Real Estate Funds Warn About Their Immediate Retreat In Case Of Secession

10 September 2015 – Expansión

Risk-averse/FEARING THE RISK / International investors warn that the uncertainty and the country risk the independence process of Catalonia would mean, will automatically alienate them from the region and some of them have already reflected this in their statutes.

That money is a coward is not new. The international investment funds require legal security and political stability to invest in a country and Catalonia may lose both if the pro-independence parties win a majority in the elections of 27-S. Currently all funds continue studying the real estate market in Barcelona because they think there is no risk of achieving independence, but also ensure that should it occur, they would leave the Catalan capital immediately.

Enrique Lacalle, president of the real estate Barcelona Meeting Point (BMP), which every year brings together leading governmental, private and institutional investment vehicles worldwide, states that “many presidents of major funds have told us that if the international investor is not sure of a place/location, he will invest in another.” The capital “does not like uncertainties, therefore it is not invested in conflict zones, and Catalonia has raised many questions in recent times, which can increase depending on the outcome of these regional elections”.

The president of BMP recalls that three years ago, international investment has returned “massively” to Madrid and Barcelona for two reasons: their confidence in the reforms Spain has carried out and improving economy, which currently registers the highest growth in Europe. “Many job positions depend on this sector, so the consequences are not good for Catalonia”, notes Lacalle.

Veto in the statutes

Some of the funds specify in their statutes the impossibility of investing in a country outside the European Union. Fernando Conde, the president of the company for managing real estate and hotel assets, Newland, explains that he is currently advising a London-based fund management company investing capital from US, to reassess its operations based on the outcome of the 27-S. “I have been told explicitly that their statutes forbid them to continue investing in Catalonia if it separates from Spain,” says Conde. He adds that “they continue to study the market because they don’t believe it is going to happen, but in their contract there is a specific clause stating that if independence is achieved negotiations will be aborted.” On the other hand, although they are still here, they do complain that there are very few explanations about how the process will be carried and claim that some serious questions, of a concern to investors, such as in what way Catalonia will get in debt, have not been cleared yet”.

The director of investment department of Aguirre Newman consultancy in Barcelona, Hipolito Sanchez, notes that the funds he works with also expressed some doubts. Investors buy buildings based on profitability the rent will bring” explains the consultant, “and the urban leases act, for example, is a state law that in case of a hypothetical independence would mean dependency on the new jurisdiction.” This is the kind of legal uncertainty that could restrain investors, says Sanchez.

Cessation/Stagnation

In his opinion, the independence process would result in the same consequences for investment as the country risk in 2008: “Cessation of investments awaiting improvement, the classic English ‘wait and see’,” he says.

The vice president of CBRE in Spain, Enrique Martinez-Laguna, thinks the same, adding that this hypothetical timeout the process will cause until the situation in Catalonia normalizes, would halt the investment. “An illiquid market not only implies a slowdown in the arrival of new projects, but also means that those already there can not rotate their assets as they would like.” “I do not want to predict whether it will be positive or negative for Catalonia, but no sector dependent on foreign investment likes uncertainty,” concludes Martinez-Laguna.

Many funds have told us that they do not invest in areas of conflict and would prefer somewhere else. “

“Some are prohibited in their statutes from investing in Catalonia if it secedes from Spain”

“Neither family nor conventional tourism want a destination conveying an image of conflict and aggression “

“The separation of Catalonia from Spain would greatly affect the congress and convention sector”

“The waiting period for the investors a hypothetical secession would cause, would leave the market without liquidity”

Original story: Expansión

Translation: Lee La

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