Axiare Buys McKinsey & Co’s HQ In Madrid For €41.8M

24 November 2016 – Inmodiario

The Socimi led by Luis López de Herrera-Oria has completed the acquisition of McKinsey & Co’s headquarters in Spain, involving an investment of €41.8 million. This is one of the properties that Axiare Patrimonio had included in its pipeline, according to an announcement made by the firm on 15 November. The acquisition has been completed in an off-market operation, in line with the Socimi’s strategy to purchase assets at competitive prices and with strong potential for appreciation in value.

The historical property, which has been converted into offices, has a gross leasable area (GLA) of 7,054 m2 and 93 parking spaces. It is located in the Calle Almagro area of Madrid, close to the offices of Cuatrecasa Gonçalves y Pereira, Ramón y Cajal, Linklaters and the headquarters of Innovación de BBVA.

Luis López de Herrera-Oria, CEO of Axiare Patrimonio, said: “With the purchase of this property, Axiare Patrimonio continues to push ahead with the fulfilment of its business plan and approaches the end of 2016 with a strong outlook”. López de Herrera-Oria added: “The unique building, located in the Plaza de Alonso Martínez, fulfils all of our pre-requisites: it is a prime product, located in the capital’s financial centre and it has great potential to create value. (…).

So far this year, Axiare Patrimonio has signed 24 lease contracts covering a GLA of more than 100,000 m2. (…). The Socimi now owns real estate assets worth €1,100 million, with great potential to generate value: it forecasts that its rental income will increase by 77% over the next year and a half, from its current level of €42 million per annum to €76 million by 2018. (…).

For this transaction, Axiare Patrimonio has been advised by EY (legal), PwC (technical) and Cushman & Wakefield (commercial). The seller has been advised by Tenigla Real Estate and Aiga Investments.

Original story: Inmodiario

Translation: Carmel Drake

Deutsche Will Partially Finance Popular’s New RE Firm

21 November 2016 – Expansión

Popular has taken a new step in the constitution of its real estate company, a key project in its attempt to try to recover investors’ lost confidence, which it hopes to have ready by the first quarter of next year. According to financial sources, Deutsche Bank has reached a preliminary agreement to finance this company.

In total, up to six banks and funds have expressed interest, which does not mean that they will all end up participating. However, according to sources close to the process, “these players are being offered provisional agreements to invest between €200 million and €500 million”. The same sources state that they have also held talks with the giants Apollo and Cerberus, who declined to comment about the process.

Popular wants to transfer assets with a gross value of €6,000 million, primarily finished homes, to the new entity. Specifically, for this reason, executives at the entity feel uncomfortable that the project is being referred to as the bad bank in financial circles because it will also incorporate high quality assets.

On the liability side, the company will initially have share capital contributed by the bank, which will then be distributed amongst all of its shareholders in the same proportion as their existing shareholdings. In addition, the company will issue subordinated debt, which Popular will subscribe to, as well as senior debt.

It is expected that the banks and funds that want to participate in the financing will do so through this latter (senior debt) tranche.

According to a report from Bank of America Merrill Lynch last Thursday, in which the firm reduced the target price from €1.30 to €0.75, the company’s liabilities will be constituted as follows: the share capital will amount to €975 million, whilst the senior debt will amount to €2,200 million and the subordinated debt will amount to €1,400 million. The US bank’s analysts predict that the players who finance the senior debt tranche will request an IRR of 10%.

Deutsche Bank, which together with EY, is acting as financial adviser to the project, as well as Apollo and Cerberus, have been active in the Spanish real estate market in recent years. The former acquired two portfolios from Bankia, between the end of 2015 and this summer, comprising loans, both real estate and property developer related, worth almost €1,000 million. Meanwhile, Apollo has acquired several portfolios (it recently bought a hotel portfolio from CaixaBank) and controls the former platform (servicer) of Santander, Altamira. And Cerberus, which hired the former CEO of BBVA, Manuel González Cid in 2014, owns the real estate arm of Bankia, now Haya Real Estate, and the Cajamar platform.

Assets on the balance sheet

Popular has damaged assets on its balance worth €33,000 million before provisions, which amount to another €15,000 million. According to Bank of America, this high volume (of assets and provisions) eliminates many potential interested parties from a merger. Besides constituting this company, Popular also wants to accelerate the sale of these assets through both its wholesale and retail channels.

The bank earned €94.3 million during the first nine months of 2016, 66.1% less than during the same period in 2015. Nevertheless, its banking activity (when separated out from its real estate business) generated profits of €817 million.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake

Hays Is Set To Become Castellana 81’s First Tenant

16 September 2016 – Expansión

Azca, the financial heart of Madrid, is set to have a new tenant soon. The firm in question is the recruitment firm Hays, which has announced that it is going to transfer its Madrid offices to the building on Castellana 81, popularly known as Torre BBVA, due to its former tenant. The real estate consultancy Cushman & Wakefield has advised the deal.

The firm will make the move in January once the current renovation work on the building has been completed. In addition to Hays, at least one other firm has expressed interest in moving into the building. “For reasons of confidentiality, we cannot comment about the rest of the space leased, only that the marketing of C81 is receiving a good response in the market”, said a spokesman from the real estate company.

Castellana 81 has been owned by the Socimi GMP since 2007, when the real estate company purchased the building, together with three others, from BBVA in exchange for a plot of land in Las Tablas, where the financial entity has constructed its new corporate headquarters. Following BBVA’s move at the end of last year (the bank still occupies five floors of the tower that carries its name), GMP decided to completely renovate the property, which was designed in 1971 by the architect Sáenz de Oiza.

Renovation of Azca

Castellana 81 measures 38,800 sqm and is 107m tall. It is not the only building being renovated in the Azca area. Castellana 77, also owned by GMP, is currently being updated to turn its 16,000 sqm surface area into offices.

In the case of Torre Titania, work has just been completed on the skyscraper owned by El Corte Inglés next to its store in Nuevos Ministerios, to accommodate its tenant, the professional services firm EY.

Another historical building in the area that is being completely renovated is Torre Europa. The property, owned by the real estate group Infinorsa, has taken advantage of KPMG’s departure (which has moved to Torre de Cristal in the Cuatro Torres) to renovate the building, with an estimated investment of €20 million.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

EY: Spain Is 9th Most Attractive Country For RE Inv’t

19 July 2016 – El Economista

Spain is the ninth most attractive country in the world for investors planning to make acquisitions over the next few months in the real estate and construction sectors, according to the “Real Estate, Hospitality & Construction Capital Confidence Barometer”, compiled by EY.

Spain has risen by seven places in the ranking and is now in the top 10 most interesting countries for investors, surpassed only, in order of most to least attractive, by USA, UK, India, China, Canada, UAE, Germany and Sweden.

The consultancy firm highlighted the strong performance of Spain in the ranking despite the uncertainties lurking around the globe at the moment, which have reduced optimism about the performance of the world economy as well as confidence in the capital markets.

In addition, EY notes that with this development, Spain has left behind countries such as France, Italy, Cyprus, Egypt, Saudi Arabia, Indonesia, Argentina and Australia.

International investment lethargy

Meanwhile, the study revealed that the economic uncertainty at the global level is reflected by the fact that the percentage of executives who expect to make an acquisition over the coming year has decreased by more than 10 points to 37%.

In addition, 48% of the executives surveyed admitted that they have at least three operations on their radars, compared with 57% who said the same six months ago.

In parallel, the proportion of executives that expect a decrease in asset prices over the next twelve months has increased from 4% to 29% in the last six months. Currently, only 19% of executives forecast an increase.

Original story: El Economista

Translation: Carmel Drake

Popular Engages Deutsche To Sell RE Assets Worth €4,000M

13 July 2016 – Expansión

Banco Popular has almost oiled the machinery that it will use to remove between €3,500 million and €4,000 million in property from its balance sheet. The entity chaired by Ángel Ron (pictured above) has engaged Deutsche Bank and EY to create a real estate company, which will be opened up to investors, in order to deconsolidate its assets, according to financial sources.

The plans are already well underway, although the complexity involved means that they will probably be delayed until the end of the year.

For the time being, Popular and its two advisors will focus on defining the perimeter of the assets to be transferred to the company and in creating the ideal structure. To this end, the bank will write to Spain’s National Securities Market Commission (CNMV) to obtain the necessary authorisations.

The plan being carried out by the entity is very similar to the one conducted by Santander, and to a lesser extent by BBVA, with Metrovacesa, when it reduced its stake and transferred its assets in order to deconsolidate them from their balance sheets. That forms part of the merger plan with Merlin Properties. Popular also owns a stake in Metrovacesa, and so has followed the process closely.

In theory, all of the assets to be transferred to the new company will be foreclosed: land, homes and work in progress properties. The new company will have its own management team, which will operate independently of the bank chaired by Ron.

Popular owned €16,132 million in foreclosed assets at the end of 2015. Of those, €4,352 million related to finished buildings; €6,685 million was land; €1,436 million comprised homes proceeding from (unpaid) mortgages; €398 million related to buildings under construction; and €3,255 million corresponded to other assets.

Problematic assets

In addition to these foreclosed assets, Popular held doubtful loans to property developers, which took its total exposure to problem assets to €34,000 million, making it the financial group with the largest real estate inheritance in the financial sector at the end of 2015.

That situation movitvated the €2,500 million macro capital increase that the entity completed last month. One of the main objectives was to increase the coverage of the problem assets from its current level of 38% to 50%, in line with the rest of the sector. The low coverage ratio was one of the impediments facing the entity in its efforts to undertake large sales of real estate assets.

The bank’s strategic plan involves reducing the volume of problem assets by €15,000 million between now and 2018, to €19,000 million.

In addition to its large operations, such as the one it is working on with Deutsche Bank and EY, Popular is also promoting the sale of properties through its commercial network and its real estate manager, Aliseda. That company is controlled by Värde Partners and Kennedy Wilson, which together own a 51% stake in the share capital, and Popular, which holds the remaining 49% stake.

Investors

Värde Partners is one of the major investors who will be invited to participate in the company. In addition to Aliseda, the US fund has joined forces with the bank in its credit card business, WiZink, in which it acquired a 51% stake. Värde also recently launched its own property developer, Dospuntos, which has an ambitious investment plan amounting to €2,000 million. Even so, the project will also be opened up to other international and domestic investors.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Rental Prices Will Rise On La Castellana After The Summer

6 July 2016 – Expansión

Madrid’s financial district is refreshing its image and prices are set to rise in the area after the summer. The Spanish capital’s La Castellana thoroughfare is aiming to attract tenants who are willing to prioritise the quality of space over rental costs.

Whilst investors remain attentive to the course of events unfolding in the City (London), following Brexit’s victory in the EU referendum held on 23 June, and the formation of a new Government in Spain after the election on 26 June, business is continuing as usual and the capital’s financial district is getting ready to open its doors to some new tenants. Some of the countries in the Eurozone may, over time, attract some of the activity that has been performed in the United Kingdom until now, and if this becomes a reality, Madrid’s financial district could represent a good option for companies currently headquartered in London.

Torre Europa is preparing itself to this end. Grupo Infinorsa has launched a process to renovate the property following KPMG’s departure and will allocate €20 million to the modernisation of its facilities. In the same way, GMP is in the middle of renovating the Castellana 77 skyscraper, known as Torre Ederra – the former headquarters of Saint Gobain – as well as Castellana 81 – Torre BBVA – to adapt them both to the new demands of the market. Another building that is looking for new tenants is Torre Picasso following EY’s move to Torre Titania. (…).

Sources at Cushman & Wakefield explain that demand is not growing in Madrid at the moment. “GDP levels are similar to during the years before the crisis, and so around 200,000 sqm of space is being leased out per year. The main explanation is uncertainty”. Moreover, it seems like the slowdown is more acute in the financial district, due to the quality of available stock and the cost. (…).

José Miguel Setién, Director of the Office Business at JLL, explains that renting in Madrid has been cheap until now and the price ratio is still very attractive when compared with other major European cities; this means that there is still a lot of potential in the Spanish capital. “Provided there are no political or structural macroeconomic problems, the figure trend is that the market will continue to rise”, he added.

The CEO of Aguirre Newman, Jaime Pascual-Sanchiz de la Serna, explained that offices in prime areas, as well as in the market in general, have been very static in terms of renovations and new projects. Pascual-Sanchiz says that several projects launched within the last 12 months will come onto the market within the next year. In his opinion, they will be a good indicator for measuring the evolution of offices. “The owners of those properties, including Pontegadea, Mutua Madrileña and the Consorcio de Compensación de Seguros do not have financial problems, and are not desperate to lease their properties at any price”. For the expert, although we are seeing small and medium-sized operations in the area, the large moves, which are more dependent on the domestic and international political situation, will have to be unblocked after the summer.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

El Corte Inglés Leases Iconic Titania Building To EY

27 November 2015 – Expansión

El Corte Inglés has signed a lease contract with the consultancy firm EY, which will occupy the eleven floors of office space in its iconic building, Torre Titania. The property is located in the centre of Madrid on the site of the former Torre Windsor, which burnt down in 2005.

The tower, which forms part of the El Corte Inglés commercial complex on the Castellana, is 111m tall and has 27 floors, five of which are dedicated to underground parking, with another four used for technical aspects (lift machinery, air treatment units, fans, etc..).

The first seven floors above ground were opened in 2011 as the retail area of El Corte Inglés on the Castellana, whilst the remaining eleven floors are reserved for office use and were put on the market for both lease and sale.

According to a statement by EY on Wednesday, the new offices will house its 2,000 employees in Madrid. It added that Titania is one of the most modern and efficient buildings in the capital from an energy perspective.

The property, also known as Torre Azca, is located in the financial district of the same name, says EY, which expects the relocation of its headquarters in Spain to be completed during the first few months of 2017.

It was vital for José Luis Perelli, the President of EY in Spain, to find new headquarters for the company given the growth of its workforce, which will amount to almost 3,000 employees by the end of the year, compared with 2,300 at the end of 2014.

Original story: Expansión

Translation: Carmel Drake

EY Negotiates Move From Torre Picasso To Torre Titania

6 October 2015 – Cinco Días

El Corte Inglés completed the construction of the building more than two years ago, but until now, nobody knew who the tenant might be. But now, Torre Titania, one of the most futuristic and newly-constructed buildings in Madrid, has a clear candidate for its tenancy. The leading contender is the consultancy firm EY (formerly known as Ernst & Young), which is now negotiating the terms of its potential move with the retail giant, according to sources in the sector.

The Spanish headquarters of the consultancy firm is currently located in Torre Picasso, owned by Pontegadea, the investment vehicle controlled by Amancio Ortega, the founder of Inditex. EY occupies 10 floors in that building, covering around 15,000 m2, for its c. 2,000 employees based in Madrid (of the 3,000 people it employs in Spain). The British firm is looking for a larger space for its team based in the capital, as the company is hoping to continue to grow in response to the high demand for professional services.

JLL is acting as the RE advisor

The chosen destination for the move is the space owned by El Corte Inglés, although according to sources in the sector, the company is also evaluating other options. The move to Torre Titania is the most advanced of all the negotiations, but no contract has yet been signed. EY has engaged the consultancy JLL to coordinate its search process, but JLL refused to comment on the recent speculation.

Torre Titania has a surface area of 18,744 m2 for office use. EY is expected to fill the 22-floor tower, which is more than 100m tall and stands next to El Corte Inglés’ flagship store at Nuevos Ministerios.

The retail company, led by Dimas Gimeno, began construction of the property on the plot of the former Torre Windsor, which suffered irreparable fire damage in 2005 and was demolished. Six years later, the expanded shopping centre was inaugurated on this site and in 2013, the façade of the new skyscraper was finished completely.

Rents of more than €25/m2/month

El Corte Inglés itself has been marketing this new office space in the heart of Azca for the last few years. Only a few players in the real estate sector have had the opportunity to see inside Titania, and they say that the building is very modern, energy efficient and has a spectacular terraza on the roof of the building.

The rent charge for the building is expected to exceed €25/m2/month, according to market sources, somewhat higher than the average for the area, given that it is a brand new property.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Tourist Sector Hits Back At Airbnb, HomeAway & Niumba

18 May 2015 – Expansión

The sector is demanding a stronger institutional fight against the intermediaries. The Government says that each region is responsible for its own response.

The main Spanish tourism companies have teamed up in an offensive with the aim of limiting the power of the proliferation of unregulated tourist rental accommodation, which do not pay taxes and do not meet the safety, hygiene and space requirements and other guarantees offered by legal accommodation. The sector wants to curb the platforms (websites such as Airbnb, 9flats, Wimdu, Rentalia, Niumba and HomeAway, amongst others) that make money by acting as intermediaries. And to that end, it has been pressuring the Spanish Government for some time to prohibit them, since they think that the autonomous communities are not fulfilling their regulatory duties.

Over the last few months, the tourism association Exceltur, whose members include prestigious companies such as NH, Melia, Iberia, American Express, Hotusa and Globalia, has been holding conversations with the Secretary of State for Tourism (who reports into the Ministry for Industry, Energy and Tourism). Exceltur thinks that the Executive “could do a lot more” to regulate the operations of these rental companies, which it considers are unfair competition and which threaten its business. The main trade association for Spanish hoteliers, Cehat, estimates that between 2010 and 2013, the number of customers staying at these establishments increased by 300%, and it calculates that the number of foreign tourists who use them represents more than 20% of the total.

To support its position, Exceltur has commission the consultancy firm EY (Ernst & Young) to conduct a study analysing the impact that this illegal rental accommodation is having on the tourism sector as a whole, not just on the hotel segment. To date, EY has prepared a report about the consequences for the Balearic Islands if this rental accommodation continues to grow at its current rate over the next ten years. According to its calculations, the hotel sector would lose between 5,000 and 13,000 jobs and forgo a gross added value of between €211 million and €529 million.

Regional jurisdiction

The Government says that tourism is a regional jurisdiction, and so the Central Administration cannot do much beyond trying to standardise the regional regulations as much as possible. Moreover, the upcoming regional and general elections are likely to scupper any attempt at reform.

To date, the regions that have endeavoured to do the most to regulate tourist rental accommodation are Madrid and Cataluña, although the former received a blow from the National Competition and Markets Commission (CNMC) in March when it ruled that the Madrid law (which only allows accommodation to be rented provided the minimum stay is five days) is a barrier to free competition.

Meanwhile, the Catalan Generalitat requires intermediary websites to ensure that each property offered for rent has a kind of identification number plate to accredit it as accommodation with its license in order. Last summer, Cataluña imposed a fine of €300,000 on the web portal Airbnb for allegedly failing to comply with that standard.

On an international level, cities are taking a variety of decisions. Thus, for example, New York has declared war on tourist rental accommodation, with coordinated teams of tax inspectors, police and lawyers; and the town hall of Amsterdam has just approved an agreement with Airbnb, which requries the platform to coordinate the collection of the tourist tax that is applicable to the activities of its users.

The so-called “collaborative economy” represents a real headache for legislators, both in Spain and across Europe. In Spain, Article 16 of the Law for Information Society Services (2002) states that intermediaries (such as Airbnb, Uber and others) are not liable for the possible unlawfulness of the people they host, unless they have specific knowledge thereof. Meanwhile, the European Commission is drafting a directive that may ease restrictions on the European market and facilitate the activity of these platforms.

Original story: Expansión (by Yago González)

Translation: Carmel Drake

Santander’s Landlord Finalises The Sale Of 400 Branches

5 March 2015 – El Confidencial

Uro Property, the name given to the company formerly known as Samos, will begin trading on the MAB (‘Mercado Alternativo Bursátil’ or Alternative Investment Market) with the minimum legal amount, given that its ultimate aim is to move onto the main stock market.

Another one of the Socimi giants is counting down the hours until its goes public. Uro Property, the name give to the company formerly known as Samos, and the company through which several investment funds advised by Oleguer Pujol purchased a one third stake in Santander’s branches, will list on the MAB within the next few days and will continue to put the pieces in place to fulfil its aim of listing on the main stock market, with a healthier financial structure.

With this challenge in mind, the company chaired by Carlos Martínez Campos and led by Simon Blaxland is finalising the sale of 400 of the 1,316 branches that it owns, a transaction that it is already negotiating with an institutional investor and that will allow it to repay some of its €1,424 million loans ahead of time. This debt was already financed last year, when Samos’s creditor entities, led by Santander and CaixaBank, took control of the company, by capitalising €424 million of mezzanine debt and creating Uro.

This transaction turned Santander into the main shareholder of the Socimi, with a 24% stake, whilst CaixaBank took ownership of 14.89%; BNP Paribas holds a 8.81% stake and Société Générale holds 3.14%. In addition, several hedge funds and other entities, including Barclays and Bayerische Landesbank were left with stakes of less than 1%; whilst the former shareholders, Sun Capital, now known as Atisha Holding and the Pearl Group, now Phoenix Life, hold 21.7% and 14.38%, respectively.

All of the shareholders have committed to retaining their stakes for a minimum period of 12 months, during which time Uro Property is confident that it will close a new financing deal that will allow it to reduce its spread from its current level of 300 basis points to closer to 200 basis points.

In fact, the listing on MAB is seen as another step in this process, given that by law, all of the Socimis are obliged to go public within a period of two years. Although Uro Property’s deadline in this sense does not expire until after 2015, it has chosen to go public as soon as possible precisely because it believes that its status as a listed company will facilitate its refinancing.

This explains why Santander’s landlord is going to limit its initial placement to the minimum established by law: two million euros, a paltry figure, considering that its assets have been valued by CB Richard Ellis to amount to €2,000 million and given that forecasts suggest its market value amounts to around €500 million.

An independent audit to separate the company from Pujol

Renta 4 has been hired as the liquidity provider, whilst EY has performed the valuation of the company ahead of the placement. Aware that all eyes are focused on it, given its historical ties with Oleguer Pujol, the company commissioned Deloitte to conduct an independent audit (the auditor of the Socimi’s accounts is PwC), which certified that the maximum investment made in the Socimi by the son of the former President of Cataluña amounted to €67,000.

The Socimi has signed a new lease agreement with Santander, which has committed to occupy the properties for a minimum period of 25 years, and it may extend that period by 14 more years for a third of the assets, which the bank, chaired by Ana Botín, has identified as more strategic for its business. In return, the company has been granted the right to review the portfolio each year, as well as the ability to exchange some branches for others, provided these exchanges do not represent more than 1% per year, under any circumstances.

Santander will pay Uro rent amounting to €125 million net, since the bank itself will bear all of the costs relating to the properties. This guaranteed income, together with the refinancing deal signed last year, allowed the Socimi to generate profits in 2014. Moreover, with the new financial structure that it is negotiating, which it is hoped will extend the current six year maturity period, the Socimi is confident that it will significantly improve its results; this is key for a vehicle such as this, whose main attraction is the fact that it is obliged to distribute the majority of its profits in the form of dividends.

Uro will be able to begin working on its plans to list on the main stock market and expand its portfolio of assets from 2016, in line with the steps being taken by its competitors, such as Merlin, which acquired BBVA’s offices.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake