Who’s Who Behind The MAB’s Largest Socimis?

6 February 2017 – Expansión

The majority of Spain’s Socimis are now listed on the Alternative Investment Market (MAB). They have a combined market capitalisation of €3,500 million and so account for 68.5% of the value of that market, which is aimed at small and medium-sized companies.

In total, 29 real estate companies form part of the MAB, which comprises 67 companies in total. Seventeen of those real estate companies debuted on the MAB last year (…).

The largest Socimis

With a market capitalisation of €819 million, GMP is the largest Socimi on the MAB, larger even than one of the four Socimis that trades on the main stock market, Lar España. GMP, which was founded in 1979 by the Montoro Alemán family, debuted on the MAB last July, after adopting the Socimi structure two years ago. The real estate company, which owns around twenty office buildings in the most high profile financial districts of Madrid, has the sovereign fund of Singapore GIC as one of its shareholders; GIC owns a 32.9% stake in GMP, which it controls through another MAB-listed company, Eurocervantes.

Moreover, GMP is not only the largest Socimi (on the MAB) by market capitalisation, it also holds the largest portfolio of assets, worth €1,800 million as at 30 June 2016.

Another important owner of office buildings is Zambal. This Socimi is the only one of the five largest Socimis on the MAB that is not managed by its owner. The firm Investment Business Beverage Fund, based in Luxembourg and owned by the French magnate Pierre Castel, has appointed Iba Capital to manage its real estate investments in Spain. Iba is led by Castel’s fellow countryman Thierry Julienne.

This Socimi is the landlord of a number of large companies, both home-grown and from overseas. It owns the Madrid headquarters of Vodafone, Enagás, Gas Natural, BMW, Unidad Editorial and Día, amongst other buildings. Its portfolio is worth more than €730 million and its market capitalisation amounts to €559 million.

Meanwhile, Uro Property was created by the creditors of the company Samo, which purchased around 1,130 bank branches leased to Banco Santander in 2007. Nowadays, after selling several batches, it owns 755 branches worth €1,585 million (as at 30 June 2016).

Its main shareholder is the firm Ziloti Holding, although Santander and CaixaBank also hold direct stakes in the company amounting to 22.79% and 14.5%, respectively.

Blackstone, the largest investment fund in the world, has also listed a Socimi on the MAB to manage some of its real estate assets in Spain. Specifically, it has placed the thousands of homes that it owns and rents out into Fidere, worth €317.5 million.

The fifth largest Socimi on the MAB by market capitalisation is Isc Fresh Water. This vehicle was created with more than 200 bank branches from Banco Sabadell purchased in April 2010 by the Mexican fund Fibra Uno, controlled by the investor Moisés El-Mann.

Nowadays, the Socimi owns 213 branches, worth around €374 million, and its main shareholders are the El-Mann family, with a 65% stake and Jacobo Bazbaz Sacal, with 14.85%.

Diversity on the MAB

Each one of the Socimis on the MAB has its own characteristics, ranging from Promorent, with its market capitalisation of €4 million to GMP (which is worth more than €800 million). Their performance on the stock market is also very different: five of them have recorded increases since the beginning of 2017; three have registered decreases; and the remaining 21 have not seen any changes in their share price since the start of the year. (…).

Outlook for 2017

The proliferation of Socimis on the stock market will continue this year, according to the experts, who believe that the economic context favours these companies. (…).

Nevertheless, analysts warn that their small size and lack of liquidity imply risks for investors, since it is possible that they will not be able to sell their shares when they want to, due to the very small volume of business. (…).

Original story: Expansión (by Rocío Ruiz and Diana Esperanza)

Translation: Carmel Drake

Spain: for sale.

Spain is for sale. And finally, it seems there are buyers. Dozens of investment funds from all over the world, but mostly from the United States, are buying apartment blocks, real estate firms, and even company debt. There are some vulture funds out for a quick buck, but most are looking for medium-term returns. “Two years ago, Spain was radioactive, and the property sector toxic. Suddenly it’s become our savior; it’s that stupid,” says one veteran real estate developer on condition of anonymity.

On February 7, 2012, when the future of the euro was still in the balance, Jaime Bergel, a former board member of energy giant Endesa, opened an office for 13-billion-dollar US investment fund HIG Capital in Madrid. “We had a feeling that people would come here looking for opportunities,” he says. In fact Merrill Lynch and Goldman Sachs were already here.

On August 6 of this year, HIG carried out its so-called Operation Toro, the first major sell-off of property accumulated by Sareb, the bank set up by the government to hoard unsold property and debt belonging to the country’s failed savings banks. HIG bought around 500 properties for a total of 50 million euros. Most of the properties are low-cost apartments in the outskirts of Madrid, Valencia, Seville, Málaga, Murcia and in the Canary Islands that so far nobody wants.

Investment funds have spent around two billion euros buying up property in Spain since April. Some experts are interpreting the great sell-off as good news, flushing the financial system with new money; others say that it is a de facto takeover of a significant chunk of the economy by foreign capital.

“We are looking for businesses with good assets and that are well managed but that can’t get their hands on the capital they need. We lend them the money and let them get on with running the business,” says Jesús Olmos, KKR’s representative in Madrid. In April, KKR lent 320 million euros to construction materials manufacturer Uralita over a seven-year period, and it has also taken positions in parking lot firm Saba and helicopter maker Inaer.

In 2008 Juan Vizcaíno, once of Lehman Brothers, set up Hipoges, which specializes in managing distressed assets. He now employs around 80 people in Madrid, and already manages assets valued at 2.3 billion euros, most of them in the form of property and bought at knock-down prices from the banks. “Most of the property we buy is new and hasn’t even been lived in. It was bought as an investment by people who have now gone abroad,” he says.

Vizcaíno says the toxic assets business has grown so fast that he has had to move office twice as he takes on new staff to keep up with demand. His current offices occupy more than 1,000 square meters in downtown Madrid: “We are spectacularly busy. Interest in Spain has multiplied tenfold,” he says.

In August, the owners of Mexican fund Fibra Uno bought more than 900 offices that had originally belonged to Banco Sabadell, which the bank had sold to a US fund for 300 million euros. The Catalan regional government sold 13 buildings to French company AXA for 172 million euros in a deal that sees the government pay rent on them. With a profit rate of 9.45 percent, in just under a decade AXA will have recouped its investment in rent alone.

Meanwhile, the Popular Party-controlled regional government of Madrid is busy selling off chunks of housing stock built for low-income families. On June 24, Madrid’s Municipal Housing and Property Company (EMVS) said that it had sold 1,860 low-rent apartments to Blackstone, an associate of Spanish property developer Magic Real Estate, for 128.5 million euros. Blackstone is one of the world’s largest investment funds, with assets of 60 billion dollars.

The purchase looks like a classic vulture fund move: buying where nobody else dared to strip the assets and sell as soon as possible. “Blackstone knows that 85 percent of property in Spain is privately owned, with just 15 percent rented out. The average in Europe is 70/30. Eventually Spain will get to that point. If the figure shifts from 15 percent to 25 percent, that is 2.7 million properties that will enter the rental market. In Germany, Blackstone has 50,000 properties for rent, but until now, there weren’t enough properties available for it to be worth buying in Spain,” says a source close to the operation.

Blackstone is obliged to continue the low-rental policy for a decade, during which time it will operate a zero-tolerance policy toward tenants who fall behind with payments, and after which it can rent them out at higher prices. Most of the properties are in the working-class district of Carabanchel, in the southwest of the city. Speaking to tenants in one block that has been sold off, it is clear most have no idea who the new owners of their homes are. One man says he has stopped paying his rent because he no longer knows who to make the transfer to. Average rents here are around 200 euros a month for a three-bedroom apartment. Many homes have never been occupied.

In August, the Madrid Housing Institute (Ivima), also set up to provide low-cost housing, sold 2,935 low-rent apartments in the working-class dormitory town of Parla to Goldman Sachs and Azora for 201.2 million euros. Azora already manages some 7,000 of these properties slated for social housing, along with student residences and hotels, all valued at 1.3 billion. Fernando Gumuzio, the company’s founder, says the firm charges rents of between 250 and 600 euros.

Gumuzio rejects the idea that companies like his are vultures circling the moribund carcass of the Spanish economy: “I prefer to call them opportunists. They are investing in problem companies, and helping to clean up their debts. This is the first step toward recovery. Later on, the institutional funds will move in.”

Rafael Powley of US consultancy Jones Lang LaSalle explains that investment funds are awash with cash after taking advantage of the collapse of the US property market and its subsequent recovery. “There are a lot of people who made a lot of money buying cheap, and want to repeat their success here.”

The figures suggest that property prices in Spain may well be bottoming out. The price per square meter for office space on the Paseo de la Castellana, Madrid’s upscale central thoroughfare, has been stable for a year now. At the height of the property boom, prices were 13,000 euros per square meter; the rate is around 6,500 euros. “The speculative market is always ahead of the real economy: that’s how you make money,” says Juan Manuel Ortega, who heads Jones Lang LaSalle’s operations in Spain. He says that three years ago, most of the firm’s clients were looking for advice on how to get out of Spain; “now they want us to tell them what to buy.”

Powley explains that most of those rushing to buy now are the same companies that inflated the property bubble of the late 1990s and early 2000s: “In those days, a developer would call you to say that he had sacked his sales team because they had sold his property so quickly that he hadn’t been able to put the prices up.”

Ismael Clemente hails from a tiny community in the western province of Badajoz and has many years of experience in the property business. Before setting up Magic Real Estate, he headed the property division of Deutsche Bank in Spain. In November 2005, seeing which way the wind was blowing, he advised his bosses to get out of the Spanish property market before selling the Hotel Arts in Barcelona in early 2006. The bank made 170 million euros on the deal, selling the hotel to a Dutch group and Singapore’s sovereign wealth fund. “We lost 18 months, but we made up for it with that sale,” he says. Magic is now a partner with Blackstone.

Clemente explains some of the key points of Spain’s emerging property market: “Buying a shopping center in Leipzig is barely profitable, and one setback and you are down on the deal. So the idea is to get into other markets. Prices are back up in Dublin, London is enjoying its own particular boom, while France is beginning to look weak. A shopping center in Valladolid is more risky, but twice as profitable if you handle the purchase properly. That’s why the investors are here. People see these funds as pirate ships, but they are playing with other people’s money. Vultures serve a function: they clean up corpses. It’s the same here: they pump money into a market starved of funds.”

He says that Blackstone’s entry into the Spanish market has sent out a message of confidence: “Investors are like sheep. If things go badly here, these funds can always tell their investors that everybody else was here, and nobody could see what was going to happen.”

Some funds have already set aside fixed amounts to invest in Spain. “A client called me a couple of days ago saying he had 500 million euros to spend in Spain,” says Iñigo de Luisa, a partner at law firm Cuatrecasas. “This summer we have seen a lot of activity: I haven’t seen anything like it since the boom.” De Luisa specializes in buying debt, and advised the Bermudas project that saw Sareb sell 245 million euros in loans owed by Grupo Colonial to Burlington Loan Management. The mechanics of these operations is not rocket science: if a company owes 100, the funds buy the loan for 70, or much less, dependent on the risk. If they get the money back they have won; if not, they keep the property portfolio, which is worth more than the 70 they put up.

The party has barely started. Spain’s banks have huge numbers of apartments that sooner or later they must sell. The vulture funds have taken the first step by taking over the property divisions of Bankia (bought by Catalana Bank and Cerberus, a company partly owned by the son of former Prime Minister José María Aznar, whose government in the late 1990s oversaw the property boom). Meanwhile, La Caixa is negotiating the sale of 51 percent of Servihabitat to the Texas Pacific Group.

The country’s regional administrations are also keen to sell off their property assets, often at fire-sale prices, in a bid to generate desperately needed cash. Andalusia, Catalonia, and Valencia were the first to begin offloading publicly owned property: in total some 144 buildings that they hope will raise around 2.2 billion euros.

British investment company Moor Park, which is tied to risk fund Och Ziff, offered the Catalan regional government 450 million euros for 26 buildings it would then rent out to it. The offer was tempting, but the regional government eventually decided that the conditions were not up to scratch. The buyers wanted to be paid in dollars or Swiss francs. “At the height of the euro crisis, what sort of message would that have sent out?” say sources close to the Catalan government.

Murcia has put the seat of the regional government up for sale; Extremadura is also keen to reduce the size of its property portfolio; Asturias is looking for a buyer for its offices in Madrid and Brussels; the Canary Islands has palaces for sale; and Castilla-La Mancha has so far not found a buyer for 16 government buildings. But a consultant who has acted as an intermediary in the sale of government buildings to foreign investment groups says that only Madrid and Barcelona have any appeal. The regional government of Madrid has already put 11 buildings up for auction this year with a starting price of 32 million euros. But for Madrid City Hall, it was only after dropping the price by 40 percent that it managed to sell its environment department’s offices for 21.8 million euros to the Bank of China. The Valencian regional government says that it is in advanced talks to sell three buildings.

More and more properties owned by regional and municipal governments are expected to come onto the market in the coming months. The central government has so far only raised 90 million euros since 2012 from selling off its property portfolio, but now says that it is to put more than 15,000 properties on the market, among them 61 apartment blocks, almost 7,000 houses, and 800 stores. No price has been agreed, say sources at the Economy Ministry.

This macro-sale includes some attractive assets, as well as many that will prove tricky to dispose of. For example, the former headquarters of the National Stock Exchange Commission on the Castellana, valued at 30 million euros; the building formerly occupied by the RTVE state-owned radio and television company, just round the corner, along with properties in other upscale areas of the capital. The government even wants to sell 14,000 hectares of the Alcornocales natural park in Cádiz, offering permission to the buyer to build an aerodrome, two golf courses and a luxury hotel. As Spain goes on sale, nothing is beyond the bounds of possibility.

The fund Fibra acquires 278 Sabadell branches from Moor Park for 300 million Euros

The British fund Moor Park Capital Partners has decided to close up its first investment in Spain. The firm, with headquarters in London, has reached an agreement to transfer 278 branches leased to Banco Sabadell.

The properties belong to a package of 378 real estate assets acquired by Moor Park in April 2010 from Banco Sabadell through an operation of sale & leaseback, that is, the institution sold the branches and, at the same time, closed a leasing deal to stay as a tenant.

At that time, the British fund paid 403 million Euros for the nearly 400 branches with an initial yield of 6,65%. Now, after two previous sale operations, Moor Park will obtain between 300 and 330 million Euros for the 278 branches, according to sources close to the operation.

A figure that would need to be added to the earnings obtained for the sale of a hundred branches transferred at the end of 2010 and 2011. Moor Park decided to split up the package and place it among small and medium sized investors. However, it also closed an operation with a great investor, Amancio Ortega, who acquired through its real estate company Pontegadea a lot of offices for 55 million Euros in December 2010.

The objective of the British fund was to sell branches in order to obtain 200 million Euros, however, according to real estate sources, up to the sale of its last package of 278 branches, it had obtained 70 million Euros.

The nearly 300 properties generate an annual rent of 25 million Euros, according to these same sources, and are scattered all throughout Spain and mainly, in Madrid and Barcelona.

As it happened with Moor Park when it acquired these branches, the new owner enters the Spanish market with this operation. It is Fibra Uno, a Mexican institutional fund that works as a Reit. That is, it is a listed company devoted to the rental of properties, whose earnings have to be divided between the shareholders.

On the 30th June, the accounting value of these properties reached 51.100 million of Mexican pesos (2945 million Euros). Its portfolio includes 316 properties, located mainly in the south and center of Mexico. The assets have an industrial, commercial and office use.

This is the first great operation carried out by a South American fund which, after years focusing its acquisitions in the United States, has started to invest in Spain. At the end of June, a group of Venezuelan investors acquired a building located at the Recoletos Street in Madrid for more than 20 million Euros from the real estate company Renta Corporación. The agreement between Moor Park and Fibra Uno has been closed a few weeks ago, after finishing the negotiations which started on the last month of May. However the acquisition will not be closed officially until the 15th September.

The operation has also been approved by Banco Sabadell. The Catalan institution has confirmed its interest to maintain the branches as they are strategic ones. The properties have a lease agreement for 35 years, with a minimum 25 years, guaranteed by Sabadell.

In this first great operation of sale & leaseback in 2013, the consulting company CBRE ad the law firm Clifford Chance have acted as consultants for Moor Park; while the acquirer has been advised by Banco Santander on the financial side, the law firm Uría y Menéndez on the legal and tax side and Deloitte on the real estate aspects.

Sabadell´s share dropped yesterday by 4,59% down to 1,848 Euros.