Tag: guaranteed returns

British Investors Buy Up Entire Residential Buildings In Barcelona

7 December 2016 – La Vanguardia

They used to own a flat in a good location in the centre of London. They sold it and with the profits they bought an entire four-storey building in Barcelona. That is the story of a British family, which has become the new owner of number 68 on Calle Hospital in the heart of the Raval neighbourhood. The property, constructed more than a century ago, needs to be completely renovated. Once that has been done, the four floors will be put on the market for rent, whereby benefitting from the current market of rising prices and within a few years, the owners will sell the property.

That is how British families with investment potential are managing to generate guaranteed returns from real estate assets. A property like the one on Calle Hospital costs around €1 million. After the renovation, the rental income is unlikely to fall below €1,000/month. Such properties can be sold subsequently for more than €1.5 million, at least.

This real estate “play” is not a unique case. The consultancy firm Aguirre Newman has closed the sale of two buildings in Eixample to a British investor group within the last few weeks. “The property is in a bad condition, but they will take care of the renovation, and then put it up for sale straight away”, explained Anna Gener, Director General of the firm in Barcelona.

Over the last year, Brits have realised that Barcelona offers them high returns, regardless of whether they buy or rent. “Brexit has meant that there are increasingly more investors who are interested in buying assets here”, said Albert Sarrias, Commercial Director at Engel&Völkers in Barcelona, although he recognised that “we will only see the real effects in the long term, for the moment, they are browsing more than they are buying”.

By contrast, for Miquel Laborde, owner of the real estate management company Laborde Marcet, the divorce between the UK and the EU is not the driver behind the latest phenomenon. “It is a simple matter of returns. British investors can earn more money here from investing and selling than they can in London”. The reason, beyond any fluctuations in the euro-sterling exchange rate, is that prices in the residential sector in the British capital are at historical highs and they seem to be peaking. The price per square metre of a new home in the centre of the British capital ranges between €10,000/m2 and €15,000/m2. (…).

17.66% of house sales to foreigners in Spain are made to Brits, according to data from the College of Registrars. They are followed, at a considerable distance, by wealthy French, German, Swedish and Belgian investors.

These types of operations in the residential sector are mainly concentrated in the centre of Barcelona Raval, Born and Eixample are the preferred locations although the real estate agents lament the limited supply of products on the market. (…).

Small investors prefer to put their money in the residential sector. Offices and buildings, measuring more than 5,000 m2, generate more rental income but only Socimis and large investment funds can afford them. (…).

Original story: La Vanguardia

Translation: Carmel Drake

Marina d’Or Launches Aggressive Marketing Campaign

4 October 2016 – Cinco Días

The former hotel and real estate empire Marina d’Or has launched an aggressive marketing campaign to raise revenues. It has put apartments up for sale from as little as €130,000 and retail premises from €200,000, with a “guaranteed” return of 7%.

The empire created by Jesús Ger began to crumble at the same time as the real estate bubble burst in Spain. The Holiday City, which was advertised in the City of London as the best place to spend the summer and as a golden retirement destination for British pensioners, is resorting to aggressive marketing techniques once again to increase its sales in the short term.

The key to the campaign, which is featuring in most national newspapers, is the slogan… “Guaranteed returns of 7%”. The small print explains that these investment opportunities relate to fully operational retail premises, with an established client base, as well as beach-front apartments. It specifies that the return of 7% with guaranteed rent will be over “1, 2 3 or more years, depending on the agreement”.

The reality is that the entity selling these assets is the hotel subsidiary of the group, which has not filed for bankruptcy, unlike its property developer associate.

Hoteles Marina d’Or has been selling homes and retail premises from €130,000 and €200,000, respectively, since the summer. In theory, the guaranteed return used to be 4%, but in September, that figure was increased to 7%.

How does it work?

The mechanism is simple. The company undertakes to pay that percentage over the purchase price on the basis of a signed contract, if the owner grants it the right to rent out its property in return. “In reality, they are apartments that the hotels already manage and given their locations, it is almost certain that they will be occupied; and as such, we are able to promise such returns”, said a sales agent from Marina d’Or. A spokesperson for the firm added that the sale of these apartments represents a direct cash injection and allows them to consider using this formula with more homes in the future. (…).

The hotel and real estate complex, which has half a dozen hotels, ranging from three- to five-star categories, is also home to several leisure facilities and a large spa. (…) The company, which guarantees annual interest of more than €9,000 per year for a flat costing €130,000, held own funds amounting to €86.2 million at the end of 2014, the last period for which accounts have been deposited in the commercial registry.

The company generated revenues of €38.6 million in 2014, in line with the preceding year. Its profit amounted to €627,000, compared with a loss of more than €1 million in 2013. The debt repayment calendar of Hoteles Marina d’Or, a limited company that is fully owned by Jesús Ger, was clear at the end of 2014. Last year, it had to repay €1.2 million; this year €1.4 million; and in 2017, €2.8 million. In 2018, the amount will increase to €4.6 million and from 2019, to €87.5 million. In total, the company’s debt amounts to almost €100 million. (…)

The return means multiplying the average interest rate on one- and two-year deposits by 30, given that on average such deposits paid out 0.23% in July. Nevertheless, the return is not quite so far-fetched in the real estate world. Sources in the sector acknowledge that it is high, given that holiday apartments offer around 4% in their contracts, and that it depends on the tourist occupancy rates in the area. In any case, there is a risk, given that the hotel company is responsible for paying that interest rate.

Original story: Cinco Días (by Pablo M. Simón y Laura Salces)

Translation: Carmel Drake