Real Estate Rally Leads Colonial, Hispania, Merlin and Axiare to Surpass Their Book Values


11 August 2017

The four largest companies are quoted above the net value of their assets.

Shares of the four largest Spanish Socimis (REITs) are worth more than their net asset values (NAV) for the first time ever, and analysts continue to mostly recommend buying these securities

The fierce appetite for Spanish real estate has led the four largest Spanish socimis to trade above their net asset values (NAV), something that hasn’t been seen since the financial crisis.

Over the last few weeks, one after another, the shares of Colonial, Merlin, Hispania and Axiare have exceeded the price of the assets in their portfolios, an indicator of the interest that exists for this type of investment vehicle. This, moreover, has occurred even after the significant appreciations their portfolios seen in recent times.

Axiare, historically better regarded by investors, is trading at 5% above its estimated EPRA net asset value of 15.3 euros per share (June 2017). This measure reflects the net value of the assets of a company that corresponds to each security and serves as a barometer of market perception: if shares are trading above the measure, then investors believe that the company’s assets will appreciate further.

In the case of Hispania, its share is quoted at 2.2% above NAV; while for both Merlin and Colonial, the only two companies in the list that are included in the Ibex 35 index, and can, therefore, be a target of investment by those institutions that are limited to investing in reference indices, this difference in their favour is 1.5% and 0.8%, respectively.

SocimiEPRA NAV per share (€)Market Price (€)Difference (%)
Merlin Properties11,3611,531,5
Lar España9,288,44-9


The exception to this rule, among the companies in the Spanish Continuous Market, is Lar España, which continues to trade 9% below the value of its assets. The company, headed by José Luis del Valle, is the only one in the sector focused on the shopping centre segment, although it also has residential and logistical assets, representing around 11% of its portfolio. Its forthcoming sale is seen as a given in the sector.

A history of consolidation

Since they began to arrive on the scene in the spring of 2014, these vehicles have been placing ever greater bets on specialization and size, strategies that have led three of the socimis, Merlin, Colonial and Axiare, to concentrate most of their assets in offices.

Precisely, one of the factors motivating investors and that explains part of the strong appreciations is their confidence in future increases in incomes from office spaces. “Income will continue to grow consistently in Madrid and Barcelona both in CBDs (central business districts) and in new districts,” Bankinter said in its latest semi-annual property market report.

Hispania is the only company of its kind to specialize in hotels, and its portfolio is already the largest in Spain, making it a unique platform to take advantage of the historic highs that tourism is reaching in Spain (80 million tourists are expected to visit Spain in 2017).

In addition, the real estate market is experiencing extremely benign conditions, as low interest rates, excess liquidity and the gradual recovery in housing has in turn triggered renewed investment appetite for Spanish real estate, contributing to the strong increase in assets prices in these companies’ portfolios.

“After many years of negativity, it is nice to be optimistic about the Spanish economy and real estate sector, and it is why we have invested in some companies that are able to take advantage of it,” said Cobas, the investment fund managed by Francisco García Paramés, in its latest quarterly report.  The fund recently took positions in Merlin and Lar, in addition in several developers.

The question now is whether, after this rally, these companies have exhausted their potential or if they still have room to grow. According to the majority of analysts at Bloomberg: the party isn’t over.

CompañíaBuy (%)Hold (%)Sell (%)
Merlin Properties52,243,54,3
Lar España53,838,57,7
Source: Bloomberg


52.2% of experts recommend buying in the case of Merlin, compared to 4.3% that recommend selling; for Hispania, the balance is 61.9% compared to 9.5%; for Axiare, it is 58.8% compared to 11.8%; for Lar España, positive recommendations reached 53.8%, with negative ones limited to 7.7%; while Colonial received the most half-hearted recommendations, though 40% of analysts still recommended buying shares, versus 25% that suggested selling shares.

These forecasts that go hand in hand with the positive expectations surrounding the Spanish economy. Socimis are one of the main routes that investors are using to take advantage of this scenario: “to ride the recovery in GDP, invest in offices, and take advantage of the hotel and tourism boom, you should buy shares in Hispania, and to take advantage of the recovery of consumption, you should buy Lar, which is a specialist in shopping centres, “says Antonio Fernández, president of Armabex.

Original Story: El Confidencial – Ruth Ugalde

Translation: Richard Turner