26 March 2015 – Expansión
During 2015, the company plans to buy (properties) in Madrid and Barcelona, where “asset values have more potential (to increase)”.
Colonial has an annual budget of €300 million to purchase office buildings. The CEO of the real estate company, Pere Viñolas (pictured), explained yesterday that Colonial invested that amount in property in 2014, although the majority was spent in Paris, where it purchased a building for €230 million. In 2015, however, the company expects to allocate the majority of its budget to the acquisition of office buildings in Madrid and Barcelona.
According to Viñolas, “asset values have more potential (to increase)” in the Spanish real estate market than in Paris. Although, in his opinion, “the Spanish market is not as good as people think, but then the French market is not as bad as they say either”.
Investor pressure in Spain and the “abundance of money” does not mean that “there is a bubble”, according to Viñolas. “Colonial is not under any pressure to invest, and so we will avoid entering into any transactions that do not have rational criteria”, he said. Nor does the company want to deviate from its traditional business: investment in office buildings in Madrid, Barcelona and Paris, located on prime streets and with long-term profitability objectives. However, they will not only purchase prime assets, since the group wants to allocate 20% of its budget to the acquisition of buildings that need to be renovated, in order to increase their values through their refurbishment and by securing solvent tenants.
Viñolas was talking yesterday at a conference entitled Colonial, a successful transformation in the new financial environment, organised by PwC. He spoke about the massive return on investments in Spain and the new type of investor. For example, none of the traditional financial institutions feature in Colonial’s new liability structure. For this new phase, the real estate company has placed its debt in the hands of new players in the sector, such as a Singapore sovereign fund, Quebec pension funds and foreign insurance groups.
Change of cycle
Viñolas believes that it is too early to talk about a recovery in terms of rents in the office segment, but “it could happen this year or in 2016”, he said. For now, he added “companies that previously sought cheaper locations and shorter contracts, are now demanding better locations and longer-term contracts.
Original story: Expansión (by Marisa Anglés)
Translation: Carmel Drake