The Catalan Independence Movement Scuppers the Largest Real Estate Deal of the Year in Spain

1 November 2017

It was expected that Swiss Life would pay roughly €500 million for Hispania’s office assets.  The sector has succumbed to fears of contagion due to the political instability

It was the first major real estate deal thwarted by the independence process. And the operation was for nothing less than 500 million euros, which would presumably have made it the largest transaction of the year. Socimi Hispania has been forced to suspend the sale of its portfolio of offices, which began last March and which, before the summer, had been practically finalised with the insurer Swiss Life. The operation’s death knell was the current market uncertainty generated by the independence movement in Catalonia.

“Given the currently uncertain circumstances in Catalonia, the company has decided to postpone the divestment of assets from the portfolio of branches until the first quarter of 2018,” the firm acknowledged on Tuesday in a statement to the CNMV. The possibility of a cancellation of the sale had already been floated in recent weeks.

The company owned by investor George Soros (16.7% of the capital) intended to sell a portfolio of 24 office blocks. The real estate company valued – in its accounts as of June 30 – these assets at a total of €585 million.

Five of these buildings, with a value calculated at €118 million, are in Barcelona, Europa Press reported. The socimi has chosen to suspend the sale for a few months. The company intends to resume the sales process next year if the situation has improved.

Several sources who are knowledgeable of the process indicate that the deal had been practically closed at the end of the summer, barring some minor details, but that Swiss Life hardened the conditions of the deal due to a lack of clarity regarding the Catalan political situation.

This is a severe blow to the real estate sector, according to several market sources, since Swiss Life has a conservative buyer profile, a type of investor that generally appears when the economy is stabilised, replacing other types of investors, such as opportunistic funds, which have led the recovery of the sector in recent years.

In fact, experts point out that the failed deal can signal a lack of confidence to other institutional, insurance and international pension funds seeking conditions of stability. Deutsche Bank, Axa and Generali are others of this type of buyers who made investments in Spain in recent months. Among the largest deals of the year was the sale of Madrid Xanadú, acquired by the British operator Intu for around €520 million.

Hispania’s offer to sell its portfolio of offices fits within its strategy for the real estate sector, which now has the ultimate goal of becoming focused solely on the hotel industry. The socimis investment plan has 2020 as its horizon, at which point it plans to seek new shareholders interested in the hotel business. The company is managed externally by the Azora Group, led by Concha Osácar and Fernando Gumuzio.

Original Story: El País – A. Simón

Translation: Richard Turner