The Resurgence Of Spain’s RE Market: Who’s Who?

11 July 2016 – Expansión

Spain’s real estate companies are making a name for themselves on the European map, particularly thanks tothe merger of Merlin and Metrovacesa. The Socimis and funds are also boosting the sector and are throwing themselves into the tertiary business. (…).

Following its merger with Metrovacesa, Merlin now owns assets with a gross value (GAV) of €9,317 million and a net value of €4,927 million. This portfolio of assets have catapulted it into the top ten ranking of the largest listed Socimis in Europe, all of which have a GAV of more than €9,000 million. The largest three are Unibail Rodamco (€37,800 million) Klepierre (€22,100 million) and Land Securities (€18,700 million). Merlin is ranked eighth. Unlike its European counterparts – who are much more specialised but who have a presence in more countries – Merlin is focusing its activity in Spain, although it does own some assets in Portugal and has a more diversified portfolio.

Professionalisation

The operation between Merlin and Metrovacesa “is a clear sign of the professionalization of the sector”, according to Humphrey White, CEO of the consultancy firm Knight Frank (…).

Other, smaller Socimis are also competing in the race to grow in size, such as Axiare, Hispania Real and Lar España, which have also gained prominence in the sector. A tier below, we find other Socimis such as Cuatro, Promorent and Mercal Inmuebles, which are listed on the specialist MAB market.

Other Socimis

“One of the first effects of this merger is that the other Socimis are going to have to following the path adopted by Merlin and carry out operations of this kind, so as to place themselves at the same level in the market”, says Borja Ortega, Director of Capital Markets at JLL.

Compared with Merlin, the other Socimis in Spain are much smaller in terms of asset values. Specifically, Hispania, with GAV of €1,500 million; Lar, with €1,050 million; and Axiare with around €900 million, are above or near the threshold of €1,000 million, but light years away from the €9,300 million held by the newly merged Merlin. The large players in the capital markets, such as Blackstone and Fidelity, are demanding liquidity (in terms of share trading) from the listed companies to invest in their share capital. (…).

In this way, the Socimis are facing up to companies with a long history in the real estate sector, such as Colonial, which specialises in prime offices in Barcelona, Madrid and Paris, with assets worth almost €7,000 milion. Colonial, chaired by Juan José Brugera, is currently evaluating the possibility of investing in other European cities, particularly offices in prime locations. The company, one of the real estate companies that survived the burst of the bubble, has just approved the distribution of its first dividend since 2008. It has also launched an investment plan whereby it will allocate €400 million to the acquisition of real estate assets and undertake a €265 million capital increase.

In addition to the Socimis, another major player that has burst onto the new property map with a vengeance is Pontegadea, the investment arm of the founder of the textile empire Inditex, Amancio Ortega.

Pontegadea

Pontegadea’s assets, worth more than €6,000 million, are located across a dozen countries in Europe, America and Asia. The company invests in buildings where some of its Zara mega-stores are opening in major cities, such as New York, Boston and Milan. In addition, it has purchased unique office buildings in prime areas such as Torre Picasso in Madrid, considered its largest single investment to date (€400 million). It also owns hotels, such as the one it has just purchased in New York for €68 million from the fund KHP Capital Partners. (…).

Original story: Expansión (by G.Martínez and R.Arroyo)

Translation: Carmel Drake

Merlin & Metrovacesa May Join Forces To Create Housing Socimi

14 June 2016 – El Confidencial

Create the largest Spanish housing Socimi. That is the plan that two giants in the sector, Merlin and Metrovacesa, are currently working on. For weeks now, they have been negotiating the creation of a joint vehicle, into which they would merge the residential assets that they currently rent out.

In total, these two giants together own almost 5,000 homes, of which, just over 1,500 would be contributed by the company chaired by Ismael Clemente, whilst the rest would come from Metrovacesa, which, in turn, has inherited most of those assets from its shareholder banks, above all the former Banif Inmobiliario fund, from Santander.

But, in addition, one of the points that they are analysing during these preliminary conversations is the possibility that both the entity chaired by Ana Botín, as well as its partner in Metrovacesa, BBVA, would benefit from this new company by injecting other homes that they currently hold on their balance sheets, which could add another 5,000 homes into the future vehicle.

If this marriage is consummated, the two parties would end up finding a solution to their respective problems. On the one hand, since it acquired Testa and inherited its residential assets, Merlin has been trying to remove them from its perimeter, given that its strategy is to focus on offices, logistics assets, retail premises and shopping centres.

On the other hand, for Metrovacesa, the main obstacle is management, given that the profound metamorphosis that the company has undergone in the last year, with the receipt of more than €1,000 million in assets and the carve out of its residential business, has converted the group into a giant that is still in the process of adapting to its own size.

Moreover, the complex times that the banking sector is experiencing, with a decrease in margins due to the low interest rate environment and the new regulations that are attacking its real estate assets, are putting pressure on the entities to put their large property portfolios on the market.

Although Rodrigo Echenique, the Chairman of Metrovacesa and a strongman at Santander in Spain, foresaw the recovery that the sector has undergone in the last two years and so decided to put a stop to his company’s asset sales and instead consolidate most of the bank’s property into his firm’s real estate arm, he is also aware that the time has now come to reap the rewards.

In fact, according to sources in the know, these conversations are being held directly between Metrovacesa’s shareholder banks, with Santander taking the lead, with the idea that Merlin’s team would take the reins in terms of the management of the new Socimi, although the entity chaired by Ana Botín would, presumably, be the major shareholder.

Santander controls Metrovacesa, with 70.27% of its share capital, followed by BBVA, which owns 20.52% and Popular, which owns 9.14%, whilst the remaining 0.007% is held by a small group of minority shareholders. By contrast, Merlin does not have a majority shareholder; most of its capital is traded freely on the stock market (free float), although several funds, including Blackrock, Fidelity, Invesco and Principal Financial Group, own significant positions. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Hispania Closes Best Trading Period Of The Year

20 July 2015 – Expansión

The Socimi has completed its best trading period of the year – its share price exceed has exceeded €14 for the first time and it has overtaken Merlin in terms of profitability.

Discretely, whilst two of its competitors are hitting the headlines with significant capital increases (Merlin Properties is raising €1,033 million for pay for its purchase of Testa; whilst Lar is looking to raise the more modest figure of €135 million), the Socimi Hispania Activos Inmobiliarios has been recording its best numbers of the year on the stock exchange and has become the most profitable company in an emerging sector that is attracting some of the largest investors in the world.

Before experiencing a slight decline of 0.78% last Friday, the Socimi led by Concha Osácar and Fernando Gumuzio had recorded six consecutive days of increases, taking its share price to over €14 for the first time, a new historical high for the group that is now worth almost €1,150 million on the stock exchange.

It has been the best trading period of the year for Hispania, whose share price has increased by 28.3% since the start of 2015, and means that the company has replaced Merlin (whose share price has increased by 25.2%) as the Socimi whose share price has appreciated by the most in 2015…Meanwhile, Axiare’s price has increased by 10.5% and Lar by 8.2%.

The stock’s rally is generating profits for the group’s largest shareholders. And the gains are being shared by both historical shareholders, those who acquired shares at €10/share when the Socimi debuted on the stock exchange in 2014 (George Soros is the largest shareholder with a stake of 16.7%, followed by John Paulson’s investment fund, which owns 9.85%; the Dutch pension fund APG and the fund that specialises in this kind of company Cohen&Steers have also owned stakes in the company from the start), as well as those that joined as a result of the €337 million accelerated capital increase that was closed in April (such as BW Gestao de Investimentos, Fidelity, CBRE Clarion and Novo Viseu).

There was significant demand for the placement, which was completed in just three hours; demand amounted to €844 million, which meant that the requests for shares exceeded supply by more than two times. Market sources say that many funds were left wanting to buy more shares and have since gone to the market to make those purchases. And other new companies are hooked on the stock as its price continues to increase.

The result is that the stock’s rally, as well as the capital increase, has allowed Hispania (which operates as a pure Socimi, but still retains its structure as an ordinary limited company to afford greater flexibility to its investments) to almost double its market value since the end of last year, when it stood at less than €600 million.

The trading volume has gone through the roof in the last two sessions. Almost 600,000 shares have changed hands, which is well above the average daily volume in July. With its charged portfolio following the capital increase in April, Hispania’s corporate activity is frenetic. Last month, the company acquired two hotels in the Canary Islands for €105 million. A few days later, it announced the purchase of two office buildings in Madrid for €54.4 million from the German company Deka.

Original story: Expansión (by Enrique Utrera)

Translation: Carmel Drake

Prominent Investors Poach Shopping Centers & Offices in Spain

15/04/2014 – Cinco Dias

Since the dawn of the year, foreign investors have been looking closely at purchase opportunities in Spain, let it be through retail sales or betting on Socimis (Spanish REIT companies). Also, such giants as Baupost, Pimco or Fidelity have put their focus on our country´s real estate, especially on the tertiary sector: offices, trading premises, shopping centers and hotels.

Last year, investment in the sector reached €5 billion that duplicated the 2012 amount, however still much behind the scores of 2007 with €10 billion spent. According to a report drawn by CB Richard Ellis, the investment focus shifted from other countries to Spain.

This year, the most important transactions were defined by Baupost acquiring 8 shopping malls in Spain for €160 million and the Banco Sabadell and London & Regional Properties´s deal on purchase of trading properties in Madrid.

Such operations revive demand and help in obtaining better yields. As BNP Paribas Real Estate informs, during the first quarter of 2014, primary areas in the business part Madrid have seen 4% yields.

High yield and low risk are two factors that convince investors to look inclinably at Spain again. The best example are Socimis, the REIT firms that enjoy growing popularity. For instance, Lar España aspires at 12% profitability for its offices, shopping malls and industrial property. Pimco and UBS are its major shareholders.

In turn, Hispania Activos Inomobiliarios, another freshly listed Socimi, expects to raise 15% yields in the tertiary sector and the most important investors who decided to bet on it are Soros and Paulson, Morgan Stanley or Fidelity.

Out of the €5 billion invested in offices, shopping centers and trading premises in Spain, 70% was contributed by foreigners. Almost half of it, €1.582 million arrived from the United States.

The first signs of looming improvement was the return of foreign investors seeking Spanish public debt. Since August 2012, non-resident investors have bought sovereign debt for over €103 billion. At the end of February, they owned €295.282 million, while in December they reached €298.139 million. (…) Real estate represented €1.787 million, 66.7% more than a year before. CBRE adds that they all jumped by 200 bps more.

Last year, one of the most heard transactions was, for example, the lease-to-buy contract on Torre Foster in Madrid signed with Abu Dhabi sovereign fund. Also, the purchase of the Agbar Tower in Barcelona for around €200 million by Emin Capital has not escaped unheeded.

 

 

Original article: Cinco Días (by David M. Pérez)

Translation: AURA REE