Who are the Key Players in the Spanish Real Estate Market?

4 May 2018 – El Mundo

House sales are on the rise, as are house prices and rentals. Mortgages are also continuing their upward trend. Moreover, the resurgence of real estate activity is now a reality that can be seen in the increase in the number of new construction and real estate companies.

A recent report published by Gedesco, a firm specialising in financing for companies, says that one in four of the businesses created in Spain during the first quarter of 2018 belonged to the construction or property development sectors.

That represented a volume of almost 6,000 companies, 1.75% more than during the same quarter in 2017. With respect to the last three months of last year, the increase amounts to 21.9%.

Some good news to help us try to forget the fact that 142,576 construction companies disappeared between 2008 and January 2017 – both building firms and property developers -, according to the latest data from Spain’s National Institute of Statistics (INE).

In eight years, the sector went from having almost 360,000 companies to having just 216,987, a reduction of 39%. If we take the look at real estate companies, there were 106,375 in 2008, whereas there were just 67,812 by 2017, almost half.

The data compiled by INE reveals another interesting fact: the construction companies that had more than 5,000 employees in 2008 have disappeared. Although there were actually only three (including building firms and property developers), by 2017, there were just nine companies with 500 or more workers.

Names such as Martinsa Fadesa – created by the businessman Fernando Martín-, Astroc (chaired by Enrique Bañuelos) and Nozar went into the history books of the Spanish real estate sector, after failing to survive the impact of the recession.

Good health

Now, the outlook for the sector is looking healthy, in line with the increase in construction activity, which last year recorded a 28.9% increase in new build permits, to 80,786. According to the latest data from the Ministry of Development, corresponding to the first two months of this year, new home permits rose by 17.4% to 8,035 in February. Estimates in the sector indicate an output of 150,000 homes p.a. for the next few years.

For Elisa Valero, Marketing Director at Gedesco, “the construction sector is back in business”. Nevertheless, the director adds that “the creation of businesses has never gone away, if we look back a few years, the property developers were still there, but the volume of business creation was much lower”.

Whereas 5,000 companies are now being created, in 2011 – at the height of the crisis – just 2,000 were being constituted (…).

Success stories

Another report published in recent weeks by the College of Registrars in Spain also shows that real estate activity in the country is gaining momentum. In 2017, the weight of construction companies and property developers over the total number of businesses constituted rose to 20%, and the rate of growth in relation to 2016 was 14%.

But, looking beyond the figures and back to specific cases (…) we see, for example, that two of the largest property developers of the current cycle were created less than three years ago. The firms in question: Neinor Homes and Aedas, which were created in 2015 and 2016, respectively.

The origins of Vía Célere, another of the important property developers these days, dates back to 2007, at the height of the crisis. The firm emerged after Juan Antonio Gómez-Pintado sold the company that he had chaired, Agofer, and created Vía Célere.

In all three cases, the presence of funds in the shareholding of the companies has stimulated their rates of investment to purchase land on which to build new homes.

Second chances

On the list of property developers that have been created recently, highlights include Kronos Homes, Stoneweg and Q21 Real Estate.

There is another noteworthy name on the current panorama, which, although it cannot be considered a new company, is a clear example of the resurgence of a business after the crisis. The company in question is Metrovacesa. Following a facelift by its creditor banks, it returned to the stock market at the beginning of this year, after abandoning it in 2013.

The firm, controlled by BBVA and Santander, stands out since it is the largest landowner in Spain, amongst the listed property developers, with 6.1 million m2 of land spread over the whole country, with the capacity to build 37,500 homes.

Business transformations such as the one involving Metrovacesa were commonplace during the crisis and resulted in the appearance of new players on the real estate stage.

Another illustrative example has been the birth of the so-called servicers. These companies have emerged in recent years from the former real estate subsidiaries of the banks.

Altamira (whose origins are found in Banco Santander), Servihabitat (La Caixa), and Solvia (Banco Sabadell), amongst others, are fulfilling the mission entrusted to them: to take on the bank’s property, enabling them to complete their clean-ups and to divest the assets by taking advantage of the current boom in activity.

The servicers, whose main activity is located in the Community of Madrid, are also responsible for selling the properties of another one of the stars created in recent years: Sareb, commonly known as the bad bank.

In 2018, that company celebrates its 5th birthday, and during its short life, it has taken over the properties of the entities that have been intervened as a result of the bank restructuring (…).

In recent months, Sareb has also started to market its first new build developments constructed on own land that it holds in its portfolio. In addition, last week, it launched a campaign to sell 3,314 homes along the coast, 95% of which will be lived in for the first time by their new owners.

The Socimis

If there is one group of players that stands out above all of the other newly created real estate companies it is the Socimis.

The real estate investment companies started to trade on the Spanish stock exchange in 2012 as a result of a regulatory change introduced by the Government that gave them free reign to do so.

The Socimis Entrecampos and Promorent were the first to make their debuts. Six years on, there are 51 such companies and, according to some estimates, that number may reach 100 in the future. Merlin, Axiare, Hispania, Lar España, Testa and Colonial – the largest by volume – have all been created in the last four years and are now competing with property developers, such as Neinor and Aedas, on the real estate stage and on the stock market.

In April, one of the newest faces, Sareb’s Socimi Témpore, made its debut. In its first month on the Alternative Investment Market (MAB), it has seen its share price appreciate by 3.85%. When it made its stock market debut, the company’s valuation amounted to €152 million (…).

Original story: El Mundo (by María José Gómez-Serranillos)

Translation: Carmel Drake

Socimis Account For Almost One Third Of The MAB

14 March 2016 – El Economista

Almost one third of the 49 companies currently trading on the Alternative Investment Market (MAB) are Socimis. The real estate investment vehicles have a combined market capitalisation of €1,600 million and have led the debuts on this market, which have accompanied the recovery of the sector.

The first Socimi to make the move onto this growing business market was Entrecampos, which debuted in November 2013, a year in which Promorent also joined the exchange. In the middle of 2012, the Ministry of Development decided to improve the regulations governing Socimis – created in 2009 – whereby relaxing the requirements for their constitution, in relation to capital and the number of shareholders.

Despite that, in 2014, only two Socimis debuted on the MAB, namely Mercal and Obsido; the latter specialises in hotel assets.

The presence of Socimis was almost symbolic until in 2015, when there was also a change of direction in the real estate sector and this type of company – very common in other countries similar to our own – burst onto the MAB, which had been questioned after having witnessed some high profile failures (Gowex, Grupo Nostrum and Bodaclick, amongst others).

Last year, seven Socimis debuted on the MAB. They included Trajano Iberia, which is managed and promoted by a division of Deutsche Bank; Uro Property, whose portfolio mainly comprises bank branches leased to Santander; Corpfin Capital Prime Retail II; Autonomy; Fidere; Zambal; and Zaragoza Properties, which owns a stake in the Puerto Venecia Shopping Resort shopping centre in Zaragoza.

So far this year, four Socimis have debuted on the MAB, namely, Heref Habaneras, owner of the Habaneras shopping centre (in Torrevieja); Corpfin Capital Prime Retail III; Inversiones Doalca and Jaba I Inversiones Inmobiliarias. Indeed, the last two made their debuts on Friday.

Zambal is the Socimi with the largest market capitalisation on the MAB, almost €570 million, followed by Uro Property (€218 million) and Fidere (€192 million). Promorent and Obsido have the smallest market capitalisations in the Socimi segment on the MAB, with €4.3 million and €6.6 million, respectively.

The tax advantages of these vehicles for investors (they are exempt from Corporation Tax, although they must distribute almost 80% of the profit that is not reinvested in the form of dividends) are part of their appeal.

Nevertheless, even though the MAB is still growing and increasingly more companies are joining it, the heavy weight Socimis are listed on the main stock market (Hispania, Axiare, Lar España Real Estate) and Merlin Properties is even listed on the Ibex 35.

Original story: El Economista

Translation: Carmel Drake

Socimi Fever Shakes Up The Stock Market

28 September 2015 – El Economista

After a flurry of activity during 2015, Spain now has 14 listed Socimis, of which 10 trade on the MAB. And this figure is expected to continue to grow over the coming months.

Last week, two Socimis went public on the Alternative Investment Market (‘Mercado Alternativo Bursátil’ or MAB). The first, Autonomy Spain, debuted with an increase of 1.52%, to €16.75.

Autonomy is the parent company of a group that currently comprises two sub-Socimis. The group’s real estate portfolio contains six office buildings – five located in the Community of Madrid and one in Cataluña.

A day later, it was the turn of the Socimi Corpfin Capital Prime Retail II, which became the tenth real estate investment company to go public on the MAB.

The company, which has already invested €75 million in retail premises in “prime” areas of Madrid, San Sebastián, Burgos and Vitoria, expects to invest a further €35 million before November 2016, whereby taking its total investment to €110 million.

This is the first Socimi that the private equity firm Corpfin Capital has listed publicly. The firm also has plans to list another Socimi, Corpfin Capital III, through which it holds joint investments in 8 real estate assets.

The week before, Zaragoza Properties, which owns a stake in the Puerto Venecia Shopping Resort shopping centre in Zaragoza, debuted on the MAB.

Also this year, the Socimi Obsido entered the market for small companies. Its growth plans involve the purchase of hotels in Spain’s principal tourist destinations.

In addition, Trajano Iberia debuted on the stock market (in July). It is managed and promoted by a division of Deutsche Bank, and focuses on “semi prime” offices in Madrid and Barcelona; “prime” offices in secondary cities, shopping centres, and logistics assets.

Also in July, Mercal went public with a portfolio of assets in strategic locations in Spain. Four months before that Uro Property Holding, which owns one third of Santander’s bank branches, began trading on the MAB with a valuation of €259.7 million.

The Socimis Entrecampos, Fidere and Promorent also trade on the MAB, but the largest Socimis, namely Merlin Properties, Hispania, Lar España Real Estate and Axiare, all trade on the main stock exchange. Between them, they had purchased assets amounting to more than €3,100 million as at the middle of August, strengthened by the funds raised through their respective capital increases.

Even Acciona is evaluating the possibility of creating a Socimi for its real estate assets, and this Monday, the General Shareholders’ Meeting of Testa is expected to approve the conversion of the company into a Socimi after it was acquired by Merlin.

Original story: El Economista

Translation: Carmel Drake

New Hotel Socimi ‘Obsido’ To Debut On MAB In Sept

5 August 2015 – Idealista

Obsido Socimi, whose portfolio of retail assets is concentrated in Málaga, is set to become the next Socimi to list on the stock market in Spain; and it will do so in September, with a market value of €21.39 million….and a share price of €19.40.

Following the recent debuts of the Socimis owned by Blackstone and Deutsche Bank, Obsido will become the seventh Socimi to list on the Alternative Investment Market (‘Mercado Alternativo Bursátil’ or MAB). (…).

According to the company’s prospectus, Obsido Socimi is backed by Spanish and Norwegian capital. Håkan Tollefsen controls a 33.165% stake in the company (365,683 shares), as does Joaquín Hinojosa, whilst the Obsido Group, the parent company, holds a 0.26% stake (2,850 shares) and the other minority shareholders own the remaining shares (33.41%).

The company, which has the support of Armabex as the registered advisor and Banco Sabadell as the liquidity provider, has focused its real estate portfolio on Málaga, specifically two hotels in Marbella, according to Antonio Fernández, President of Armabex.

“All of the properties in the company’s real estate portfolio are located in the province of Málaga. As a result, the company’s business depends to a large extent on the overall economic conditions in the province and on demand for hotels in that area in particular”.

The seventh Socimi to list on MAB

Obsido is the seventh Socimi to debut on this exchange, which is also home to small companies looking to obtain financing to accelerate their expansion and SICAVs (the investment vehicles used by high net worth individuals).

The most recent Socimi to list on MAB was Trajano Iberia, owned by Deutsche Bank, which debuted on 30 July,… In addition, Entrecampos, Mercal Inmuebles, Promorent, Uro Property and Fidere (Blackstone’s Socimi) complete the line-up of Socimis listed on this alternative investment platform.

One thing is certain, Obsido will not be the last Socimi to debut on this market. In fact, analysts expect that the MAB will receive a new wave of Socimis after the summer.

Original story: Idealista

Translation: Carmel Drake

Up To 15 Socimis Are Planning To Go Public In 2015

12 February 2015 – El Economista

Since the first Socimi debuted on the stock exchange – Entrecampos was the pioneer at the end of 2013 – seven companies of this kind have now floated on the stock market. And according to Jesús González Nieto, the Vice-President and CEO of the Alternative Investment Market (el Mercado Alternativo Bursátil or MAB) the number of listed Socimis will increase this year to include seven or eight more, with two of them planning to go public this quarter.

Nevertheless, market sources close to these transactions claim that the number of vehicles of this kind preparing to go public is even greater: with “up to fifteen” (currently involved in the process).

“Around fifteen Socimis are planning to go public within the next year, with assets ranging from €20 million to €400 million”, said one of the people responsible for placing the shares of these new real estate companies in the market. “Most of them are investments being made by foreign funds in Spain, which are buying up premium assets (hotels and above all, shopping centres). In parallel, there is a stream of hoteliers, who are seeing the benefits of putting their hotels into these vehicles because it allows them to dissociate the business from the properties”, he added.

According to the same source, there are two main reasons as to why non-residents above all are incentivised to constitute Socimis. Firstly, it is easier to exit an investment in one of these type of companies than it is to exit an investment in a specific building, “Socimis represent an easier way of buying (when you have a view) to sell”, he said. And secondly, there are tax advantages: Socimis are exempt from paying corporation tax, and also receive a 95% discount oon property transfer tax. For investors, however, the main appeal of these companies is that the rules require them to distribute 80% of the companies’ gross operating profits in the form of dividends, although at the moment, none of them are expected to make a profit this year.

“For these types of Socimis, those that are businesses, the average IRR of their portfolios is at least 8%”, say a number of financial sources. But amongst the fifteen Socimis that are preparing to float, there are also some property managers. As such “families are using these vehicles as a way of organising their assets to convert immovable property into movable property, whereby allowing it to be easily distributed”, they explain.

The regular stock market or MAB?

What remains to be seen is the market they will choose to list on – namely, the regular stock market or the MAB? The latter allows these types of companies to be valued on a discounted cash flow basis rather than on the basis of their NAVs (net asset values), which is the more accurate ratio used for valuing real estate assets in general and REITs (the US version of Socimis) in particular.

To date, the stats are as follows: of the seven Socimis that have debuted on the stock market in recent years, three have done so on the MAB (Entrecampos, Mercal and Promorent). And the other four have listed on the regular stock exchange: Lar España, Merlin Properties, Hispania and Axia. But, what determines whether these companies list on one market or another? “In reality, all of the Socimis that list today should do so on the MAB. Nevertheless, some of them have jumped onto the regular stock exchange because the investment funds behind them are subject to regulation 401k, which requires them to list on an official exchange, and MAB does not quality; it is regulated but not official. This means that some Socimis were forced to list on the regular stock exchange”, say market sources.

For the time being, the only thing we know about the six or eight companies on MAB’s radar (where they may list, according to comments made by MAB’s Vice President on Wednesday) are their timelines. “Two this quarter” and another “three or four before the summer”. One of them is “a very big player, with a large volume of capital”.

González Nieto explained that he regrets the slow speed of the mechanisms that process the files of these companies; a Socimi has two years from when it first registers to fulfil all of the conditions required to begin its activity, which means that this year is the deadline for those that first signed up in 2013. It is time for the interested parties to “get on with their homework if they regard it as a good opportunity”, he said.

Original story: El Economista (by C. García and J. Gómez)

Translation: Carmel Drake