Month: August 2016

CNMC Approves Merger Between Merlin & Metrovacesa

30 August 2016 – Expansión

Authorisation from the CNMC / The merger will result in the creation of the largest real estate company in Spain, with assets worth almost €10,300 million. The group will compete with the large European Socimis.

On Friday, Spain’s National Commission for Markets and Competition (CNMC) approved the merger between the Socimi Merlin Properties (owner of Torre PwC in Madrid, pictured above, amongst other assets) and Metrovacesa, the real estate company controlled by Banco Santander, in an operation announced on 21 June. With the green light from the supervisory body, the door has been opened for the creation of a giant that will become the largest real estate company in Spain and one of the largest in Europe. The group will own assets worth €10,297 million in total.

The CNMC approved the deal on the basis that the barriers to entry into the tertiary real estate business (shopping centres, offices, logistics warehouses, retail premises and hotels) are not instrumental. And on the basis that this business, which comprises domestic and international companies, is quite fragmented in Spain, according to the body.

The analysis performed by the Commission focused on the relationship of control between Merlin, Testa – the real estate company that the Socimi purchased from Sacyr and in which it owns a 99.93% stake, and for which it plans to complete the integration of the remaining 0.07% within the next few months – and Testa Residencial, which is fully owned by Testa and therefore controlled indirectly by Merlin.

Three carve-outs

The operation will involve the carve-out of Metrovacesa into three lines of business, as revealed by Expansión on 22 June. One real estate line, one residential line and one line for assets under development and land.

The new Merlin will group together all of the real estate business and will acquire Metrovacesa’s tertiary assets, worth €1,672 million. To execute the operation, the Socimi will increase its share capital by 146.7 million shares, at a price of €11.40 per share.

The residential arm of Metrovacesa will carve out its assets from its rental housing business and move them into the newly created company Testa Residencial. The gross value of that company’s assets will amount to €980 million and it will also take over debt amounting to €250 million not transferred to Merlin as part of the tertiary business.

In terms of the third line of business, a newly created public company will take ownership of Metrovacesa’s remaining assets, in other words, the set of land and work in progress in the tertiary sector whose characteristics “do not fit with the profile defined by Merlin for its investments”. The total value of the assets of this third company will amount to €326.49 million.

The Boards of Directors of both companies will meet on 15 September to give their final approval of the operation.

In terms of the shareholder structure of the new Merlin and Testa Residencial companies, Banco Santander will be the largest individual shareholder of both, with stakes of 21.95% and 46.21%, respectively. Merlin will be left with a 68.76% stake in the tertiary business and Metrovacesa will have a 31.24% stake.

In the case of Testa Residencial, Metrovacesa’s shareholders will acquire 65.76% of the share capital.

Original story: Expansión (by María Sánchez)

Translation: Carmel Drake

The Socimis Set Their Sights On Rental Housing

30 August 2016 – Expansión

After buying up offices, shopping centres and hotels, many Socimis are now setting their sights on rental housing.

The Socimis owned by Domo, Alquiler Seguro and Inveriplus, amongst others, are preparing to start trading on the stock market. (…).

At least five new Socimis, focusing on rental housing, are expected to debut on the stock market over the next few months. Some of these Socimis have already started the process to join the MAB by preparing their Information Memorandums for Incorporation onto the Market (DIIM), which will, subsequently, be submitted for review by the MAB’s Coordination and Incorporations Committee and the Board of Directors. These bodies must analyse the document and decide whether or not to approve their debuts on the market.

The potential new joiners to the MAB include the Socimi owned by the management company Domo, which has the distinction of being able to offer its investors the possibility of participating in every project phase – from the acquisition of land, to the monitoring and control of developments, to placing homes up for rent and, subsequently, where appropriate, the sale of the assets. This Socimi is scheduled to join the MAB in September.

New joiners

Domo Activos Socimi, which was constituted on 11 June 2015, aims to raise up to €50 million in initial capital and then carry out capital increases to raise up to €250 million.

Meanwhile, the Socimi owned by Alquiler Seguro – Quid Pro Quo – is planning to debut on the stock market before the end of the year. The company initially wants to raise €50 million, which it will use to purchase properties for their subsequent rental.

The company’s plans involve incorporating 500 homes into its portfolio during the first phase, and its five year objective is to own around 6,000 homes and reach a fund volume of €500 million through subsequent capital increases.

Another Socimi that is finalising its debut on the stock market is owned by Inveriplus, a firm that specialises in the clean up of real-estate assets. This company will be created with €10 million, which will be used to purchase developments. In addition, the company plans to invest €60 million in assets before its debut on the stock market.

Armabex – which specialises in the constitution of Socimis and their subsequent incorporation onto the stock market – is working with two other companies that it expects will be ready to debut on the MAB before the end of the year. One of those Socimis is the subsidiary of a real estate company and the other is a company owned by two architects with projects in the south of Madrid. (…).

Currently, the average gross yield on rental housing amounts to 4.6%, according to the latest available data from the Bank of Spain. If we include future capital gains, from the sale of assets, those yields can soar into the double digits. (…).

For the time being, the ratio of rental properties to owned properties in Spain stands at around 20%, whilst the European average is closer to 35%, with some cities, such as Berlin, reporting percentages of almost 60%. These figures indicate that there is still a lot of potential (in Spain). (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Registrars: House Sales Soared By 23.7% In Q2

30 August 2016 – Expansión

Between April and June, 107,838 homes were sold, specifically 88,291 second-hand homes and 19,547 new homes. The figure represents the highest number of transactions recorded in a single quarter in the last three years.

(…). According to data published yesterday by the College of Registrars, house prices rose by 7.48% in Q2 compared with the same period last year. Compared with the figures recorded during the first quarter, the rise between April and June amounted to 2.19%. Despite these significant increases, prices have still not returned to their pre-crisis levels. And although the cost of housing is now similar to the level last seen in 2004, the cumulative decrease still amounts to 26% with respect to 2007, when prices reached their highest level before the burst of the real estate bubble.

The data from the College of Registrars also shows that the figures for the second quarter “comfortably” exceeded the 100,000 transaction threshold, after more than three years below that figure. Specifically, 107,838 transactions were signed during the second quarter (representing an increase of 23.7%), of which 88,291 corresponded to second-hand homes and 19,547 to new homes. Nevertheless, sales of new homes recorded their second consecutive positive inter-quarter variation (0.84%), after a long period of steady decline. It is the highest level seen in the last five quarters, proof that this type of housing is now showing its first signs of recovery.

Second-hand homes

In addition, sales of second-hand homes continued their strong upwards trend, already seen in recent quarters. The 88,291 sales recorded represented a QoQ increase of 10.31%, resulting in the highest number of second-hand sales in almost nine years, according to the College of Registrars. We have to go back to Q3 2007 to find such a high level of quarterly second-hand home sales.

Most autonomous regions recorded a QoQ increase in the number of house sales (specificially fifteen), with double-digit increases in six of those. The highest number of transactions were recorded in Andalucía (20,846 homes), Cataluña (17,300), the Comunidad Valenciana (15,734) and Madrid (15,540). In relative terms, the highest increases were recorded in the autonomous regions of the Balearic Islands (31.4%), País Vasco (24.07%) and Murcia (22.2%).

Furthermore, demand for housing from foreigners maintained its traditional strength during the second quarter, to account for 13.38% of all house purchases, up from the figure of 12.93% recorded during the first quarter. The historical maximum was recorded in Q4 2015 (14.38%). British citizens continue to buy the most residential properties in Spain; they accounted for 19.73% of all purchases made by foreigners. They were followed by German (7.3%), French (7.05%), Swedish (6.9%) and Italian buyers (5.9%). (…).

Meanwhile, 11,470 mortgage foreclosure proceedings were initiated during Q2 and there were 2,432 “daciones en pago”, down by 30.8% compared with a year earlier.

Mortgage debt grew by 1.6% during the second quarter, to reach an average of €110,981.

Original story: Expansión (by Calixto Rivero)

Translation: Carmel Drake

Ministry Of Finance Auctions Off 34 Buildings In Community Of Madrid

30 August 2016 – Expansión

The Ministry of Economic Affairs and Finance has announced the public auction of 34 properties owned by the Central Government in Madrid capital and in another nine municipalities across the Community of Madrid, according to a statement published today in the Official State Gazette (BOE).

The properties comprise urban buildings and land in the centre of Madrid as well as in the municipalities of Galapagar, Torrelodones, Somosierra, Boadilla del Monte, Chinchón, Loeches, Tres Cantos, Valdemoro and Estremera.

Bids will be submitted in sealed envelopes and the amount of the guarantee will be 5% of the value of the assets, according the statement made in the BOE by the Delegation for Economic Affairs and Finance in Madrid.

The period for the submission of bids will open tomorrow and will end on 20 October, with the sealed envelopes being opened on 3 November.

In the capital, the properties located in the following places will be auctioned off: Calle General Varela, 21-23; Calle Almagro, 28; Calle Monte Esquinza, 41- ground floor; Calle Cervantes, 6; Calle la Oca 15, ground floor, right; the plot of land on the corner of Avenida Santo Ángel de la Guarda and General Cadenas Campos 19, as well as plots in the APR Calle Cantalejo, in the UNP Ciudad Aeropuertuaria de Valdebebas, in the UZP Ensanche de Vallecas and in the PAU de Carabanchel.

The urban plot on Avenida Santo Ángel de la Guarda, which has a surface area of 3,173.81 sqm and a constructible area of 11,230.15 sqm, has the highest appraisal value (€17.18 million) of all of the assets in the portfolio.

It is followed by the buildings on Calle General Valera de Madrid, valued at €5.9 million and Calle Almagro, worth €3.18 million, whilst in the municipalities, the most valuable building is a rural property in Valdemoro, measuring 46,999 sqm, worth more than €3.4 million, as well as a plot of land in Tres Cantos, valued at €3.2 million.

Those interested in participating in the auction must provide the information detailed in the tender specification document, and may request information about the properties from the State’s Real Estate Service from the Treasury’s delegation on Calle Guzmán el Bueno, or through the Ministry’s website www.minhap.gob.es.

Original story: Expansión

Translation: Carmel Drake

Housers Will Build First Building In Spain Using Collective Financing

26 August 2016 – El Economista

The real estate market has evolved so much in recent years that now anyone can become a residential developer without triggering the start of a new real estate bubble, as happened before the crisis, when many entrepreneurs decided to enter this business without any prior knowledge of it.

This has been made possible thanks to an initiative developed by Housers, which has started to raise funds, through crowdfunding, for the construction of the first residential building in Madrid to be financed by this shared investment model, and the subsequent sale of its homes. This is also the first real estate project of its kind to be undertaken in Spain.

The project involves the purchase of land, the demolition of a small existing residential property on the site, as well as the complete construction of a residential building, which will comprise five homes and three duplex lofts.

According to the company, the turn-key construction projectwill begin once the financing has been raised, and will take approximately 24 months. The homes will go up for sale when the building work commences.

The cost of the real estate project is estimated to amount to €1.041 million, of which €255,228 corresponds to the gross acquisition cost of the existing building, €539,000 relates to the construction of the new building, and the remainder corresponds to processing costs, taxes and a cushion for unforeseen expenses.

The project aims to raise €748,000 (71.8% of the project) through crowdfunding, with each investor able to participate from as little as €50; and €293,000 through a mortgage to improve returns for investors.

The term for the sale of all of the homes is 24 months. During this period, the gross yield is expected to amount to 44.06% and the net yield will reach 27.94%; those profits will be distributed in the form of dividends to all of the participating investors. Housers estimates that the sale of all of the homes in the building will generate €1,242,000. The residential building will be located in Madrid, in the district of Tetuán, an area that has very high potential given the scarce stock of new homes there.

Housers celebrated its first birthday a month ago and in that time, it has created a community of more than 8,000 investors and has received contributions amounting to more than €8.5 million to finance the purchase of 38 properties in Madrid, Barcelona, Valencia and Marbella.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

Insurance Companies Have Unrealised Gains Of €2,400M From RE

26 August 2016 – Expansión

Mapfre, Mutua Madrileña and Catalana Occidente own the majority of the real estate in the insurance sector, whose total portfolio amounts to €4,475 million.

Insurance companies in Spain are accumulating a cushion of unrealised gains in their real estate investments amounting to €2,433 million, according to data from the Director General of Insurance and Pensions.

This amount is the difference between the value that the companies assigns these assets on their balance sheets and the market price of these assets, according to the mandatory appraisals that have to be performed periodically by independent appraisers.

These latest gains in the insurance sector are still well below the threshold of €4,226 million achieved in 2009, at the beginning of the burst of the real estate bubble.

Unrealised gains are recognised in the accounts of entities if the properties are sold at a profit. They are also included in the calculation to measure the solvency margin of the entities, which measures the firms’ strength to deal with unforeseen events using their uncommitted assets.

Insurance companies have traditionally invested in properties, given that they are a particularly appropriate asset for the long term over which they conduct their activity. They also generate regular income in the form of rental payments.

In addition, insurance companies have had to diversify their portfolios following the decrease in interest rates in recent months, which makes the investment strategy of these entities more complicated; they have traditionally focused on public debt, primarily in Spain.

Purchases

Insurance companies are risk averse in their investments and in the face of this new panorama, they have made several purchases that have increased their real estate portfolios, particularly important for the Spanish capital firms Mapfre, Mutua Madrileña and Catalana Occidente, which own the majority of the sector’s total portfolio of €4,475 million, according to data from the Director General of Insurance and Pensions. In recent months, these three entities have been involved in several real estate purchases amounting to more than €250 million. (…).

The Mapfre Group, which has a presence in fifty countries, reported latent gains of €975 million in its accounts for 2015 on the basis of the book value of its total real estate portfolio (€2,267 million) and the market price (€3,242 million). Most (56% or €1,835 million) correspond to real estate investments, whilst the rest (44% or €1,406 million) are properties used by Mapfre. (…).

Meanwhile, Mutua has accumulated a piggy bank of unrealised real estate gains amounting to €462 million, with total assets worth €1,443 million at market prices and €981 million on the balance sheet. Its assets are concentrated in Madrid, where historically it has owned a handful of individual buildings on Paseo de la Castellana. (…).

Grupo Catalana Occidente’s investment in real estate amounts to €1,024 million, which includes unrealised gains amounting to €465 million. The insurance company, which has a presence in more than fifty countries, acquired a building measuring almost 4,000 sqm in the 22@ district in Barcelona in July.

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake

Azca: Madrid’s Financial District Gets A Makeover

26 August 2016 – Expansión

Three buildings in the area are currently being completely renovated, along with all of the public spaces in the financial district. Zara will move in soon and the neighbouring Bernabéu stadium will be renovated in 2018.

The refurbishment of some of its classic office buildings, the complete renovation of the public squares, the arrival of a fashion giant and some changes in the faces of some of the most illustrious neighbours. That is the urban landscape facing Azca at the moment and it means that the financial district will have a completely new image in a matter of months.

In the schedule of programmed works, we have the complete refurbishment of Torre Europa, one of the flagship buildings in the area, which has not had any space available for three decades. Following the departure of its veteran tenant – KPMG -, Grupo Infinorsa has decided to invest €20 million in the complete modernisation of the 32-storey skyscraper, including the renewal of the façade, which will be completed at the beginning of 2017. (…).

JLL has been commissioned to market the empty office space, equivalent to 70% of its 42,000 sqm surface area, and has already signed its first contract with the US multinational AOL.

Also for the first time since it opened in 1981, almost all of the Torre Negra is available for rent; until last year, it housed the corporate headquarters of BBVA, which continues to occupy the upper floors of the 28-storey skyscraper. A construction canvas currently covers the façade of the building, renamed Castellana 81, where GMP is undertaking work to improve the 38,000 sqm space.

The triangle of planned renovation work is completed by the former headquarters of the Saint Gobain group in Madrid, which is currently unoccupied. With a leasable surface area of more than 16,000 sqm, spread over 18 floors, the building’s façade is going to change with the inclusion of some unique wavy slats on the outside, although the internal refurbishment will be carried out from the ground floor to the roof terrace.

Whilst three of its most spacious office buildings are being updated, Azca is also participating in the renewal of its public spaces. (…).

For the time being, the first phase of the rehabilitation of Plaza Pablo Ruiz Picasso has been completed and the second, and final, phase is scheduled to begin before the end of the year. (…).

But the most high profile issue in Azca over the next few months will be the arrival of Zara to the financial centre of Nuevos Ministerios. The company owned by Amancio Ortega plans to open its largest store in Spain in the 5,000 sqm building currently occupied by FNAC, next door to El Corte Inglés.

The renovation of the area could be completed in the medium term with urban projects in the vicinity. One project that is already in an advanced phase is the renovation of the Bernabéu stadium, which will not involve the extension of the constructed surface area, but will allow the construction of a roof, which is what the club wants. Most of this construction work will be carried out in 2018.

Another project, which is in an embryonic phase, will be the transformation of the Palacio de Congresos on La Castellana into a 23-storey property, which will include, amongst other facilities, a five-star hotel. (…).

Original story: Expansión (by Marta Belver)

Translation: Carmel Drake

Sareb Will Take Ownership Of The ‘In Tempo’ Skyscraper In Benidorm

25 August 2016 – El Economista

The In Tempo skyscraper in Benidorm is the tallest residential tower in Spain and the second tallest in Europe, however, it is proving difficult to find an investor willing to pay the asking price. The property is weighed down by debt amounting to €100 million, which is in the hands of Sareb, but is reportedly worth around €90 million.

According to the newspaper El Confidencial, none of the offers for the skyscraper, which has been on the market since the end of last year, have exceeded €60 million. For this reason, Sareb has not waived its right to submit a higher offer to take over the asset, in an operation that would form part of the liquidation process of its current owner and developer, the company Olga Urbana.

According to online media, the bad bank has confirmed this information, however, “they assure that they have not yet received the asset foreclosure notice from the judge”.

The 52-floor building, which is 189m tall and contains 300 apartments is a symbol of the real estate bubble. Once the judge has authorised the award of the asset to Sareb, the bad bank could begin a new sales process involving negotiations with the two funds that have already expressed interest in the property.

Although construction work is still underway and the degree of completion ranges between 83% and 97%, apartments in the skyscraper are being sold for between €190,990.80 and €1.6 million, according to the online portal Idealista.

Original story: El Economista

Translation: Carmel Drake

Family War Between The Owners Of La Finca

24 August 2016 – Expansión

An open war is raging between members of the García-Cereceda family, owner of Procisa, the property developer of, amongst other assets, the exclusive La Finca business park in Madrid.

The carve out of the property developer and the subsequent entry of the US fund Värde has represented a new chapter in the battle between Susana and Yolanda García-Cereceda, both daughters of the founder of Procisa, Luis García Cereceda, who died in 2010, and both heiresses of the family empire.

As a result of this latest encounter, a ruling from Commercial Court number 11 in Madrid, on 18 August, decided to partially adopt the injunction requested by Mercedes López, the mother of Susana and Yolanda García-Cereceda, regarding the total carve out of Procisa.

The carve out of Procisa

The carve out was approved at a general shareholders’ meeting held on 26 July 2016. Specifically, the shareholders approved the decision to divide Procisa’s assets between La Finca Global Assets – owner of the carved out company’s real estate assets, which manages the leases of the offices and retail premises; La Finca Somosaguas Golf – which included ownership of a urban development area for luxury residential use that can be executed immediately, known as Casablanca – and finally, La Finca Promociones y Conciertos Inmobiliarios (owner of Procisa’s remaining assets and liabilities).

This carve out plan also involved the entry of the US fund Värde into the office business, as Expansión revealed in April.

This line of business is the group’s most profitable and it includes, amongst other assets, La Finca business park, located in Pozuelo de Alarcón, whose tenants include multinationals such as Orange and Microsoft.

Entry of Värde

Procisa, chaired by Susana García-Cereceda, had reached an agreement to sell 40% of its office business to the fund Várde, with Procisa retaining ownership of 100% of the residential business.

According to that plan, Susana García-Cereceda would lead the two areas. The entry of new members with experience and background in the sector was also planned, to complete the organigram of the new real estate company.

Nevertheless, this decision had not been approved by all of the company’s shareholders. Some voices against the negotiations argued that the complete carve out had not been referred for consultation to the Tax Authorities or other tax bodies to confirm the existence or otherwise of tax benefits in terms of exemption from Corporation Tax.

According to sources close to the opposing shareholders, if there are no tax benefits in terms of Corporation Tax, then the younger daughter of García-Cereceda, Yolanda, and her children, would be “seriously harmed”.

The legal ruling on 18 August requires the Commercial Registrar to suspend the inscription of the corporate operation agreed at the general shareholders’ meeting in July. This decision, therefore, hampers Värde’s entry into Procisa’s office business. (…).

According to the ruling, the suspension must remain in force until the Tax Authorities have issued their binding opinion regarding the existence or otherwise of tax benefits in terms of Corporation Tax. (…).

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

Värde – One Of The Largest RE Developers In Spain

24 August 2016 – Expansión

The US fund Värde has been one of the most active investors in the Spanish real estate sector in recent years.

It made its last purchase in June here, when it bought the real estate group Aelca. Specifically, Värde signed an agreement with the Avintia Group to purchase the company for around €50 million.

The US fund is also a major shareholder in Dospuntos – the former real estate division of the Sanjosé group, the result of the integration of Parquesol within the construction group – . The fund acquired 51% of Sanjosé Desarrollos Inmobiliarios in August 2015 after acquiring a 25% stake from Popular for approximately €90 million.

Dospuntos has launched a plan for the promotion and development of homes that includes an investment amounting to €2,000 million over six years and it is, alongside Neinor Homes – the real estate arm of the fund Lone Star – one of the main residential property developers in Spain.

Dospuntos’ plan involves starting the construction of homes this year and completing around 800 homes in 2018 and almost 1,500 in 2019. With this roadmap, the group hopes to reach its cruising speed in 2019, with the completion of 2,000 homes per year.

In addition to Värde, the property developer is also partially owned by the funds Marathon and Attestor, as well as Bank of America Merrill Lynch (BofA), JPMorgan and Barclays.

The US fund also controls Bancopopular-e (Banco Popular’s card business). Värde purchased 51% of the business from the financial institution in October 2015. In addition, Värde acquired, together with Kennedy Wilson, the real estate arm of Popular, Aliseda, for approximately €800 million.

At the global level, the fund, founded in 1993 in Minnesota (USA) manages more than $40,000 million and has 200 employees, of which 65 are professional investors with more than twelve years experience.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake