Caixa Selling Entire City Block in Downtown Lisbon

8 July 2018

The sale can yield close to € 60 million and is a part of the bank’s strategy of reducing its real estate holdings.

The Caixa Geral de Depósitos (GCD) is selling a property on the Rua do Ouro. The building covers an entire city block in downtown Lisbon, close to Terreiro do Paço. “We are starting the sales process. Market placement will be done by [the consultancy] Cushman & Wakefield,” an official source at the bank told the Jornal Expresso.

The building is one of the most emblematic properties in Caixa’s real estate portfolio. According to experts in this market segment, the property may be valued at up to €60 million. The elevated price is due not only to its location and size but also because of the high potential for return on investment that any new owner may have.

It is only not worth more, the same analysts note, because the building cannot have underground parking, although it has two floors in the basement, and because the service desk must be maintained, reducing the available amount of commercial space to rent. Also, the property requires extensive remodelling to change the offices into a hotel or residential property, the type of projects that investors believe to be the most profitable in that area of the city and that type of property.

The 13,810-square meter building occupies an entire city block and has seven floors, two of which are below-ground, and one is an attic. On average, each above-ground floor has approximately 2,000 square meters. The building faces the Rua do Ouro, Rua de São Julião, Rua Nova do Almada and the Rua da Conceição, and was the main agency of the state-owned bank between 1966, when it was completed, until the time when the downtown area ceased to be Lisbon’s financial district. It should be noted that in addition to the main branches and headquarters of almost all banks (BCP, Totta and Azores, BPI, BES, etc …), the Lisbon Stock Exchange was also nearby, in Terreiro do Paço.

“It is a very attractive asset that is sure to attract many interested parties, especially considering the current state of the market and Lisbon,” one analyst who declined to be identified stated.

Gains of more than € 300 million

The sale of CGD’s block in downtown Lisbon is not only occurring because of the increased demand and financial capacity to buy this type of asset. While it’s true that these developments have helped t accelerate the process, there are several examples of deals that went ahead in the last year and a half precisely because the market is at a fever pitch. This is the case of another downtown city block owned by BPI on Rua Augusta, which is in the process of being sold. The sale of the former grounds of the Popular Fair (Feira Popular) will also head to a public auction in September, three years after a second attempt at a sale.

For Caixa, however, this operation is part of a strategy of reducing the bank’s exposure to the real estate market.

“In 2017, we sold 3,100 properties for €338 million. The Marconi Building and the Santa Maria Building, both in Entrecampos, and the 50 República building stand out among the properties sold that year,” an official source at Caixa stated. This year, the bank also sold the former headquarters of Caixa BI, a building in Barata Salgueiro, in Lisbon, which was bought by insurer Zurich for about €23 million, according to Expresso at the time of the transaction in February.

These operations are part of a cost reduction strategy. In addition to the financial windfalls, selling these properties also leads to “significant cash savings in expenses with electricity, water and building maintenance,” an official source said in statements to Expresso, without revealing the possible extent of the savings.

The process may take six months

As Caixa revealed to Expresso, the process is just beginning. The bank chose the consultancy which will advise on the sale about two weeks ago and is now defining which investors – national and international – will be invited to submit the initial, non-binding proposals. The bank will then select the candidates with the best proposals, who will then have to submit another binding or final offer and provide bank guarantees or evidence that they have sufficient funds to pay for the asset. After that, Caixa will analysis the proposals and eventually announce the winner.

The purchase agreement would then be signed, followed by the official deed. This whole process can take six to seven months, the time it normally takes to finalise a transaction of this size, the unidentified market consultant explained.

Original Story: Jornal Expresso – Ana Baptista

Photo: Nuno Botelho

Translation: Richard Turner