Month: April 2018

New Project in the Algarve to Cost €60 Million

28 April 2018

The Bayline residence is located in Armação de Pera, 30 meters from the Pescadores Beach. The venture belongs to Vanguard Properties and construction is expected to start in June.

Look at the picture. Look carefully at what’s on the right side. That’s right: the beach. It is the main feature of the new development that will be built in Armação de Pera, in the Algarve: it is right on the beach. “It is 30 meters away, or less. This cannot be found anywhere else,” José Cardoso Botelho, the head of Vanguard Properties, told Expresso.

Vanguard is the company that is developing the €60-million Bayline project. The reason for the name is that the development, in addition to its beachfront location, is also right next to the Alcantarilha river and a lagoon known locally as Lagoa das Garças.

However, in spite of its privileged location and the intended investment, Bayline will not be a resort, but rather a residential complex consisting of six 5- to 6-floor buildings, with a total of 255 one- to three-bedroom flats.

José Cardoso Botelho says that construction will begin in June of this year, and will be completed by December 2020. The development is to include swimming pools, playgrounds, a gymnasium, spa, private parking and individual storage areas.

In addition to the support infrastructure, “the project includes the rehabilitation of the surrounding area, which was a kind of counterpart that we agreed with the local authority,” the head of French company stated.

Sales in June or July

Although the expected length of the construction is a bit long – 22 months – Vanguard intends to start selling the flats in June or July of this year. In fact, according to Mr Botelho, they could have started selling them already, because “there are already some interested parties” but, as a rule, the company only begins sales when “we already an architectural project complete with detailed finishes” and the chosen studio is still working on the final project.

“We do not want to show something that will be changed later. For us it is very important that our reputation not be negatively affected,” he said.

For now, in addition to the exterior, which has already been defined, another detail of the project has been decided upon: there will be large windows from which to enjoy the view over the sea and the beach – beginning on the first floor – and views of the lagoon.

With all these features, the price per square meter is expected to range from €3750 to €6500.

Recuperating a Failed Venture

Before the Bayline project, the property had another life and another name. It was called the Lagoa das Garças Village, where the construction of the same 5- to 6-floor were planned, but with 296 flats instead of just 255.

The developer was a company called Almagarça that started work on the project in 2008. The foundations for four of the buildings were laid, along with parts of the first floors.

However, according to Mr Botelho, the company’s partners had “problems due to the crisis” and the project halted, leaving the people who had already bought the flats there – still in plant – trying to recover their deposits.

Knowing the story, and after analysing the project, Vanguard decided to negotiate with the owner to purchase the project for an amount equivalent to what people had paid for the planned flats. However, the process was not easy.

“We concluded negotiations on March 20 this year. It took five months, and we had 30 people included in the deed because they had made 62 promissory agreements. We returned all that money to the buyers who, by this point, had thought they would never see that money again.”

Original Story: Expresso – Ana Baptista

Translation: Richard Turner

 

Portugal’s Palaces and Farms Are on Investors’ Radar

26 April 2018

Interest in real estate investments is no longer limited to the historic centres of Portugal’s main cities, Lisbon and Porto. Luxury properties in rural areas are also increasingly targeted by Portuguese and international investors.

A good example of this new trend is the Quinta das Regadas, in the municipality of Santa Maria da Feira, owned by Millennium BCP. The property is a well-known and unique manor that is in a reasonable state, which is relatively rare in the country. The estate has caverns and a lake and was acquired by a Portuguese investor for nearly half a million euros.

The Urban Group, a Santa Maria da Feira-based franchise of the real estate company Arcada, was responsible for the sale of the iconic Quinta das Regadas. According to Arcada’s CEO, Emanuel Poças, “an aggressive marketing plan was carried out with the objective of completing a deal in a quick but surgical way so that the value of the property was preserved and surprisingly it was the target of many interested parties. It is proof that the market is ebullient and that the differentiated service undoubtedly translates into the best results.”

The executive highlighted the fact that it is an extremely well-located city that benefits from transportation links that connect it to rest of the country. The city is a mere 10 minutes from Porto and still has fairly low prices per square meter for real estate, and little of the speculation that is affecting the so-called big cities, “which permits access to unique luxury properties, located within the urban environment, at a fair price.”

Companies linked to the tourism sector are looking for these kinds of assets

According to Mr Poças, this asset, as well as others of a similar nature, are arousing the interest of investors. Arcada’s portfolio has a number of comparable properties which are attracting the attention of companies linked to the tourism sector that are seeking such assets precisely because of their unique characteristics and the surrounding environment. The city is receiving ever greater numbers of tourists, and they believe that it is time to invest in the area.

“We have people such as doctors and lawyers who are looking to escape the city centres, without necessarily having to give up their proximity to those centres and transport links. We also have large French, Brazilian and Swiss investors who are looking for this type of investment, where their money goes a lot further than in their home markets,” Arcada’s CEO explained.

Mr Poças referred to the Urban group, which owns Arcada Feira, saying that it is well positioned in the market, and has made itself a benchmark in the real estate industry.

“[The company] is well positioned in all market segments by having a well-trained team with very diverse skills, which allows it to study each property carefully and define tailored ways of working with each of them, depending on the type of product and target audience. Each case is a case, and each property is a property. The company develops all of its marketing and communications based on its analyses of each product. Arcada Feira looks for diversity in its portfolio to satisfy the largest possible number of people,” he explained.

We are seeing unbridled demand, and in many cases, speculation

At a time when the real estate market is very dynamic, Arcada’s executive stresses that despite this, the company acts with a measure of caution, “keeping an eye on the guidelines that brought us to where we are today. We are aware that the market is cyclical in nature, and that we are responsible for alerting our clients of that risk. As in other cities, such as Lisbon and Porto, we are currently seeing unbridled demand, and in many cases, speculation,” he stated. That is why the company has taken steps, and Emanuel believes that our customers need qualified professionals in this area, “above all to guarantee the best possible investment in such a fickle market.”

Portugal’s north is demonstrating that it has increasing potential, and Feira is one of the largest municipalities in the District of Aveiro, so the company regularly deals with highly varied types of buyers and sellers. “Undoubtedly the highest level of demand is concentrated in the centre of Santa Maria da Feira, but in reality, the largest number of transactions is located in the peripheries due to the greater supply and the price differential between the centre and the peripheries,” he stated. Mr Poças also said that the supply in these areas is still balanced. “The only issue is a client’s desire to live in the centre …. there is not much more room to grow in the centre itself, and people are beginning to realise that the city’s growth will be concentrated in the peripheries, which is already happening. Prices are also beginning to rise in these areas due to the increase in the demand for housing and expansion,” the executive reasoned.

Buyers want to buy with confidence

Asked about the evolution of prices, Mr Poças went on to mention that there is speculation in some specific cases, mainly because people are trying to sell without using an agency, “which leads to a lack of knowledge of the market, which sometimes causes values to be inflated. That is why we are increasingly sought by investors and buyers precisely to ensure a safe purchase. Although some people want to sell on their own, this cycle will begin to reverse itself. It is inevitable, buyers want to buy with confidence,” he concluded.

Original Story: Diário Imobiliário

Translation: Richard Turner

 

CGD Announces That NPLs Fell to 9% of its Total Credit Portfolio

26 April 2018

“In 10 years, will the banks and fintechs be disputing who controls the last mile?” Nuno Sebastiao da Feedzai queried in a debate in the program Negócios da Semana. Paulo Macedo, Nuno Amado and Anónio Ramalho also participated in the forum.

Paulo Macedo stated at the SIC Notícias Negócios da Semana that Caixa Geral de Depósitos’s NPL (Non-Performing Loan) ratio has already reached 9% (at the end of 2017 it was 12.1%). The bank has managed to reduce its bad debts “well beyond [our] Strategic Plan,” the CEO of the state-owned bank stated.

Nevertheless, CGD’s ratio compares poorly with the European average of around 5%.

“The banks have been making very significant efforts,” the banker who recalled that “this was a decade of losses for the Portuguese banking sector,” explained.

Portuguese banks have clear targets for reducing their NPL ratios, “but we must strike the right balance between the selling the loans and protecting their value. Otherwise, we run the risk of crystallising our losses. Banks have to understand how to recover the loans,” Mr Macedo argued.

In the SIC Program, the debate was between Paulo Macedo (CGD); Nuno Amado (CEO of BCP); António Ramalho (CEO of Novo Banco) and Nuno Sebastião (CEO of the fintech Feedzai). Feedzai is a company that combats fraud in payment systems using artificial intelligence. It was created less than ten years ago and already has sales exceeding 35 million dollars. The company is headquartered in Coimbra, though its CEO, Nuno Sebastião, lives in the United States.

Regarding BCP’s bad debts, Nuno Amado said that “we have to strike a balance between reducing NPLs and defending the interests of the bank and the economy.”

While BCP decreased its outstanding NPLs by €1.8 billion, the bank’s bad debt ratio continues to be very elevated. “This year we have the objective of greatly reducing our NPLs, but we have to do it in an organised way so as not to transfer profits, capital gains and the shareholders’ capital to external investors,” Mr Amado stated.

BCP’s president said that delays in Portugal’s justice system “affect the NPLs.” “Recovery proceedings take a year to complete in the Netherlands, while the average for the European Union take two years, and, in Portugal, the proceedings take five years. Therefore, the NPL stock obviously stays higher in Portugal,” he said. Mr Amado added an appeal for the government to streamline judicial proceedings to support the economy and aid in the reduction of NPLs.

Meanwhile, António Ramalho stated that Portugal’s financial system has a level of NPLs that is more than the EU average. “At the end of 2017 the average ratio of Portuguese banks stood at 13.3%, well above the European average of 3.6% and the Spanish banks’ average of 4.8%,” Novo Banco’s president said.

Nevertheless, Mr Ramalho said, Novo Banco managed to reduce its stock of NPLs by €2.4 billion in 2017. However, the executive did not explain whether this reduction came through impairments, portfolio sales or recoveries.

“Portugal is one of the European countries that most reduced its NPLs,” Mr Ramalho said.

However, “we can not harm clients that are recoverable,” he said.

António Ramalho expects the banks to sell NPL. “There will come a time when NPL sales are needed to accelerate our alignment with the European average and accelerate the reduction of capital requirements for banks,” he stated. “This is especially the case, when I see that last year the three largest sellers of NPLs were Santander (15 billion euros), the United Kingdom’s state-owned vehicle which had absorbed the bad debts of the banks during interventions and BBVA, which sold NPL portfolios worth €13 billion,” he added.

The CEO of Novo Banco said that the sales are essential for banks to reduce their NPL ratios to the single digits, “which is the quality of the Portuguese loan portfolio that would lead local banks to have values that are equivalent to any other European bank,” he said.

Nuno Sebastião, in turn, said that US investors are reluctant to invest in Portugal because they fear that if something goes wrong, they will not be able to recover the money quickly because of the slow judicial system.

“For a fund that is raising funds, which is a three-week process in the United States, including due diligence and the formalisation of documents, takes three months in Portugal. After three months, the market has changed,” the CEO of Feedzai stated.

“In 10 years, will the banks and fintechs be disputing who controls the last mile?”

José Gomes Ferreira later spoke of the issue of competition between fintechs and banks.

Paulo Macedo repeated what he has also said several times. “All banks are fintechs” and “Fintechs avoid deposits because they require capital and incur regulation.”

“CGD is committed to increasing its digital customer base, and we want to reach 1.5 million euros soon,” he said.

Nuno Amado, in turn, guaranteed that BCP would invest in automation, digitisation and customer analysis, and spoke of the possibility of partnerships with traditional companies or even with fintechs.

However, ” in order to safeguard our customers, we will not provide data beyond what is legally required,” he said.

The CEO of Novo Banco pointed out that Portuguese banks have a long tradition in technology.

However, he also warned of a cultural issue and gave an example. While Europe raised 2.7 billion euros through crowdfunding last year, Asia raised 200.8 billion euros.

Nuno Sebastião explained that clients are the biggest customers of the banks and in 10 years the same thing will happen to them as happened to the telecoms. That is, the focus of competition will be to control the last mile, that is, direct contact with the client. “This is where the banks are threatened,” he said.

He then said that Starbucks is, in practice, “a bank that sells coffee.” This is because of the loans they grant to customers through their gift cards. “It has a larger balance sheet than most European or even US banks.”

“Who controls the contact with the customers? This is where the banks will be threatened,” the CEO of Feedzai stated. “Some banks are already retreating from direct contact with customers, falling back to contact through digital media, among others,” he said, adding that the banks will continue to be depositories for funds.”

Beyond these, other themes were also addressed, such as the question of public and private debt. Ramalho’s statements in that regard were of particular interest. The executive stated that “We are nearing the end of an interest rate cycle, which has benefited from both optimism about the Portuguese economy by rating agencies; and on the other hand, the monetary stimuli that allowed [the banks] to work with very low-interest rates.”

“This means that the direction of interest rates will soon change. It is therefore normal for risk premiums to be reassessed,” he warned.

“We have to take advantage of this moment, from a tactical point of view, to reduce our quality of life. For public debt can act as a contagion to the external debt. Moreover, the debt of individuals is still particularly high,” said Antonio Ramalho.

Paulo Macedo, on the other hand, pointed out that it is not possible to have a public spending levy without a high tax burden. However, he admitted that he believes that incentives are lacking for company investments.

Nuno Amado agreed that Portugal needs investment and that [the government] should reinforce the tax privileges of those who invest in creating wealth and employment.

On the same topic of fiscal competitiveness, António Ramalho recalled the tax burden for companies in Spain. “There is a difference of 2.9% in the tax burden between Portugal and Spain due mainly to indirect taxes (from 15% in Portugal to 11.6% in Spain). “We may have some diversion of wealth.”

Nuno Sebastião said that if Portugal wants to attract companies headquarters and not back offices of the same companies, it must improve the competitiveness of its taxes.

Original Story: Jornal Econômico – Maria Teixeira Alves

Photo: Cristina Bernardo

Translation: Richard Turner

 

Climbing Home Prices Cause Value of New Loans to Hit Record

25 April 2018

The average amount of new outstanding housing loan contracts amounted to approximately €96,300 in March. It is the highest value in almost a decade.

Whoever wants home often wants a loan too … and also more and more money. The average value of new housing loans in Portugal is closing in on 100,000 euros, a level never before achieved. The rise in property prices justifies, to a large extent, this phenomenon, which is also fueling the banks’ appetite for granting such loans at a time when the Portuguese are increasingly confident in the state of their economy.

Data released by the National Institute of Statistics (INE) show that the average amount of newly issued housing loans – that is, in the last three months – amounted to 96,297 euros in March. This is the highest amount since at least January 2009, the period immediately preceding the beginning of the crisis that would eventually lead to a bailout for Portugal.

This average amount corresponds to almost double the average size of the totality of outstanding mortgages in Portugal. In March, this amounted to 51,770 euros. It has remained almost unchanged, with the increasing rate of amortisation of the older loans being offset by the high amounts ceded by the banks in the most recent contracts.

In practical terms, what the INE’s data show is that Portuguese households are increasingly asking for money from banks when they want to buy a home. Much of the responsibility for this reality is, according to experts, in the escalation of real estate prices in the domestic market.

“Comparing the data on the evolution of new loans with that of the housing price index, we can see a near perfect correlation.”

Filipe Garcia – IMF

“The main factor that explains the evolution of the data is the rise in housing prices, Philippe Garcia, chief economist of the IMF stated. His opinion is shared by Nuno Rico, an economist at Deco who says that “the rise in real estate prices causes families to resort to higher and higher amounts of credit.”

“Comparing the data on the evolution of new loans with that of the housing price index, we can see a near perfect correlation,” Mr Garcia added, in support of his conclusion.

Outstanding loans at a ten-year high

In fact, it is enough to put the graphs that show the evolution of the outstanding capital of the new loans for home purchases next to the index that shows the evolution in housing prices in the same period to note this “coincidence.”

The housing prices in Portugal are also at a ten-year high. Last year, the price increase reached 10.5%, the second largest in the eurozone.

Evolution of housing prices

However, these two trends are accompanied by another: an easing of credit by the banks, in general terms, which have been continuously loosening their purse strings with each operation they finance. Mr Garcia explains that the banks are “approving credits for an ever-greater percentage in relation to the associated valuations.” In the period of the crisis, banks hardly financed more than 50-60% of the property valuation. Today, it is already possible to see some operations being 100% financed in some cases.

The real estate valuations for housing loans – which are at a post-2010 high – attest to this reality. “We have an increase in valuations and prices and an increase in the percentage of the number of transactions that banks approve,” Filipe Garcia stated, explaining that the whole scenario supports an increase in the value of home financing.

A threat around the corner?

According to experts, this situation poses a threat to Portuguese families. “Banks are re-assuming housing lending risk, which could see an increase in defaults when interest rates rise again, or there is a recession,” notes the IMF economist, adding that “for buyers, this is a warning sign because it means that mortgage instalments are, on average, higher and can lead to difficulties when interest rates rise.” This despite his belief that “banks seem to be acting more prudently.”

Deco also shares the IMF’s concerns, with Nuno Rico highlighting two types of risks. “First of all, the amount of debt itself, since we are talking about fairly significant amounts and they are increasing. A second factor, linked to this, has to do with the fact that the interest rates in the contracts made in the last three months are much higher than those of the debt stock in general,” he stated, adding that, in this context, a small change in the [interest rate] indexes could create “very significant difficulties” for families.

“They are not only taking on higher amounts of credit, but also at higher interest rates, and although there has been a recovery in incomes in recent years, it is not comparable to rising real estate prices,” the consumer association’s economist reasoned.

All this happens in a scenario in which, although they have not yet fully recovered their pre-crisis income-levels, Portuguese families are more confident about the economy and their financial commitments, particularly with the banking sector. It should be noted that Portugal’s GDP last year saw the highest growth of the century.

Original Story: Economia Online – Catarina Melo

Translation: Richard Turner

 

Oitante Posts a Profit and Reduces Debt by 25%

25 April 2018

The special investment vehicle, which holds Banif’s former banking assets that were left out of the sale to Santander, ended 2016 with a profit of 11.4 million euros. It also expects to pay off all of its debts by 2021.

Oitante, a company that received the banking assets of the former Banif that did not go to Santander Totta, had a troubled start. In its first months of existence, it did not have enough money to pay its employees’ salaries, but by 2016 the company had already generated enough liquidity to reduce debt significantly and generate a profit of €11.4 million, Oitante’s president, Miguel Artiaga Barbosa, told the Jornal Econômico.

“From 2015 to the end of 2017, we have been able to reduce Oitante’s debt by 25%. If we can fulfil our business plan, which has a horizon of five years but can be extended, we will be able to pay the entire debt by 2021,” the executive in charge of the company that belongs to the state-owned Resolution Fund, stated. He added: “And possibly even pay an extraordinary dividend to our shareholder.”

The reduction in Oitante’s debt over the last two years was possible due to a strategy that has focused on asset sales – subsidiaries, real estate and Non Performing Loans (NPL) – along with a reduction in operational costs, to generate liquidity.

At the end of 2015, when the Oitante was created following Banif’s liquidation, its debts amounted to 794 million euros, of which 746 million were bonds. At the end of 2016 the total debt stood at 701 million euros and continued to decrease in 2017, he added.

Oitante’s debt has an average maturity of 10 years and a cost of 3%, which represents 18 million euros per year. “We will seek to refinance the debt, to reduce the cost,” Oitante’s president stated, noting that the payment of the debt has been made exclusively using equity.

The company recently finished its accounts for 2016, fulfilling the target set for public institutions. “The company’s situation has been normalised, and the 2017 accounts will already be presented in the normal calendar year,” he said.

Voluntary dismissal of 355 employees

The cost reduction was partially generated by the departure of 355 of the 449 employees that Oitante had when it separated from Banif in December 2015.

“The team we had at that time was too big and was not geared to Oitante’s activity,” Mr Barbosa explained. They were people who worked in the bank and who, suddenly, saw their world collapse with Banif’s liquidation. Not a part of the business areas that were sold to Santander, hundreds of employees of commander Horacio Roque’s former empire had to work in a company whose mission is to manage assets and later liquidate them after maximising their value.

“It’s completely different from working in a commercial bank, and it was a very difficult situation from a psychological point of view,” said Tiago Santos, a member of the board of directors of Oitante, who also took in the conversation with Jornal Econômico.

To reduce the number of staff in 2016 and 2017, the Oitante carried out two sets of voluntary dismissals with the help of a specialised psychologist, while maintaining a dialogue with the workers’ representative structure. In the second voluntary dismissal program, the company paid employees an amount corresponding to two months of wages for each year of work, also giving the ex-employees the right to SAMS (Social-Medical Assistance Service), as defended by the workers’ commission.

“We wanted to do this correctly and as painlessly as possible, so that people can continue their professional lives in the financial sector or in other areas they prefer,” Miguel Artiaga Barbosa stated.

The reduction in costs also occurred with the renegotiation or termination of contracts with suppliers and with the centralisation of the company’s activity in two spaces, in Lisbon and Porto. “We reduced the occupied area by 79% and lowered our installation costs by 92%,” Mr Barbosa explained, adding that the buildings that were vacated were placed on the market, including the building on Avenida José Malhoa in Lisbon, whose sale is currently being negotiated.

Discount on real estate sold was 8% against net book value

The assets sales are, moreover, a fundamental part of Oitante’s management strategy. In the beginning, the company was flooded with offers for real estate that included haircuts of 66%, the same percentage that the Bank of Portugal had imposed in Banif’s liquidation. “We had to tell those who were interested that we would not sell at fire-sale prices,” the executive said, adding that to date the real estate that was sold for 250 million euros has not suffered significant discounts because Oitante has been careful in these sales and the real estate market has been on the rise. In average terms, the discount was 8% against the net book value of Banif’s accounts for 2015, though the sales registered a premium of 12% against the net book value included in Oitante’s initial accounts.

The sale of subsidiaries is also moving ahead, as is the case with the Banif Investment Bank, which is awaiting a green light from its European supervisor, due to a procedural issue that has to be completed by the buyer, the Chinese group Bison.

With the sale of real estate, NPL portfolios and subsidiaries, Oitante managed to reduce its balance sheet by 28%, compared to the 2.2 billion euros it registered in 2015.

Original Story: Jornal Econômico – Filipe Alves

Translation: Richard Turner

 

Euribor Rates Hold Steady at 3 and 12 Months and Rise at 6 and 9 Months

23 April 2018

Euribor rates held steady today at three and 12 months and rose at six and nine months.

The three-month Euribor, in negative territory since April 21, 2015, held steady today for the fifth consecutive session at -0.328%, against a low of -0.332%, first seen on April 10, 2017.

The six-month Euribor rate, which fell below zero for the first time on November 6, 2015, rose to -.270%, up 0.001 points compared to a low of -0.279% (January 31).

The 9-month Euribor also rose today to -0.219%, up by 0.001 points versus a low of -0.224%, first registered on October 27, 2017.

The 12-month Euribor rate, which fell below zero for the first time on February 5, 2015, held today for the sixth consecutive session at -0.189%, compared to a low of -0.194 %, first seen on December 18, 2017.

Euribor is set by the average rate at which a group of 57 eurozone banks are willing to lend money to each other in the interbank market.

Original Story: Lusa / Diário Imobiliário

Translation: Richard Turner

 

Legislative Housing Package Includes Powerful Tax Incentives

23 April 2018

The Portuguese Prime Minister announced today a possible reduction to the withholding taxes charged to landlords entering into long-term rental contracts and the renewal of contracts for the elderly and disabled.

António Costa presented these measures at the end of the session dedicated to the Portuguese government’s new legislative package entitled “New Generation of Housing Policies”, after speeches by Secretary of State Ana Pinho and Environment Minister João Pedro Matos Fernandes.

In his speech, the Prime Minister criticised “the enormous instability” associated with the current urban rental program and proposed a tax incentive that would grant owners a 50% reduction to their withholding taxes, from 28% to 14% when applied to rental contracts that exceed ten years.

“This withholding rate should fall to 10% for contracts that exceed 20 years,” António Costa added, subsequently denying that the government is encouraging “the administrative fixation of rents or rental periods.”

“It is an appropriate incentive for the parties to negotiate,” the prime minister countered at a session in which the independent socialist MP Helena Roseta, the author of a housing law bill, was sitting in the front row of the audience.

In addition to this tax measure, the prime minister spoke next about the elderly, “who have the right to live until the end of their days in the house where they have always lived.”

“We will also propose to the National Assembly that those over 65, and citizens with more than 60 percent disability – and who have lived in their homes for a significant number of years – necessarily have the right to contract renewal,” he announced.

Original Story: Lusa / Diário Imobiliário

Translation: Richard Turner

 

Lisbon: Where Did Foreigners Buy the Most Homes in 2017?

23 April 2018

Misericórdia, Santa Maria Maior and Santo Antônio were the three parishes that attracted the most foreigners looking to buy a home in Portugal’s capital. However, two relatively new areas gained the attention of potential investors. Arroios and Estrela are experiencing significant growth in demand.

The capital’s historic centre has long been in the sights of foreign investors. Chiado, Bairro Alto, Cais do Sodré, Santos, Príncipe Real and Avenida da Liberdade are zones that have always most attracted the “appetite” of “outsiders.” However, the truth is that other places are beginning to win the interest of investors. The parishes of Arroios and Estrela have already taken their place as areas of interest for buyers.

These last five parishes accounted for more than half (57%) of the 1,100 transactions made by foreign private buyers in the Urban Rehabilitation Areas (ARU) of Lisbon, according to Confidencial Imobiliário (Ci), quoted by Expresso.

In total, 415 million euros were spent on home purchases by individual international investors in 2017. In the case of Arroios, the investment increased from €29.7 million in 2016 to €34.7 million in 2017. In Estrela, foreigners spent 51 million euros on the acquisition of real estate in 2017, up from €36 million in the year before.

Original Story: Idealista

Photo: Creative Commons

Translation: Richard Turner

 

Fidelidade Cuts Real Estate After Investing €80 Million

21 April 2018

The Portuguese insurer will reduce its exposure to the real estate sector, referring to tighter solvency requirements.

Fidelidade, the former insurance arm of the Caixa Geral de Depósitos, now owned by China’s Fosun, is one of the country’s largest lessors, with a major real estate portfolio, much of which is concentrated in Lisbon and Porto. A boon for the company at a time when the real estate market is at a fever pitch and breaking records, but frequently a headache for its tenants. In recent weeks, the insurer has attracted controversy, as it has been besieged with charges that it is evicting tenants to benefit from the surging market, as was the case in Santo António dos Cavaleiros in Loures.

The insurer is selling off part of its real estate portfolio, 276 properties have been placed on the market. The sales coincide with its policy of increasing rents to market rates in contracts where it is allowed to do so. Jorge Magalhães Correia, president of Fidelidade, told Expresso that the company wants to remain a “major investor” in Portugal’s real estate market, “but with a different profile.” The executive added that the benchmark index for updating rents comes from the National Statistics Institute (INE).

Fidelity’s investment [in the real estate sector] is so large that it easily outstrips the European rules (regime II) for insurance companies’ solvency ratios. The rules have been in force since January 2016 and limit direct investment exposure in real estate to 2%. Fidelidade is at 14%, with €2.1 billion in direct investments in real estate, 70% of which is concentrated in Lisbon and Porto. That figure will fall substantially to €1.5 billion, or 9% to 10% of total assets, Mr Magalhães Correia stated. The tightening of European rules is a factor in the insurer’s decision to sell. Mr Magalhães Correia denied that the sales are designed to take advantage of the market rise, explaining that the insurer’s properties are listed on their balance sheet at market values.

The brake on its real estate investments comes after Fidelidade invested €80 million in 2017, one year after the law penalising real estate investments came into force. Magalhães Correia defended his actions by stating that the €80 million were mainly invested in urban rehabilitation. Examples of the use of the funds include the offices of Abreu Advogados and Vieira de Almeida in the riverside area of Lisbon.

Since the insurer was acquired by Fosun in 2014, Fidelidade has invested heavily in real estate, both in Portugal and abroad. It made significant acquisitions in the most iconic areas of Lisbon, purchased the headquarters of the Renaissance in Chiado and invested millions, as reported at the time, in the area adjacent to EDP’s new headquarters.

More Than 800 Lessors Under Pressure

Of the 276 properties that Fidelidade has for sale, 151 are residential; in these, the insurer has 1,299 tenants, of which 823 are covered by the urban rental program. These figures were provided by Magalhães Correia at a hearing in Parliament this week, after being summoned by the PS parliamentary group, after eight residents in three buildings that are owned by Fidelidade in the parish of Santo António dos Cavaleiros in Loures complained that they were being pushed out. Magalhães Correia denied the existence of any evictions, playing down the matter, explaining to the deputies that the situation is being resolved and that three of the tenants in question had already renewed their contracts, maintaining the same rental payments.

Magalhães Correia told Expresso that: “The 151 residential assets included in the sale process are comprised of several categories: 476 permanent leases, that is, of indefinite duration, which fall under the protection of the former Urban Rental Program (RAU); 423 fixed-term contracts that had been signed since 2012, in which the contracts’ temporary nature was contractually accepted; 186 leases entered into between the New RAU of 2006 and 2012, whose contracts which known from the beginning to have fixed terms. Moreover, “214 contracts entered into under the old RAU, which were transferred to the new RAU without being legally protected, for lack of requirements at the time of transition.”

At the hearing in Parliament, Magalhães Correia stressed that Fidelidade is complying with the law while remaining attentive to situations of social fragility. MEPs confirmed that the insurer – where Caixa Geral de Depósitos still holds 15% of the capital – will update the rent of the tenants to market values, but guaranteed that there would be exceptions. Mitigating circumstances such as effort rates and situations of vulnerability, such as diseases, will be taken into account. Rental costs will always be updated when the two, three and five-year contracts are renewed, he said. However, there will be cases where the rents will remain the same or will rise to a value still below market price (cases will be analysed on an individual basis).

Most of Fidelidade’s buildings in Lisbon, Magalhães Correia explained, are in prime areas, such as Avenidas Novas, Campo de Ourique, Belém and Chiado. These are areas where real estate prices have risen significantly, boosted by high levels of demand. Magalhães Correia affirmed his belief that many of the tenants in these areas belong “to the upper middle class.” Moreover, he warned the deputies to make sure they are not defending people with above-average incomes.

Magalhães Correia also assured that Fidelidade is doing everything possible to ensure that any future buyer of the properties respects the existing tenants’ social stratum while noting that the firm is open to the Lisbon City Hall exercising its preemptive rights with regards to a possible acquisition of the insurer’s properties.  The executive also expressed a desire to participate in government and municipal affordable rental programs.

Original Story: Expresso – Anabela Campos / Isabel Vicente

Photo: D.R.

Translation: Richard Turner

 

Eight Additional Properties to be Added to the Revive Program by the End of the Year

23 April 2018

The Portuguese government intends to place a further eight real estate projects in the Revive program by the end of the year, Economy Minister Manuel Caldeira Cabral said today, calling this project “complex” due to its involvement.

The Revive program, launched in 2016 by the Finance, Culture and Economy Ministries, plans to grant concessions for 30 state-owned properties to private investors, with the commitment that they will be rehabilitated. Currently, three properties are the tender phase and others have already been granted to concessionaires.

“At the moment, dozens of these buildings are in an advanced stage of analysis. We already have six that are either in the public tender phase or have been concluded, with construction beginning. We are planning to place another eight [properties] under public tender, after coordinating the process among the various ministries,” he stated.

Manuel Caldeira Cabral, who believes that the process surrounding the Revive program is “complex,” spoke to journalists at the end of the inaugural ceremony of the Coudelaria de Alter (Alter Stud Farm) concession in Alter do Chão, Portalegre. The concession will see parts of the property transformed into a hotel.

“These processes (until the final concessions) take time, but they have to have firm steps. In the case of Alter, we are talking about a process that has been going on for 30 years, which is how long people have been talking about building a hotel there. That idea will finally become a reality with the opening of this public tender,” he said.

According to the Minister of the Economy, there may be an investment of “five to ten million euros” in the Coudelaria de Alter, for a “50 to 80-room” hotel.

Minister Cabral revealed that “there have already been several expressions of interest” on the part of private investors for the concession, and the winner of the public tender will be announced during the month of July.

The Minister believes that the stud farm project “can be a centre of attraction”, not just for the region, but for “the whole country,” emphasising that “it can spur regional development.”

“The opening of the hotel will spur job creation, bring more tourists to the region of Alentejo, which is already one of the regions in which tourism is growing the most in the country,” he added.

The Minister of Agriculture, Capoulas Santos, was present at the ceremony in Alter do Chão. In remarks to journalists, the Minister stated that this type of initiative also contributes to the development of the rural regions.

“Developing rural [Portugal] creates jobs, and creates the conditions for local inhabitants to stay in the area. Fortunately, at the moment [Portugal] is experiencing a tourist boom, which allows us to be very optimistic,” he said.

The Minister of Planning and Infrastructure, Pedro Marques, also attended the ceremony and, in his speech, stated that the moment is “remarkable” for the country.

“This is a project that is not just for Alter, nor even for the district of Portalegre. This project is strategic for tourism and Portuguese culture, and you have to keep this in mind,” he said.

The management of the stud farm, which employs around 30 people, was transferred to the Alter Real Foundation (FAR) in March 2007 within the scope of the State Central Administration Restructuring Program, after the extinction of the National Stud Service.

After the extinction of the FAR in August 2013, the Companhia das Lezírias took over the management of the stud farm, with the management of the Molecular Genetics Laboratory belonging to the Directorate General of Food and Veterinary Affairs.

The Alter do Chão Stud Farm, founded in 1748 by D. João V, is currently carrying out work on the selection and improvement of Lusitano horses and has a clinical unit equipped with all the means to medically treat and follow up on the horses.

Original Story: PressTUR / Agência Lusa

Translation: Richard Turner