Coworkings: the New King of the Real Estate Sector

15 February 2019 – Eje Prime

Millennials, flexibility, start ups…All of the socio-demographic trends are inevitably leading to one common place: coworking offices. Flexible workspaces have become the great promise of the real estate sector but their largest operator, IWG, generates just 15% of its revenues from them and WeWork is multiplying its losses year after year. What risks does the model have? Can it withstand a recession without the guarantee of the traditional five years of mandatory occupancy? And what if Amazon and Facebook, its tenants of today, end up becoming its main competition?

In 2017 alone, the total volume of flexible workspace in the twenty largest markets around the world grew by 30%, equivalent to 1 million m2. Since 2014, the sector has doubled, and in cities such as London, they account for 20% of the office space leased, according to a report from JLL. In Barcelona, that figure already amounts to 12%.

The consultancy firm forecasts that the European stock will grow by between 25% and 30% per annum on average over the next five years and will account for 30% of some corporate real estate portfolios by 2030. But those predictions hide the major challenges that are threatening the great promise of the sector.

One of the main challenges facing the model is that the operator is tied to a given property for at least five years, like in the case of a traditional office, but its tenants have contracts that last for months or even hours. When the next crisis hits, what guarantees does the owner have that the operator will be able to continue paying the rent?

“On paper, that does seem like a risk, but the reality is that the coworking phenomenon was launched during the crisis”, explain sources at Savills Aguirre Newman. All sectors suffer when there is a recession, but traditional offices are hit harder because whoever cannot bear those costs can afford a coworking space”, argue the sources at the consultancy firm.

Another of the risk factors is that coworking offices have capitalised on the lack of available office space in the centre of cities and also, on the shortage of appropriate spaces for the new ways of working within traditional companies (…).

“The players driving the sector are multi-nationals that are looking for appropriate spaces for their innovation teams or for project-based work”, says Manel de Bes, Director of the Office department at Forcadell.

But, what will happen when the offices of these large companies have adapted to the new scenario? “At the moment, most companies are in the experimental phase; if they consider that the trials do not meet their needs, they will be able to return to more conventional models”, explains JLL’s report (…).

From rock star to conservative player

Within the coworking phenomenon, the rock star is WeWork. The New York-based company, which became the largest lessee of offices in its home city last year, is worth USD 20 billion, but it recorded losses of USD 723 million in the first half of last year.

“Its model is based on taking over the best buildings, in the most prime areas and then competing with other operators on price: it is not sustainable”, argues a competitor in the sector. “Sooner or later, they will have to raise their prices”, he assures.

IWG’s model is more conservative. That firm has an umbrella of five brands and thirty years of history. “We have gone through three or four cycles and we cover our backs: first, by diversifying in terms of the type of tenant to minimise risk. We also ask the owners to invest and we do not select the best buildings or at any price”, said Philippe Jiménez, head of the group in the Spanish market (…).

De Bes from Forcadell forecasts that “Over the medium term, just four or five operators will remain: those that lease 200 m2 or 400 m2 in secondary areas will exit the market”. In fact, the market is already becoming more concentrated: since 2015, the five most important operators have accounted for 50% of all of the new flexible workspace in Europe (…).

Original story: Eje Prime (by Iria P. Gestal)

Translation: Carmel Drake

Corestate Teams up with Medici Living to Invest €200M in Co-Living Homes

17 December 2018 – Eje Prime

Corestate Capital is launching itself in the residential co-living market in conjunction with Medici Living. The Luxembourg-based fund manager has joined forces with the German provider of spaces to invest €200 million in the development of shared residences across Spain, according to explanations provided by sources close to the operation speaking to Eje Prime.

The plans of the two groups in Spain form part of an expansion target at the European level. In fact, over the next three to five years, Corestate and Medici Living are planning to invest €1 billion in the development and purchase of around thirty co-living properties, containing 6,000 rooms in total, located in Austria, Poland, Switzerland and Spain.

Barcelona, Madrid and Sevilla are the cities that the joint venture has chosen for its debut in the Spanish market. In those regions, they forecast investment of between €20 million and €60 million. For the time being, the intention of the companies involves acquiring seven buildings in Spain, with 1,190 rooms in total.

Corestate is responsible for the investment, project development, financing and management of its assets. Meanwhile, Medici Living takes care of the design and operation of the properties, according to reports by the company, which already has a portfolio of 1,800 rooms and a presence in Germany, the United Kingdom and the Netherlands.

It is the largest operation undertaken to date in the European co-living market. In fact, it is a sector with a great deal of potential on the Old Continent, aimed at people looking for professional environments and collaborative lives, where they can share ideas and experiences. Currently, most of these assets are located in Anglo-Saxon countries and they are expected to become one of the alternatives for affordable living in large cities.

“The arrival of investment to the shared accommodation sector represents a great step forward for the European residential market”, said Gunther Schmidt, CEO at Medici Living, who stresses in a statement that, as a company, they have set themselves the objective of becoming the WeWork of co-living.

Meanwhile, the CEO of Corestate Capital, Michael Bütter, confirmed that “demand for shared residential spaces is increasingly motivated by the desire of young people to work and live in different cities and to do so in a community”. Moreover, according to the executive, “they are low-risk operations that generate great returns”.

In addition, with this agreement, the Luxembourg fund manager is diversifying its commitment in Spain after announcing its investment plan for student halls of residence next year. Corestate is planning to allocate €100 million to the construction of those types of assets and is currently searching for land in Valencia, Sevilla and Bilbao, as revealed by Christopher Hütwohl, the head of the company in the country, speaking to Eje Prime.

Original story: Eje Prime (by Berta Seijo)

Translation: Carmel Drake

Barings Finalises Purchase of 5 Office Buildings in Madrid from Meridia

27 July 2018 – Eje Prime

The office market in Madrid is just a few days away from seeing the completion of a deal that is shaping up to be the largest operation of the summer. The British fund Barings is finalising the purchase of five office buildings owned by Meridia Capital in the Avalon business park, which have a total surface area of 25,785 m2, according to confirmation provided by sources close to the operation speaking to Eje Prime.

The American fund Starwood Capital was also a finalist in the bid for this portfolio of assets, but in the end, Barings has fought off the competition to seal the deal. The total amount of the operation has not been revealed, but the transaction is expected to be signed within the next few days. The real estate consultancy firm Savills Aguirre Newman is advising Meridia on the sale.

Located in the Julián Camarillo district, the new tech area of the Spanish capital, the Avalon business park comprises nine buildings and spans a total surface area of almost 47,000 m2. The rest of the properties in the complex are owned by GreenOak, which purchased its four assets from Banco Santander in 2015 for €40 million.

That same year, Meridia also completed its entry as an owner of the Avalon properties. In May 2015, the Catalan fund, led by the businessman Javier Faus, acquired the five Madrilenian buildings, as part of its purchase for €60 million of 33 assets from Naropa Capital, the family office owned by the Fernández Fermoselle family. The offices in Julián Camarillo were the main assets in the portfolio, but it also included commercial premises, residential properties and even a plot of land in Valencia.

With this operation, Barings is acquiring five assets that, in addition to a vast office space, have 423 parking spaces in a highly sought-after area of Madrid, close to the Adolfo Suárez-Barajas airport.

Diversification: after logistics and retail come offices

Barings is on fire in the Spanish real estate market. This latest operation that it is on the verge of signing in Madrid follows several others that it has closed over the last year, to take advantage of the new upward cycle in the real estate sector.

Nevertheless, Avalon is the first large portfolio that the British fund has purchased in the Spanish office market. Barings is, therefore, diversifying within the real estate sector, where it has made investments in the logistics and retail segments in recent months (…).

€23 million more for new purchases and to create a Socimi 

In the framework of its new roadmap for the Spanish real estate market, Barings carried out a capital increase amounting to €23.1 million last February for its Spanish subsidiary Barings Core Spain.

The reason for this reinforcement to its financial muscle resulted from the British fund’s interest to convert the company into a Socimi. The group’s intention is to combine all of the assets owned by Barings in Spain in this new vehicle and to list it on the Alternative Investment Market (MAB) over the coming months, as revealed by Eje Prime.

Original story: Eje Prime (by Jabier Izquierdo & Pilar Riaño)

Translation: Carmel Drake

CBRE GI to Invest €800M in Spain in 2018

18 May 2018 – Expansión

The real estate asset manager CBRE Global Investor (CBRE GI) is redoubling its commitment to Spain. After ending last year with a record investment of €800 million and starring in several mega-operations, the firm wants to establish a new record this year, exceeding the milestone set in 2017. From its offices in Madrid, CBRE GI manages assets worth €3.2 billion in the retail, office, logistics and student hall sectors, located in Spain and Portugal, and is getting ready to enter the residential sector.

“Last year was very important given the significant transaction activity undertaken, of which €800 million corresponded to purchases. This year, we hope to match that figure and even exceed it”, explained Antonio Simontalero, Head of Operations for Spain and Portugal at CBRE GI, speaking to Expansión.

The firm works with eight funds and owns a portfolio comprising 19 shopping centres, 37 logistics platforms, three office buildings and 33 halls of residence for students.

Although retail is still the main market for the manager, accounting for 70% of its portfolio, CBRE GI has decided to attack new businesses. Thus, last year, it entered the market for student halls with the purchase, together with AXA IM Real Assets and Greystar, of Resa, the market leader in Spain, for €400 million. “We are continuing to analyse opportunities in the student hall market. We want to grow the portfolio and increase our exposure”, says Antonio Roncero, Head of Transactions for Spain and Portugal at CBRE GI.

Another milestone in 2017 was the consolidation of the manager in the logistics sector following the joint venture signed with Montepino for the development and promotion of logistics assets. “The initial objective of the investment in the joint venture with Montepino was €300 million, but we hope to exceed that figure soon. With the developments underway, we have 80% of the investments committed”.

Simontalero points out that CBRE already had 700,000 m2 of logistics assets under management and the agreement with Montepino will allow the firm to exceed the 1 million m2 threshold. The logistics sector is thereby becoming the manager’s second segment by volume, accounting for almost 15% of its total assets. “The differentiating feature of this joint venture is that all of the assets are going to be latest generation, which is what the main operators require”, adds Roncero.

Rental homes

In terms of next steps, CBRE GI is preparing to attack a new market, specifically, the residential rental market. “We are analysing various options with different partners, either through the development of new-build properties or by investing in a business through the purchase of portfolios”, say the directors.

For Simontalero, the size of the rental market vs. the purchase market in Spain is going to grow and will move into line with the rest of Europe. “There is latent demand that is not being fully satisfied with the current supply in the market”, he said.

For Roncero, the key is in the service. “We see an opportunity for offering a professionalised service in the rental home segment, providing security to the tenant and placing emphasis on the maintenance of properties”.

Roncero says that the objective of CBRE GI involves gaining “critical mass” in the sectors to which it is least exposed in order “to diversify and be more versatile”.

Sales

In addition to growing its portfolio with new properties, the company is continuing to rotate its assets. Specifically, last year, it sold four shopping centres (two in Spain and two in Portugal), and it is now preparing to sell three more – Gran Casa (Zaragoza), Valle Real (Cantabria) and Max Center (Barakaldo) – whose ownership it shares with Sonae.

“Our business involves identifying investment opportunities, managing them and selling them to generate returns for our investors”, he said.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Mazabi’s Socimi Silicius Acquires an Office Building on c/Velázquez (Madrid)

21 May 2018 – Press Release

Silicius Inmuebles en Rentabilidad, the Socimi managed by Mazabi, has purchased an office building in the heart of Madrid’s CBD, on Calle Velázquez, 123.

The property, which has been renovated recently, meets the requirements of the investment policy established by the shareholders and represents another step in the Socimi’s growth phase, ahead of its debut on the stock market. The acquisition has been conducted entirely using own funds.

In the heart of Madrid’s CBD, the property has an above ground gross leasable area (GLA) of 2,346 m2 (offices and a commercial premise) plus 30 parking spaces. Currently, the 1st, 2nd and 3rd floors are available for rent; they are completely open plan and have a surface area of 300 m2 each. This is a highly visible property thanks to its location at the junctions of Calles Velázquez and María de Molina, and the floors enjoy lots of light (with 15 windows per floor). The property is currently in the pre-certification phase of obtaining a sustainability stamp.

This is a firm step forward for the Socimi as it advances its growth phase. The company, which specialises in long-term rental assets, is continuing its growth phase with the acquisition and contribution of new assets to its existing portfolio, following its policy to invest in diversified assets that generate stable rental income.

The Director-General of Silicius, Juan Diaz de Bustamante, said that “the purchase of this asset is a good example of the ideal asset for our portfolio, given that it meets the necessary requirements set out in our principles: to back conservative investments over the long term, as well as to ensure diversification and asset liquidity in order to pay an annual dividend to shareholders”.

With a very defined investment policy, Silicius is currently evaluating the purchase or contribution of properties worth approximately €500 million (commercial premises, out-of-town stores, shopping centres, office and hotels in Spain). The volume of investment/contribution per property amounts to between €5 million and €30 million.

Currently, Silicus owns assets worth €120 million, which generate annual rental income of approximately €6 million. The company’s assets include several commercial premises in “prime” locations with long-term tenants (Paseo de la Castellana, Velázquez, Blanca de Navarra and Paseo de Yeserías), a multi-tenant office building on c/Virgen de los Peligros (in the historical centre of Madrid), an office building on Calle Obenque, 4 in Madrid (with a façade overlooking the A-2) and a hotel with a long-term lease in Conil de la Frontera (Cádiz).

Silicius is a Socimi, managed by Mazabi, specialising in the purchase and active management of profitable assets that generate stable rental income over the long term for investors, providing them with an annual dividend (…).

Original story: Press Release

Translation: Carmel Drake

Medcap Diversifies & Allocates €50M to Alternative Investments & Portugal

19 March 2018 – Eje Prime

Medcap is starting 2018 by making new investments and entering new markets. Diversification and alternative assets are going to be the focus of the group over the coming months, which has just invested €50 million on its entry into Portugal and the launch of a healthcare assets investment division, according to explanations provided by Dimas de Andres, the group’s CEO to Eje Prime.

One of the main operations that Medcap is going to carry out this year, as well as continuing “to keep an eye on opportunities in the prime retail sector, which is one of the fund’s main activities” is going to be the launch of two out-of-town retail parks in the Portuguese market, specifically, in Lisbon and Porto.

The company has invested €30 million in the purchase of 2 plots of land, one spanning 19,000 m2 and the other measuring 27,000 m2, for the complete development of two commercial areas, which are going to be leased in their majority to a supermarket group, according to explanations from Medcap.

Medcap Real Estate, a company owned by the De Andrés Puyol family, has also explained that it is going to back alternative investments this year. The company is currently involved in a healthcare project in the Community of Valencia. With an investment of between €15 million and €20 million, Medcap is going to construct the building with all of the needs that a healthcare operator may have, in order to put it on the market and lease it or resell it.

With these types of assets, the company is going to focus its efforts on Valencia and Cataluña. “We are not afraid to continue buying in Spain: our investments in Madrid and Barcelona are still intact”, explains the CEO of the company. “We are long-termists and we are not afraid of the political situation”, he says.

In addition to its investments, the group is also starting a divestment phase in 2018. The company has already sold the NH Murcia Hotel, located in Cartagena, and a supermarket, also located in Cartagena, for €12.5 million. “At the end of the day, divestment forms part of our business too”, say sources at the company.

MedCap, ten prime assets

At the beginning of 2015, the De Andrés Puyol family constituted Medcap Real Estate to manage its portfolio of assets, formed as a result of the contribution by Inversora del Reino de Valencia of one of its branches of activity, which included all of the urban assets leased or offered as rental properties, as well as all of the shares of the subsidiary specialising in managing operations relating to prime retail.

Medcap’s shareholders have a long history in the real estate business, with extensive experience in the search for, development of and letting of assets. Medcap focuses its activity mainly on the prime segment given the greater stability of that sector. Nevertheless, it also has a portfolio of rental properties for operation such as supermarkets in more secondary areas.

Medcap has a pipeline of assets in different stages of development or study in Spain, the Netherlands and Italy. Its most noteworthy properties include the building at number 80 Paseo de Gracia, where the luxury firm Louis Vuitton has its flagship store in the Catalan capital, as well as the Desigual megastore on Plaza Cataluña and the Apple store on Paseo de Gracia, according to the firm’s annual accounts.

In Madrid, until January, the group was the owner of the Adidas flagship store at number 21 Gran Vía (pictured above), which it sold to Triuvua; and the Louis Vuitton flagship store at number 66 Calle Serrano in Madrid, amongst others. The valuation of Medcap’s prime retail assets exceeds €475 million, according to the most recent valuation performed by the company.

Original story: Eje Prime (by Custodio Pareja)

Translation: Carmel Drake

Patrizia Wants to Buy a Property Developer to Become Rental Giant in Spain

8 February 2018 – El Economista

Over the last six months, the German real estate fund manager Patrizia has closed three acquisitions that have turned it into the new property giant in Europe, with assets under management worth around €40 billion.

With a solid structure, the firm is pushing ahead with its plans to grow in Spain through the purchase of a property developer. “A few months ago, we were analysing two operations. We are still looking and would love to close something this year, because we have the funds and the desire”, explained Borja Goday (pictured above), Head of Patrizia Immobilien in Spain, who added that what he is looking for is “a company that is well-balanced in terms of the team and its bank of land”.

“Much of the development that we would be looking to carry out would be focused on homes for rent”, highlighted the director, who added that Patrizia’s objective is to become one of the major players in the rental market in the country.

In fact, the fund manager already has extensive experience in the residential market in some of Europe’s main countries, where it manages the rental of more than 50,000 homes.

In Spain, this business is still emerging, and there are just three large companies operating. “We want to introduce the institutional model that already works so well in other European markets, such as in Germany, and we are backing this segment because we think that the business in Spain will have an institutional base in 10 or 20 years”, explains Goday, who firmly believes that the 23% of the population that currently chooses to rent a home in Spain will grow significantly over the coming years.

Whilst it continues the search for a property developer, the fund manager will take its first steps into the residential rental market in Madrid, where it is finalising the acquisition of a property. “We are also negotiating the purchase of another building, which needs renovating, like we did with our project on Calle Claudio Coello 108, where there is just one home left for sale”, revealed Goday.

Investment strategy

The growth plans of the fund manager, which is finalising the process to integrate Rockspring, Triuva and the Danish firm SPI, are not based solely on the residential market.

“Our portfolio is very diversified, both geographically as well as by asset type, given that we have a presence in the hotel, office, high street retail and logistics segments”, said the director.

Following its recent acquisitions, Patrizia has established a portfolio worth around €1 billion in Spain and is positioning itself as an overseas real estate manager with one of the largest teams in the country, comprising 14 professionals.

“One of the major factors that differentiates Patrizia from other fund managers is that it does not invest in a country unless it has a local team with experience there”, stressed Goday.

“With these three operations, we have doubled our portfolio at the European level and we will now start to look more actively at the shopping centre segment, where we can add value”.

Moreover, the German firm, which works with investors from all over the world, wants to raise Spanish capital. “We are a wonderful partner for institutional investors and family offices who want to get involved in the real estate sector, since we give them the opportunity to also invest in Europe and to do so alongside a listed firm like Patrizia”.

Although the fund manager has doubled its volume of assets, it is committed to maintaining the same profile as always. “We are very comfortable closing operations of between €15 million and €100 million, because we think that that range is very well adapted to the reality of the current supply in the Spanish market”.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

French Fund Corum Will Invest €450M-€500M In Europe In 2017

8 March 2017 – Expansión

The real estate fund manager Corum Asset Management has placed its focus on Spain. The firm, created in 2011 and with offices in Paris and Amsterdam, has closed 2016 with a record investment figure of €328 million.

In the case of Spain, the manager chose the market to carry out its first operation outside of France, acquiring its first asset in 2013: a retail property in Tarragona, which is leased to MediaMarkt.

Three years later, in May last year, Corum sold that asset to a fund managed by Ciloger for €9.43 million. “2016 was a record year in terms of transactions, with a deal volume amounting to €360 million, of which €328 million involved acquisitions. In addition, we made our first sale in an overseas market in 2016, in this case in Spain, where we achieved a significant return”, explained Philipp Cervesa, Head of Investments at Corum AM.

Besides that sale, the French manager closed three purchases amounting to €41.4 million in Spain, involving logistics assets, during the year. Specifically, in April, it acquired two platforms in Gerona and Guadalajara, with a combined surface area of 35,670 m2. Three months later, Corum AM paid more than €24.8 million for a logistics building leased to the company Trabis. “Our strategy is to bet on real estate cycles. We are investing in Spain because it offers good diversification and is a very dynamic market”, said Cervesi.

Both operations achieved a return of around 7.6%. “We invested heavily between 2013 and 2014, when the market fell, and thanks to that, we have undertaken some good deals, such as the sale of the property leased to MediaMarkt, which we sold last year for a hefty profit”. A high return that the manager forecasts it will maintain in 2017. “We are looking for assets with long-term lease contracts and high returns, of around 7%, he added.

This year, the manager, which invests directly through an Asset Management fund, has set itself the objective of increasing its portfolio to €500 million. “Our strategy for 2017 is to invest between €450 million and €500 million in the Eurozone. We have not set ourselves any country limits, which means that we could buy an unlimited amount in Spain”, explained the Head of the fund.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Meridia Converts New RE Fund Into A Socimi

19 May 2016 – Expansión

The private equity manager Meridia has decided to convert its latest real estate fund, Meridia Real Estate III, into a Socimi, which will be listed on the Alternative Investment Market (MAB) within a maximum period of two years, according to sources at the company led by Javier Faus (pictured above).

The fund, which was constituted last year, has available resources of around €250 million, but its investment capacity increases to €600 million including its bank debt.

The same sources explained that the conversion into a Socimi comes in response to the fact that, unlike its predecessors, large institutional players have invested in this fund – together with a family office. Such players tend to employ the REIT structure for their operations in the real estate sector. REITs are very similar companies to the Spanish Socimis, with significant tax incentives and the obligation to list on the stock exchange.

Meridia Real Estate III debuted in April with the acquisition of a batch of eight office buildings and a logistics warehouse located in Madrid and Barcelona. The package, which belonged to the real estate fund Segurfondo Inversión, managed by Inverseguros, was sold for €52.45 million. It is a diversified portfolio with great potential.

Original story: Expansión (by J.Orihuel and M.Anglés)

Translation: Carmel Drake

Mercal Analyses Hotels As It Seeks To Diversify Its Portfolio

12 May 2016 – Expansión

Mercal, the Socimi listed on the Alternative Investment Market (MAB) since July 2014, is analysing new business opportunities to diversify its portfolio and is looking at hotel assets in particular. “We are focusing on urban hotels”, explained the CEO of Mercal, Basilio Rueda, who specified that his firm is looking to acquire assets worth up to €20 million (maximum), whose day-to-day operation will be left in the hands of professional managers.

The company’s real estate assets are currently distributed as follows: commercial premises (60%), a hospital in Málaga (30%) and offices (10%). “We want to grow but in an orderly and realistic fashion, ever mindful of our commitment to generate returns and fulfil our dividend promises”, said Rueda. Mercal’s General Shareholders’ Meeting recently approved a capital increase for a maximum of €3 million.

The group debuted on the MAB with a share price of €29 and since then, its stock value has increased by almost 18%.

The CEO of Mercal explained that the company has ruled out certain operations so as not to “distort” its profitability. “Some of the operations being undertaken in the market are generating returns of 3%. Personally, I have my doubts as to whether the Socimis can keep investing for such returns without their dividends being affected”, he explained. In this sense, Mercal’s CEO highlighted that the company’s gross profitability currently exceeds 7%.

In any case, Rueda was categorical when it came to ruling out a bubble involving the Socimis and he said that he thinks that there is still scope for the development of these real estate investment vehicles. “The spread between the expected dividends from a Socimi and the return on a 10-year bond is enormous. This makes the Socimis very attractive and means that the capital that is not willing to bear the risk of variable-rate securities is being channelled into the real estate sector instead”, he said.

Rueda acknowledged that the political uncertainty is affecting investment. “Investors are willing to invest in Spain, but many are waiting to see what will happen over the next few months”, he said. Nevertheless, he considers that the current economic trend indicates that Spain will continue to grow. “The real estate sector is 100% aligned with the economic situation in the country”, he added.

Original story: Expansión (by R.Arroyo)

Translation: Carmel Drake