Sevilla: The Slow Re-awakening of the Real Estate Sector in the Andalucían Capital

2 August 2018 – Eje Prime

Sevilla, the third largest Spanish city by population, is seeing the first signs of recovery in its residential market (…).

The capital of Andalucía, which is home to almost 690,000 inhabitants, has seen its population decrease on a gradual basis since 2012 when it exceeded 702,000 inhabitants. The slow but progressive decline of the population is probably one of the reasons why house prices have not risen there and why new builds account for an all but residual percentage of the market.

Nevertheless, some of the data does indicate that Sevilla is jumping on the bandwagon in terms of the improvements in the real estate market that are being seen across Spain: a sharp increase in prices in 2017, an on-going rise in sales and, finally, investment in the city by groups of the calibre of Habitat and Ayco.

The city of NO8DO, Sevilla’s traditional motto, saw its population peak at 710,000 inhabitants in 2003, before falling below the 700,000 threshold in 2007. That figure rose above 700,000 again in 2009 before reaching a decade high of 704,000 in 2010, but it has fallen continuously since then to the current figures.

Real estate dynamism

Despite that, the dynamism in terms of house purchases has been considerable in recent years. In 2013, operations in the sector were still registering strong decreases, with a fall that year of 24.4% to just 4,715 house sales. However, the rises have been unwavering since then: up by 12.1% in 2014; 11.3% in 2015; 15.1% in 2016 and 14.1% in 2017, with a total of 7,732 sales.

According to data from the Ministry of Development, during the first quarter of this year, 2,234 house sales were recorded in the city, of which more than 95% corresponded to second-hand homes. With just 98 sales, new homes accounted for just 4.4% of the residential activity during the first quarter.

Nevertheless, and despite this growing activity in terms of sales, residential prices in Sevilla remain stagnant. In recent years, average appraisal prices per square metre in the fourth quarter of each year have decreased steadily, with the exception of 2014 only, when they rose by a measly 0.3% (…).

Currently, house prices amount to €1,468.70/m2 on average (€1,754,40/m2 for new builds and €1,464/m2 for homes aged five years or more). That value is 26.3% lower than the prices in Sevilla in 2012 and 35.9% lower than the peaks of 2007, before the outbreak of the crisis, when the average house price amounted to €2,316.10/m2.

Governed by the socialist Juan Espadas since June 2015, the weight of social housing in the city is greater than that of many other Spanish cities, at least based on data for the first quarter of 2018. In this sense, 177 of the purchases recorded in the city between January and March involved social housing properties, which accounted for 7.9% of the total.

New projects

Habitat is one of the companies that has invested in the Sevillan market this year. In July, the property developer announced a €30 million investment in a new development in the Andalucían capital comprising 199 homes. The acquired land is located in Mairena del Aljarafe, one of the fastest growing areas in the local residential market (…).

Another active player in the city is Ayco, which has acquired a batch of buildable plots this year in the municipality of Camas (Sevilla). In total, that company has purchased land spanning 18,000 m2, where it plans to build around 200 homes.

Another emerging business for the city is the office market, which closed 2017 with 919,173 m2 of space leased, up by 4% YoY, and approaching the records of 2013, according to a report by the Sevilla-based consultancy Inerzia (…).

In the commercial sphere, the Torre Sevilla project is the most important in the city at the moment. Six years after inheriting this macro-project, CaixaBank has let 100% of the office space and the shopping centre is on the verge of opening its doors.

Aenor, Deloitte, Everis, Orange and the Chamber of Commerce are some of the entities present in the 18-storey office block, which account for just half of the skyscraper. The rest of the tower is occupied by a hotel managed by Eurostars, belonging to the Hotusa Group.

Original story: Eje Prime (by C. De Angelis)

Translation: Carmel Drake

On the Hunt for Capital: Socimi Quonia Considers Issuing Bonds to Finance its Growth

11 July 2018 – Eje Prime

Quonia does not want to put any limits on its capacity for indebtedness. The company is considering carrying out a corporate bond issue to increase its financing options and, whereby, continue with its development plan, according to explanations provided by the company’s CEO, Eduard Mercader, speaking to Eje Prime. Through this move, Quonia would also open itself up to institutional investors.

The fact that Socimis must dedicate at least 80% of their profits to dividends “limits their capacity to accumulate debt”, explains Mercader. In this way, the main option for these types of companies when they are looking to grow is primarily through capital increases. However, the company’s executive is looking for “alternative formulae”, to apply “in the short term”.

Mercader’s decision to resort to bonds is also a consequence of the difficulties faced when completing capital increases with investors outside of Europe, such as in this case. Quonia was created in 2014 by the Mexican investors Divo Milán and Ana Saucedo and investors from that country currently contribute the majority of its resources.

Quonia has just completed a €3 million capital increase, although the company had approved the possibility of raising up to €26.5 million. Before the end of the year, the company will obtain another €1 million through the capitalisation of investor loans.

Although the resources forecast by the Socimi were greater, Mercader says that the final amount does not limit the company’s development plan. “We adapt ourselves to the capital that we receive”, says the executive, and adds that Quonia “is continuously raising funds”.

After its launch with the purchase of an asset in Barcelona, Quonia has been attracting different investors from Mexico, Europe and the USA. In July 2014, the company adopted the Socimi regime and in July 2016, it made its debut on the Alternative Investment Market (MAB) where it is currently listed.

“We are very much a real estate Socimi, we do not have a financial profile at all”, explains Mercader – “we buy assets with a lot of potential”. The company’s portfolio currently comprises seven assets, located in Barcelona, Lagreo and Sevilla, of a residential, hotel and commercial nature. The valuation of the company’s portfolio in October 2017 amounted to €85 million, with a gross value of €57 million.

The company is currently finalising the sale of one of its properties. Specifically, the building located at number 166 Calle Balmes in Barcelona. It is an eight-storey residential property, with commercial premises on the ground floor, constructed in 1930 in the rationalist style. Both this property and the one at number 45 on the same street are being used as residences for students.

Quonia, whose average investments range between €10 million and €13 million, is on the lookout for opportunities in Spain to continue growing its portfolio. With Barcelona and Madrid always in its sights, the company is branching out to new destinations for its new investments in cities such as Málaga and Sevilla, as well as País Vasco, where it is analysing several operations. Palma is another city where it is considering investing (…).

Original story: Eje Prime (by P. Riaño and J. Izquierdo)

Translation: Carmel Drake

Blackstone Includes its own RE Manager in the Popular Divestment Deal

3 May 2018 – La Información

Blackstone’s real estate platform, Anticipa, is going to collaborate with Aliseda – founded at the time by Popular – in the management of its voluminous property portfolio. The US fund acquired Anticipa in 2014 when it was awarded Catalunya Caixa’s portfolio, and it has just taken control of Aliseda, as part of the mega-operation signed with Santander. The Cantabrian group included the real estate platform, together with a dozen real estate companies, in the €30 billion gross portfolio of properties that it transferred to the new company, in which Blackstone owns 51% of the capital and Santander held onto the remaining 49%.

Blackstone decided not to merge the companies but they are going to collaborate together, according to information submitted to the market about the syndicated loan signed to close Popular’s transaction. The toxic exposure divested by Santander in the deal known as “Project Quasar” has been valued at €10 billion net, given that there was a provision cushion amounting to 63% of the original value in the case of the foreclosed assets and 75% in the case of the loans.

The transaction was structured with the contribution of 30% in capital and 70% in debt. The bank and the fund are going to contribute almost €3 billion in capital and the remaining almost €7.333 billion will proceed from a financial structure led by Bank of America Merrill Lynch, together with Deutsche Bank, JP Morgan, Morgan Stanley, Parlex 15 Lux, The Royal Bank of Scotland and Sof Investment. The operation has been advised by the law firm Allen & Overy, amongst others.

The “Neptune” portfolio constituted to obtain the financing includes Aliseda in the perimeter along with numerous real estate companies and stakes held in them by Popular, including Tifany Investments, Corporación Financiera ISSOS, Pandantan (Mindanao), Taler Real Estate, Vilarma Gestión, Marina Golf, Popsol, Elbrus Properties, Cercebelo Assets, Eagle Hispania, Las Canteras de Abanilla and Canvives. A large proportion of the assets transferred are plots of land, together with residential homes, industrial warehouses, commercial properties, offices, garages and almost €1 billion gross exposure in hotels.

This operation is going to allow Santander to dramatically reduce its exposure to foreclosed assets from €41.1 billion to €10.4 billion – a figure that is reduced to a net of €5.2 billion thanks to the provisions it has recognised amounting to 50% of the initial value – but enabling it to benefit from the divestments as a shareholder of the company receiving the portfolios with a 49% stake.

The plan includes the use of Socimis

The fund’s divestment plans include constructing or transferring some of the assets to Socimis, a vehicle that Blackstone has made use of for previous operations because it offers tax benefits such as avoiding the need to pay Corporation Tax if they distribute dividends. In gross terms, residential assets accounted for almost one-third of the perimeter of the original properties involved in the transaction.

After leaving the Popular portfolio in the hands of Blackstone, Santander still has €4 billion net in foreclosed assets and €1.2 billion in doubtful financing that it wants to get rid of soon. The bank plans to repackage the assets by batch and put them on the market, where half a dozen entities and Sareb are exploring how to get rid of almost €48 billion gross – the bad bank alone is looking for a buyer for the €30 billion whose sale is being managed by Haya Real Estate, and Sabadell has several batches up for sale amounting to almost €11 billion.

The Cantabrian group acquired Popular when it had closed the chapter to clean up its real estate and now it wants to return to that position quickly. It was its real estate division to leave behind the “red numbers” this year or by the early stages of 2019 at the latest.

Original story: La Información (by Eva Contreras)

Translation: Carmel Drake

Insurers’ Interest In Real Estate Investments Rebounds

10 November 2017 – Grupo Aseguranza

Needs must. That is the main reason that has led – indeed, almost forced – Spain’s insurance companies to look at real estate assets as another, better alternative to achieving additional returns, which are not currently being generated in the financial markets (…).

The second reason that has caused the insurance sector to focus more intently on investment in the real estate sector has been the recovery of the rental market, primarily the office segment, which is where the majority of investments from the insurance sector are targeted (…).

The third reason for the increase in real estate investments stems from the Solvency II regulations. According to this regulation, properties require a provision equivalent to 25% of their appraisal value for capital consumption purposes, which is below those required for other formulae such as variable income, which need almost 50%.

More in Madrid than Barcelona

These 3 reasons have served as fuel to boost investment by insurance companies in properties. (…) In this sense, the stock of properties, measured in square metres, increased by 2.8% during 2016, from 3 million m2 in 2015 to 3.27 million m2 in December 2016. The growth in Madrid amounted to 7.5%, whilst in Barcelona, the figure decreased by 0.3%; in the rest of Spain, it increased by 0.4%.

According to data from ICEA, the Spanish insurance companies hold €287,000 million in their investment portfolio: of those, 3 out of every 4 euros are invested in fixed income and 3.7% is invested in property.

2017 will depend on the buffer required

Miguel Ángel Rodríguez, the ICEA’s external collaborator, in conversation with Aseguranza, highlighted that the increase in real estate investments this year will depend to a large extent on the capital buffer that the insurance companies need to have. The economic conditions are ripe, but the insurance sector is always conservative. The only numerical reference is the survey performed for the report “Real estate investments in the Spanish insurance sector. Data as at 2016”, which shows that only 7% of companies are considering divesting their properties, whilst almost 40% are planning to increase this kind of investment.

The report also asks how the entities are planning to undertake these new property purchases: more than half of them, 52%, are inclined to invest directly, compared to 12% who would do so indirectly, in other words, through investment vehicles. The remaining 36% would combine both methods (…).

Returns of 3%

Another fact that the report measures is the annual operating return on the appraisal value that insurance companies can expect to obtain from their real estate. On average, the figure amounts to 2.9%, with the highest yield being reported in Barcelona (+3.4%), compared to Madrid and the rest of Spain (+2.8%).

By type of property, the highest returns for insurance companies are generated by parking spaces (+4.5%), followed by commercial properties (+4%), offices (+2.8%) and homes (0.1%).

Along with profitability, appraisal values also rose in 2016, by 1.7% per m2. They grew by 1.3% more in Barcelona than in Madrid. Similarly, the vacancy rate stood at 18.8%, almost the same as in 2015. Meanwhile, the average rental income on properties owned by insurance companies rose by 0.3% to reach €12.27/m2/month. In Madrid, rents cost €18.60/m2/month and in Barcelona €12.80/m2/month.

Original story: Grupo Aseguranza (by Manuel Chicote)

Translation: Carmel Drake

Bankinter Launches A €400M Socimi For Its Private Banking Clients

27 December 2016 – Expansión

Bankinter has started to offer its private banking clients a new investment project. It is a Socimi, which the entity plans to launch on the MAB in around two months time. This entity will invest in commercial assets, such as supermarket, hypermarkets, retail premises and parks, as well as bank branches, in sought-after locations. The aim is to invest around €400 million in assets, of which around €200 million will come from contributions made by the entity’s clients and the remaining 50% from financing. The minimum investment per client will be €250,000, up to a maximum of 10% of their financial wealth.

For the launch of this investment vehicle, Bankinter has sought a partner with experience in the Spanish real estate market and in the management of commercial assets. The Portuguese real estate company Sonae Sierra, which owns more than 40 international projects in Europe, Africa and South America, seven of which are located in Spain, will take care of the search for and management of the assets that the Socimi buys. Like Bankinter, it will hold a minority stake in the new company, and two of its representatives will sit on the Board of Directors and on the Investment Committee.

Meanwhile, the bank led by María Dolores Dancausa will have three Board members and two representatives on the Investment Committee.

Anchor investors

The two partners will invest a maximum of €15 million in the case of Bankinter, with a minimum of €7.5 million; and €7.5 million in the case of Sonae, with a minimum of €3.75 million, if they achieve €200 million in equity for the upcoming stock market debut.

The Socimi will focus on buying commercial properties located mainly in Spain (the idea is that Spanish assets will account for 65% of the total portfolio) and the rest in Portugal. The minimum investment volume by operation will be €5 million to €20 million per asset or per portfolio of properties.

All of the assets that the Socimi acquires must be in good locations with long-term contracts that will run for at least five years. Its potential tenants include retail groups such as Mercadona, Carrefour and Día and other large operators such as Leroy Merlin and Decathlon.

Although the investment vehicle does not own any assets yet, it is already analysing ten operations, having made a series of non-binding offers. These deals include the purchase of a portfolio of hypermarkets worth €150 million and the acquisition of a retail park for around €20 million.

The Socimi hopes to achieve a gross asset value yield of between 6% and 6.5% during the first two years, which is higher than the returns offered by other listed real estate companies such as Axiare, Merlin and Realia, which this year expect to offer yields of 4.8%, 3.2% and 4.5%, respectively, according to information provided by Bankinter to its potential investors.

The aim of this Socimi is to offer an average annual dividend of between 4.5% and 5%, which is a much higher return than those offered by other banking products currently on the market. (…).

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake