Mapfre to Invest in Property due to Low Interest Rates

7 March 2019 – Expansión

Mapfre has announced its intention to invest in more real estate in light of the low interest rates in the global markets. The insurance group ended 2018 with real estate investments worth €2.9 billion, accounting for 4.3% of its total investments, having invested heavily in the renovation of its asset portfolio during the year.

Given the scarce supply and illiquidity of the real estate markets in Madrid and Barcelona, the firm has already created two companies headquartered in Luxembourg to invest in properties in Paris and Germany. It also plans to acquire real estate in Amsterdam, Brussels, Milan and Luxembourg.

Moreover, it has teamed up with the German real estate fund manager GLL, with whom it aims to invest up to €300 million in properties in some of the main European cities.

The objective of the insurance company is to generate returns of between 4% and 6% p.a. on a recurring basis and to diversify its portfolio.

The firm did also divest some properties last year, in Portugal, Chile and Palma de Mallorca, which together with the appreciation of other assets, resulted in net gains for the group of €47 million.

Most of Mapfre’s investment portfolio comprises public and corporate fixed income securities, which had balances of €49.3 billion and €8.9 billion, equivalent to 56% and 18% of its total portfolio, respectively, at year end 2018. Equities accounted for €2.4 billion (4.9%) and investment funds €1.3 billion (2.7%).

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake

Sabadell Places €1,000M In 10-Year Mortgage Bonds

20 April 2017 – Expansión

It has taken Sabadell just four months to debut on the debt market this year. Yesterday, it completed the placement of €1,000 million in mortgage bonds with a maturity of 10 years, to leave Popular as the only entity that, given the uncertainty surrounding its specific situation, has not resorted to the capital markets to raise finance or secure resources for its capital buffer.

For these bonds, Sabadell is offering a coupon of 1%, in other words, 33 basis points above the mid-swap rate, the reference rate for issuances of fixed income securities in euros. The mortgage bonds are the safest debt that an entity can issue, given that, in Spain, they are guaranteed by all of the mortgage loans of the issuing bank, which serve as collateral in the event of bankruptcy. There has never been a default of this kind in Spain.

To carry out the operation, Sabadell has received help from Barclays, Commerzbank, Crédit Agricole, Lloyds and Natixis, as well as from its own investment banking team. Demand for the bond issue amounted to €2,400 million, in other words, more than twice the amount awarded.

Santander Totta

Meanwhile, Santander Totta, the Portuguese subsidiary of Santander, launched an order yesterday to place 7- and 10-year mortgage bonds. According to sources in the market, the operation will close tomorrow and will serve to raise cheap financing. Besides Santander, the following entities are participating in that operation: Unicredit, Deutsche Bank and Société Générale.

Original story: Expansión (by A. Stumpf)

Translation: Carmel Drake

Málaga Is The Most Profitable RE Market In Spain

28 April 2016 – Málaga Hoy

The city of Málaga is centre stage once again for dozens of domestic and international investors and not just because of its good climate and cultural facilities, but because there is money to be made there. And more so than in the country’s other capital cities. In the real estate market, Málaga generates higher returns than the national average and, what’s more, the highest returns of any city on its commercial premises and the second highest returns on its garages.

That is according to a study published yesterday by the real estate portal Idealista, which analyses the percentage profit obtained from investments in a real estate product and their subsequent rental income. In the specific case of Málaga capital, the gross yield during the first quarter of 2016 exceeded that obtained during the same period last year across all parameters, which were already positive.

This year, if you acquire a home and then rent it out, you obtain, on average, a return of 5.9%, i.e. seven tenths more than last year. That exceeds the national average, although only just, given that the average for Spain is 5.7%; Lérida is the most profitable province, with average returns of 8%.

That is one of the factors that has driven the sale and purchase of homes in Málaga over the last two years. The crisis caused a collapse in house prices, which fell by up to 50% in some cases, but encouraged investors, who bought houses for around €100,000 or €150,000 in cash to rent them out. It is worth noting that the returns on private and public financial products are very low…For example, a 10-year government bond generated a return of 1.4% in 2015 and now offers 1.5%, four points lower than the return generated from buying (and leasing out) a home.

According to this report, in Málaga city, the best assets to buy are commercial premises, because they generate a gross return of 10.4%, the highest in the country. The improvement in one year is striking – during the first quarter of 2015, the yield of commercial premises amounted to 8.1%, which represented the third highest in the country, after Córdoba and Granada. In just one year, that yield has increased by more than two points and has exceeded the growth in the other provinces, in such a way that Córdoba has remained almost equal and others, such as Lérida, Zaragoza and Las Palmas de Gran Canaria have surpassed 8%. At the opposite end of the scale, Castellón and Cáceres are the Spanish capitals where yields on commercial premises generate the lowest margin, although even there, they come in above 5%, which is not bad at all considering the return on fixed income securities.

Garages also represent a good investment in Málaga, given that they offer returns of 5.5%, the second highest in the country, surpassed only by Murcia. In the case of offices, returns amount to 6%.

And so, following the catastrophe of the crisis, the real estate market is gradually building up its strength again. Property developers are increasing the number of permits they are requesting to build new homes, although the overall levels are still low, and many banks have started developing properties themselves to improve their assets.

Original story: Málaga Hoy (by Ángel Recio)

Translation: Carmel Drake