Tag: CPI

The Government’s New Rental Act Limits Annual Price Increases to CPI

1 March 2019 – Eje Prime

On Friday, the Government approved a new Rental Act containing urgent measures for the rental sector, including a limit on annual price rises for new contracts to CPI. However, in the end, no IBI rebate incentive was included to reward landlords for maintaining rental prices below the reference price index.

The measure to limit rental price increases will take effect for new contracts signed from the date that the law enters into force.  Moreover, the law provides for the preparation of a state-managed house price reference index within eight months, which will be updated annually.

In addition, the law extends the period for extending rental contracts to five years, from the current term of three years.

Original story: Eje Prime

Summary/Translation: Carmel Drake

PSOE & Podemos to Save the Rental Reform without Price Limits

27 February 2019 – Cinco Días

Despite the initial disagreements and failures, all indications are that the Government and Podemos are going to end up rescuing the Rental Act. The Executive is expected to present new text to the Council of Ministers on Friday, which will not include limitations on rental prices, but which will reflect significant changes with respect to the text that was toppled a month ago. Those changes include: the compilation of an official price index in large cities; updates to rents subject to CPI; and greater guarantees against evictions, according to reports from El País yesterday.

The draft being finalised by the Executive does not include any measures regarding limits on rental price increases, but it does propose compiling some official price indices to serve as a tool for autonomous regions to establish their own housing policies, since they have the authority in this regard.

Podemos, a key partner to enable the validation of the Act regards this measure as insufficient but sources in the party acknowledge that they would have to concede to save the other improvements proposed by the text and reverse the harmful measures introduced by the PP in 2013. One option being considered is an 80% discount on the IBI charge for those owners who comply with the price index (…).

Another feature of the new text is that the update to rental prices during the term of a contract may only be subject to CPI, something that used to be included in the Urban Rental Act until the PP eliminated it in 2013.

The Act also recovers the increase in the duration of contracts from three to five years, or seven in those cases where the owner is a company, but also adds that all contracts will be valid, regardless of whether they are registered in the Property Registry (…). Another initiative included in the draft text, to provide greater security to tenants, are the notice periods for the non-renewal of contracts, which increase from one to four months in the case of owners and from one to two months for tenants.

The new regulation will also include enhanced guarantees against evictions (…).

Original story: Cinco Días (by E.C.)

Translation: Carmel Drake

Housing CPI Skyrockets, Rising 3.7%, the Highest Figure in the Last 14 Months

14 August 2018

Broad-based inflation also rose by 2.3% for the Spanish economy as a whole, the highest level since April 2017.

The Consumer Price Index (Housing) shot up in July. Rental expenses and provisions increased by 3.7% in relation to the same month in 2017, an inter-monthly increase of 1.1% and the highest increase since May last year (5.4%).

According to data from the National Institute of Statistics (INE), the CPI – Housing started the year in retreat, with a year-on-year decrease of 2% in January, rising at rates of between 0.8% and 1.4% in the following three months.

However, in the last three months, housing inflation has exceeded the broad-based CPI, reaching over 2%, levels that last seen in November of last year.

As for the broad-based CPI for the Spanish economy, the indicator decreased by 0.7% in July compared to the previous month and decreased by one-tenth of its interannual rate, to 2.2%, according to the data published by the INE.

Original Story: EjePrime

Translation: Richard Turner

 

Meliá Finalises Sale & Leaseback of Palacio de Congresos Hotel in Valencia

20 July 2018 – Las Provincias

The tallest skyscraper in Valencia is on the verge of changing hands. The sale of Meliá’s Palacio de Congresos Hotel, located on Avenida de las Cortes Valencianas, number 52, is being finalised for €50 million, according to sources speaking to Las Provincias. The operation is expected to be signed in September and several investors have expressed their interest in acquiring the former Hilton Hotel.

The owner of the iconic property, the fund Colony Capital, took just two months to put it on the market after acquiring it in February when it purchased the fund Continental Property Investments (CPI), the former owner of the hotel. According to the same sources, the candidates to acquire the building now include Socimis, institutional investors and family offices, such as the Valencian Zriser group, the firm owned by Pablo Serratosa. Another interested player is AXA Real Estate, the company that acquired the Hilton Hotel Diagonal Mar in Barcelona last year.

Despite the change of owner, the management of the hotel will continue to be entrusted to Meliá, which signed an extendable 10-year operating contract in 2011. It is a strategic asset for the hotel group, given its location next to the Palacio de Congresos, which makes it the best-positioned accommodation on the market for business people and guests of events organised in the Valencian enclave.

A yield of 5%

According to sources familiar with the operation, the asking price for the hotel was €45 million, which was the “minimum to make an offer”. Nevertheless, the market was pricing it at around 10% more, approximately €50 million and some even think that it will be sold more than that. “Socimis and institutional investors look for yields of 5% per year”, they reveal.

In addition, the sale price per room will range between €165,000 and €175,000. In terms of the price per overnight stay, hotels of this kind with an occupancy rate of 80% typically range between €90 and €95 per room. The expectation is that the former Hilton will cost around €100 per night in five years time.

The former Hilton is a 5-star hotel that opened its doors to the public in May 2007. It stands 117 m tall and has 29 storeys, with 269 rooms, 33 suites and two presidential suites. Moreover, it has a convention room and 18 meeting rooms. The building was constructed between 2002 and 2006 at a cost of €110 million, double the price at which the owners want to sell it for now. It was in 2010 when the owner company, the firm Hotel Palacio de Congresos SL, sold the property to CPI to avoid its definitive closure after that company filed for voluntary creditor bankruptcy.

Original story: Las Provincias (by Elísabeth Rodríguez)

Translation: Carmel Drake

Vitruvio Acquires Commercial Premise in Madrid for €1.5M

5 June 2018 – Eje Prime

Vitruvio is gaining strength in the centre of Madrid. The Socimi has just completed the purchase of a commercial premise in Madrid for €1.5 million. With this acquisition, the real estate group now owns 100% of the building located at number 52 Calle Fernández de la Hoz, which it acquired in 2016, according to the company. Vitruvio also recently completed the renovation of the building.

The commercial premise that Vitruvio has just purchased has a commercial surface area of 314 m2 and until now was occupied by a Bankia bank branch. “The acquisition has not required external financing, but rather has been paid for using the company’s own funds”, say sources at the Socimi.

The acquisition forms part of the transformation strategy that the company has carried out on the building on Fernández de la Hoz to improve the rental income generated by the asset when it purchased it in 2016”, they explain.

“The building has been renovated, to create modern and attractive office space so that the future tenants will be able to benefit from the location of the property in an open and modern space”, they maintain. “Therefore, adding the commercial premise means improving the representativeness of the entrance and improving the space for the tenants of the offices”.

After starting the year with this purchase (in April, it ruled out the acquisition of another building that it was evaluating), the Socimi is looking ahead with 2018 with optimism after recording strong results in 2017. The company closed last year with a 91% increase in its profits to €1.1 million, and a real estate portfolio worth more than €107 million.

That growth was due in large part to the integration of CPI, a real estate investment vehicle created by Consulnor (the manager in which Banca March holds a 48% stake), as revealed by Eje Prime last September.

Meanwhile, rental income at the end of the quarter amounted to €5.1 million, which represented a return of 4.8% on the most recent valuation. Once the building work has been completed on the properties on c/Sagasta and c/Fernández de la Hoz, the income will increase to more than €6 million, which will result in a yield of around 6%. Specifically, the return on Vitruvio’s residential premises amounted to 3.8% in 2017; on its offices to 6.2%; on its commercial premises to 6.4%; and on its industrial premises to 9.3%.

At the end of the year, Vitruvio managed 36 assets and 126 tenants, of which 118 accounted for less than 3% of its income. In terms of asset composition: 38% of the Socimi’s portfolio comprises residential properties; 28% commercial; 22% offices; and 12% industrial.

The company concentrates the bulk of its assets in Madrid, which account for 78% of the portfolio, followed by Vizcaya (10%) and Barcelona (4%). Portfolio highlights include the property at number 24 Calle Sagasta in Madrid, worth €18.8 million and the building on Calle Ayala 101, worth €10.3 million.

In the last quarter, Vitruvio refinanced a significant part of its debt. The group obtained a €19 million loan with a fourteen-year term and an interest rate of 1.95%.

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

Vitruvio Doubles its Real Estate Portfolio to €107M

1 May 2018 – Expansión

The Socimi is growing its real estate portfolio following the integration of CPI (the investment vehicle of Banca March’s manager), the entry of the Borbón family and several purchases.

The Socimi Vitruvio closed last year with a 91% increase in profits and a 95% leap in revenues. “Vitruvio closed a very positive 2017 with a 130% increase in EBITDA, and the doubling of its size, as well as of its number of properties and tenants. And all of that, whilst maintaining a very low level of indebtedness: from 35% in December to 24.6% at the end of the first quarter”, highlighted Joaquín López-Chicheri, CEO of Vitruvio.

This outstanding growth is due, to a large extent, to the integration of CPI, a real estate investment vehicle created by Consulnor (the manager in which Banca March holds a 48% stake).

The agreement, which was closed at the end of 2016 and formalised during the second quarter of last year, involved the incorporation of around twenty properties into Vitruvio’s portfolio, which closed the year with 36 assets worth €107 million. “We doubled the number of assets in the portfolio and their value between 2016 and 2017. Moreover, the average appreciate in the value of the portfolio was 7.85%, plus dividends”, explained the senior executive.

Dividend

In total, the listed real estate company (which has been trading on the MAB since July 2016) recorded revenues of €4.1 million, an EBITDA of €2.3 million and a profit of €1.1 million.

On 11 May 2018, Vitruvio is going to pay an interim dividend of €0.05 gross per share against its profits for 2018, as part of its quarterly dividend payment policy. In 2017, it paid 15% more than expected, distributing dividends amounting to €1.014 million in total.

“Vitruvio is the Socimi with the most disperse shareholding, excluding the Socimis owned by banks, with 206 shareholders at the end of 2017 and 284 as at 31 March 2018”, said López-Chicheri.

Currently, Vitruvio’s real estate portfolio is split between residential (38%), commercial (28%), offices (22%) and logistics assets. By location, 78% are situated in the central area of Madrid capital, 10% in Vizcaya and 4% in Barcelona.

Brand new projects

Following the strong results recorded in 2017, the Socimi plans to continue its good run, with a further increase in revenues, thanks to the incorporation of two high-profile assets, which are currently undergoing renovation: Sagasta 24 (pictured above) and Fernández de La Hoz 52, where building work is going to be completed this month (May). “The rental of both buildings is going to multiply turnover next year. In the case of Sagasta, we expect revenues to increase by four-fold, whilst in the case of Fernández de la Hoz, where the investment has been much lower, we estimate that the increase will be 1.7 times”.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

College of Registrars Creates New CPI Indicator for RE Sector: the IRAI

4 December 2017 – El Confidencial

The recovery of the real estate sector is now a reality that nobody doubts. In fact, activity in the sector in Spain has been growing in a sustained way since 2014, far from the minimum levels of 2013, but also a long way from the peak heights. The volume of – new build and second-hand – transactions is rising; more mortgages are being granted; property prices are recovering; and new build permits are increasing. Moreover, the number of companies linked to the sector filing for creditor bankruptcy is also decreasing. Each one of these parameters has its own indicators proceeding from different sources (e.g. Spain’s National Institute of Statistics (INE), real estate websites, appraisal companies, Ministry of Development…), that show the evolution of those specific parameters.

Nevertheless, from now on, there is going to be a new indicator that groups them all together and, through a complex weighting system, shows the overall evolution of activity in the real estate sector. This new indicator is the Real Estate Activity Registry Index (IRAI), compiled by the College of Registrars. According to its creators, it is set to be called the CPI of the real estate market, given that its preparation adopts a very similar methodology to that used by INE to measure inflation.

The indicator takes the year 2003 as the base year (100); it serves as the reference for analysing the evolution of real estate activity. In this way, for example, during the third quarter of this year, the IRAI amounted to 98.26% points, 30% below the maximum levels of 2007, the year the real estate bubble burst. During the first 3 months of that year, the index reached its maximum, 139.90 points. Nevertheless, since the historical minimum of 68, to which it fell in 2013, the sector has risen by 45% to date. Like in the case of CPI, the IRAI can be softened or purified to avoid seasonality, in which case, it amounts to 94.34 points.

This new index is a synthesis of different indicators. It includes real estate transactions, mortgage financing and, in addition to the above, another set of commercial activity indicators, such as the number of company constitutions, economic variables from filed annual accounts and bankrupt companies, in all cases relating to the construction and real estate sectors. For its launch, the College of Registrars has constituted a Committee of Experts, advisors from the college in each aspect listed above, who have been responsible for preparing the index and determining the weighting of each one of the indicators in the index. The IRAI will be prepared on a quarterly basis (…).

Evolution of the IRAI so far this year

The variation in the IRAI since January has been an increase of 10.12%, representing the cumulative impact of the ownership element (9.55%) and the commercial element (0.57%). In other words, the part corresponding to house sales and financing has pushed up the index by the most, compared to the boost from commercial activity. In December last year, the IRAI amounted to 89 points, compared to 98.26 now.

In this way, the groups with the greatest positive cumulative impact so far this year have been sales (cumulative impact of 6.98%) due to the significant rise in the number of sales (cumulative impact of 6.11%), especially of new and second-hand homes with growth rates of 31.87% and 27.06% and cumulative impacts of 1.19% and 4.14%, respectively.

Sales prices also grew by 3.74% (impact of 0.87%) with the price of second-hand homes having a greater impact (impact of 0.9% with a growth rate of 5.91%). Meanwhile, mortgages (cumulative impact of 2.56%) due to the significant increase in the number of mortgages (cumulative impact of 2.05%), especially for new and second-hand homes with growth rates of 21.65% and 15.42% and cumulative impacts of 0.92% and 0.94%, respectively.

From the commercial perspective, the greatest boost to activity has come from the decrease in the number of creditor bankruptcies involving both construction companies, which have decreased by 83%, and real estate companies, which have fallen by 57% (…).

Original story: El Confidencial

Translation: Carmel Drake

Socimi Vitruvio Signs €19M Loan With Abanca

5 December 2017 – Eje Prime

The Socimi Vitruvio has paid off an outstanding debt with a new loan. The company has subscribed a financing contract amounting to €19 million with Abanca. According to explanations provided by the group, the funds will be used to repay the debt resulting from the merger by absorption of Consulnor.

The debt assumed following the merger with the real estate company Consulnor amounting to €12.7 million will be paid off thanks to this new loan. The Socimi will also proceed to cancel the line of credit granted by Banco Santander amounting to €4.6 million.

The new loan with Abanca has a two-year grace period (until 30 November 2019) and a monthly repayment schedule of 14 consecutive instalments. The interest rate that Vitruvio will pay will be fixed at 1% during the first year, before rising to 1% plus 1-year Euribor from November 2018 onwards. The loan is due to mature in December 2031.

At the end of 2016, Vitruvio and Consulnor Patrimonio Inmobiliario (CPI) signed a merger agreement whereby CPI, a real estate investment vehicle created by Consulnor (the manager in which Banca March holds a 48% stake), transferred its assets to the Socimi in exchange for shares.

After closing the operations involving CPI and Madrid Rio, Vitruvio plans to undertake new investments amounting to more than €30 million this year.

Original story: Eje Prime

Translation: Carmel Drake

Socimi Vitruvio Acquires 4,000 m2 Building In Madrid For €7.6M

19 April 2017 – Expansión

The Socimi Vitruvio Real Estate has completed the incorporation of a new property into its portfolio. The listed company, which is currently immersed in an integration process with CPI (the investment vehicle created by the manager of Banca March), has acquired a 4,000 m2 building at number 14 on c/Ermita del Santo, in the heart of the Madrid Río area of the capital.

The operation, signed on Friday 7 April, sees the incorporation of a unique asset into its existing real estate portfolio, which comprises residential and office buildings in the most historic areas of Madrid. For this property, which has a surface area of around 4,000 m2, spread over 38 homes and four commercial premises, Vitruvio will disburse €7.6 million, to which it will have to add a significant injection of funds to refurbish the asset. Currently, the property, which is leased in its entirety, generates annual rental income of €330,000, an amount that Vitruvio expects to increase following its upgrade or, in a worse-case scenario, it will sell the homes unit by unit.

The operation, advised by Baltex Brokers and Arcania, has a peculiar feature in that the vendor, or in this case, the vendors, have decided that almost half of the agreed price (around €3 million, to be specific) will be covered by shares in the Socimi (the rest will be financed through a loan with Banco Santander). In this way, Oliva de Borbón y Rueda, the last marquis of Villamantilla de Perales and her daughter Cristina de Figueroa de Borbón, daughter of Alfonso de Figueroa y Melgar IV, Duke of Tovar, will go from being the owners of this building, constructed in 1948 and owned by the family since then, to owning shares in the listed real estate company.

These types of operations are not new in the market or for this Socimi. Whilst the large listed real estate investment companies have become a haven for large international funds wanting to invest in Spanish real estate, the smaller real estate companies have developed a market for themselves as an efficient tool for wealthy families. In the majority of cases, families with wealth opt to build up their own vehicles, however, in some cases, they choose to transfer their family wealth to a firm managed by third parties, something that has already happened in the case of Vitruvio with families (primarily Spanish business people and private banking investors) who invested in the March’s management company.

At the end of 2016, the managers of the Socimi Vitruvio and Consulnor Patrimonio Inmobiliario (CPI) signed a merger agreement whereby CPI, a real estate investment vehicle created by Consulnor (the manager in which Banca March holds a 48% stake) would transfer its assets to the Socimi in exchange for shares in its capital. As a result of this operation, Vitruvio will become the largest Socimi on the MAB, by number of shareholders, with more than €100 million in properties.

After closing the CPI and Madrid Rio operations, Vitruvio plans to undertake new investments amounting to more than €30 million this year, taking the global figure to around €75 million. “In parallel to the fusion by absorption with CPI, which should be definitively approved between the end of May and the beginning of June, we are engaged in negotiations to acquire more assets”, said Joaquín López-Chicheri, CEO at Vitruvio.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Socimi Vitruvio Set To Merge With Consulnor Patrimonio

15 December 2016 – Press Release

The Boards of Directors of the Socimi Vitruvio and Consulnor Patrimonio Inmobiliario (CPI) have agreed to submit plans for a merger between the two companies to their respective General Shareholders’ Meetings.

The resultant company, which will operate under the Vitruvio name, will manage a real estate portfolio worth approximately €90.5 million, according to the Socimi whose shares are listed on the MAB. The new company can expected to generate gross revenues from rental income of €5.3 million in 2017.

The aim of the merger is to generate value for the shareholders of both companies. Vitruvio will contribute better locations and its core renovation business, as a lever for creating shareholder value. Vitruvio will also reduce CPI’s indebtedness and therefore lower the risk for its current shareholders. Meanwhile, CPI will contribute a portfolio with a greater capacity to generate revenues, which will improve Vitruvio’s current dividend. Overall, the larger vehicle will be very attractive for a wider range of investors.

Original story: Press Release

Translation: Carmel Drake