Knight Frank: Residential Inv’t Continues To Rise

14 October 2016 – Expansión

Residential investment is continuing its upwards trend in Spain despite the political uncertainty that continues to plague the country. In 2016, investment in the housing sector is expected to exceed last year’s levels thanks, above all, to the boost from property developers and private capital, and to the increasingly important role being played by investment funds. According to a report prepared by the real estate consultancy Knight Frank, the volume of residential investment in Madrid will reach €1,000 million by the end of 2016, whereby slightly exceeding the €950 million recorded last year and the €800 million recorded in 2014.

Currently, residential assets account for 19% of all real estate investment, compared to tertiary sector assets (offices, retail, industrial and logistics assets), which account for 81%.

By type of investor, the main players are private equity firms, which account for 36% of all operations and property developers (31%), followed by investment funds (20%), cooperatives (8%) and Socimis (5%).

In its report, Knight Frank highlights that alliances between local property developers, who bring knowledge and management expertise to the table, and international funds, who contribute capital, still represent a “formula for success” in the residential real estate market.

Moreover, this segment hardly sees any opportunistic operations. “Operations of a value added nature, which require investors to assume some of the risk involved in repositioning assets, are the most prevalent, on the basis that most investments have involved buildings that need renovating”, explained the consultancy. In this sense, the Socimis are the big stars of core operations – safer transactions that offer investors lower returns -.

Fewer defaults

In terms of financing, the report from the consultancy highlights the change that the sector has experienced compared to the years of economic crisis, when the credit tap was firmly shut.

Knight Frank highlights that one of the most significant differences in the new cycle is that financial institutions are not only giving importance to appraisal values, they are also analysing projects before they grant financing.

For the consultancy firm, the major adjustment in the banks’ weighting criteria, following the transformation of the financial system and the new classification of clients and loan to value policies, have caused the default rate to decrease to around 6.5% over the last two years, bringing it to levels more in line with the European average. Nevertheless, Knight Frank points out that Spain has a fair way to go to reach the levels seen in countries such as Germany (4%) and France (4%).


In terms of the alternative to the classic property developer loan financing, the consultancy firm highlights the rise of the Socimis as specialist vehicles and fixed income financing, for example, through bonds.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

Freo Buys An Office Building In Madrid For €15M

14 October 2016 – Expansión

The German fund Freo, which opened offices in Madrid and Barcelona at the end of last year with the aim of investing in the Spanish market, has completed its first purchase. The private equity manager has acquired an office building on Avenida de Manoteras in Madrid for €15 million. The property, known as Edificio Orion, used to be owned by the German fund manager Triuva, formerly known as IVG Institutional Funds.

The asset, constructed in 2001, is located at number 26 on the Madrilenian street and has a surface area of 7,300 sqm. According to sources in the real estate sector, the offices are fully occupied and currently house twelve tenants in total, including Whisbi Technologies, Sacyr, TPI Edita, Tento and several companies from the ACS Group. The operation will generate a return of 6% for the buyer.


Freo is a private equity fund manager that also has its own investment vehicle. It was founded in Frankfurt (Germany) twenty years ago and has offices in all of Europe’s major cities.

Last year, Freo hired Daniel Mayans, former Director at GE Capital Real Estate in Spain, as the CEO of its Spanish subsidiary. It also appointed Óscar de Navas, who also came from the US multinational, as the Vice-President of Investment at Freo for the Spanish market. The firm’s purpose is to look for buildings such as Orion to add value to them, in terms of investment by renovating the offices, as well as in terms of returns by making improvements to the rental contracts.

Investment focus

That is the goal of the most international funds, which, given the shortage of assets in the most central areas of Madrid and Barcelona and the strong pressure to buy, are acquiring assets in more peripheral areas of Spain’s largest cities. Other funds that have recently made purchases on the Manoteras thoroughfare include: IBA Capital Partners, Axa Real Estate, Lone Star and Blackstone, as well as the Socimis Trajano Iberia and Merlin Properties.

The seller of the property in this case, the company formerly known as IVG Institutional Funds, which has been called Triuva since 2015, is the largest institutional real estate fund manager in Germany, with 45 funds in total. The subsidiary in Spain and Portugal manages assets worth €300 million, which have a combined surface area of 78,000 sqm.

Original story: Expansión (by Marisa Anglés)

Translation: Carmel Drake