Tag: FMR

International Funds Take Control Of Spain’s Real Estate Companies

6 November 2017 – Expansión

Together they own stakes worth €4.3bn / International funds and managers have become the largest shareholders of the listed companies in the sector. Seven of the top ten have foreign majority shareholders.

Seven of the ten large listed real estate companies are held in foreign hands. That is the new reality of the Spanish real estate market, which is enjoying a new period of growth ten years after the last boom.

Whilst during the previous upwards peak in the sector, the owners of the property companies were domestic businessmen, now it is the turn of the international funds to hold majority stakes in these companies in the sector. That is the case of the new leaders in the property developer sector: Aedas and Neinor Homes. These two companies made their stock market debuts this year, in October and March, respectively. In both cases, the property developers making their IPOs were owned by two large international funds: Lone Star in the case of Neinor; and Castlelake in the case of Aedas (…).

In the case of Aedas, which debuted on the stock market on 20 October with a valuation of €1.518 billion, two international firms became reference shareholders: T. Rowe Price, with a stake of almost 3.8%, and Fidelity Management and Research (FMR), with a 3.6% stake. It is not their first investment in a Spanish real estate company in either case. T. Rowe was one of the funds that participated in the IPO of the Socimi Axiare, in July 2015, acquiring a 9.7% stake; meanwhile, FMR is the third largest shareholder in another Socimi, Hispania, and in the property developer Neinor Homes. In the case of the latter, another international investor is the second largest shareholder, Wellington Management, which already owns 8.5% of the capital, worth around €120 million.

In the case of the traditional real estate companies, the status of the international funds varies. Realia (…) is currently controlled by Inversora de Carso, a firm owned by the Mexican businessman Carlos Slim. In addition to the Mexican magnate’s stake (70.77%), Polygon Global own 10.5% and JP Morgan own 6.026% (…).

By contrast, two of the classic real estate companies on the stock market still have Spanish businessmen as their main shareholders: Quabit, whose largest shareholder is its President, Félix Abánades, with a 21% stake (…); and Renta Corporación, in which Dinomen, a company controlled by its President Luis Hernández, holds a 29.97% stake. In the latter real estate company, Baldomero Falcones also holds a stake, of more than 5%, making him the fourth largest shareholder.

Quabit’s second-largest shareholder is a Spanish company: Sareb. The public company holds a 7.66% stake in that firm (….). By contrast, the second largest shareholder in Renta is Morgan Stanley, with an 8.1% stake.

In total, foreign investors hold shares worth more than €4.343 billion in the five main Socimis and four largest property developers.

Spanish shareholders

(…), the number of domestic investors who control these types of companies is much lower, but they have a very prominent weight.

Such is the case of the banks Santander and BBVA, the largest shareholders in the largest real estate company on the Spanish stock market: the Socimi Merlin Properties. (…). Currently, Santander holds a 22.26% stake in that company, worth €1.162 billion, more than half of all Spanish investment in the ten largest listed real estate companies (around €1.8 billion). BBVA’s stake is worth around €336 million.

Alongside the two large Spanish banks, two real estate groups stand out as prominent investors in the listed companies in the sector. Such is the case of Colonial, which holds a stake worth €200 million in Axaire (…). Meanwhile, Colonial is controlled by three overseas investors, after Villar Mir reduced its stake.

Moreover, the real estate group Lar, controlled by the Pereda family, is the third largest shareholder of the Socimi Lar España, with a stake of more than 5.6% (…).

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Neinor Plans To Build 400+ Homes/Year In Cataluña

30 April 2017 – El Confidencial

Neinor is the new kid on the block. Cataluña has traditionally been a territory reserved for local, family-owned property developers. However, the crisis of 2009 left a large gap in the market: it swept aside groups such as Promociones Habitat (Figueras) and Espais. And it reduced companies such as Vertix to their knees. Only Núñez i Navarro and, to a lesser extent, La Llave de Oró (Marsá) were able to resist the onslaught. But now, Neinor has arrived. And it not only occupies the podium, its property developments and investments to date already make it the largest property developer in Cataluña. (…).

Neinor has 28 plots of land in Cataluña and has already started construction work on 17 of them, with a corresponding investment of €400 million. These figures place it way ahead of all of the local developers. Sources in the real estate sector indicate that Neinor plans to construct more than 400 homes per year in Cataluña. No other developer will even come close to that pace. Nor did Núñez i Navarro, ever, even at the height of its reign.

Neinor Homes debuted on the stock market in March, with plans to grow a purely residential property development business – a very different initiative from the proposals made by the Socimis. The stock market listing has created a group worth more than €1,300 million, in which the major shareholder is the fund Lone Star, with a 39.5% stake. Moreover, other international funds such as Fidelity, FMR and Invesco have stakes ranging between 3% and 5%. Anglo-Saxon capitalism pure and simple, the complete opposite of the approach adopted by the traditional Catalan property developers, which were always wary of the stock market and its pitfalls.

Now, Neinor forecasts that Cataluña will account for a quarter of its property development activity in Spain. When the 28 developments are underway, Neinor will be building 1,951 units in total in the Catalan market alone.

Of the 880 units up for sale, 668 homes have already been purchased off-plan. In practice, that represents 76% of the total, a very high percentage for the sector, which demonstrates the buyer pressure at a time when demand is a lot higher than supply in Cataluña. According to Tinsa, new house prices rose by 8.2% in the Catalan market during 2016.

Barcelona – unfinished business

Despite this start, the city of Barcelona, with its endemic shortage of land, represents Neinor’s unfinished business. The firm has just one development in the Catalan capital, almost all of which has been sold and completed. (…).

Nevertheless, Neinor is trying to consolidate its position in the city and is currently evaluating several purchases, according to sources at the company.

Given its lack of presence in Barcelona, Neinor is pushing ahead with projects in nearby cities such as Sitges and Sant Cugat. Its most important project is in Plaza Europa, in L’Hospitalet de Llobregat (Cataluña’s second largest city), where it is planning to build two blocks of flats. Like in the case of its other developments, one of those towers has already been sold off-plan.

Second homes

Neinor is also planning to build second homes in Cataluña, like it is already doing in other markets, such as in Málaga. Nevertheless, it wants to limit those projects to 20% of the total volume that it builds in the Catalan market. (…).

Original story: El Confidencial (by Marcos Lamelas)

Translation: Carmel Drake

Hispania Gets Ready To Debut On The Bond Market

17 January 2017 – Cinco Días

The Socimi Hispania is planning to join the bond issues undertaken in recent months by other major players in the sector, including Merlin and Colonial, with the aim of diversifying its financing. To this end, it has already started to sound out the ratings agencies. Its objective is to obtain an investment grade rating for its securities.

Hispania Activos Inmobiliarios is studying the option of debuting on the capital markets with a bond issue to refinance some of its gross debt, which currently amounts to €631 million, according to sources familiar with the operation.

The Socimi has already started the process to request a rating from the ratings agencies, with the aim of launching the operation during the first few months of the year.

The firm has made contact with the three large players –Standard & Poor’s, Moody’s and Fitch–, although it will not need a rating from all of them, rather from just one of them or two at most. The aim is to achieve an investment grade rating – BBB – or Baa3 – , which would allow it to debut on the capital markets at a reasonable cost.

Hispania, in which the magnate George Soros owns a 16% stake, will thereby join the other bond issues undertaken recently by other companies in the sector.

The Socimi Merlin Properties – which forms part of the Ibex 35 – went to the market in October with a 10-year bond placement amounting to €800 million. The current yield on that debt is 2.3%. It has a Baa2 rating, which is one notch above the limit that separates junk bonds from investment grade securities, according to Moody’s nomenclature. Moreover, Merlin has assumed another €1,550 million in bonds from two bond issues made by Metrovacesa, with which it completed its merger at the end of October. (…).

Hispania’s current debt has an average maturity period of 7.2 years and €497 million of the balance is due to be repaid from 2022 onwards. The current average debt cost is 2.7%. Hispania also has hedges in place to avoid any surprises if interest rates rise. 96% of its debt is guaranteed. (…).

In general terms, the optimal balance sheet structure of these types of companies rests on three pillars: bank debt with an additional guarantee – in the majority of cases, properties from the company’s portfolio – , unsecured financial loans and listed debt.

With the proceeds that it raises from the bond issue, Hispania plans to repay some of its current debt balance. It would thereby take advantage of the good conditions in the market with liquidity and the environment of low interest rates. This company, created in 2014 under the special tax regime for Socimis, is led by Concha Osácar and Fernando Gumuzio, and is managed by Azora. In addition to Soros, its shareholders include the funds Fidelity, FMR, Tamerlane and BlackRock.

Hotel specialist

Hispania’s portfolio of real estate assets closed the third quarter of 2016 with an appraisal value of €1,680 million. The Socimi owns 36 hotels in Spain with 10,407 rooms. 68% of the value of those assets is located in the Canary Islands and 64% is managed by Barceló, with which it has signed a strategic alliance. The Socimi recently purchased three properties in the Cala San Miguel in Ibiza (pictured above) for €32 million.

Original story: Cinco Días (by A. Simón and R.M. Simón)

Translation: Carmel Drake