Month: November 2016

Ibosa To Convert Hotel Foxá Into Luxury Homes

30 November 2016 – Cinco Días

The Hotel Foxá located next to Chamartín train station will soon disappear to be converted into a residential tower containing luxury homes, worth up to €1 million each. According to the property developer, the Ibosa Group, the design will adopt a “New York architecture” style.

The company, which manages housing cooperatives, will spend €30 million (including the purchase of the building) on the project to convert the former Hotel Foxá M-30 in Madrid – which has been closed since 2013 – into a 16-storey residential complex containing 72 homes, which are expected to be handed over to their owners during the final quarter of 2018.

70% of the homes in the tower, known as Torre Borealis, have already been sold and the demolition work is expected to begin next spring, once all of the properties have been sold. The construction work will involve the complete renovation of the building, including a total transformation of the façade, according to explanations provided by the Head of Ibosa.

In fact, the company expects to obtain the licence that it needs to undertake the work at the building within the next few weeks. The property previously housed a four star hotel for 13 years.

The price of the homes will range from €175,000 to €900,000, with each property containing between one and four bedrooms. Moreover, the constructed surface area will range between 40m2 and 200m2 per apartment. The building, located on Calle Serrano Galvache 14, will have a double height entrance hall and 1,000 m2 of common areas, including a “gastroteca”, a swimming pool and a gym. There will be several different types of apartments, including ground floor duplexes, (normal) duplexes and penthouses with terraces up to 120m2.

Hotel Foxá M-30 closed its doors after the company Trome, owned by the businessman Mariano Moreno Fernández, was declared bankrupt, with debt amounting to around €300 million. The company used to own several hotels and spas.

Original story: Cinco Días

Translation: Carmel Drake

Sevilla’s Chamber Of Commerce Sells 2 Plots Of Land To Rivero Family

30 November 2016 – Real Estate Press

The Chamber of Commerce in Sevilla has recently completed the sale of a portion of land at the Antares Club, where a hotel is going to be constructed, as well as a plot of land next to Eusa, where a hall of residence for university students is going to be built. The buyer of both assets is the Rivero family.

Initially, the Chamber of Commerce’s conversations began with Joaquín Rivero Valcarce, the Jerez-born businessman who used to chair Bami and who led the merger with Metrovacesa and Gecina. Following the death of the businessman in September, his only daughter, Helena Rivera, decided to push ahead with the operation and subsequently completed the negotiations that her father had begun.

The total price for the acquisition of both plots of land amounts to around €7.5 million. The largest investment relates to the Antares hotel. The plot covers a surface area measuring 1,700 m2, allocated for tertiary use, which includes the current exhibition hall, the Spica hall, the unique sloping auditorium, as well as a section for squash courts and a space that is currently used as a car park. The amount of this acquisition is estimated to have reached €4.5 million. This plot of land has a buildable surface area of 6,000 m2, where a hotel containing around 100 rooms may be built.

In the case of Eusa, the plan is to construct a hall of residence for students, given that, as well as being located next to the Chamber of Commerce’s own training centre, the site will also be close to the Law and Business faculties and with good transport connections to the University of Pablo de Olavide. The company managed by Helena Rivero has invested €3 million on this plot of land, which may be used for educational purposes and whose buildable surface area amounts to 9,000 m2.

The Chamber of Commerce has declined to make any comments on the details of the operation, given that the negotiations are subject to confidentiality clauses. Nevertheless, the sources consulted say that the sale has gone ahead and has received the necessary approvals from the Chamber of Commerce and the Junta de Andalucía.

Original story: Real Estate Press

Translation: Carmel Drake

Al Breck’s Socimi Debuts On The MAB With 300 Rental Homes

30 November 2016 – Cuatro.com

The Socimi RREF II Al Breck will debut on the MAB today (Wednesday 30 November) at a price of €5.40 per share.

The fund Al Breck will debut its new Socimi on the Alternative Investment Market (MAB) today, Wednesday 30 November. The Socimi was constituted with a stock of around 300 rental homes, located in the centre of Madrid. The fund acquired the properties from the Spanish fund Segurfondo Investion in December 2014.

The firm, known as RREF II Al Breck Socimi, will debut on the stock market at a price of €5.40 per share, which represents a company valuation of €28.8 million, according to the BME.

Specifically, the new Socimi owns a stock of 293 homes located in the centre of Madrid (in the following neighbourhoods: Centro, Salamanca, Chamberí and Chueca), as well as in La Moraleja (Alcobendas) and in towns close to Alcobendas and Torrejón de Ardoz. It also owns twelve retail premises and one office.

According to the prospectus for the IPO, the market value of this portfolio of assets, calculated by an independent firm, amounts to €110.52 million.

On the other side, the company’s debt amounts to €70.03 million, and comprises a participative loan granted by the parent fund, i.e. a liability equivalent to 63% of the value of the portfolio. In addition, all of the homes are mortgaged in favour of Banco de Sabadell, the entity that financed their acquisition.

The Socimi will debut on the stock market with a business plan that involves generating value from its portfolio, in other words, forecasts selling all of the homes within a five-year period, which will end in December 2020.

Aggressive strategy

Specifically, the plan involves investing in improvements in the homes “to increase returns and improve occupancy rates to stable levels, implementing an aggressive rental strategy that includes, where necessary, lowering rents and making concessions to tenants to improve their cash flows”.

Subsequently, “once the occupancy rates have increased, we will ensure they remain stable and start to progressively increase rental income, in accordance with the improvements made at the properties and market prices”.

Finally, the Socimi expects “to optimise the value of the portfolio by selling the assets either individually or in batches, when demand and price make such a decision worthwhile and only after the minimum holding period of three years (applicable to all Socimis) has been exceeded”, according to the prospectus.

Original story: Cuatro.com

Translation: Carmel Drake

PortAventura’s Owner May Buy TPG’s Stake In Servihabitat

30 November 2016 – Voz Populi

The real estate arm of CaixaBank, Servihabitat, is preparing for a possible change in its shareholders. The Italian private equity group Investindustrial (which is headquartered in Barcelona) is holding conversations with TPG regarding the possible acquisition of the 51% stake that the Texan fund owns in Servihabitat. For the time being, no offer has been put on the table, but several financial sources consulted are convinced that a deal will be reached soon and that the group, owned by the Bonomi family, is well positioned to take over the reins of the real estate company.

Investindustrial already has a lot of roots in Spain and above all in Cataluña. The same sources add that Carlo Bonomi, the CEO of the firm, has a good relationship with Isidro Fainé. Both groups completed one of the largest private equity operations between 2009 and 2012, with the purchase of the PortAventura park from Criteria for almost €200 million.

The fund created by the Bonomi family also controls the rental car company Goldcar in Spain and the ambulance firm Emeru. In recent years, it has held stakes in Applus, Euskatel and Recoletos, amongst others. In fact, Investindustrial was one of the groups that submitted a bid for the takeover of RCS (owner of Unidad Editorial), but it was pipped at the post by Cairo Communication.

The possible acquisition of a stake in Servihabitat comes at a time when the financial sector is rethinking its real estate partnerships: Santander has engaged Citi to handle its purchase of Altamira; Popular is negotiating with Värde Partners and Kennedy Wilson to regain control over Aliseda; and Servihabitat has also been the target of rumours in the market. Nevertheless, the sources consulted explain that the Catalan group does not want to regain ownership of 100% of its real estate company, but rather is looking for a new partner whose plans for Servihabitat fit better with its own vision than that of TPG.

This change in strategy has not arisen due to personal differences, but rather due to the new circumstances in the financial sector. When the banks sold their stakes in their real estate companies in 2013, they did so because they needed capital; and they were very successful in this regard. In the case of Servihabitat, TPG paid €310 million for its 51% stake.

Change in strategy

Nevertheless, with the passage of time, the banks are seeing a slowdown in the rate of property sales and are incurring expenses on their income statements as a result of all of the commissions that they are having to pay their property managers.

A priori, the investment in Servihabitat does not fit with the type of investments that Investindustrial usually undertakes. It traditionally backs sectors such as services, consumer and industrial. But, sources in the sector regard Servihabitat as a classic private equity investment, since it is a cash generating machine with potential to grow through corporate operations. In fact, Servihabitat is one of the candidates in the running to buy Portugal’s largest bad bank.

The company generated EBITDA of €111 million last year. Its consolidated profit amounted to almost €44 million.

Original story: Voz Populi (by Jorge Zuloaga)

Translation: Carmel Drake

Anticipa Strengthens Its Commitment To The Rental Business

30 November 2016 – Economía Digital

Anticipa is continuing to grow its rental home business. At the end of 2015, the real estate manager bought a batch of empty homes from Banc Sabadell, specifically, 3,700 properties that it has been incorporating into its portfolio over the last few months. In addition it owns 5,500 homes from the real estate stock of the former Catalunya Caxia, the seed for the current firm Anticipa.

“We are clearly in a buying position” said Eduard Mendiluce, CEO of the company, in comments to La Vanguardia. The group has already formalised its offer to buy the Eloise portfolio that Sareb or the bad bank has put up for sale. This package of unpaid loans to property developer includes 150 buildings, containing around 4,000 homes”.

“We are already one of the largest rental home real estate companies in Spain, and we have an orderly portfolio, with market profitability and the capacity to continue growing, by incorporating more homes”, said Mendiluce.

Renegotiation of mortgages

According to explanations given by the director in a recent interview with Economía Digital, Anticipa is renegotiating 3,000 of the mortgages that it inherited from the Catalunya Caixa portfolio in their first year of life. 2,400 will result in “daciones en pago” (the cancelation of the debt in exchange for handing over the keys) and another 600 cases will see their terms and conditions renegotiated, in such a way that homeowners will be able to afford their debt repayments.

Original story: Economía Digital

Translation: Carmel Drake

C&W: RE Inv’t Amounts To €5,500M During YTD Sept 16

30 November 2016 – Expansión

Change in the trend / Investment fell by 25% during the first nine months of the year, excluding Merlin’s purchase of Metrovacesa’s assets.

During the first nine months of 2016, real estate investment in Spain (excluding the purchase of residential and corporate assets) amounted to €5,500 million, down by 25% compared to the same period last year, but in line with the first three quarters of 2014.

If we include Merlin’s integration of Metrovacesa’s assets, this figure increases by €1,000 million, explain sources at the consultancy firm Cushman & Wakefield (C&W) in their latest report.

By type of buyer, international funds lead the investor ranking, accounting for 57% of all investment, however, Spanish firms, led by the Socimis and in some cases privately owned firms such as Pontegadea, are starting to bring domestic capital into line with overseas capital as we head into the final month of the year. In 2015, domestic buyers accounted for 57% of all operations.

The decrease in investment volumes in 2016 is explained by a reduction in purchases during the first six months of the year, given that, during the third quarter, several large operations have been signed, including the acquisition of the Diagonal Mar shopping centre in Barcelona, by Deutsche Bank’s real estate fund, which paid €495 million for the property; and Torre Foster, which was acquired by Amancio Ortega’s real estate company (Pontegadea) for €490 million.

Excluding these operations, the average volume per acquisition has decreased this year, from €55 million to €40 million, say sources at Cushman & Wakefield (C&W). The average over the last decade stands at €50 million.

Shopping centres

By type of asset, the large shopping establishments (centres, retail parks and flagship stores) have been the stars of the investment market so far in 2016, accounting for 44% of the total, according to the report. In this way, in addition to Diagonal Mar, the following establishments have changed hands: the ABC Serrano in Madrid and the Gran Vía in Vigo. “Investment in retail in Spain is much more oriented towards foreign capital, above all, in the case of shopping centres”, say sources at the consultancy firm.

Meanwhile, offices have accounted for 25% of the total investment volume, compared with 30% on average over the last ten years.

Purchases of logistics assets are recovering well, thanks to the high returns that they now offer compared to other types of properties, whose returns have started to decrease due to high demand. One of the most important operations of the year saw the fund CBRE Global Investors purchase 16 logistics centres from Metrovacesa.

By location, Madrid maintained its position as the leading destination for real estate investment in Spain, accounting for 30% of the total.

After a strong third quarter, the forecast for the end of the year is positive, but lower than the figure recorded in 2015. “We estimate a total spend of around €8,000 million for the full year (excluding Metrovacesa’s office portfolio, worth €1,000 million), compared with €8,600 million last year”, say C&W.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Housing Crash Turns Spain’s Young Into Generation Rent

30 November 2016 – Bloomberg

Having witnessed the meltdown in the country’s property market at the height of the European financial crisis, more young Spaniards are turning their backs on their parents’ dream of owning a home. The emerging trend is leading Merlin Properties Socimi SA to bet it can overtake Goldman Sachs Group Inc. and Blackstone Group LP in the rental market. Spain’s biggest real estate investment trust is planning to almost double the units it has for rent by the end of the year, Chief Executive Officer Ismael Clemente said in an interview.

“Young Spaniards today don’t have a culture of ownership — they no longer see renting as a bad thing,’’ he said.

The real estate crash and resultant bank bailout spurred many millennials to question the received wisdom that a Spaniard’s house is not just a home but also a haven for savings. The crisis sent unemployment soaring, stripping away the economic certainties of a safe job and income and the relentless rise in property prices that had underpinned the country’s passion for home ownership.

“The concept of owning a home in Spain was almost religious, but that’s changed for an entire generation of young people who have seen people losing their homes, prices dropping and losing access to credit,” said Fernando Encinar, co-founder and head of research at Idealista SA, which operates an online platform to buy and rent homes. “That has made renting a more attractive option, especially in big cities such as Madrid and Barcelona.”

Credit Explosion

Spain’s adoption of the euro in 2002 drove down long-term interest rates to power a surge in mortgage lending that jumped more than fourfold from 2000 to its 2010 apex. The top of its property boom saw Spain building more houses than Germany, France and the U.K. combined, and house prices soared in tandem with the credit explosion. After rising 71 percent between 2003 and 2008, when home prices peaked, they then plunged 31 percent before starting a slow recovery in late 2014.

The number of homes listed for rent has risen from 9 percent of the total number of available homes in big cities in 2000 to as much as 25 percent in 2015, according to Idealista. The proportion of Spaniards renting a home has risen to 22 percent from 19 percent in 2007, according to data from Eurostat, the European Union’s statistics office.

That compares with a European Union average of 30 percent. Even so, home ownership continues to dominate with 78 percent of Spaniards describing themselves as owners. That’s slightly down from 81 percent in 2007 but above the EU average of about 70 percent.

No-Brainer

For Guillermo Garcia, a 26-year-old restaurant entrepreneur, the decision to rent instead of buying a three-bedroom apartment in central Madrid was a no-brainer.

“Owning a house is not a sign of success,” he said. “I don’t have to live like my parents did. I don’t want to sign away my life like that.”

For Merlin, the rising popularity of rentals represents a business opportunity.

“Until now, there has been no professional landlord in Spain and the quality of the rental sector has been very poor,” Clemente said in the interview.

As part of Merlin’s business combination with Metrovacesa SA announced in June, the two will also merge their portfolios of rental apartments. Merlin and the former shareholders of Metrovacesa will combine the properties and add more apartments to create a landlord with 10,000 rented homes, dwarfing the 6,000 units owned by Blackstone in Madrid and the close to 5,000 homes owned by Goldman Sachs.

Clemente, who wants to list or sell its residential unit — Testa Residencial — within three years, sees the switch to renting as part of a wider generational change that’s also underway in his own home.

“My children don’t have a culture of ownership,” he said. “They rent their mobile handsets from Telefonica, they listen to music on Spotify and they simply no longer see renting as a bad thing.’’

Original story: Bloomberg (by Maria Tadeo and Sharon R Smyth)

Edited by: Carmel Drake

Metrovacesa Puts Merlin On The Shopping Centre Map

29 November 2016 – Expansión

Ismael Clemente presented an ambitious proposal to his shareholders on 15 September 2016. The Socimi, which debuted on the stock market in July 2014, without any assets on its balance sheet, submitted the decision to absorb the traditional real estate company Metrovacesa, to the scrutiny of its investors, led by Santander and BBVA (…).

And having obtained the general support of the shareholders, Clemente is now working on managing the largest real estate company in Spain and one of the largest in Europe, with assets worth €9,400 million and annual gross revenues of €450 million. “The immediate focus is to successfully complete the post-merger program with Metrovacesa, which was registered on 26 October 2016 and whose shares have now been admitted for trading. Technically and legally, the operation has been completed, but now the business side begins, with the launch of three workstreams to manage the integration of the systems, human resources and operations”, said Clemente.

The Executive…defines Metrovacesa’s portfolio as “fantastic”. “And that’s not a coincidence, it is a historical company. It has been punished by relative inactivity in recent years, but it has a incredible intrinsic quality”.

Critical mass

Clemente highlights Metrovacesa’s shopping centre portfolio as the key to understanding the transaction. “For us, the over-riding purpose of the operation is, above all, the shopping centres, which clearly put us on the map. Before, we were in the middle of nowhere and now we have sufficient critical mass to allow us to negotiate better with our commercial operators. We have also grown in the office segment, and although that was not a primary objective, the purchase of Metrovacesa places us in a completely different class in terms of space (in m2), in spectacular locations, which really strengthens the position of leadership that we already held”.

Through the integration of Metrovacesa, Merlin has incorporated 14 shopping centres into its portfolio, worth more than €1,000 million, placing it second in the market behind only Unibail-Rodamco; as well as 37 office buildings covering 574,781 m2, worth €1,835 million.

In terms of challenges for next year, Clemente has earmarked making improvements to the occupancy rates of the offices it has inherited from Metrovacesa and acting “decisively” with respect to its shopping centres to secure occupants and sales.

In addition, Merlin will also look to either create a specialist Socimi or sell its portfolio of hotels as a whole. “We will analyse the book value and decide whether a direct divestment of the portfolio as a whole is possible. If not, we will probably decide to create a subsidiary, look for partners and constitute a company, with a majority, minority or equal stake shareholder structure”.

Following the integration with Metrovacesa, Merlin has 24 hotels with a gross value of €654 million. By number of rooms, the union between the two companies has given rise to a hotel leasing giant with almost 4,500 rooms, behind only Hispania.

In addition, he points to a surprise benefit from the operation with Metrovacesa: the strengthening of Testa Residencial, the subsidiary created with residential assets proceeding from the purchase of Testa: “A by-product has emerged, which has a life of its own. At first, we were exploring the market for potential buyers but, now, we are talking with our shareholder banks and other firms because we believe that this vehicle has the potential to be the star of the residential rental market in Spain”.

Original story: Expansión (by R.Arroyo and R. Ruiz)

Translation: Carmel Drake

IPE: House Prices Will Rise By 7.5% In 2016

28 November 2016 – Expansión

According to the Institute of Business Practice (IPE), house prices are booming, driven by a significant increase in sales (+17%). Mortgage lending (+8.7%) and building construction (+25%) are also underpinning the recovery of the sector, which will reach cruising speed in 2017.

Prices, sales, construction permits, mortgage lending, building construction, returns from rental properties…all of the major indicators in the residential market are growing at a strong pace in 2016, the year of consolidation for the real estate recovery. The housing sector has switched gears and is progressing, steadily, towards sustainable figures.

The end of year forecasts from the Real Estate Academic Arm of the Institute of Business Practice (IPE) confirm this trend. Firstly, the forecasts show that the average sales price of homes will rise by 7.5% this year (…). By the end of the year, the average home will cost €144,973, a level not seen since the end of 2012. It is worth remembering that, according to Spain’s National Institute of Statistics (INE), average house prices rose by 4.2% in 2015, the largest increase since 2007 (5.7%). If IPE’s predictions are correct, the price rise this year will be the largest increase since the recovery of the property market.

In addition, according to the XXII Real Estate Pulsometer from the IPE, house sales are soaring, by 17.2%, to reach 414,812 transactions, the best figure since 2010,and 9% higher than in 2013, which is when the sector bottomed out.

Permits and house starts are also rising, but they are starting from a very low base. Permits have increased by 25%, from 35,945 to 44,880. This forecast represents the most abundant activity in terms of cranes since 2012, but it is light years away from the years of the boom, when more than 700,000 house starts were recorded per year. The number of urban mortgages granted – over plots of land, homes, garages, premises, etc. – is expected to grow by 8.7% and the amount loaned is forecast to increase by 14.9%, according to the study, prepared using data from MAR Real Estate’s network of real estate agents and the Network of Qualified Real Estate Advisors, which has been cross-checked with official data from INE, the Ministry of Development, the College of Registrars and the Notaries.

Two speeds

At the same time, the surplus of unsold new residential properties is expected to decrease significantly. At the end of 2015, this stock amounted to 433,583 homes. In 2016, a quarter of that volume has been drained, with 326,295 units left. That figure is less than half the stock recorded in 2014 (675,945), according to the IPE’s study.

Almost all of the unsold homes are located in areas with limited demand or are properties that fail to fit with the current needs. By contrast, in the most established and sought-after areas, such as the centre of Madrid and Barcelona and along the main areas of the Costa del Sol, homes, and even land, are scarce. In other words, the recovery is still happening at two speeds, but the difference is less acute, in the sense that, it is now widespread across almost all of Spain.

What’s more, the residential rental market is recovering strongly (by 4.4% gross per annum, or 8.3% with capital gains) (…).

With these statistics, the residential market is heading towards its cruising speed. The outlook for 2017 is encouraging, although all indicators point towards a slow down in terms of the increase in house prices. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Interview With Ismael Clemente, CEO of Merlin Properties

29 November 2016 – Expansión

On 21 December 2015, Merlin Properties became the first real estate company to enter the selective Ibex 35 since the burst of the real estate bubble. And for just over a month now, it has led the ranking of the largest Spanish real estate groups, following its merger with Metrovacesa. The Socimi, led by Ismael Clemente, has marked this milestone just two years after making its debut on the stock market.

In an interview with Expansión, the CEO of Merlin Properties, Ismael Clemente, has confirmed that he is committed to ensuring that the banks that have just become shareholders of the Socimi will stay for the long haul. He is also commited to maintaining a high level of shareholder remuneration.

Following the integration with Metrovacesa, Merlin has increased its real estate portfolio to €9,500 million and has incorporated three new shareholders: Santander, which is now its largest shareholder, with a 22.2% stake; BBVA, with 6.4%; and Popular, with 2.8%.

“There is no formal commitment that the market is not already aware of. But, from a factual standpoint, we think that, given where Santander and BBVA have placed their stakes (in industrial investments), they will hold onto their share capital for much longer than the market expects, because they can see that we are a company with great potential and a strong dividend yield, which we will maintain over the medium term”, said Clemente.

The Director said that the banks are the new high profile shareholders of the Socimi, but added that they are not interfering with the management of the business. In this sense, Clemente commends the appointment of the directors who will control the banks’ stakes and, specifically, that of Rodrigo Echenique, the former Chairman of Metrovacesa and the Chairman of the Board of Directors of the new Merlin. (…). “He is much more gifted than I am in terms of his experience and professional career”.

Clemente says that the historical shareholders “have reacted well” to the incorporation of the banks into Merlin’s capital. (…).

The Director revealed that the Socimi’s shareholder remuneration policy will continue with a stable dividend, through the sum of ordinary and extraordinary payments – in the event that divestments take place – and will maintain a high pay out, based on cash flow.

Debt reduction

Clemente explains that the company is not planning to undertake any more capital increases in the short term. “We do not know what stage of the market we are in. We are unsure as to whether the share price will continue to reflect a discount compared to NAV (net asset value) or will return to a premium” (…).

In addition, the Socimi has set itself the objective of reducing its level of indebtedness. To this end, it has launched several bond issues this year. In October, it placed €800 million of bonds to allow it to finance Metrovacesa’s bridge loan amounting to €500 million and to pay off some other debts.

“We do not have any significant maturities until 2021 and, from here, a stable calendar of maturities will begin, which we will have to refinance like any other company in the sector.

In terms of the behaviour of the Socimi’s share price, Clemente acknowledges that, since December last year, the firm has entered a “very negative dynamic”, which he blames on the political instability in Spain. (…).

Nevertheless, Clemente is steadfast (…) adding: “We can only work to improve NAV per share. What’s more, we have a generous dividend working in our favour”.

Original story: Expansión (by Rocío Ruiz and Rebeca Arroyo)

Translation: Carmel Drake