Renta’s Revenues Soared by 102% to €92.4M in 2018

1 March 2019 – Expansión

Renta Corporación closed 2018 with revenues of €92.4 million, up by 102% compared to a year earlier and a net profit of €16.6 million, up by 33% (…).

The real estate company’s business portfolio amounted to €133.9 million at the end of 2018, plus the assets managed for sale in conjunction with real estate funds for an estimated investment of €35 million.

Dividends

Last October, the Board of Directors agreed the distribution of a dividend amounting to €1.1 million to be charged against the income statement for 2018. At the next General Shareholders’ Meeting, which is going to be held on 11 April, the company is expected to approve the distribution of €1.9 million as a complementary dividend.

In terms of Vivenio, the Socimi that Renta Corporación launched in the middle of 2017 together with the Dutch pension fund APG, it closed 2018 with 18 residential properties in its portfolio containing 2,000 homes under management, which have a gross value of €524 million (…).

Original story: Expansión (by M. Anglés)

Translation: Carmel Drake

Lar España’s Profits Fell by 4.6% in 2018 to €129.3M

1 March 2019 – Expansión

Lar España recorded a net profit of €129.3 million in 2018, which represented a decrease of 4.6% with respect to the previous year, whilst its revenues grew by 0.3% to €77.8 million.

According to explanations provided by the company, this result includes a charge of €17.9 million in the first quarter, to comply with the Grupo Lar management contract, as it achieved divestments of €100 million.

Without that negative effect, which is only going to be recorded in 2018 (…), the resulted would have amounted to €155.7 million, 7% more than in the previous year. Meanwhile, the EBITDA amounted to €55 million, up by 0.3%.

The firm completed divestments amounting to €272.5 million in 2018 and invested €75.6 million in the renovation of its asset portfolio.

In terms of dividends, the sale of the luxury homes at Lagasca 99 (Madrid) will allow the company to increase its remuneration to shareholders from €0.49 in 2017 to €0.80 in 2018, a rise of 63.2%.

At the end of 2018, the firm’s financial debt amounted to €621.7 million. Last year, its assets appreciated in value by 12.1% (…).

Original story: Expansión

Translation: Carmel Drake

Revised Legislation: Socimis to Pay Tax of 15% on Retained Profits

11 January 2019 – Expansión

The General State Budgets for 2019, which are going to be approved by the Council of Ministers today (Friday) and which are going to be presented to the Congress on Monday, will include a tax charge on the undistributed profits of Socimis, to which a tax rate of 15% will be applied, according to reports made by sources speaking to this newspaper. The measure was agreed between Podemos and the Tax Authorities although the Government did not include it in the Budget Plan that it sent to Brussels in October or in the draft bills that are already being processed. The General Secretary of Podemos, Pablo Iglesias, blames the Socimis for the “rental bubble”.

This measure follows other initiatives agreed with Podemos, which cause the greatest impact of the increase in taxes set out in the budgets to fall on companies: they include a tax of 5% on overseas dividends and the imposition of a minimum taxable base of 15% in terms of Corporation Tax, which will be added to the draft bills to create the Google tax and the Tobin tax.

Socimis (Listed Public Companies for Investing in the Real Estate Market) were created by Zapatero’s Government in 2009 to revitalise the real estate market. They enjoy a very beneficial tax regime. The rate of Corporation Tax applicable to them is zero, provided they fulfil a series of requirements: their minimum capital stock is €5 million, which may be invested in a single property; a minimum of 80% of the profits obtained from rental must be distributed in the form of dividends; and a minimum of 80% of the value of the assets in urban buildings must be leased for three years. For the rents received from other types of activities, the Socimis have to pay tax at a rate of 25%.

From now on, a tax rate of 15% will have to be paid on all of the profits not distributed by these types of entities.

“We need to discourage the promotion of these types of companies that promote the bubble model, undermine the public coffers and represent a grievance for competition. We consider that the special regime afforded to the Socimis, whose main feature involves a tax rate of 0% for Corporation Tax, needs to be reversed”, said Podemos in a recent document. It regards it as “necessary to reverse Government policy, based on forcing tax regulation to create a tax haven for companies that promote a new housing bubble”.

Original story: Expansión (by Mercedes Serraller)

Translation: Carmel Drake

Realia Launches a €149M Capital Increase

15 November 2018 – El Economista

Realia has launched a capital increase amounting to €149 million, with preferential subscription rights, through which Carlos Slim is going to make a new capital injection into the real estate company that he controls in Spain.

This increase follows another two that the firm has carried out since 2015, when the Mexican magnate took control of the company and which have been used to clean up the firm and reduce its debt.

By virtue of the new operation, Realia is going to issue 175.45 million new shares at €0.85 per share, a price that represents a discount of 7.5% with respect to the firm’s current share price, which closed trading on the stock market on Thursday at €0.923.

The operation is going to be launched once approval has been received from Spain’s National Securities and Markets Commission (CNMV). Current shareholders will have preferential subscription rights, which means that they may request new shares at a rate of three new shares for every eleven that they already own.

Carlos Slim controls 70.76% of Realia’s share capital, 33.8% in a direct way and 36.9% through FCC, a construction group that he also controls. The Mexican businessman has participated in all of the capital increases that Realia has undertaken until now.

Realia is launching a new capital increase after reactivating its construction and house sale business, which has been suspended since the start of the crisis.

The company also has a portfolio of assets spanning a surface area of around 500,000 m2, comprising office buildings and shopping centres, including one of the Kio Towers in Plaza Castilla, Madrid.

The real estate firm, which has suspended its dividend since 2009, closed the first nine months of this year with a profit of €24 million and a turnover of €70 million. The firm has total debt amounting to €672 million.

Original story: El Economista 

Translation: Carmel Drake

Spain’s Large Socimis are not Perturbed by Podemos’s Proposed Tax Legislation

14 October 2018 – La Información

The Socimis, one of the great tax regimes currently booming in our country, suffered a serious blow on Thursday after an agreement was published between PSOE and Podemos to push ahead with the State’s General Budgets. As a result, the Socimis are going to have to pay tax (at a rate of 15%) on any profits that they do not distribute as dividends, in other words, the funds that remain in the companies to increase their capitalisation. But, which companies are going to be most affected? Only the smallest ones.

In recent months, the large real estate companies on the Ibex and the Continuous Stock Market have been distributing significant dividends, in some cases even exceeding their accounting profits by two or three times. Therefore, the new measure will not affect them, given that only undistributed profits will be taxed. By contrast, the small entities that are listed on the Alternative Investment Market – where they have their own segment – barely exceeded the obligatory dividend distribution of 80% of the profits for that type of company in most cases.

If we take Merlin – a giant in the tertiary sector –by way of example. Last year, it obtained a profit of €114.5 million (after discounting the appreciation of its assets) and it dedicated 205% of its profits to dividends. Even high figures were recorded by Colonial, which distributed 267% of its profits to its shareholders, and Lar España, which is listed on the main stock market, and which distributed 236% of its results after taxes to the owners of its shares.

By contrast, the small companies on the MAB complied with the law in a comprehensive way but without distributing such significant figures. Such was the case of AP67, a Socimi whose assets are primarily residential, commercial and office-based, which distributed just over €240,000 of its total profits of €300,000.

Why do the small companies only distribute the legal minimum? Most of the companies listed on this market are owned by a small number of shareholders, normally those who have been with the entity since the beginning and, therefore, they have no commitment to the owners of those shares. In fact, the movement in shares is so small in the majority of cases that the volume is almost nil.

By distributing 80% of their profits as dividends, they pay tax of up to 25% on those earnings, whilst the remaining 20% is posted to reserves and, previously, there was no requirement to pay any tax on that. With this proposal, the money that is not distributed to the shareholders (in other words, that 20%) would be subject to a tax rate of 15%.

For tax experts, these measures may scare off foreign investors, especially funds, which regard Spain as a good opportunity for investing after the framework for Socimis was brought into line with those governing REITs in countries such as France and Germany. Moreover, “other countries have an advantage over Spain going back many years and they offer more beneficial tax frameworks”, something that the new tax will only serve to dent in the Spanish system.

In light of the possible approval of the draft presented on Thursday by Unidos Podemos and PSOE, the Socimis “will distribute all of their profits as dividends to avoid the double taxation of the same money”, said a high-profile tax advisor consulted by La Información.

Original story: La Información (by Lucía Gómez)

Translation: Carmel Drake

Podemos & the Tax Authorities Negotiate a Stricter Fiscal Framework for Socimis

11 September 2018 – Expansión

Podemos and the Government are studying measures to put a stop to the “rental bubble in Spain’s largest cities”, which Pablo Iglesias argues is being caused by the tax advantages being afforded to the Socimis.

The Tax Authorities and Podemos are negotiating a stricter fiscal framework for Socimis. That is according to sources at the negotiations, and to an announcement made by the leader of Podemos, Pablo Iglesias (pictured above, right), after his meeting with the President of the Government, Pedro Sánchez (pictured above, left), on Thursday.

Iglesias spoke of an “understanding” on this point and of advances in the negotiations. Although the fiscal framework of these real estate investment companies has always been under Podemos’s spotlight, it did not mention it in the document that it sent to the Tax Authorities in August detailing its requests, in exchange for its support of the Budgets. But, that was not a question of “limited demands”, according to sources at Podemos, who are now negotiating measures with the Executive to put a stop to the “rental bubble in Spain’s largest cities”. And, in Podemos’s opinion, the beneficial legislation afforded to Socimis explains this bubble, and it needs to be addressed urgently. Iglesias will spend tomorrow questioning Sánchez in the control session of the Government in Congress regarding the “measures that the Executive plans to adopt to put an end to the rental housing bubble”.

“We need to discourage the promotion of these types of companies, which foster the bubble model, undermine the public coffers and represent an affront to competition. We think that the special framework for Socimis, whose main feature consists of a Corporation Tax rate of 0%, needs to be reversed”, said Podemos recently in a document (…).

In this latest document, Podemos therefor, therefore, to put an end to this zero tax rate for Socimis, compared with the nominal tax rate of 25% (…). The negotiations with the Tax Authorities are based on the premise that Podemos wants to bring the tax rates for Socimis in line with those applicable to other companies. However, it does not rule out that the measures agreed will be aimed at having more control over their tax framework.

Zapatero’s Government created Socimis in 2009 in an attempt to revitalise the real estate market, inspired by the REITs (Real Estate Investment Trust) from the Anglo-Saxon world. They enjoy a very beneficial tax framework. Their Corporation Tax rate is 0%, provided they fulfil certain requirements: the minimum share capital must amount to at least €5 million (…); the funds must be invested in properties; a minimum of 80% of the profits obtained from rental must be distributed as dividends; and at least 80% of the value of the assets in urban buildings must be leased for at least three years.

Unlike the Sicavs, there is no requirement for Socimis to have a minimum number of shareholders, but their shares must be admitted for trading on a regulated market (…).

Following the economic recovery and the boom in the real estate market since 2013, the Socimis are enjoying a golden period (….).

Original story: Expansión (by Mercedes Serraller)

Translation: Carmel Drake

Quabit Acquires Land from Sankar in Exchange for 4.55% of its Own Shares

3 August 2018 – El Español

Félix Abánades, President and largest shareholder of the listed real estate company Quabit, is continuing to immerse himself in a quagmire of capital increases that he has been promoting in order to raise funds to use to purchase land, on which to build almost 8,000 homes between now and 2022. His ambitious objective is to invoice almost €2 billion, generate a cash flow of almost €500 million and distribute €90 million in dividends.

Land in exchange for shares

Basically, these increases have been of a non-monetary nature, with the purchase of land in exchange for shares in Quabit. A much cheaper route than the two lines of credit amounting to €100 million that the firm signed with the fund Avenue between December 2016 and December 2017.

Those loans carry a clear risk, given that the principal, on which interest of between 12% and 16% is charged, must be repaid within a maximum term of 4 years following the drawdown date.

Repayment commitment

In light of the probability that the principal will not be returned on time, Avenue forced Quabit to issue warrants, an abusive right over the shares in favour of the fund that, in the worst case, would see it take ownership of 8.56% of the property developer.

For the time being, with Quabit trading at €1.77, at the close of business on Thursday, that option would be ruled out, given that the subscription prices agreed with Avenue for the execution of those rights over the shares range between €3.07 and €3.75.

Six capital increases in one fell swoop

It is for that reason that, in light of this negative outlook, Abánades carried out six capital increases in one fell swoop last November, for a combined total of €41.8 million, with the issue of shares at a price of €2, with a nominal value of €0.50 and a premium of €1.50.

All of those increases were of a non-monetary nature, in which Abánades captured estates from the Basque property developer Ondabide in Mijas (Málaga) and plots in Guadalajara contributed by Rayet, Abánades’s own company. The other four capital increases were placed by the President of Quabit with the Malaga-based property developer, Sankar Real Estate.

Agreement with Sankar

Quabit’s agreement with Sankar, for the subscription of those four increases, was aimed at obtaining plots in the Malagan municipalities of Mijas, Marbella and Estepona and in the Menorcan town of Mercadal, some in the form of proindivisos for 30% of the surface area.

The total operation will allow Sankar to acquire 4.55% of Quabit’s share capital, once the four increases have been fully subscribed. A package of 6.78 million shares, valued initially at an issue price of €13.56 million.

For the time being, Sankar has subscribed to two of these increases. With the public deed of the capital increase of the latter, relating to estates on the island of Menorca, the Malaga-based property developer has been obliged to report to Spain’s National Securities and Exchange Commission (CNMV) its stake as a reference shareholder of Quabit, given that it now owns 3% of the shares. Specifically, its stake amounts to 3.31%.

Losses of 12%

A package of 4.93 million shares that have accumulated losses of 12% compared with the €2 price for which they were issued, taking as a reference Quabit’s COB trading price on Thursday, €1.77.

The consequence of these non-monetary increases is affecting the personal stake of Félix Abánades, the President of Quabit, who has seen his position in the company decrease from 24% just a few months ago to the current level of 21.4%. He is trying to maintain the rate with the acquisition of financial instruments that, in the future, may yield another 1% of share capital.

Original story: El Español (by Juan Carlos Martínez)

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

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

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