Inditex Puts 16 Stores in Spain & Portugal up for Sale for €400M

12 December 2017 – Eje Prime

Inditex is getting rid of some of its property portfolio. The Galician giant has put 16 retail premises up for sale, of which fourteen are located in Spain and the other two in Portugal. The buyer will have to commit to leasing the stores to the retail group for twenty years.

The retail group is looking to raise USD 472 million (€400.5 million) from this operation, through which it is seeking to harmonise its leasing strategy, according to Bloomberg. Inditex has only confirmed the sale of the premises.

The Spanish company ended the first half of this year with an 11.5% increase in sales and a 9% rise in its net result, percentages that were similar to those recorded during the first six months of 2016. The company chaired by Pablo Isla recorded turnover of €11.671 billion, whereby exceeding the €11 billion threshold for the first time during the first six months of the year.

The net result of the company that owns Zara amounted to €1.366 billion during H1 2017, compared to €1.256 billion during the first half of last year. Its EBITDA also grew at a rate of 9%, from €2.112 billion to €2.292 billion.

Original story: Eje Prime

Translation: Carmel Drake

Meliá & Starwood Sell 4 Hotels To London & Regional For €230M

10 July 2017 – Expansión

The Meliá Hotel Group is rotating its asset portfolio. Starmel, the joint venture that the Mallorca-based hotel chain controlled by the Escarrer family constituted with Starwood Capital in 2015, has sold four hotels to London & Regional in an operation worth €230 million, according to market sources.

The hotels in question are the Sol Príncipe de Málaga, Sol Lanzarote, Sol House Ibiza and Sol Palmanova in Mallorca. These establishments, which have been renovated recently, contain more than 2,000 rooms between them and will continue to be managed by Meliá following the operation.

This is not the first time that London & Regional and Meliá have crossed paths. In fact, the company owned by Ian Livingstone, one of the greatest real estate entrepreneurs in the United Kingdom, and the Mallorca-based hotel chain have been partners since 2013, when London & Regional purchased 50% of a hotel that Meliá was preparing in Ibiza. That operation opened the doors to the Spanish market for Livingstone.

Meanwhile, the alliance between Meliá and Starwood Capital dates back to 2015, when the hotel group sold seven establishments in the Balearic Islands, the Canary Islands and Andalucía, worth €176 million, to Starmel. The fund controls an 80% stake in the joint venture, whilst Meliá, which recorded profits of €35 million from that operation, owns the remaining 20%. The partners planned to allocate €30 million to the renovation and repositioning of those hotels, which Meliá will continue to manage for the next 15 years.

In parallel, Starmel is continuing to look for opportunities to acquire new assets, with the focus on holiday resorts in the Mediterranean area. Hotels have become one of the preferred assets for investors.

According to data from the consultancy firm CBRE, investment in hotels exceeded €2,000 million during the first half of this year, which represents an increase of 170% compared to the same period in 2016. During this period, operations involving one hundred establishments have been closed, affecting 14,000 rooms in the Spanish market. In this case, CBRE has advised Starmel in the operation. “The assets are located in key tourist areas. Together with those destinations, Madrid and Barcelona are continuing to attract international investors, which reinforces the strength of the Spanish hotel market as an investment destination for the international investment community”, said Miguel Casas, Director of CBRE Hotels España.

Forecasts

The share price of Meliá Hotels International fell by 0.62% on the stock market on Thursday (following the announcement) to €12.88. The hotel chain, which has a market capitalisation of €2,959 million, has seen its share price rise by 16.25% so far this year.

For the year as a whole, Bloomberg’s analysts forecast that Meliá’s revenues will rise by 6.75% to €1,927 million and the net profit will increase by 12.45% to €116.5 million, according to the experts.

Original story: Expansión

Translation: Carmel Drake

Armabex: The Avalanche Of Socimis Continues

17 October 2016 – El Economista

There are 29 listed Socimis on the Spanish stock market, of which 24 are listed on the Alternative Investment Market (MAB). And there are lots more on their way. All of them are subject to the following basic conditions: they must have a minimum share capital of €5 million, distribute 80% of their profits as dividends and hold each rental property in their portfolios for at least three years. But, other than that, they are all completely different.

Socimis, which is the acronym for collective listed real estate investment companies, have come to replace the former real estate companies, which are now just shadows of their former selves (firms such as Quabit and Inmobiliaria Colonial) in a country where investing in property is the typical thing to do. “For every one million euros invested or saved in financial assets, another €25 million is invested in property in Spain”, according to Antonio Fernández, Chairman at Armabex.

Arrival of foreign capital

A few years ago, the Socimis found the perfect breeding ground for construction in Spain. Following the real estate boom, which did away with much of the sector and the subsequent burst of the price bubble, overseas investors decided that it was time to return to Spain. From there, the large Socimis were born in our market, such as Merlin Properties, Hispania, Lar España and Axiare, which all have significant overseas shareholders.

Fernández called these companies the Alpha Socimis – they are used by overseas investors to enter the Spanish real estate market because “by buying shares in them, they are, in turn, acquiring major buildings in the country’s largest cities”. By contrast, the Beta Socimis are those that focus on the development of their assets and, therefore, they make investments (capex).

According to the latest data from Eurostat, house prices in Spain rose by 3.8% YoY during the second quarter of 2016, i.e. by almost one percentage point more than the 2.9% increase registered across the Eurozone as a whole. As such, the increase in house prices has now been higher in Spain than across the EU (on average) for seven months in a row.

The different types of Socimis

(…).

– On the one hand, we have the large Socimis in the market. If an investor is looking for real estate vehicles, such as Merlin Properties, he should know that he is mainly investing in high quality homes and premises that will generate regular rental income. In addition, they are monitored by at least ten brokerage houses, such as in the case of Lar España. According to Bloomberg, these two companies, along with Axiare and Merlin, i.e. the four large players in the Spanish market, all have “buy” recommendations.

– On the other hand, we have the mainly family-run Socimis, where “there may be just a single person taking the decisions”, said Fernández, “and that involves risk”, even more so when they are dealing with single assets that could be sold at any time. Five Socimis have been constituted on that basis, with just one property. (…). A fair few others own between three and five properties only.

– There are also Socimis that own land. “It is worth noting that their returns are higher because they involve greater risk”. According to the expert, these firms rent land and invest in it, which means that, in many cases, the company does not generate any profits and therefore it does not distribute dividends to its shareholders. (…).

– And there are also Socimis that more closely resemble funds of funds, in other words, Socimis that invest in other Socimis, but that do not possess their own assets. Corpfin Capital holds four Socimis under its structure; and Optimum Re Spain Socimi manages several real estate funds.

Original story: El Economista (by Laura de la Quintana)

Translation: Carmel Drake

Investing In RE Companies: Analysts Share Their Top Picks

11 July 2016 – Expansión

The constraints that several British real estate funds are facing following Brexit has placed the focus on the RE sector once again. “With globalised markets, an event in one country has an impact around the world. In the short term, it is likely that property companies will decline in the United Kingdom, as well as in other European markets”, says Mar Barrero, from Profim, but she is certain that the chances of a contagion, affecting companies and real estate funds in Spain, are minimal.

Indeed, the effects of the result of the British referendum on the real estate market may also be positive. At least, that is according to Pablo García, from Carax Alphavalue. “If companies that are currently headquartered in London change their centres of operation, there will be activity in the sector to mobilise offices in Europe. In this context, Paris, Barcelona and Madrid would be well positioned”, he assured and, for this reason, he is positive about the sector.

Barrero justifies her optimism by the “purge that has taken place in the last 10 years, which has led to a significant cut in property prices”. “In Spain, we are in a different phase of the real estate cycle”, says Rubén de la Torre, from Andbank.

Merlin Properties: The industry giant on the stock market and one of the shares with the highest percentage of buy recommendations, according to the consensus of Bloomberg analysts, with support from 85% of them. After overcoming the risk of a possible interventionalist government, De la Torre points to its size as one of Merlin’s positive features. “Its listing on the Ibex gives it visibility and its merger with Metrovacesa will allow it to enter the orbit of many funds” says the expert. In addition, it has managed to diversify its profile through its latest acquisitions.

And as if that weren’t enough, its shares are trading at attractive prices, given that, according to the analyst, they are being traded at a discount of almost 20% with respect to their net book value. The Socimi has potential, according to the consensus, of 21% following a YoY decrease of 18.5%.

Colonial: This is Pablo García’s favourite security due to the quality of its assets and its exposure to the French market, which allows it to diversify. In any case, he believes that the growth of the company will come from its Spanish assets. According to other experts, the company’s decision to start paying dividends again (at the start of July, it paid its first dividend for ten years) is another of Colonial’s attractive features. 66% of the analysts advise buying this security, which they say has potential to increase by 19%. The share price has fallen by 1% so far this year.

Hispania: De la Torre says he also likes this share, “which is very linked to the hotel sector” (…). The company has recently closed a capital increase amounting to €230 million to finance new investments. 57% of the analysts advise buying this share, which has an upside potential of 18%. Its price has fallen by 9% so far this year.

Axiare: The only Socimi that is unlikely to increase its capital this year, given that its net debt is almost non-existent. (…). 63% of the analysts advise buying this security, which has upwards potential of 13%. This year, the share has fallen by 9.8%.

Lar España: A share that is very dependent on the economic cycle due to its significant exposure to the shopping centre segment. (…). 80% of Bloomberg’s analysts advise buying this share, with an upside potential of 38%. This year its price has decreased by 23%.

Other real estate companies: the stock market is also home to other real estate companies, which, due to their small size or limited monitoring by analysts, are at the mercy of speculative movements. Shares in Inmobiliaria del Sur, Quabit, Renta Corporación and Urbas tend to be highly volatile.

Original story: Expansión (by R. Martínez)

Translation: Carmel Drake