“The situation has changed dramatically since January”. “We are experiencing a unique moment”. These statements have been issued by experts, presidents of the main consulting companies in Spain or representatives of international funds, from the real estate sector. After more than five years of crisis, the uncertainty on the date of recovery of the construction business – a vital sector, according to the minister of the Treasury – has given way to a general optimism thanks to the closure of operations of foreign investors. “We have entered a new stage in the Spanish real estate market. In the last few months, we have seen that, what seemed impossible one year ago, is now real. Foreigners have seen the opportunity and start to think that investing now in Spain, they will obtain an interesting profit in the future”, Ricardo Martí-Fluxá, president of the Asociation of Real Estate Consulting Companies, declared yesterday. “We are experiencing a sort of spring and a boom in the interest of investors”, Andrés Escarpenter, managing director of Jones Lang La Salle, declared.
A phenomenon that will not last long, though – “the message we are passing on to investors is that if they wish to do something in Spain, they need to move ahead, because this situation will change”, Escarpenter added – as different factors have now come together:
The economic difficulties faced by the country have increased the risk of investing in Spain, punishing any operation in this market and obliging sellers to improve their offer. “A mall in a village in Germany, has a yield of 4,25%, while in Spain there are operations of prime malls being closed at 7%”, Ismael Clemente, managing director of Magic Real Estate, partner of Blackstone in the acquisition of 1860 homes from the Madrid Town Hall, declares.
This return on the investment will be lower when the perception of the Spanish economy improves. “The investors are already deducting that we are at a turning point”, Alberto Prieto, managing director at Knight Frank, declares.
Adolfo Ramírez-Escudero, president of CBRE, thinks it is probable that if the Spanish economy improves, prices will do the same.
Decrease of prices
Santiago Aguirre, president of Aguirre Newman, estimates that the decrease in prices will reach 50% in general, depending on the location and the type of property. These discounts have activated the purchases and, in some cases, have increased the prices.
Since the creation of Sareb at the beginning of the year and, above all, after the first sale in August, a “pull effect” has taken place in search of the best opportunities. Sareb has a very strict business plan, which will allow the sale of half of its assets in five years. In its first year, Sareb has already reached sales for 1200 million Euros, with a forecast of reaching
1500 million Euros at the end of the year. It has launched almost ten operations (Bull, Bermuda, Corona, Abacus, Teide and Harvest, among others), with very quick procedures that do not give time to investors to doubt their participation. “Ten operations will be closed from now until the end of the year”, Juan Pepa, general director of Lone Star Europe, a finalist of the operation Bull, declares.
“There are more than 200 funds ready to invest in Spain”, the president of Aguirre Newman assures. After years studying the Spanish market, many international investors are ready to invest in Spain. “We have a great opportunity in Spain to turn this positive noise into jobs”, Pepa explains.
There are not only important packages of assets in the market. The real estate companies, with a great know how of the market, can be strategic allies for the international funds, usually without a team in Spain. “There are some investors who continue to be tied to 2012 when price was the only factor and there are others who are starting to work differently, through alliances”, Juan Barba, director of Real Estate Assets from Sareb, declares. This company has turned to the BAFs, investment vehicles through which they manage the assets jointly with investment funds. “In the future we will see alliances between international investors and local management companies, as the long term results start to be more and more important”, he adds.
Pere Viñolas, managing director at Colonial, bets on changes in the capital of the great real estate companies – “that will be more specialized and more global” – as they are selling the financial institutions. “A piece that was missing were the debt funds which are already arriving and which can invigorate the sector”.