Funds, Socimis, El Corte Inglés & Seur Compete in the Urban Logistics Segment

9 March 2019 – Expansión

Investors and logistics operators alike are setting their sights on urban hubs to benefit from the boom in e-commerce. According to data from CBRE, investment in the logistics sector is thriving – it amounted to €2 billion in 2017, €1.5 billion in 2018 and is forecast to reach €1.2 billion in 2019. Active players in the sector include the Singapore sovereign fund through its Socimi P3, Blackstone, Prologis, Logicor, CBRE GI and Montepino, and Merlin, amongst others.

Urban hubs are gaining significant weight in the sector thanks to their ability to reduce transport costs, avoid the new traffic restrictions and resolve the problem of product returns.

According to the CNMC, Correos and Correos Express currently deliver 44% of all packages in Spain, followed by MRW and Seur (14% each) and DHL (4.5%).

In terms of retailers operating in this space, Amazon set the ball rolling by opening a logistics centre in the heart of the Eixample district of Barcelona and in the Méndez Álvaro area of Madrid. Other large retailers are following suit by opening distribution centres inside major cities, such as Decathlon, MediaMarkt, Ikea, Aki, Carrefour and Worten.

The investment firm Azora has also announced its intention to invest €250 million in logistics hubs in urban centres, which it will lease to delivery specialists such as Seur, DHL and MRW. Seur already has eleven urban logistics centres and plans to open another nine this year. Meanwhile, DHL already has ten such hubs and plans to open two more this year.

In the same vein, the department store giant El Corte Inglés has also launched an ambitious omnichannel logistics strategy, which will convert its 94 shopping centres into storage points for the management of online purchases.

Original story: Expansión (by I. de las Heras & R. Arroyo)

Translation/Summary: Carmel Drake

Spain’s CNMC Takes Madrid, Bilbao & San Sebastián to Court Over Anti-Airbnb Legislation

7 August 2018 – El País

The competition authorities are cracking down on the attempt by some of Spain’s large Town Halls to regulate the boom in tourist apartments, created by Airbnb and its competitors, which many blame for contributing to an increase in residential rental prices and the expulsion of the most underprivileged from the centre of Spain’s cities. The National Markets and Competition Commission (CNMC) announced on Tuesday that it is going to challenge the urban planning rules approved recently in Madrid, Bilbao and San Sebastián on the basis that they violate “competition” and harm consumers and users. Other rules, not yet in force, in Barcelona and Valencia, could also be targetted by the CNMC, warn sources at the agency.

Imposing a compulsory licence on those who rent their homes to tourists. Limiting the types of properties that may be leased for short periods. They are some of the measures introduced by the Town Halls that the CNMC is now challenging. And the battle doesn’t stop there. New rules that other cities decide to approve may also clash with the opinion of the market regulator, which is now sending the cases of Madrid, Bilbao and San Sebastián to the High Court of their respective autonomous regions. They will have to decide whether to admit the appeals and overturn, in part or in whole, the municipal regulations.

The body chaired by José María Marín Quemada said that it has sent a request to the three municipalities to provide explanations regarding the “need and proportionality” of the restrictions or, failing that, for those restrictions to be annulled. In the absence of a satisfactory response, the CNMC will resort to the courts through a contentious-administrative appeal. The informal talks held so far have made very clear the gulf that separates the independent body from the Town Halls.

In its note, the CNMC details the different regulations that are, in its opinion, deserving of appeal for being measures with “restrictive effects on competition”. Madrid requires a licence for the rental of tourist apartments and homes. The municipality also establishes a period of one year, extendable for one more, before new licences can be granted in areas such as the Centro district. According to the recently approved legislation, the rental of tourist apartments that do not have an independent entrance will be prohibited, which represents 95% of the homes in the city centre.

In both Bilbao and San Sebastián, the regulations limit tourist apartments to ground and first floors only, unless they have independent access from the street. In Bilbao, moreover, tourist apartments need to be authorised and registered; and in San Sebastián new tourist apartments are prohibited in certain parts of the centre.

Higher prices

The Competition authority believes that, with their decisions, the municipal teams in Madrid, Bilbao and San Sebastián “are impeding the entry of new operators and consolidating the position of the existing suppliers of tourist accommodation”. The body has announced that these measures will lead to “higher prices in terms of tourist accommodation” and lower quality, investment and innovation in tourist accommodation in those three cities (…).

The affected municipalities reacted quickly, stating that they will defend their regulations in the courts. The Town Hall of Madrid, governed by Manuela Carmena (Ahora Madrid) said that it wants to combine the defence of tourism with the rights of “citizens in our neighbourhoods”, according to Julio Núñez. “Our objective is introduce regulation that protects the residential use of land and favours competition in a sector where hostels and hotels already operate”, add sources at the Urban Planning Department (…).

Original story: El País (by Luis Doncel)

Translation: Carmel Drake

Spain’s Competition Authority Approves Minor’s Takeover of NH

21 July 2018 – Expansión

Minor’s takeover of the NH Hotel Group is moving forward. The Spanish National Securities and Markets Commission (CNMV) admitted the offer from the Thai company Minor on Thursday and then, yesterday (Friday), Minor obtained approval from the Spanish and Portuguese competition authorities (CNMC). In this way, the offer is conditioned “exclusively” on its approval by Minor’s General Shareholders Meeting, which has been convened for 9 August. The Thai company currently controls 29.8% of NH’s share capital and, in September, plans to complete the purchase of an additional 8.4% stake from the Chinese firm HNA, which will increase its percentage stake to more than 38%.

The company, which is offering to pay €6.40 per share (€6.30 following the payment of the dividend approved by the General Shareholders’ Meeting) has indicated that its objective involves controlling between 51% and 55% of the Spanish group and for the remaining shares to continue to be listed. If that limit is exceeded, the company will consider making way for the entry of a financial partner in the share capital. Minor has also said that its objective involves increasing NH’s dividend by 50% next year to €0.15 per share.

The Thai group recorded revenues of €1.4 billion in 2017, has a market capitalisation of €3.9 billion and employs 66,000 people. With this operation, Minor will strengthen its hotel presence in America and Europe. Minor has 161 hotels and 20,384 rooms, primarily in Asia and Africa, whilst NH has 382 establishments and 59,350 rooms. Currently, the only markets in which the two chains have a presence are Brazil, Portugal and the United Kingdom.

At the General Shareholders’ Meeting held in June, the Chairman of NH’s Board, Alfredo Fernández Agras, described the offer as insufficient. Moreover, the President of Hesperia and CEO of NH, José Antonio Castro, expressed his criticism of the operation and his dissatisfaction with the Thai group’s entry onto the Board of Directors, where it now has three representatives.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

CaixaBank Transfers Servihabitat & €6.7bn in Toxic Assets to New JV with Lone Star

28 June 2018 – El Confidencial

Caixabank has followed in the footsteps of Santander and BBVA, as expected, to create a joint venture company with a large international fund to which it is going to transfer a large proportion of its toxic real estate assets.

Specifically, the entity has reached an agreement with Lone Star to transfer to this new jointly-owned vehicle its entire portfolio of foreclosed assets, whose gross value amounts to €12.8 billion, and which in net terms is worth €6.7 billion, as well as the servicer Servihabitat, whose ownership it recovered on 8 June, when it acquired the 51% stake that it had sold to TPG five years ago, and which takes the final amount of the agreement to €7 billion.

Lone Star will own 80% of the share capital of the new company, whilst the financial institution will control the remaining 20%, a structure that will allow CaixaBank to deconsolidate the assets. The deal is expected to have a neutral impact on the bank’s income statement, but will allow it to improve its capital ratio, the ultimate motivation behind these kinds of operations.

Specifically, the agreement with Lone Star will allow the bank to increase its fully loaded CET 1 ratio by 30 basis points, but, given that the purchase of Servihabitat resulted in a hit of 15 points, the net outcome of these two operations will have a final impact of a 15-point improvement.

Pressure from the European Central Bank on Spanish entities to accelerate the real estate clean up have been the trigger for these kinds of operations, since they allow the immediate deconsolidation of million-euro batches of toxic assets, which will be sold gradually through the joint ventures that are being created with the funds, whereby avoiding the need for the entities to recognise greater losses now.

Gonzalo Gortázar (pictured above), CEO of CaixaBank, highlighted that this “operation allows us to fast forward by a couple of years with our strategic objectives of reducing non-performing assets, allowing CaixaBank to position itself as one of the banks with the most healthy balance sheets in the Spanish market”.

The agreement also stipulates that Servihabitat will continue to render services to the bank for five years and the final signing of the agreement with Lone Star still depends on approval from the CNMC – Spain’s National Competition and Markets Commission – for the repurchase of 51% of the servicer, at which point the financial institution will be able to sell the assets onto the new joint company.

For its 80% stake (equivalent to around €5.6 billion based on current numbers), the fund will pay the valuation that the assets have at the time the transfer is definitively closed, which is still pending the corresponding authorisations, in both Spain and Europe, which means that the parties will have to wait until the end of this year or the first quarter of 2019.

CaixaBank expects to achieve cost savings of €550 million before taxes over the next three years, an improvement that also includes the new servicing contract that will be signed with Servihabitat.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Blackstone Begins its Conquest of Hispania by Acquiring 16.5% of its Shares

5 April 2018 – Eje Prime

Blackstone’s conquest of Hispania has begun. Whilst yesterday it was rumoured that the US fund was plotting a corporate operation involving the Socimi, today the mystery was revealed to all: the group (through Bidco) has purchased 16.5% of the company managed by Azora and is preparing to launch a takeover bid for 100% of Hispania, according to a statement submitted to Spain’s National Securities and Exchange Commission (CNMV).

The purchase by Blackstone has involved a disbursement of €315.37 million. Specifically, Blackstone has bought a package of 18.07 million shares in Hispania, equivalent to 16.56% of the share capital, at a price of €17.45 per share, which represented a discount of 5.67% on the price registered yesterday when trading of its shares was suspended (€18.50). The fund has purchased almost all of the stake held by George Soros in the Socimi, reducing his share to 0.11%.

Hispania’s share price plunged by 6.22% to €17.35 when trading was resumed after the purchase had been made public. Yesterday, at the end of the afternoon, the CNMV decided to suspend trading in Hispania Activos Inmobiliarios, which was listed at €18.50 at that point. Before the opening of today’s session, the CNMV decided to lift the suspension after the news of Blackstone’s takeover bid was revealed.

The offer will be subject to approval by the shareholders of the holding company, as a whole, of the number of shares necessary that will allow Bidco to take ownership of 50%, plus one share, of all of the shares in the company (including the shares owned by Bidco).

The deal will also be subject to approval (or to a lack of opposition by virtue of the expiry of the corresponding waiting period) by Spain’s National Markets and Competition Commission (CNMC).

Original story: Eje Prime

Translation: Carmel Drake

CNMC: Online RE Business Grew by 22% During H1 2017

5 January 2018 – Eje Prime

The Spanish real estate business soared in terms of e-commerce during the first six months of 2017. From renting a flat to booking a holiday home, the electronic sector is starting to shine in the real estate sector. According to the latest figures published by Spain’s National Markets and Competition Commission (CNMC), the real estate market increased its volume of online business by 22% during the first half of 2017.

Online real estate services, in other words, those offered by companies that operate in Spain under the CNAE corresponding to the Freeland rental of real estate properties, increased in size during the first six months, with a turnover of €55.4 million, compared to €45.4 million during the same period a year earlier.

Focusing on the second quarter of the year, the real estate sector invoiced €32.4 million, the highest figure since the CNMC started to record e-commerce data in Spain. Before that, the record had been set during H1 2016, when the real estate sector recorded a turnover of €26.1 million.

For the time being, the real estate business contributes a tiny part of the total volume moved by the e-commerce sector in Spain, however, whilst small, the trend is very much on the up. Even though in 2016, real estate contributed just 0.35% of the total turnover of this channel, its share has remained stable in recent quarters: in 2015, it amounted to 0.34%, whilst in 2014, the turnover that it contributed represented 0.38% of the total.

During the first half of 2017, that value increased to 0.39%, when the total e-commerce turnover figure in Spain amounted to €14.095 billion.

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

CNMC Approves Sabadell’s Sale of Hotel Socimi to Blackstone

4 December 2017 – Eje Prime

The sale of Sabadell’s hotel Socimi has been given the go-ahead. Spain’s National Markets and Competition Commission (the CNMC) has given the green light to the first phase of the sale of Banco Sabadell’s hotel subsidiary, HI Partners, to the US fund Blackstone for €630.7 million.

The operation was agreed in October through the company Halley Hodco, which is controlled by the US investment fund. The sale of the Socimi will generate a net profit of €55 million for Sabadell and will improve its capital ratio by 22 basis points this year.

A few months ago, the Catalan bank engaged Credit Suisse, Citi and JP Morgan to work on the possible IPO of the hotel chain, but in the end, the financial institution decided to completely divest the company.

In addition to Blackstone, the fund Brookfield also bid for the purchase of the company, which was created only two years ago. HI Partners has a portfolio of 29 assets and is worth €1 billion. Its hotels include the Abora Catarina in Maspalomas (Gran Canaria); the Ritz-Carlton Abama and the Jardín Tropical, both in the province of Tenerife.

Original story: Eje Prime

Translation: Carmel Drake

CNMC Approves Merger Between Merlin & Metrovacesa

30 August 2016 – Expansión

Authorisation from the CNMC / The merger will result in the creation of the largest real estate company in Spain, with assets worth almost €10,300 million. The group will compete with the large European Socimis.

On Friday, Spain’s National Commission for Markets and Competition (CNMC) approved the merger between the Socimi Merlin Properties (owner of Torre PwC in Madrid, pictured above, amongst other assets) and Metrovacesa, the real estate company controlled by Banco Santander, in an operation announced on 21 June. With the green light from the supervisory body, the door has been opened for the creation of a giant that will become the largest real estate company in Spain and one of the largest in Europe. The group will own assets worth €10,297 million in total.

The CNMC approved the deal on the basis that the barriers to entry into the tertiary real estate business (shopping centres, offices, logistics warehouses, retail premises and hotels) are not instrumental. And on the basis that this business, which comprises domestic and international companies, is quite fragmented in Spain, according to the body.

The analysis performed by the Commission focused on the relationship of control between Merlin, Testa – the real estate company that the Socimi purchased from Sacyr and in which it owns a 99.93% stake, and for which it plans to complete the integration of the remaining 0.07% within the next few months – and Testa Residencial, which is fully owned by Testa and therefore controlled indirectly by Merlin.

Three carve-outs

The operation will involve the carve-out of Metrovacesa into three lines of business, as revealed by Expansión on 22 June. One real estate line, one residential line and one line for assets under development and land.

The new Merlin will group together all of the real estate business and will acquire Metrovacesa’s tertiary assets, worth €1,672 million. To execute the operation, the Socimi will increase its share capital by 146.7 million shares, at a price of €11.40 per share.

The residential arm of Metrovacesa will carve out its assets from its rental housing business and move them into the newly created company Testa Residencial. The gross value of that company’s assets will amount to €980 million and it will also take over debt amounting to €250 million not transferred to Merlin as part of the tertiary business.

In terms of the third line of business, a newly created public company will take ownership of Metrovacesa’s remaining assets, in other words, the set of land and work in progress in the tertiary sector whose characteristics “do not fit with the profile defined by Merlin for its investments”. The total value of the assets of this third company will amount to €326.49 million.

The Boards of Directors of both companies will meet on 15 September to give their final approval of the operation.

In terms of the shareholder structure of the new Merlin and Testa Residencial companies, Banco Santander will be the largest individual shareholder of both, with stakes of 21.95% and 46.21%, respectively. Merlin will be left with a 68.76% stake in the tertiary business and Metrovacesa will have a 31.24% stake.

In the case of Testa Residencial, Metrovacesa’s shareholders will acquire 65.76% of the share capital.

Original story: Expansión (by María Sánchez)

Translation: Carmel Drake

Tourist Sector Hits Back At Airbnb, HomeAway & Niumba

18 May 2015 – Expansión

The sector is demanding a stronger institutional fight against the intermediaries. The Government says that each region is responsible for its own response.

The main Spanish tourism companies have teamed up in an offensive with the aim of limiting the power of the proliferation of unregulated tourist rental accommodation, which do not pay taxes and do not meet the safety, hygiene and space requirements and other guarantees offered by legal accommodation. The sector wants to curb the platforms (websites such as Airbnb, 9flats, Wimdu, Rentalia, Niumba and HomeAway, amongst others) that make money by acting as intermediaries. And to that end, it has been pressuring the Spanish Government for some time to prohibit them, since they think that the autonomous communities are not fulfilling their regulatory duties.

Over the last few months, the tourism association Exceltur, whose members include prestigious companies such as NH, Melia, Iberia, American Express, Hotusa and Globalia, has been holding conversations with the Secretary of State for Tourism (who reports into the Ministry for Industry, Energy and Tourism). Exceltur thinks that the Executive “could do a lot more” to regulate the operations of these rental companies, which it considers are unfair competition and which threaten its business. The main trade association for Spanish hoteliers, Cehat, estimates that between 2010 and 2013, the number of customers staying at these establishments increased by 300%, and it calculates that the number of foreign tourists who use them represents more than 20% of the total.

To support its position, Exceltur has commission the consultancy firm EY (Ernst & Young) to conduct a study analysing the impact that this illegal rental accommodation is having on the tourism sector as a whole, not just on the hotel segment. To date, EY has prepared a report about the consequences for the Balearic Islands if this rental accommodation continues to grow at its current rate over the next ten years. According to its calculations, the hotel sector would lose between 5,000 and 13,000 jobs and forgo a gross added value of between €211 million and €529 million.

Regional jurisdiction

The Government says that tourism is a regional jurisdiction, and so the Central Administration cannot do much beyond trying to standardise the regional regulations as much as possible. Moreover, the upcoming regional and general elections are likely to scupper any attempt at reform.

To date, the regions that have endeavoured to do the most to regulate tourist rental accommodation are Madrid and Cataluña, although the former received a blow from the National Competition and Markets Commission (CNMC) in March when it ruled that the Madrid law (which only allows accommodation to be rented provided the minimum stay is five days) is a barrier to free competition.

Meanwhile, the Catalan Generalitat requires intermediary websites to ensure that each property offered for rent has a kind of identification number plate to accredit it as accommodation with its license in order. Last summer, Cataluña imposed a fine of €300,000 on the web portal Airbnb for allegedly failing to comply with that standard.

On an international level, cities are taking a variety of decisions. Thus, for example, New York has declared war on tourist rental accommodation, with coordinated teams of tax inspectors, police and lawyers; and the town hall of Amsterdam has just approved an agreement with Airbnb, which requries the platform to coordinate the collection of the tourist tax that is applicable to the activities of its users.

The so-called “collaborative economy” represents a real headache for legislators, both in Spain and across Europe. In Spain, Article 16 of the Law for Information Society Services (2002) states that intermediaries (such as Airbnb, Uber and others) are not liable for the possible unlawfulness of the people they host, unless they have specific knowledge thereof. Meanwhile, the European Commission is drafting a directive that may ease restrictions on the European market and facilitate the activity of these platforms.

Original story: Expansión (by Yago González)

Translation: Carmel Drake