Spain Offers Pockets of Opportunities

22/07/2014 – Investment Week

During the “golden age” in the Spanish real estate market, this sector accounted for around 18% of the country´s GDP, while investment in property was topping €30 billion in 2007. Then the recession loomed.

However, the year 2014 started to show some clear traces of recovery. For instance, five Socimis (REITs) have gone public since January with several more waiting to become listed.

The vehicle Merlin Properties has raised the largest IPO amount so far (€1.25 billion). Originally, the firm tried to raise €1.5 billion on its flotation.

Many big-name investors decided to bet on the Spanish REITs, such as George Soros and John Paulson, as well as a number of international funds.

Stuart Mitchell, the founder of SW Mitchell, sees builder Sacyr Vallehermoso as the real opportunity calling its earlier books valuations “underestimating”. He assures he gained 100%-150% through the investment, expecting 50-100% more in the future as the company comes back to normal. The investor also purchased stakes in Santander and Banco Popular.

There are some that think the REO sales by banks pressured by strict European capital reserve requirements are the real deals. T. Rowe Price´s portfolio manager Dean Tenerelli says that the Spanish appeal lays in “record low rentals and an abundance of cheap properties”. In fact, home values in Madrid continue to go down with depreciation of 1.9% registered in Q1 2014.

Terenelli points out that the recovery is still crawling and for this reason investors shall stay on alert. “In this economic circumstances, identifying reliable companies is essential to obtain high return when the market gets over the crisis hit.”


Original article: Investment Week (by Dan Jones)

Summary: AURA REE