22 June 2017 – Expansión
The residential market has come onto the radar of investors, who are analysing this real estate segment as an alternative to allow them to diversify their investment portfolios in light of the uncertainty over sovereign debt and the volatility in the stock markets. Thus, the gross return on residential rental assets amounted to 4.3% at the beginning of 2017, above the yields offered on other options for more conservative investors.
In this way, the interest from the professional residential market caused the volume and number of operations carried out in this business segment to soar last year. Specifically, investment in the residential sector in Spain reached €2,100 million, which represented an increase of 300% with respect to last year. Moreover, the push was maintained during the first three months of 2017, with operations closed amounting to €486 million, according to a report compiled by the real estate consultancy firm CBRE.
Last year, two operations accounted for 75% of the market. The first of these transactions was the American fund Blackstone’s purchase of 4,500 rental homes from Banco Sabadell for €600 million.
Another of the major operations in the sector was so-called Project Crete, which initially comprised the divestment by Merlin of a portfolio of homes inherited from Testa which the Socimi considered to be non-strategic.
During the execution of the process to divest those assets – with a target of around €300 million – Merlin reached an agreement with the banks that own Metrovacesa to acquire that real estate firm. During the subsequent integration negotiations, Merlin and Metrovacesa decided to combine their residential portfolios to constitute a new firm, Testa Residencial – to be managed by Merlin, in which it holds a minority stake – with a volume of assets worth €1,000 million and comprising more than 4,600 homes. This portfolio was expanded to include almost 8,000 homes in April, with the incorporation of assets proceeding from Santander, BBVA and Banco Popular.
Besides these two operations, the main investor in these kinds of assets are the Socimis and real estate companies, and typical operations involve the sale of assets for between €10 million and €15 million. In terms of the vendors, above all, they are financial institutions and small domestic owners.
The report indicates that the rental home market continues to be a less professional sector and, with the exception of Blackstone, interest from the funds has not been translated into the creation of large portfolios, at least for the time being, which means that this segment offers business opportunities. In this sense, although the rental market is growing, Spain is still an owner-dominated market, and so there is still potential for expansion.
Original story: Expansión (by Rebeca Arroyo)
Translation: Carmel Drake