinco Días

The real estate industry recovers almost 120,000 job positions

The sector most affected by the crisis, and the one that partly was its cause, is recovering. Construction, among other sectors, is responsible for the improvement in employment in recent months. The industry is creating new jobs and businesses: last year saw the biggest growth in the past five years with 6,634 new real estate companies and has recovered about 120,000 jobs, mostly related to public work, according to the National Statistics Institute (Instituto Nacional de Estadística, INE).

The rest of employment comes from housing construction, more related to the private enterprise.

According to an analysis by Infoempresa.com on entrepreneurship in Spanish real estate sector in the 2011-2014 period, it represented 3% of all new companies in 2014, with a total subscribed capital exceeding 1,200 million euros (on average 453,000 euros per company), second only to the Energy sector.

Madrid is first in the ranking of new companies dedicated to real estate activities with 1,428 in 2014, representing 21.5% of the total. Barcelona is second with 868 new firms (13.1%), followed by Malaga with 619 (9.3%), Alicante with 409 (6.2%) and Valencia with 351 (5.3%).

In all, between 2011 and 2014, 26 Spanish provinces have recorded an increase of companies engaged in the real estate business.

In the same period, the number of new registered enterprises grew up to 23.9%. Specifically, 5,354 were created in 2011, while in 2014 the number was 6,634. In recent years, the sector’s growth consolidated and 2014 saw a clear boost, with an increase of 10.9% compared to 2013, according to the study of Infoempresa.com.

Among the new companies engaged in real estate stand out limited partnerships, which have grown by 24.3% since 2011, while corporations have grown by 15.5%.

However, these figures are still far from the levels of 2008, when more than 10,000 new businesses entered the market. In the case of the main provinces with more weight in the sector, the comparison clearly shows that the activity of 2008 has not been regained.

On the other hand, according to a study by Antal, a company specializing in search and recruitment of staff, when it comes to job creation in Spain the consumer sector is seen among the first, as it has reached a hiring rate of 59% in the last quarter, surpassing the previous quarter by 28 points. Furthermore, this trend is expected to continue over the coming months, up to an increase of 63% in the number of contracts.

Experts agree that the prospects are very positive. “The macroeconomic data indicate that the Spanish economy will be one of the most advancing within the euro zone and this improvement is also expected to positively impact the consumer sector,” notes the study.

Original story: Cinco Días

Translation: Lee La

Cohen&Steers Sells 3,5% Off its Lar Stake in Less Than a Year…

27 August 2015 – Expansión

Cohen&Steers’ stake goes down from 6.54% to 2.97%, with bearish investors no longer betting on the stock immune to the overall market downturn.

Continues the dance of major holdings in the REITs. It is the turn of Cohen & Steers now, who continues its special operation outlet in Lar España. The firm, that emerged in March last year with a stake of 7.44% and became one of the three reference shareholders of the REIT has just reduced its stake to 2.97%.

This is the third sale this year, in which Cohen & Steers has reduced its stake from the 6.54% of July last year. The sales took place with the value around nine euros per share, a level that the value has maintained without difficulties in the last sessions in spite of the serious decline in the overall market, fearful of the slowdown of the Chinese economy growth.

Although it built up an increase of around 10% this year, Lar remains below the level of 10 euros, with which it went public in March last year. A level which the value reached closely this spring (marking up to 9.91%) but which resulted in serious profit taking.

New sales of Cohen & Steers occur precisely when bear investors leave the value all together. Short interests, that in the first week of August had the record-breaking rate with the 0.84% of the capital bet down, have disappeared at full speed for Lar.

The reason is that at the beginning of August the company has successfully closed the capital increase that has attracted 134.9 million euros, now allocated for new investments. The operation involved placing among investors 19.9 million shares and has had much success. The demand exceeded the amount of securities for sale by 9.2 times.

Original story: Expansión

Translation: Lee La

Testa Will Become SOCIMI To Merge With Merlín

27 August 2015 – Expansión

The company will approve its conversion into SOCIMI at an extraordinary general meeting to be held on September 28.

The transformation of the property management company into a SOCIMI is a first step to its merger with Merlin Properties, a SOCIMI which already controls 77% of the company’s share capital.

In fact, the extraordinary meeting celebration and the conversion of Testa into a SOCIMI form part of the agreement made between Merlin and Sacyr last June to buy Testa in several phases, which will conclude in June 2016 at the latest, and for a total amount of 1,793 million euros.

The summons of the Testa meeting also coincides with the planned by Merlin launch of initial public offering (IPO) in the real estate.

The mandatory IPO, for exceeding the 50% of Testa, only addressed effectively just about 581,609 listed securities of the company, representing 0.38% of its capital.

According to the purchase agreement, Merlin, directly with Sacyr, must finalize the buying of 22.6% of Testa still in the hands of the construction company before the end of next June.

The final objective of the whole operation is to merge Merlin and Testa to create what, according to the SOCIMI directed by Ismael Clemente, will be the first Spanish property management company with an asset portfolio valued at 5,000 million euros, among which is one of the north towers of the Cuatro Torres Business Area in Madrid.

Interests in other SOCIMIs

For the time being, the extraordinary meeting called by Testa for September 28 will approve the amendment of the bylaws of this company to convert it into a SOCIMI.

Among the changes to be implemented is that of the company’s name, for it to be renamed to Testa Inmuebles en Renta Socimi, and that corresponding to the social object of the company.

As a result, the new SOCIMI Testa, in addition to buying and leasing buildings “in Spain and abroad”, will be able to take stakes in other SOCIMIs, national and foreign.

The agenda of the extraordinary meeting of the hitherto subsidiary of Sacyr also includes the ratification of the appointment of the chairman of Merlin as a new director of Testa.

Ismael Clemente became the highest management body of the company last July, when Merlin gained control over 50% of the company capital.

Original story: Expansión

Translation: James Leahu

Blackstone Raises its Bid for Rental Housing …

27 August 2015 – Expansión

The venture capital firm has closed the purchase of the Ferrocarril Intermediación y Patrimonios.

The US fund Blackstone continues to expand its investment property portfolio in Spain. In this case, the venture capital firm has bet on the rental housing business, where it operates through the REIT, Fidere. Blackstone has completed the purchase of Ferrocarril Intermediación y Patrimonios, a company with almost 500 subsidized homes spread over two promotions in the Community of Madrid.

The fund already was a minority shareholder in this company. Specifically, it held 35% after buying Bankia’s holding. This company, until last year controlled by the financial institution, acted as a holding participating with national companies in about twenty partnerships to promote low-cost housing in the Community of Madrid. Ferrocarril Intermediación y Patrimonios was among these companies, with others in the sector participating as well: Hercesa, OHL, and Bigeco Gestesa, among others.

Now, Blackstone has agreed with Ferrocarril to get hold of 100% of the company, which has some 406 subsidized homes under lease in Las Rozas and another 80 in Alcalá de Henares.

Through it, the fund would have paid about 54 million euros, according to market sources, 46.6 million of which would correspond to the promotion of las Rozas and the rest to the homes of Alcalá de Henares.

The operation will be used so that Ferrocarril Inmobiliaria, presided by Rafael González Cobos, could minimize its debt and strengthen its own funds to take on new projects, as the company itself confirmed.

Blackstone has not only managed with the nearly 500 homes; it has also paid the debts that had linked these two promotions. For the construction of these projects, the Ferrocarril company asked Bankia for several loans worth over 47 million euros. These credits passed on to SAREB and after the purchase by Blackstone have been canceled, according to the public entity.

Fidere

The 500 homes will be managed by Fidere. The fund took this company to the MAB (Mercado alternativo Bursatil/Alternative Investment Market) on June 29 with 3,000 homes to rent (now totaling almost 5,000 units), coming from portfolio purchases to the City of Madrid, FCC and Martinsa Fadesa. Then, it was valued at 212 million euros. Yesterday, it closed with a market capitalization of 217.7 million, its shares being worth 21.61 euros.

In addition to residential assets Blackstone boasts of a significant real estate portfolio in Spain. Among offices, stand out several buildings acquired last year, such as the headquarters of Capgemini and Citibank, in Madrid, and central offices of HP and Mediapro in Sant Cugat and Esplugues de Llobregat (Barcelona), respectively.

The US fund has a logistics subsidiary called Logicor, with assets in several European countries, including Spain.

Blackstone also owns a portfolio of doubtful mortgages purchased from Catalunya Banc, which runs through the company Anticipa and several shopping centers controlled by the Multi Development firm.

Original story: Expansión

Translation: James Leahu

Aliseda’s CEO, Pedro Berlinches, Opines On The RE Sector

24 August 2015 – Expansión

Interview with Pedro Berlinches (pictured above right), CEO at Aliseda. 

The real estate company owned by Banco Popular and the funds Värde Partners and Kennedy Wilson will start to build homes this year.

18 months after Popular outsourced the management of its real estate assets to Aliseda, its CEO, Pedro Berlinches, takes stock and is optimistic about the future. The company – jointly owned by the funds Värde Partners and Kennedy Wilson (51% stake) and Popular (49% stake) – is already paying dividends (the yield for shareholders is 18.2%) and expects to close 2015 with a double digit growth in profits, after it recorded profits of €68.4 million in 2014. As well as managing Popular’s foreclosed assets and loans, Aliseda, which has recently received additional investment of €100 million from Värde, will commence the development of 900 homes this year, for completion in 2018.

How have your first few months been?

The overall picture has been very positive. We exceeded our targets for the sale of real estate assets during 2014 and the first half of 2015. And we are going to slightly outperform the objective we set for property sales (€2,000 million) by the end of the year (i.e. 33% more than in 2014). The sale of land has been boosted and we will end the year with much higher figures than in 2014.

Which new activities will you focus on?

Basicaly, the development of real estate and the management of portfolios for third parties, be they real estate assets or loans. (…).

Aliseda recorded profits of €68.45 million in 2014 (…). What is the profit forecast for 2015?

We expect profits to experience a significant double-digit increase compared with 2014.

Why was the share capital increased by 2014?

The company was created with a capital structure that included loans from shareholders and third parties. The shareholders converted around 50% of their subordinated debt into capital. (…).

What are the plaform’s main sales channels?

Banco Popular’s retail network plays a very important role, as it accounts for 73% of sales. Another 23% of sales are made through direct marketers and 4% of sales are closed online. We launched a new website in April to increase the weight of direct sales made online to 10% by the first quarter of 2016.

Why has the sale of a large batch of assets amounting to €450 million been postponed?

Due to the economic conditions of the offers received, Popular (the owner of the assets) has decided to postpone the transaction. (…).

Have international funds withdrawn from the market due to the political situation in Spain?

No, not for the time being at least. To date, we have not seen any funds withdrawing from the market, quite the opposite. We have seen concern amongst investors. I think they have been nervous about the political situation. But the decision to postpone Popular’s €450 million transaction was taken purely on the basis of price.

How do you think the real estate market and prices will evolve?

There is not a single real estate market in Spain. The evolution by province is going to be uneven. Prices decreased by 0.3% on average during the first quarter (of 2015), nevertheless, they increased in certain areas, such as in Madrid, Barcelona, Valencia, Alicante and Málaga, where there is demand and a shortage of supply. And prices have bottomed out now so that the trend is towards a slight increase. I do not see us having double-digit growth rates again like before the onset of the crisis. We shouldn’t think that the problems are over and everything is positive now, but clearly there has been a change in perception, the macroeconomic indicators are very positive. Local property developers and international investment funds are seeing that clear opportunities are arising.

Is there a danger of over-supply of new housing?

Quite the opposite. Permits for between 35,000 and 38,000 homes are being approved this quarter, whereas during the peaks before the boom, hundreds of thousands of permits were being granted per year. The supply of new homes is limited and yet there is demand. It is good that the number of permits has increased in recent quarters, but we are light years away from (the levels seen in) 2007.

Can we expect to see a wave of consolidation amongst the servicers?

It is too early to anticipate any movements. But experts are certaintly talking about a possible concentration of servicers. Most of them are at least partially owned by investment funds, which will establish their exit strategies at some point and that may lead to movements, but I do not see that happening in the very short term. (…).

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake

Funds Seek Out Dilapidated Buildings For Renovation

24 August 2015 – El Economista

The interest from international funds in Spanish real estate has no limits. These investors are not only looking for iconic buildings and premises right in the centre of Madrid, they are also willing to buy dilapidated residential properties for renovation.

Interest is growing in the acquisition of these kinds of assets in cities such as Madrid and Barcelona, explains Samuel Población, National Director of CBRE Residential. According to the director, these investors, which tend to be international funds of Anglo-Saxon, US and French origin, are willing to pay between €5 million and €25 million to buy properties that need to be fully refurbished. “They spend up to €50 million on a single asset, but there do not tend to be many buildings for that price on the market”, he adds.

The modi operandi of these funds are almost always the same. They form partnerships with Spanish property developers, which contribute a smaller proportion of the capital, but who know the local market and who can streamline the administrative procedures. If a fund has a good business plan, it may generate a return within two and a half year, explains Población.

These investors also purchase properties to demolish them and build new ones in their place; in fact, that is often a cheaper option than a complete refurbishment. In this sense, Población indicates that “the problem they face is that the listing levels (for the protection of buildings) are very high and do not allow developers to demolish buildings and construction new ones. They have to restrict themselves to full refurbishments, preserving elements such as stairways and façades, which drives up the construction costs significantly”.

That is exactly why Población believes that introducing more flexibility in terms of the listing levels of buildings would allow the stock of homes to be refurbished more quickly, since more investors would enter the market. The reality is that Spain needs this type of investment, since around two million homes in the country are in poor conditions and need renovating, according to the figures provided by the Institute for Energy Diversification and Saving (IDAE). These figures place Spain, which has 25 million homes in total, as one of the most obsolete real estate stocks in the European Union.

A real reflection of these numbers has been seen in Madrid this month, where two properties have been demolished due to their poor condition. To avoid these kinds of incidents, Norberto Beirak, a member of the Governing Board of the College of Architects in Madrid, considers that certain protocols need to be established, which must be fulfilled when Technical Inspections of Buildings are carried out (ITE).

“There are no rules governing the procedures for these inspections”, he explains. Moreover, it is typically the buildings’ owners that pay for this service and they tend to commission very basic inspections due to a lack of resources.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

GreenOak Acquires 4 Office Buildings In Madrid’s Avalon Business Park

24 August 2015 – Mis Oficinas

The US fund GreenOak has purchased four office buildings from Banco Santander. The offices, which are located on Calle Santa Leonor in the Avalon Business Park (Madrid), have a combined surface area of 21,170 m2 and 353 parking spaces. In May, Meridia Capital purchased the other five buildings that make up the park (spanning 25,785 m2 and with 423 parking spaces) from the Naropa family office.

The main tenants of these offices include Arcelor, Konecta and Tatacs. All three lease more than 1,000 m2 of office space each.

GreenOak, founded in 2010, has a portfolio of assets under management worth $5,400 million.

Original story: Mis Oficinas

Translation: Carmel Drake