Blackstone, Cerberus, Arcano & Others Head To The Beach…

30 May 2016 – El Confidencial

(…). Just over a year and a half ago, the large real estate investment funds were concentrating their activity in Spain’s two large (regional) capital cities (namely, Madrid and Barcelona). Nevertheless, the saturation of operations and a gradual increase in prices (there is no sign of a bubble in either city, but there are increasingly fewer bargains to be had) has forced investors to explore new locations, in cities that are one step down in terms of size and population, but where there is significant latent demand, and above all, very attractive prices for operations with payback periods of five or seven years. Valencia and the Valencian Coast are in the spotlight, according to sources from an important real estate consultancy firm headquartered in the city, which has participated in some of the largest transactions completed in recent months.

Blackstone, Cerberus, and even the Real Estate division of managers such as Arcano, have been exploring and closing operations in the Valencian market for more than 12 months now, primarily acquiring debt portfolios secured by well-located residential properties and focusing on upper-middle class segments of the population with a certain amount of liquidity and the capacity to borrow. The assets acquired include not only finished promotions, but also urban land, such as the case of a group of plots located in Nou Campanar, which Sareb has just sold to the US fund Castlelake. The land used to be owned by Juan Armiñana, one of the local property developers who made his fortune during the real estate bubble and was destroyed following the crash, leaving behind a small empire of bankrupt companies and millions of euros of debt from the banks.

The presence of a fund like Castlelake in this type of operation is striking because two years ago, no-one would have imagined such a fund exploring operations beyond Madrid or Barcelona. Last year, Sareb sold it 76,000 sqm of residential land in the Madrilenian town of Boadilla del Monte for around €13 million. In the cae of Nou Campanar, the consideration has been lower, given that the plot of land measures just 12,000 sqm and has a buildability of 40,000 sqm.

The funds are exploring “prime” areas of the city of Valencia, both in the centre and along the seafront, as well as along the Patacona beach area, where there is still some undeveloped land and several developments for sale, in the hands of financial institutions. In the same way, local investors, such as the Zriser Group (Pablo Serratosa) are looking to launch a residential development in the vicinity of the Ciudad de las Artes y las Ciencias. (…).

Five year payback periods and returns of 20%

The logic behind these investments tends to have a common element – payback periods of just over five years with average returns of 20%. These deals are conceived from a purely financial point of view, but they include agreements with construction companies when they involve land development and sales plans. (…).

Original story: El Confidencial (by Víctor Romero)

Translation: Carmel Drake

Arcano: House Prices Rose By 6.9% In Q1 2016

26 May 2016 – El Economista

House prices accelerated their growth in Spain during the first quarter of 2016, increasing by 6.9% with respect to the same period last year, according to Spanish Real Estate Macroeconomic analysis performed by the independent financial advisory firm Arcano.

The study shows that the recovery is being seen in every autonomous region, regardless of the political colour; both in the new and second-hand housing segments; and in terms of both housing and land. Following a decrease in house prices of 38% in nominal terms and 50% in real terms, Arcano believes that the increase, which began in 2014 “should be maintained due to the positive underlying forecasts for demand, supply and accessibility”.

Specifically, the analysis highlights that the sale of homes in Spain continued to grow at double-digit rates during the first quarter of the year, increasing by 10% YoY, favoured by “significant” demand from foreigners, who now account for 13% of all house purchases in Spain.

Moreover, Arcano explained that another pillar of this data for the recovery of the residential sector is based on the “favourable” macroeconomic environment in Spain, especially the “historical” 12% decrease in unemployment and the subsequent 3.3% improvement in employment and 1.1% increase in wages, following several years of stagnation.

“The economic improvement is allowing pent-up demand for housing to flourish”, says the report, which adds that the recovery of the real estate sector in Spain “is continuing, led by strong fundamentals and a favourable macroeconomic environment in Spain”.

It also helps that house purchases are recovering not only due to necessity on the part of buyers, but also due to investment, given their “attractive” prices in comparison with other assets, explains Partner and Chief Economist at Arcano, Ignacio de la Torre.

In addition, mortgage loans have become cheaper, reaching average levels of 2.38% during Q1 2016, generated by the fall in Euribor. In turn, the number of new mortgages signed in February 2016 rose by 16% YoY, following their increase of 20% in 2015 and 2% in 2014.

In terms of the supply of housing, Arcano says that “it is still very limited”, above all the supply of new vacant homes, which is “practically” non-existent in many areas with high populations and GDP, such as Madrid, Barcelona, Sevilla and Valencia.

Specifically, 46,000 new homes were constructed in 2015, compared with 641,000 in 2007. And although it is true that new housing permits are recovering, they are still a “long way below their historical levels”.

Original story: El Economista

Translation: Carmel Drake

Aguirre Newman Puts Large High Street Portfolio Up For Sale

21 April 2016 – El Confidencial

Aguirre Newman has decided to put the “For Sale” sign up on one of the largest assets that it owns through its fund, Zaphir. The asset in question is a portfolio of retail outlets spread across Spain, all of which are located on major high streets. Moreover, unlike the operations carried out by the banks and El Corte Inglés, this portfolio has lots of different tenants.

The firm, which has engaged Arcano to lead the process, considers that this multiplicity of clients is an advantage, along with the €32 million of prior year tax losses recorded by the holding company that owns these premises, which mean that the operation carries tax advantages of around €8 million.

Zaphir has already started to show the 32 assets that comprise this operation to a restricted number of interested parties, mainly core investment funds, Socimis and large family offices, on the basis that the estimated sales price amounts to €80 million, according to sources familiar with the process.

Although the portfolio is spread across Spain, almost half of the premises (15) are located in Madrid and they account for 56% of the rental income, together with some first-rate properties, such as number 82 on Calle Serrano, which houses the Trussardi store.

Despite the interest that some of these premises may awaken individually, the operation has been structured as a “share deal”, in other words, the company will be sold in its entirety, which will allow the new owner to avoid paying taxes on the gains generated by these assets, and any others than it already owns, until the prior year tax losses have been offset.

The average yield of the portfolio is estimated to amount to 4-4.5%, whilst its historical occupancy rate stands at 90%, with clients ranging from retail giants such as Zara Home, Vips, Trussardi, Cortefiel and Punt Roma, to pound shops and newsagents.

The sales process

Aguirre Newman’s decision to sell this portfolio forms part of its divestment plans for the Zaphir fund, which just two months ago completed the transfer of its logistics assets to Neinver and Colony for €87 million.

But, this divestment also comes at a particularly sweet time for the sector, given that interest in investing in profitable real estate assets is at its peak, due to the environment of zero and negative interest rates and the recovery of the Spanish economy.

In fact, last year, according to several studies, almost €1,200 million was spent on transactions in the retail sector, and some establishments in prime areas were sold with yields of around 3%.

This year it is expected that operations involving this kind of asset will multiply, both on the high streets of major capitals, as well as in secondary cities. These operations are beginning to address the recovery in consumption and the growing interest for a presence in our country, from both major fashion firms (Inditex, Primark, H&M and Uniqlo) as well as from players in the restaurant world (the hamburger chain Five Guys has arrived in Spain, opening its first property in Madrid).

The calendar communicated to potential buyers allows for the presentation of non-binding offers within the next two weeks, with the aim of closing the operation before the summer. Aguirre Newman and Arcano both declined to comment on the operation.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Arcano’s RE Fund Buys Office Building In Madrid For €10.6M

7 April 2016 – Expansión

Arcano’s real estate fund, Arcano Spanish Opportunity Real Estate Fund, has purchased an office building in Madrid for €10.6 million, the first operation to be closed by this real estate fund in the value-added space.

Original story: Expansión

Translation: Carmel Drake

Arcano Launches Its First RE Investment Fund

29 July 2015 – El Economista

Arcano, one of the most active players in the asset management sector (with private equity funds of funds and funds with loans for companies, with €3,000 million of managed or advised assets) has decided to launch a third business line: investment in all kinds of real estate assets.

According to José Luis del Río (pictured above), CEO of Arcano Real Estate, the first fund will have a budget of €200 million. “We hope that, a year from now, once we have completed the fund raising process, we will have more overseas investors than domestic. For our first partial close in July, we have secured commitments amounting to €50 million, of which three quarters have been pledged by Spanish players. We wanted to start by inviting local investors as we have been working with them for many years”.

Arcano has created an integrated team, comprising seven property management professionals, to evaluate its investments. They are looking to benefit from opportunities in a sector that is currently undergoing a strong recovery after eight years of falling prices.

Differentiation

“We want to differentiate ourselves from the large international funds that focus on securing the lowest possible prices, and from the socimis, which are paying over the odds in some cases as they seek to secure rental income to pay their shareholders. We want to add value and through that, build the return for the fund. We will not act in an opportunistic way”.

Between 50% and 70% of our investment will be focused on the residential market. From the development of land in good locations, in cities or on the coast, in conjunction with real estate developers, to the renovation of buildings. “Local developers will be our partners, not our competition”, explains Del Río, who has 25 years of experience in the sector, first as Head of Real Estate at AB Asesores, then at Morgan Stanley (which acquired AB) and subsequently at N+1, where he was the Director of Real Estate until 2011.

We will differentiate ourselves by entering operations that require investment and specialist management, such as the transformation of buildings to change their use, for example from a hotel to an office. “Provided these changes of use are already approved, we will not have to assume any urban planning risk”, says the Director.

In terms of regions, the team will focus primarily on Madrid and then on the coast, Bilbao and Sevilla for residential assets. For offices, it will look only at Madrid and maybe Barcelona; and for hotels and shopping centres, it will consider the whole country. Finally, for logistics assets, it will analyse Madrid, Barcelona, Zaragoza and Valencia. “We will be a very small and very RE-focused fund. And we will work quickly. We will close the first transactions before the end of the year, possibly in Madrid”. The average ticket will be between €5 million and €25 million.

Original story: El Economista (by Carlos Pizá)

Translation: Carmel Drake

Arcano Hires Fernández Cuesta, Former Chairman Of CBRE

29 January 2015 – Real Estate Press

Arcano, an independent financial advisory firm, has hired Eduardo Fernández Cuesta (pictured above) as a new partner of the Group, as it aims to fully launch itself into the real estate market showing clear signs of recovery.

Fernández Cuesta will lead Arcano’s commitment to the real estate sector, as it looks to create investment vehicles and launches a dedicated corporate finance team for the real estate sector. The division will offer advisory services for corporate transactions in the sector, company mergers and acquisitions, the restructuring of corporate debt and company valuations, amongst others.

Eduardo Fernández Cuesta has extensive experience in the Spanish real estate sector, having worked for 25 years at CBRE, where he was Chairman from 1998 to 2013. Since 2013, he has also served as the Chairman of the Royal Institution of Chartered Surveyors (RICS).

In October last year, Fernández Cuesta was appointed as an independent director of Aena, a profile that fits perfectly with the real estate initiative that the company intends to carry out (……).

Eduard Fernández Cuesta will become the 13th partner of the group led by Álvara de Remedios, Chairman and Jaime Carvajal, CEO. He said:

“I take on this professional challenge with enormous enthusiasm and confidence. Arcano Real Estate offers a great competitive advantage to the real estate sector in Spain, thanks to our team of professionals, the strong reputation that the firm has in the market, and the extensive knowledge that we have about the sector and its main players”.

Arcano, founded in 2003, is an independent financial advisory and asset management company. It has three main business areas: investment banking, wealth management and alternative asset management. It employs a workforce of almost 80 people in its offices in Madrid, Barcelona and New York, and since its creation has become one of the most important independent firms in the Spanish financial sector.

Original story: Real Estate Press

Translation: Carmel Drake