One by One, Portugal’s Banks Are Selling Their Properties in Downtown Lisbon, Earning Millions in the Process

22 July 2018

Novo Banco, CGD, BPI and BCP. Portugal’s banks have sold or are near selling a series of iconic buildings in downtown Lisbon, taking advantage of a property boom to pocket millions of euros.

Remember Monopoly? People who played the Portugal-themed version of the game always wanted to place their houses on the most expensive streets: Avenida da Liberdade, in Rossio, and the Rua do Ouro. That game is an accurate reflection of real-world trends in downtown Lisbon, the most coveted real estate in the game. Portugal’s banks are selling their properties in the Pombaline downtown. Taking advantage of the tourism-driven rise in real estate prices, the financial institutions are “cashing out,” pocketing millions of euros that will help them power back to profitability.

Novo Banco was the first bank to sell property in downtown Lisbon. After having sold a building on the Marquês de Pombal, the bank has now placed BES’s historic headquarters on Avenida da Liberdade on the market for 100 million euros. However, most of Portugal’s banks – including Caixa Geral de Depósitos (CGD), BPI and now BCP – are only just now beginning to sell their non-strategic assets in this prestigious area of the capital.

“The banks are concentrating their holdings in fewer buildings, streamlining the way they occupy the workspace,” CBRE’s CEO told ECO. Francisco Horta and Costa believes that financial institutions “are focusing on their [core] business, which is to take deposits and make loans. Holding real estate is not part of financial institutions’ core business.”

BPI, which is among the financial institutions with assets for sale in the Pombaline district, just sold a building on Rua do Ouro. The property covers an entire city block and is surrounded by Lisbon’s most historic streets. The flagship property was sold for more than 66 million euros to an international fund, in a sales process that was, according to the consultancy JLL, “hotly contested.”

Before that, as reported by ECO, BCP sold another building on the same street that has approximately 8,850 square meters of area spread over six floors. The transaction is valued between 40 and 50 million euros, based on the average price per square meter in downtown Lisbon.

And that’s not it. In addition to BPI and BCP, CGD also has a property for sale, once again on Rua do Ouro. The state-owned bank’s main branch had been based in the 13,810-square-meter building when the area was still Lisbon’s financial centre. Only Santander Totta, Montepio, and the Bank of Portugal, which moved from Almirante Reis, remain in the area.

“Banks are taking advantage of the opportunities, demand and investment momentum that the Portuguese national market is currently experiencing as one of the most attractive European markets,” the real estate consultancy Worx told ECO. “Because of their required audits and statements of income, the banks needed to make their portfolios profitable, which often means having to sell those assets,” he adds.

According to CBRE’s director-general, “the market’s current momentum is favourable for the sale of these assets at good prices,” taking into account the sharp rise in the price of the square meter in recent times. “It was an opportune coincidence for the banks, which would have had to sell these assets regardless, to focus on their core business,” Francisco Horta e Costa added.

“The increase in the number of tourists has increased occupancy rates and the average prices of hotels, as well as increased sales volumes in local stores. Also, there is good demand for apartments in historic areas, and this has increased interest in buildings in these areas, such as downtown Lisbon, which was deserted just a few years ago,” he concluded.

This increase in tourism is allowing banks to pocket hundreds of millions of euros in proceeds from the sale of their historic properties. “The tourism boom helped make Portugal known the world over, and with it, the residential market and, more particularly, urban rehabilitation have gained even more ground,” the Worx team noted. “Foreign investment in the country in residential assets has constituted an important and significant share of the total investment destined to the development of tourist residential units or residential real estate for income,” he adds.

The building sold by the bank led by António Ramalho in Terreiro do Paço will, according to Expresso, be transformed into 28 flats, ranging from studios to two-bedroom apartment, and should be finished in 2019. However, most are being acquired to be used as residential tourist units or to be later converted into hotels.

“The market’s current momentum is favourable to the sale of these assets at good prices. It was an opportune coincidence for the banks, which would have had to sell these assets regardless, to focus on their core business.”

Francisco Horta e Costa – General-Director – CBRE

The best example of this movement is BCP’s sale of a building to a hotel chain. Sana Hotels bought the property from the financial institution, to open its fourth hotel in the capital. After opening the Epic Sana Lisboa Hotel, near the Marquês de Pombal, the Evolution Lisboa Hotel in Saldanha, and the Sana Lisboa Hotel, in the Eduardo VII Park, Sana will now develop a new hotel in the most prestigious area of Lisbon in response to growing demand by tourists. Sana is not the only hotel group that is strengthening its presence in the country: there are 100 new hotels under construction across the country.

Original Story: Economia Online – Rita Atalaia

Translation: Richard Turner