Savills: Bumper Crop Of RE Mega-Transactions In 2015

27 May 2015 – Cinco Días

Sales amounted to €1,340 million during the first three months of 2015.

“Lots of investors are interested in Spain” say Savills.

2015 is going to be a bumper crop year for large real estate transactions. Given the lethargy in the market in recent years, due to the economic crisis and lack of financing, the non-residential sector is experiencing the start of a new golden age. Investors do not want to miss out on the emerging recovery in the sector and showing their commitment to Spain.

Mega-transactions in Spain increased fivefold during the first quarter of the year with respect to the same period in the previous year, according to a report from the real estate consultancy Savills. During the first three months, these acquisitions (those over €100 million) amounted to €1,340 million and involved four purchases.

These large transactions accounted for 60% of all transactions. With respect to all types of transactions in the tertiary sector (including small deals as well), Spain is ranked fourth in terms of the increase in investment volume in the European market, which is led by the United Kingdom and Germany. This segment includes office buildings, retail stores, shopping centres, hotels, as well as logistics and industrial warehouses.

The largest transaction at the beginning of the year in Spain was the sale of the Puerto Venecia shopping centre for €451 million, which was purchased by the British company Intu Properties. That was followed by the purchase of the Madrid building at Gran Vía, 32, which houses shops such as H&M and Primark (from Autumn 2015), for €400 million. In that case, the purchaser was Pontegadea, the family office of Amancio Ortega, owner of Inditex, and the vendors were various investors led by the fund Drago Capital.

The third transaction was the sale of the Plenilunio shopping centre, for €375 million, purchased by Klepierre, the French store management company, from Orion Capital. Finally, in fourth place was General Electric’s real estate portfolio, which was sold to the fund Meridia for €120 million.

Better prices than in London and Paris

“Lots of investors are interested in Spain. Change is apace in the country and moreover, in other markets, such as in Paris and London, assets are more expensive. Private equity firms are now focusing on Southern Europe. Spain is the best candidate because a change in the cycle has begun and prices are still attractive”, says Luis Espadas, Director of Capital Markets at Savills.

Spain also benefits from the macroeconomic conditions in the market. The prospects for growth are positive in Europe, given the low oil prices, the injection of liquidity by the European Central Bank and the depreciation in the euro against the dollar, highlights the report. In fact, the volume of investment in commercial assets amounted to €49,700 million during the first three months on the European Continent, i.e. 38% higher than the average of the last five years.

“One of the factors that is making Spain more attractive is the price of assets, which are 40% lower than before the crisis. In other markets, prices are already very high. Moreover, the banks have started financing transactions again”, says Espadas. This report from the consulting firm predates the results of the municipal and regional elections and therefore the effect that the electoral swing to the left will have on institutions is unknown. With an exceptionally good start to 2015, the trend seen last year continues, when the record for this type of sales was broken, with transactions worth more than €7,000 million, a level not reached since 2008. “The arrival of Socimis (Listed real estate investment companies) has been one of the main factors driving this improvement in the market” says the report.

In Europe, the growth of these mega-transactions increased by 18% with respect to the first quarter of 2014. Investors in the UK, USA and Germany accounted for 62% of movements. The largest transaction in the sector was the purchase of a portfolio of student residences (halls) in the UK, for which the Canadian pension fund CPPIB paid €1,500 million. It was followed by the acquisition of Corio’s shopping centres in France following its merger with Klepierre. In Italy, the sovereign fund Qatar Holdings paid €1,000 million to the property developer Hines and the insurance company UnipolSai for 60% of the financial district Porta Nuova in Milan.

“Given the low interest rates and the ECB’s purchase program, real estate demand is going to continue to grow and volumes are expected to reach or exceed the levels seen in recent years, especially in the strongest markets such as Germany and France and those that are recovering, such as Spain, Ireland and Holland, says the report from Savills.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake