Spanish REITs Assets Soar in Value to €24.2 Billion


15 August 2017


Merlin, Colonial, Hispania, Axiare and Lar Espanã increased their stock market values by almost 25% and have put real estate worth more than 1.7 billion euros on the market since the end of 2016.

The socimi’s rise this year has been meteoric and their prominence in the Spanish real estate market is indisputable.  In just one year, Merlin, Colonial, Hispania, Axiare and Lar España have increased their total gross asset value by almost 40% to €24.2 billion. This compares to a 25% increase in the Spanish stock market in general.

Colonial, which in June converted itself to a socimi structure with retroactive effect to January, conferring special tax status, has increased the gross value of its assets in the last twelve months by almost 15%, to 8.66 billion euros. This has led the company to increase its profits by 90%, to 437 million euros. The share price of the group chaired by Juan José Bruguera, which has appreciated by 36% since the end of 2016, is at all-time highs, with a total market capitalization of 3.174 billion euros.

According to the latest available data, Merlin, which will submit its semi-annual accounts on September 22, ended March with a gross asset value of 10.026 billion euros, up 62%. So far this year, the company has increased its stock market value by 12% to 5.430 billion euros, making it the largest listed real estate company in Spain.

One of the most active socimis this year in terms of acquisitions has been Axiare. The group, led by Luis López de Herrera-Oria, ended the first half of the year with a portfolio valued at €1.709 billion, up 63%. Just in the first half of the year, Axiare acquired six office and logistics assets in Madrid and Barcelona for a total of €215 million. The company has a market capitalization of €1.294 billion, 30% more than the €993 million it was valued at in December 2016.

Hispania added almost €2.340 billion in assets in the year to June, up 44% compared to the same period in 2016. The company owned by George Soros increased its net profit by 35% to €185 million, and its value on the IBEX stock exchange is close to 1.700 billion euros, compared to €1.213 billion at the close of last year.

For its part, Lar España finished the semester with 31 assets in its portfolio whose value reached 1.448 billion euros, up 38%. The company, which counts Pimco as an investor, had its profits go up by 50% in the first half of the year, to 65 million euros, and its market capitalization already exceeds 750 million euros, 22% more than at the end of 2016.

After the intense investment activity of the last three years, the Spanish REITs have entered a new phase in their strategy, accelerating turnover in their assets to lock in gains on their original investments, at a time when investors are eager for opportunities and the market is in full swing. With the asset sales, the socimis are looking to bring in new capital to make new purchases.

In addition, these investment vehicles can now take advantage of the fact that some of their assets have already met the minimum requirement to hold onto investments for three years before they can be sold to generate capital gains.

The socimis have sold or are planning to sell assets in the coming months for a combined value of more than 1.7 billion. Just a few weeks ago, Colonial sold the OECD’s headquarters in Paris. SLF, a French branch of the real estate company, reached an agreement for the sale of the property known as In&Out. Although the group did not disclose the amount of the transaction, market sources put it at around 450 million euros, a premium of more than 25% over its last sale price. The transaction is expected to be officially registered during the second half of the year. Colonial “continuously” revises the value creation potential of each property with a view to future disinvestments.

Merlin has been one of the most active Spanish REITs in terms of asset turnovers. After selling off its residential investments after its merger with Metrovacesa, and selling office buildings and branches in France last year for an aggregate amount of 226 million euros, the company agreed, at the end of 2016, to sell 19 hotels to the French real estate company Foncière des Regions for €535 million.

New opportunities

Hispania, the socimi managed by the Azora Group, reached an agreement in June to sell its Aurelio Menéndez office building for €37.5 million, an increase of 39% in its valuation since December 2016. In parallel, it has continued with its plan to sell off its residential portfolio, selling 25 assets in the Isla del Cielo and Sanchinarro buildings. Hispania also finalized the sale of its office assets to Swiss Life, including 25 assets in Barcelona, Madrid and Málaga, for 510 million euros, as reported by Expansión on August 8.

Hispania, which plans to liquidate itself by March 2020, six years after listing, will focus on its hotel portfolio, in which it continues to invest to reposition assets. Shareholders voted to extend the investment period until December 31 for this reason.

Lar España will also begin to rotate assets in the coming months to obtain new funds with which to undertake acquisitions in retail, its main business, and logistics. It expects to deliver a luxury real estate development in Madrid, on 99 Lagasca street, which it owns together with its largest shareholder, Pimco. The delivery of this development should generate sales of about 210 million euros, half of which will go to Pimco.

The luxury development’s units are being sold at an average price of 11,000 euros per square meter and the asset has a surface area of 21,000 square meters. At the end of June, pre-sales had reached 65%. Company sources indicated that Lar España will continue to focus on asset turnovers to generate value and focus on offices, where it believes that there are more opportunities.

Axiare stated that it will analyse new opportunities at the end of 2017, when some of its assets will start to reach the three-year mark on its portfolio. “Turnover will be selective, just as our purchases were. Assets will be analysed on a case by case basis and any decisions will be based on market opportunities,” it added.

Original Story: ProOrbyt Expansion – Rebeca Arroyo

Translation: Richard Turner