19 April 2018 – Eje Prime
Whilst last year was marked by investments on the part of the Socimis, this year is being marked by divestments. Lennar Corporation is divesting in Spain again and has closed fourteen operations to sell properties through one of its Spanish Socimis, Al Breck, for €11 million, according to a statement from the company.
The company has carried out the transactions through the company Rialto Capital Management, an investment vehicle headquartered in Luxembourg, which Lennar uses to carry out its real estate operations in Europe and the only one that has a stable structure in Spain.
The company divested the properties between 16 February and 12 April, generating a gain for the company of €5 million. This divestment follows another carried out in January when it sold four assets for €3.5 million.
Lennar Corporation made its debut on the Alternative Investment Market (MAB) with Al Breck at the end of November 2016 (although it commenced activity in Spain in December 2014), with a stock of around 639 rental homes located in the centre of Madrid. The Socimi created its asset portfolio through the purchase of a portfolio from Segurfondo Investion in December 2014.
Specifically, the Socimi’s assets are located in the centre of the Spanish capital (in the Centro, Salamanca, Chamberí and Chueca districts), as well as in La Moraleja and in towns close to Alcobendas and Torrejón de Ardoz. The portfolio also contains retail premises and offices. According to the IPO prospectus, the market value of the asset portfolio at the time of its stock market debut was €110.52 million.
The Socimi made its stock market debut with a business plan that involved generating value from its portfolio, in other words, selling all of its homes within a 5-year period, ending in December 2020. The company has now initiated this divestment process with the sale of these first assets.
Al Breck’s strategy
Specifically, the company’s plan involves investing in improvements in homes “to increase their yields and increase their occupancy rates to stable levels, and then implementing an aggressive rental strategy that includes, where necessary, reducing the rents and making concessions to tenants to improve the cash flow conditions”.
Subsequently, according to the group’s IPO prospectus, “after improving the occupancy rate, the objective is to keep it stable and start to progressively increase the rents in accordance with the improvements made to the properties and market prices”.
Finally, the Socimi plans “to optimise the value of its portfolio by selling assets individually or in batches, when the demand and price so dictate, and once the minimum ownership term of three years has passed in each case”, according to the firm in its brochure.
In addition, the company launched a second Socimi, Ceres Real Estate Socimi, at the end of last year. Although for the time being, that entity’s activity has been very limited (it does not hold any assets in its portfolio), the sole administrator of the company is Rialto Capital.
This new Socimi is, in turn, the heir of Clearfield Invest, a firm constituted just over two months ago and whose administrators form part of the TMF Group’s team in Spain, a company specialising in the provision of services for all kinds of companies.
Original story: Eje Prime (by C. Pareja)
Translation: Carmel Drake