Telefónica Considers Offers Worth €50M+ For 2 Buildings In Madrid

4 May 2016 – El Confidencial

The countdown has begun. Telefónica has received the first offers for two of the buildings that it currently has up for sale in Madrid. Two buildings that it is selling together and for which it hopes to receive offers amounting to at least €50 million. According to sources, the properties in question are located on Calle Irún, 15 (measuring 10,000 m2) and Calle Alcántara, 25 (measuring more than 7,000 m2). The latter currently houses Telefónica’s Research and Development department.

Both of the assets are very well located and have sparked a great deal of interest amongst investors. The first is located just a stone’s throw from Plaza de España and Príncipe Pío train station and may be converted into homes in the future.

The second is situated just 500 m from Calle Goya and Plaza de Manuel Becerra. In both cases, Telefónica will remain as the tenant for 10 years, with the option of extending the lease contract for five more years.

These buildings form part of a long list of properties on the market or already sold by the telecommunications operator, which has recorded revenues of €200 million from the sale of properties in the last two years.

Real estate divestments

The listed company designed a real estate efficiency plan for 2014 and 2015, which included the sale of nine buildings that, in light of imminent technological changes, will become completely obsolete within less than a decade, whilst the revenues obtained could be used to finance the investment required to adapt to the new times.

Telefónica will continue as the tenant of the buildings – which is known in real estate jargon as a “sale & leaseback” arrangement – for between seven and 10 years, which means that the new owner will have both of the buildings at its disposal once the lease contracts have expired.

Following the disappearance of analog technology and the digitalisation of all of its equipment, the operator has been forced to divest its non-strategic assets. And that is precisely what it has done over the last two years.

In August 2015, it sold two buildings in the centre of Madrid for €42 million. A few months before that, it sold another five buildings, located in Madrid, Bilbao, Valencia and San Sebastián, for €65 million.

On this occasion, unlike in the cases of previous divestments made by the operator, Telefónica has decided to sell the two buildings as a single lot, which has been valued at €50 million, rather than finding an interested buyer for each property. The sale mandate is in the hands of Aguirre Newman, which has declined to make any comments in this regard.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake