Government Ponders Proposal of Floating State Properties

4/11/2014 – Expansion

The sector humms that the Central Government of Spain received a proposal on creation of a Socimi (a REIT vehicle) made up of public properties, from several investment banks.

Nearly a year and half ago, the ruling authority placed up for sale 15.135 real estate units with view to adding value to the governmental properties. They were supposed to be sold by 2015, however until now only 1.600 homes and plots, a mere 10% of the total, have changed hands.

One of the options to gear the divestment up is to set up a Socimi. Sources from the market assure the suggestion has been received positively and the Government is currently weighting the possiblity up. Not only the central office has been advised to take the step but also regional authorities and city halls have been visited.

‘Spain holds an enormous real estate volume which could perfectly fit in the requirements established for a Socimi’, explains Javier Hernandez Galante, Ashurst lawyers office’s expert on Socimis. ‘The vehicle would have only one, secure tenant. Therefore, its trustworthiness would be comparable to a sovereign bond as the main risk of a Socimi is not receiving monthly payments’.

Spanish Socimis have been churned out since the beginning of 2014, however the recent market volatility made some delay the decision until the next year. This was the case of Quabit, for instance.

A State-run Socimi, though, would surely attract investor equity as, according to experts, ‘the sector abounds in liquidity and investment funds have appetite for serious and secure transactions’.

If the project on establishing a Socimi is approved, firstly the structure of the vehicle will have to be defined and designed. ‘Present law permits great flexibility: it could be one listed REIT with several outside affiliates grouping various assets. Alternatively, it could have many floated spin-offs’, says Hernandez Galante.

Now, the Government could grant the entire asset load and maximize revenues or keep a part of the stake.


Original article: Expansión (by I. Abril & D. Badía & R. Ruiz)

Translation: AURA REE