Arcano Launches Its First RE Investment Fund
29 July 2015 – El Economista
Arcano, one of the most active players in the asset management sector (with private equity funds of funds and funds with loans for companies, with €3,000 million of managed or advised assets) has decided to launch a third business line: investment in all kinds of real estate assets.
According to José Luis del Río (pictured above), CEO of Arcano Real Estate, the first fund will have a budget of €200 million. “We hope that, a year from now, once we have completed the fund raising process, we will have more overseas investors than domestic. For our first partial close in July, we have secured commitments amounting to €50 million, of which three quarters have been pledged by Spanish players. We wanted to start by inviting local investors as we have been working with them for many years”.
Arcano has created an integrated team, comprising seven property management professionals, to evaluate its investments. They are looking to benefit from opportunities in a sector that is currently undergoing a strong recovery after eight years of falling prices.
“We want to differentiate ourselves from the large international funds that focus on securing the lowest possible prices, and from the socimis, which are paying over the odds in some cases as they seek to secure rental income to pay their shareholders. We want to add value and through that, build the return for the fund. We will not act in an opportunistic way”.
Between 50% and 70% of our investment will be focused on the residential market. From the development of land in good locations, in cities or on the coast, in conjunction with real estate developers, to the renovation of buildings. “Local developers will be our partners, not our competition”, explains Del Río, who has 25 years of experience in the sector, first as Head of Real Estate at AB Asesores, then at Morgan Stanley (which acquired AB) and subsequently at N+1, where he was the Director of Real Estate until 2011.
We will differentiate ourselves by entering operations that require investment and specialist management, such as the transformation of buildings to change their use, for example from a hotel to an office. “Provided these changes of use are already approved, we will not have to assume any urban planning risk”, says the Director.
In terms of regions, the team will focus primarily on Madrid and then on the coast, Bilbao and Sevilla for residential assets. For offices, it will look only at Madrid and maybe Barcelona; and for hotels and shopping centres, it will consider the whole country. Finally, for logistics assets, it will analyse Madrid, Barcelona, Zaragoza and Valencia. “We will be a very small and very RE-focused fund. And we will work quickly. We will close the first transactions before the end of the year, possibly in Madrid”. The average ticket will be between €5 million and €25 million.
Original story: El Economista (by Carlos Pizá)
Translation: Carmel Drake