3 March 2017 – Expansión
Spain’s largest listed real estate investment companies (Socimis) – Merlin, Hispania, Lar España and Axiare – which all debuted on the Spanish stock market between March and July 2014 with €2,560 million to invest, closed their second full fiscal year with significant increases in their income statements.
The four companies recorded a combined profit of €1,131.2 million in 2016, almost five times as much as in 2015 (€244.7 million). Of that amount, almost half was generated by a single company: Merlin Properties, which saw its profits soar by more than 1,000%, following the integration of the real estate company Metrovacesa onto its balance sheet.
The other Socimis also managed to substantially increase their earnings, thanks in large part to the increase in their asset portfolios. Specifically, these four Socimis owned assets worth €14,445 million at the end of 2016, up by €5,256 million compared to the same date a year earlier. Again, the impact of Metrovacesa on Merlin’s portfolio was the main reason behind the increase in its assets, although the other three Socimis also saw their respective portfolios grow.
Nevertheless, unlike in the previous year, the Socimis opted to make much more selective purchases in 2016, each specialising in a different RE segments (offices, shopping centres, hotels, etc) – this represented a change in strategy compared to 2015 when the main aim of all of them was to grow in size and, therefore, buy assets to generate revenues.
In this sense, the combined turnover of these companies amounted to around €608 million in 2016, compared with €233.03 million the previous year.
The increase in their portfolios has also had an impact on the stock market, above all, given the capital increases that were completed last year, with the aim of financing new investments. In this case, the companies that debuted on the stock market between March and July 2014, with a combined market capitalisation of €2,560 million, now have a global capitalisation of more than €7,900 million.
From this Spring onwards, the period (three years) that the Socimi rules require these companies to hold onto their assets for, in order to benefit from the exemption to pay tax on the profits obtained in a transaction, comes to an end.
In the case of Merlin, for example, it already completed several divestments in 2016. For example, the Socimi led by Ismael Clemente deconsolidated the residential portfolio that it had inherited from Testa and merged it with Metrovacesa’s equivalent portfolio; today it holds a 16.1% stake in that divested company.
Similarly, on 30 December 2016, Merlin sold its portfolio of hotel assets to Foncière des Murs for €535 million.
A special case in Hispania, the firm in which George Soros holds a stake. It was created on the basis of a model inspired by traditional private equity and venture capital funds, for a period of six years, and so intends to sell all of its assets before March 2020.
In the case of Lar, its non-strategic assets include the luxury housing development on c/Lagasca 99, which the Socimi hopes to have sold and handed over to the new owners by the first quarter of 2018.
Original story: Expansión (by R.Ruiz and R.Arroyo)
Translation: Carmel Drake