Tag: dividends

Vocento Finalises Sale Of Its Madrid HQ To Axiare

15 December 2016 – Cinco Días

Axiare has put its foot down on the accelerator to complete several purchases during the final month of the year. In addition to its acquisition of the headquarters of Cuatrecasas and McKinsey in Madrid, the Socimi is now finalising the purchase of the building from where Vocento operates its business in Madrid. The operation will be closed imminently, for around €35 million, according to several sources familiar with the operation.

Vocento is following the strategy of moving from being the owner of the property to becoming the tenant, in exchange for making some money. Currently, the group has debt amounting to €128.5 million, according to data submitted to the CNMV relating to the third quarter.

The building, located on Calle Juan Ignacio Luca de Tena (the historical director of the ABC newspaper and member of its founding family) has been home to the newspaper since 1989, when it abandoned its headquarters on Paseo de la Castellana, where the ABC Serrano shopping centre is now located.

The holding company has negotiated a rental contract with the Socimi, which allows its companies to continue to occupy the headquarters in Luca de Tena for five years. In addition to ABC, Vocento has several online businesses, such as Infoempleo; several influential regional newspapers resulting from the merger of Prensa Española with Grupo Correo; a number of magazines; and the Colpisa agency, amongst others.

The building is located at exit Km 7 on the A-2 motorway. This area of the capital has been enjoying a busy few months, with Popular constructing its new corporate headquarters on the adjoining plot of land, and the University Clinic of Navarra building its first major hospital in Madrid just a few metres away, which is expected to open next year.

Through this acquisition, Axiare Patrimonio adds another new building to its growing portfolio, which comprises offices, retail and logistics assets. The Socimi, which debuted on the stock market in 2014, has now accumulated assets worth €1,230 million in just over two years. These types of listed real estate investment company have beneficial tax regimes, whereby they do not pay corporation tax, but they are obliged to distribute dividends on an annual basis. (…).

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Interview With Ismael Clemente, CEO of Merlin Properties

29 November 2016 – Expansión

On 21 December 2015, Merlin Properties became the first real estate company to enter the selective Ibex 35 since the burst of the real estate bubble. And for just over a month now, it has led the ranking of the largest Spanish real estate groups, following its merger with Metrovacesa. The Socimi, led by Ismael Clemente, has marked this milestone just two years after making its debut on the stock market.

In an interview with Expansión, the CEO of Merlin Properties, Ismael Clemente, has confirmed that he is committed to ensuring that the banks that have just become shareholders of the Socimi will stay for the long haul. He is also commited to maintaining a high level of shareholder remuneration.

Following the integration with Metrovacesa, Merlin has increased its real estate portfolio to €9,500 million and has incorporated three new shareholders: Santander, which is now its largest shareholder, with a 22.2% stake; BBVA, with 6.4%; and Popular, with 2.8%.

“There is no formal commitment that the market is not already aware of. But, from a factual standpoint, we think that, given where Santander and BBVA have placed their stakes (in industrial investments), they will hold onto their share capital for much longer than the market expects, because they can see that we are a company with great potential and a strong dividend yield, which we will maintain over the medium term”, said Clemente.

The Director said that the banks are the new high profile shareholders of the Socimi, but added that they are not interfering with the management of the business. In this sense, Clemente commends the appointment of the directors who will control the banks’ stakes and, specifically, that of Rodrigo Echenique, the former Chairman of Metrovacesa and the Chairman of the Board of Directors of the new Merlin. (…). “He is much more gifted than I am in terms of his experience and professional career”.

Clemente says that the historical shareholders “have reacted well” to the incorporation of the banks into Merlin’s capital. (…).

The Director revealed that the Socimi’s shareholder remuneration policy will continue with a stable dividend, through the sum of ordinary and extraordinary payments – in the event that divestments take place – and will maintain a high pay out, based on cash flow.

Debt reduction

Clemente explains that the company is not planning to undertake any more capital increases in the short term. “We do not know what stage of the market we are in. We are unsure as to whether the share price will continue to reflect a discount compared to NAV (net asset value) or will return to a premium” (…).

In addition, the Socimi has set itself the objective of reducing its level of indebtedness. To this end, it has launched several bond issues this year. In October, it placed €800 million of bonds to allow it to finance Metrovacesa’s bridge loan amounting to €500 million and to pay off some other debts.

“We do not have any significant maturities until 2021 and, from here, a stable calendar of maturities will begin, which we will have to refinance like any other company in the sector.

In terms of the behaviour of the Socimi’s share price, Clemente acknowledges that, since December last year, the firm has entered a “very negative dynamic”, which he blames on the political instability in Spain. (…).

Nevertheless, Clemente is steadfast (…) adding: “We can only work to improve NAV per share. What’s more, we have a generous dividend working in our favour”.

Original story: Expansión (by Rocío Ruiz and Rebeca Arroyo)

Translation: Carmel Drake

CBRE: House Prices Will Rise By 25% Over Next 5 Years

22 November 2016 – Finanzas.com

CBRE Global Investors is the real estate management arm of the CBRE group. It is dedicated to developing and designing investment strategies to reflect the risk profiles that its clients (normally institutional players) define through different vehicles, using funds or listed companies. José Antonio Martín-Borregón (pictured above) is the firm’s Managing Director in Spain.

What would a “core” investor invest in at the moment?

In the main markets, in other words, in Germany, (“core” investors are investing) in more liquid assets, as well as in those assets that generate stable revenues, in other words, the office market. This means low returns. But insurance companies and pension funds invest in property to receive a higher return than they are currently earning on bonds and shares, which means that for them a 3% or 3.5% return is very attractive. Then if they want to complement their portfolios, they can approach other markets, such as Spain, Portugal and Greece, where international investors tend to look for what they cannot find in their own countries: higher returns and attractive prices.

Are offices being replaced by more profitable assets in Spain?

Is now a bad time for the office segment? No. In fact, one of the recommendations that all of the brokers are currently making regarding investment in Spain is to invest in offices in the major cities. The market is discounting significant growth in income over the next five years: at their peak rental prices stood at almost €45-€50/m2/month, and now they are less than €30/m2/month. But it is true that some investors who are not willing to wait for those rents to grow and so they are choosing to invest in logistics warehouses, for example, which may generate returns of 6.5%, or even 10% if the investment is leveraged a little. There are a lot more investors out there now – they are more sophisticated and they are developing complementary investment strategies.

Is housing an interesting market or should we rule it out?

Lots of things are going to happen in the housing market: prices are going to increase a lot, by 25% over the next five years; what’s more, housing is becoming a kind of institutional asset – there is a sense of opportunity because prices have fallen by so much and because it is still seen as quite a safe investment; and, finally, the rental housing market is going to develop significantly. Buying a home does not make economic sense (for many people anymore): from an economic point of view, it is much better to rent, it is more flexible and carries fewer risks. Moreover, rental prices are increasing at the moment, because demand exists but the supply of high-quality rental assets is very limited. As such, although the yield on housing is less than 3%, there is a very significant appreciation component to consider.

Are Socimis competing unfairly with other kinds of firms because of the preferential tax treatment they receive?

Taxation is not a primarily element of returns, there are other more important factors, such as debt, because interest rates are so low. The Socimis have a special tax regime, but they also have some special duties (they must be listed, there are restrictions over their investments, they have to pay dividends…). On the other hand, the Socimis are very similar to Sicavs and the large real estate companies are using these instruments to optimise their tax structures and so almost all of the Socimis are being listed on the MAB and they are not fulfilling the purpose for which they were designed.

Original story: Finanzas.com (by Cristina Vallejo)

Translation: Carmel Drake

Popular’s Bad Bank Will Not Have To Publish Historical Accounts

24 October 2016 – Expansión

The bank will adopt the exemption granted by the regulations governing stock market IPOs and as such will not have to publish its accounts for the last three years (given that such accounts do not exist). Nevertheless, the new company must show that it has a viable long term future.

The regulations governing stock market IPOs require companies wishing to list for the first time to present audited accounts for the last three years in their admissions prospectus. However, the real estate arm of Popular is unable to fulfil this requirement because it does not exist yet. Moreover, the aim is that when it is constituted, which should happen during the first few months of 2017 at the latest, its assets will be removed from the bank’s balance sheet (…).

Despite the lack of accounts for the previous three years, it will be possible for the entity to debut on the stock market because the regulations themselves state that IPOs may be authorised without fulfilling that requirement.

Precedents

In the history of Spain’s stock markets, numerous companies have made use of this exemption, including the debut on the stock market of Bankia and Banca Cívica in the summer of 2011, and the more recently and plentiful Socimi debuts, which have chosen to list on the stock market without providing accounts because they did not exist at the time. (…).

Independence

From the perspective of the banking supervisor, it will be essential for the real estate company to make clear that it is not related to the bank in any way, for it to be able to authorise the deconsolidation from Popular Group’s balance sheet. To this end, the company’s liabilities must unequivocally reflect the independence of the two companies.

The liabilities shall comprise three major captions: capital, subordinated debt and other debt that the real estate company needs to balance the company’s assets.

The capital, whose amount is still to be determined, shall be paid in its entirety by Popular, which will distribute it immediately to its shareholders.

The subordinated debt will be acquired by Popular. Its amount may not be too high in order to ensure that it may not be concluded, under any circumstances, that the new company depends or may depend on Banco Popular. Finally, the bulk of the liabilities will comprise debt, which will be sold to institutional investors. The volume and price of that debt has not been determined yet.

On the asset side, properties with a book value of €6,000 million will be transferred, but they will be pass onto to the real estate company for a value of around €4,000 million.

The difference represents the provisions that Popular has already recognised or will recognise to reduce the value of the transfer to the figure that ends up being agreed upon. (…).

Once all of these figures have been reconciled, the company will still need to demonstrate that it is solvent by itself and that, therefore, the revenues forecast in the business plan will be sufficient for the real estate company to reduce its debt and generate positive results, which will allow it, in turn, to remunerate its shareholders through the payment of dividends. (…).

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

Armabex: The Avalanche Of Socimis Continues

17 October 2016 – El Economista

There are 29 listed Socimis on the Spanish stock market, of which 24 are listed on the Alternative Investment Market (MAB). And there are lots more on their way. All of them are subject to the following basic conditions: they must have a minimum share capital of €5 million, distribute 80% of their profits as dividends and hold each rental property in their portfolios for at least three years. But, other than that, they are all completely different.

Socimis, which is the acronym for collective listed real estate investment companies, have come to replace the former real estate companies, which are now just shadows of their former selves (firms such as Quabit and Inmobiliaria Colonial) in a country where investing in property is the typical thing to do. “For every one million euros invested or saved in financial assets, another €25 million is invested in property in Spain”, according to Antonio Fernández, Chairman at Armabex.

Arrival of foreign capital

A few years ago, the Socimis found the perfect breeding ground for construction in Spain. Following the real estate boom, which did away with much of the sector and the subsequent burst of the price bubble, overseas investors decided that it was time to return to Spain. From there, the large Socimis were born in our market, such as Merlin Properties, Hispania, Lar España and Axiare, which all have significant overseas shareholders.

Fernández called these companies the Alpha Socimis – they are used by overseas investors to enter the Spanish real estate market because “by buying shares in them, they are, in turn, acquiring major buildings in the country’s largest cities”. By contrast, the Beta Socimis are those that focus on the development of their assets and, therefore, they make investments (capex).

According to the latest data from Eurostat, house prices in Spain rose by 3.8% YoY during the second quarter of 2016, i.e. by almost one percentage point more than the 2.9% increase registered across the Eurozone as a whole. As such, the increase in house prices has now been higher in Spain than across the EU (on average) for seven months in a row.

The different types of Socimis

(…).

– On the one hand, we have the large Socimis in the market. If an investor is looking for real estate vehicles, such as Merlin Properties, he should know that he is mainly investing in high quality homes and premises that will generate regular rental income. In addition, they are monitored by at least ten brokerage houses, such as in the case of Lar España. According to Bloomberg, these two companies, along with Axiare and Merlin, i.e. the four large players in the Spanish market, all have “buy” recommendations.

– On the other hand, we have the mainly family-run Socimis, where “there may be just a single person taking the decisions”, said Fernández, “and that involves risk”, even more so when they are dealing with single assets that could be sold at any time. Five Socimis have been constituted on that basis, with just one property. (…). A fair few others own between three and five properties only.

– There are also Socimis that own land. “It is worth noting that their returns are higher because they involve greater risk”. According to the expert, these firms rent land and invest in it, which means that, in many cases, the company does not generate any profits and therefore it does not distribute dividends to its shareholders. (…).

– And there are also Socimis that more closely resemble funds of funds, in other words, Socimis that invest in other Socimis, but that do not possess their own assets. Corpfin Capital holds four Socimis under its structure; and Optimum Re Spain Socimi manages several real estate funds.

Original story: El Economista (by Laura de la Quintana)

Translation: Carmel Drake

Housers Will Build First Building In Spain Using Collective Financing

26 August 2016 – El Economista

The real estate market has evolved so much in recent years that now anyone can become a residential developer without triggering the start of a new real estate bubble, as happened before the crisis, when many entrepreneurs decided to enter this business without any prior knowledge of it.

This has been made possible thanks to an initiative developed by Housers, which has started to raise funds, through crowdfunding, for the construction of the first residential building in Madrid to be financed by this shared investment model, and the subsequent sale of its homes. This is also the first real estate project of its kind to be undertaken in Spain.

The project involves the purchase of land, the demolition of a small existing residential property on the site, as well as the complete construction of a residential building, which will comprise five homes and three duplex lofts.

According to the company, the turn-key construction projectwill begin once the financing has been raised, and will take approximately 24 months. The homes will go up for sale when the building work commences.

The cost of the real estate project is estimated to amount to €1.041 million, of which €255,228 corresponds to the gross acquisition cost of the existing building, €539,000 relates to the construction of the new building, and the remainder corresponds to processing costs, taxes and a cushion for unforeseen expenses.

The project aims to raise €748,000 (71.8% of the project) through crowdfunding, with each investor able to participate from as little as €50; and €293,000 through a mortgage to improve returns for investors.

The term for the sale of all of the homes is 24 months. During this period, the gross yield is expected to amount to 44.06% and the net yield will reach 27.94%; those profits will be distributed in the form of dividends to all of the participating investors. Housers estimates that the sale of all of the homes in the building will generate €1,242,000. The residential building will be located in Madrid, in the district of Tetuán, an area that has very high potential given the scarce stock of new homes there.

Housers celebrated its first birthday a month ago and in that time, it has created a community of more than 8,000 investors and has received contributions amounting to more than €8.5 million to finance the purchase of 38 properties in Madrid, Barcelona, Valencia and Marbella.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

Meliá & the CIO Group Bury The Hatchet

22 August 2016 – Expansión

Meliá and Compañía de las Islas Occidentales (CIO) – the Canary Island-based family group that brings together tourism, industrial and service sector companies – have put an end to the legal battle that has been raging between them since 2008.

The hotel chain owned by the Escarrer family has reported in a statement that CIO has acquired all of the shares that Meliá still owned in that group’s companies. Specifically, the company chaired by Francisco Javier Zamorano has acquired 5.03% of Inversiones Hoteleras Playa del Duque from Melía, along with the 8.42% stake that the hotel chain owned in Inversiones Turísticas Casas Bellas.

Inversiones Hoteleras Playa del Duque is the owner of the Gran Hotel Bahía del Duque (pictured above). Meanwhile, Inversiones Turísticas Casas Bellas owns and manages 40 five-star luxury villas at a complex that also houses a spa, mini-golf course and other facilities in the Playa del Duque urbanisation, in the town of Adeje (Santa Cruz de Tenerife), according to recent information filed with the Commercial Registry.

The business relationship between the two groups began in 1993, when Melía was chosen to operate Gran Hotel Bahía del Duque. The problems first arose in 2008, when CIO pushed Meliá aside from the management of the property. CIO defended its decision on the basis that Melía had opened a hotel complex in the same tourist area, which competed directly with Gran Hotel Bahía del Duque, given that, in its opinion, that represented a “clear conflict of interests”.

Meanwhile, Meliá initiated arbitration proceedings, which concluded that the Mallorcan chain had not breached any exclusivity agreement and that, therefore, the decision (to remove Meliá as the hotel manager) was improper and Meliá should receive €1.29 million by way of compensation.

Following that ruling, the company chaired by Zamorano understood that CIO would be automatically entitled to repurchase the shares that Meliá still owned in its companies, and that the dividends received for those shares would be returned, and so, it decided to appeal to the courts. Now, eight years later, and following Meliá’s exit from the CIO companies, the groups have definitively buried the hatchet.

Original story: Expansión (by R.Arroyo)

Translation: Carmel Drake

Pontegadea’s Profits Rose By 8% In 2015 To €795M

19 July 2016 – Expansión

Pontegadea Inversiones, the company through which Amancio Ortega (pictured above) controls 50% of Inditex (he owns an additional 9.28% stake through Partler) generated revenues of €810 million in 2015, up by 5.46% compared with the year before. This amount came entirely from the distribution of dividends by Inditex. The net result for the year was €795 million, up by 8.16% compared with €735 million in 2014.

Pontegadea Inversiones’ own funds amounted to €10,037 million at the end of 2015, well above their level at the end of 2014 (€7,861 million). In addition to the organic growth of the company, whose only business involves receiving dividends from Inditex, this significant increase was due to the absorption of the company Gartler, which was completed in October last year.

The directors of the company are Amancio Ortega; his wife and the Vice-President, Flora Pérez; and his two right hand men: José Arnau, as the second Vice-President of Pontegadea, and Roberto Cibeira, the CEO of Pontegadea Inmobiliaria.

Pontegadea Inversiones’ liabilities amounted to €226 million at the end of 2015.

Ortega decided to inject €717.6 million of Pontegadea Inversiones’ revenues (€810 million) into Pontegadea Inmobiliaria, the subsidiary that groups together the Inditex founder’s investments in the real estate sector. That figure was 12.4% lower than the amount invested in 2014 (€820 million).

Pontegadea Inmobiliaria’s individual results in 2015 reported revenues of €103 million, compared with €182 million in 2014. These figures reflect the impact of the absorption of Gartler by Pontegadea Inversiones, given that, prior to that operation, Pontegadea Inmobiliaria owned a stake in Gartler, which was transferred to its parent company in October last year.

Pontegadea Inmobiliaria’s net result in 2015 amounted to €106 million, compared with €184 million in 2014, a result that also reflected the transfer of Gartler to Pontegadea Inversiones.

In 2014, Gartler had injected dividends amounting to €75 million from Inditex into Pontegadea Inmobiliaria. Ortega’s real estate arm closed 2015 with a total assets of €6,058 million and net equity of €5,460 million.

Zara

Inditex has confirmed that it will open a Zara mega store in Nuevos Ministerios, on Paseo de la Castellana, 79, just a stone’s throw from El Corte Inglés. It will likely become the brand’s largest store and Zara will probably close its existing store on Calle Orense as a result.

Original story: Expansión (by Marisa Anglés)

Translation: Carmel Drake

Socimis Fear Rise Of Left-Wing Coalition, Unidos Podemos

26 May 2016 – El Economista

Since 9 May 2016, when the political leaders of Podemos, Pablo Iglesias (pictured above, right), and Izquierda Unida, Alberto Garzón (pictured above, left), announced their intention to stand together in the upcoming General Election on 26 June, the possibilities of them beating the Socialist Party and, even, forming a Government, have increased considerably (the D’Hondt electoral law penalises minority groups).

The fact that Unidos Podemos has become a real option, according to the latest polls, is being felt on the stock exchange in sectors such as real estate. The Socimis have seen an average decrease in their share prices of 1.5% since 10 May, which represents a difference of 3.6 percentage points with respect to the Ibex 35, which has risen by 1.6% during the same period.

In its election manifesto, the purple party – which now has the support of IU – proposes reforming the tax regime for Socimis (as well as for the Sicavs). The real estate vehicles are currently exempt from paying Corporation Tax, provided they fulfil certain requirements, such as distributing 80% of their net profits as dividends.

“What it (the regime) does is raise the taxation (liability) up to the shareholders. They bear the taxation through their remuneration in the form of capital income (provided their share stakes exceed 5%), says Ana Hernández, an expert in Socimis.

Merlin Properties, the largest Socimi in the market, with a market capitalisation of €3,100 million (more than twice the size of the second largest firm, Hispania), is suffering more than most from the downward trend. Within the last month, short positions of the company’s shares have almost tripled, from representing 0.4% to 1.15% on 13 May, according to data prepared by the CNMV. Meanwhile, its share value had decreased by 20% since the last General Election was held on 20 December, more than double the 8% drop that the Ibex 35 has seen during the same period.

Concern amongst investors

“There is noise (in the market)”, acknowledged sources in the sector, although “maybe it is excessive”. (…).

“Spain is an attractive country for real estate investment” said Jesús Amador, analyst at Bankinter, who recognises, nevertheless, that the latest “initiatives” motivated by Town Halls close to Podemos “may influence” the investments made by the Public Administration, following “the cuts to investment for Operación Chamartín, the controversy with Plaza de España and the problems in Barcelona”. (…).

The left-wing coalition proposes a minimum tax rate for Companies of 15%, which, in the absence of more data, would also become the future tax rate for the Socimis. “If they make the work more complicated”, said the President of one Spanish firm, “they will kill many of them off”.

Original story: El Economista (by Laura de la Quintana)

Translation: Carmel Drake

Q1 2016: 4 Largest Socimis Almost Their Triple Profits

18 May 2016 – El País

The Socimis have become one of the most attractive investment vehicles in the financial market. With an annual return of around 5%, the four largest Socimis – Merlin Properties, Hispania, Lar and Axiare – earned €73.3 million in total during the first quarter of this year, which represents almost triple the €28.8 million that they achieved during the same period last year. These companies now own property-related assets amounting to more than €5,600 million.

The Socimis are key players in the Spanish real estate market. The four largest companies have starred in high-profile acquisition of buildings, shopping centres and hotel chains in recent months. During the first quarter alone, they have bought properties for €285 million and they are now preparing new acquisitions for the months ahead. These companies are revitalising a depressed sector thanks to, amongst other reasons, the tax advantages that they enjoy.

The returns that these firms are generating are overwhelming. The four largest Socimis – Merlin, Hispania, Lar, Axiare – generated income of €127 million during the first three months of the year and a profit of €73.3 million, according to information published by Spain’s National Securities Market Commission (CNMV). Most of their revenues come from the lease of shopping centres, hotels, offices and other properties that they acquire using funds raised from investors. (…).

Their rise has been meteoric. The largest Socimi, Merlin Properties, has a portfolio of 1,017 assets (buildings, offices, retail premises, leisure centres) worth more than €3,218 million. During the first quarter of the year, it earned €45.24 million, up by 131% compared to the same period in 2015 and it is rubbing shoulders with the country’s largest companies in the Ibex 35 after buying Testa from Sacyr last year for €1,794 million.

Hispania also stands out in the sector thanks to the prestige of its major investors. The magnate George Soros (16.7% of the capital) and the popular investment fund manager John Paulson (9.85%) feature amongst its shareholders. (…). The company is the owner of properties that it leases to hotel chains such as Barceló, Meliá, NH and Vincci, amongst others.

Another one of the largest Socimis is Lar España, which doubled its revenues during the first quarter of the year. This company is undergoing expansion, like all of the firms in the sector, which led it to purchase a retail complex in Barakaldo, the Palmas Altas Norte shopping centre (Sevilla) and to formalise the purchase of the remaining stake in the La Marina shopping centre in Ondara (Alicante) for €70.6 million.

Meanwhile, Axiare recorded a profit of €5.1 million, which represents a 1% increase with respect to the same period last year. Nevertheless, its revenues have grown by 38% due to the operation of new acquisitions signed last year. During the first three months of the year, Axiare spent €33 million acquiring two buildings: one property on Josefa Valcárcel (Madrid) and one shopping centre in Roquetas de Mar (Almería).

Original story: El País (by J. Sérvulo González)

Translation: Carmel Drake