Hispania, Merlin, Lar And Axia Invest €2.4 Billion In Less Than A Year

26/12/2014 – Expansión

SINCE MARCH / The four largest real estate companies listed on the continuous market (known as ‘the trading floor’ or simply, ‘the Floor’ in the US) have bought offices, homes and shopping centers, spending all the capital from their IPOs.

From non-existent to becoming an industry benchmark – listed REITs have become a big business in record time with a total worth of €2.4 billion. Lar España, Hispania Real, Merlin and Axia Real Estate Properties – the four REITs that have made their debut this year on the continuous market – managed to raise 2.5 billion euros in their respective IPOs since March. Nine months later, they have already invested 2.438 billion, exceeding all forecasts.

The successful adaptation of these ‘Anglo-saxon’ REITs started with their going public. The leaders of these companies convinced international funds like Pimco and T. Rowe, prominent financiers such as John Paulson and George Soros as well as investment firms like UBS, JPMorgan and Citigroup, to invest in real estate companies that were founded without any assets. Only Merlin Properties, which went public on June 30, had a preliminary contract to acquire the company Tree Investments, which owns 880 branches and five of BBVA’s office buildings.

Merlin is the REIT that has invested the most and the fastest. Thanks to several large-scale transactions, it has already spent 1.188 of the €1.25 billion it raised in its IPO. Thus, in addition to 739.5 million euros spent on BBVA buildings, Merlin also closed the biggest deal made by a REIT on a single property: the Marineda shopping center in La Coruña, Galicia, for 260 million euros. It also paid 130 million for five office buildings.

The quick closing of these operations has led those in charge of Merlin to start working on raising new funds to undertake further purchases. To do this, they have chosen to refinance the bridging loan they requested before forming the REIT in order to buy the BBVA properties. The company, which has been negotiating for months, could sign the agreement in the first quarter of 2015, financial sources point out.

Hispania

Created by the Spanish consulting firm, Azora, specializing in the management of rental and student housing, Hispania Real Estate Assets company made its debut on the stock market with a corporate structure that was different from that of other REITs. Soon after, the company created a subsidiary, Hispania Real, under this same framework, through which it has channeled much of its purchases.

Among the REITs, Hispania Real boasts the most diversified portfolio, with several office buildings, more than 400 homes, several hotels and the majority stake in several companies, including La Once’s real estate company, Oncisa.

Hispania’s last major transaction has surprised the entire industry: the acquisition of Realia. After allying with Fortress, King Street and Goldman Sachs, the three biggest creditors in real estate history, Hispania Real has launched a voluntary public takeover offer for 100% of Realia at €0.49 per share, i.e. €150 million. Having spent what was left of the 550 million obtained in March to go public in buying 50% of Realia’s debt, it has requested two lines of credit from Santander and CaixaBank worth 250 million euros in order to guarantee the purchase of the company.
While awaiting the close of this acquisition, Hispania is analyzing new 1.5-billion operations, including the purchase of a group of 16 hotels from the Barceló hotel chain for $425 million, as reported by EXPANSION on December 2.
Today, at a special meeting, shareholders will be asked to make a capital increase to address current and future projects.

Funding for projects

The other two REITs present in the continuous market (there are three other smaller REITs trading on the alternative investment market: Promorent, Entrecampos Cuatro and Mercal) — Lar España and Axia Real Estate — have invested €738 million in real estate.

For Axia, which raised 360 million euros in its IPO in July, has not only invested everything it had raised from international funds, but has also resorted to bank financing for its last operation: a portfolio of Credit Suisse real estate assets, which includes four offices and a retail space, costing a total of 180 million euros.
Lar España, which still has 63.57 million of the 400 million it raised, has also resorted to bank financing to acquire an office building in Madrid. In its market debut, the heads of Lar España said they would benefit from an additional 400 million euros from bank financing to deal with their operations.
New companies will soon be added to the list of REITs on the stock exchange. Among those confirmed are GMP and Bulwin, managed by the listed Quabit. Other companies are forecast to join the ranks as well, especially those managed by large international funds that have channeled purchases in Spain through REITs.

Original article: Expansión (by Rocío Ruiz)

Translation: Aura REE

60