Will 2017 Be The Year Of Mergers Between The Socimis?

24 February 2017 – Expansión

The Socimi boom continues unabated. Ores – the listed real estate investment vehicle owned by Bankinter and Sonae Sierra – debuted on the Madrid stock market on Wednesday, and in doing so became the thirty-first company of its kind to have its shares traded on the MAB (Alternative Investment Market). Moreover, all indications are that this phenomenon is going to continue to grow.

An attractive tax regime and capital appetite for real estate assets has led to a flood of Socimis debuting on the stock market in recent years.

Heading up the list of Socimis, by size, are Merlin – the only real estate company whose shares are traded on the Ibex – Hispania, Lar España and Axiare. These four companies, which debuted on the Madrid stock exchange between March and June 2014 with €2,560 million to invest, now own a combined portfolio worth more than €10,500 million.

In addition to these Socimis, there are around thirty other companies that have joined the MAB in recent years. Following the tsunami that the real estate sector has experienced in just three years, the question now is: What will happen next?

Limitations

According to a report prepared by CBRE, “In 2016, the number of Socimis is expected to continue growing. Nevertheless, given that an increasing number of Socimis are competing in a somewhat limited market, it is likely that 2017 will be a year in which there is pressure for them to increase in terms of size and specialisation, with the aim of obtaining competitive advantages, driving merger and acquisition activity, and selling off non-strategic portfolios of assets between Socimis”.

In this sense, it is expected that existing investment vehicles owned by family offices and private banking will be converted into Socimis. The experts at CBRE point out that pooling assets into existing investment vehicles, in return for ownership stakes in them, generates value growth for investors. (…).

The analysts also point out that the Socimis are likely to move towards more specialisation in the future. In this sense, Hispania is planning to focus its activity on hotels, whilst it divests its residential business and rotates its offices. (…).

Merlin – the largest real estate company in Spain and one of the ten largest Socimis in Europe – decided to sell off its portfolio of hotel assets to Foncière des Regions for €535 million to focus on its significant office portfolio, which has just grown thanks to the Socimi’s acquisition of the iconic Torre Gloriés building, also known as Torre Agbar (pictured above), in Barcelona, for €142 million.

Meanwhile, Axiare is focusing above all on offices, whilst Lar España is centring its attention on shopping centres.

Investment

Operations such as Merlin’s purchase of Torre Agbar on 12 January and Axiare’s acquisition of the headquarters of Capgemini and PSA last month reflect the fact that, after the record investment figure recorded in 2016 – €14,000 million, a figure hitherto unseen in Spain – the real estate market is still very attractive.

“We expect 2017 to also be a very active year for the Spanish investment market (…)”, say sources at CBRE (….) thanks to the more attractive returns being offered by the real estate sector compared to other sectors, the outlook for economic growth across Europe and the continuous improvements in financing (…).

Original story: Expansión (by R.Arroyo and R.Ruiz)

Translation: Carmel Drake

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