Gas Natural Sells Its HQ In Madrid To IBA Capital For €120M

24 November 2016 – Expansión

Gas Natural has had a change of heart in its strategy to sell its real estate jewels in Madrid. The firm chaired by Isidro Fainé, which engaged the real estate consultants CBRE and Cushman & Wakefield in the summer to sell its main real estate assets in the capital, has decided to divide up its batch of four properties and sell the most sought after asset, located on Avenida de San Luis, in a separate transaction.

In this sense, the energy company has reached an agreement with IBA Capital, through its Socimi Zambal, to sell its headquarters in the capital located on Avenida de San Luis 77. The transaction will be completed within the next few days for around €120 million, once the bureaucratic procedures have been completed.

The firm has opted for the sale & leaseback formula, involving the sale of the property and its subsequent lease for a period of ten years.

The real estate fund manager, which purchased Vodafone España’s headquarters in Madrid just over a year ago, has knocked out the Spanish real estate and investment manager, Drago Capital, from the process, which until now was the favourite candidate for taking over Gas Natural’s buildings in Madrid. Drago Capital, which has been in exclusive negotiations with the energy firm for several weeks regarding the purchase, was unable to complete the operation as it failed to obtain financing from the banks.

In terms of the rest of the buildings up for sale – one property on Avenida de América 38; the Acanto 11 complex; and the Antonio López complex, on Antonio López 193– , the company has decided to reopen the process and invite those investors who expressed interest in the initial process to participate. Besides Drago Capital, the finalists also included Henderson Park and Has Capital.

In total, the combined surface area of the four complexes amounts to 57,000 m2. In addition, this asset portfolio includes 1,695 parking spaces. Specifically, Gas Natural’s headquarters on Avenida de San Luis 77 has a surface area of almost 32,000 m2, which is dedicated to office space. With this operation, Gas Natural is taking advantage of the real estate sector’s current strong performance to generate value from its properties and earn some cash, without having to move its staff by remaining as the tenant.

The office market in Madrid and Barcelona has heated up a lot in recent months due to the shortage of high quality products in good locations. During the first three quarters of this year, investment in the office market amounted to €2,200 million, according to data from Aguirre Newman.

Gas Natural’s approach is in line with that of some of its rivals, which have also opted to divest their real estate investments. For example, Torre Cepsa, located in the Cuatro Torres complex in Madrid, was sold to Amancio Ortega’s investment vehicle, Pontegadea, two months ago for €490 million. Meanwhile, Endesa’s headquarters in the capital is owned by the Socimi Merlin and Iberdrola’s head office in Bilbao is partly owned by Kutxabank.

Original story: Expansión (by R. Arroyo & M. Á. Patiño)

Translation: Carmel Drake

Drago Finalises Purchase Of Gas Natural’s RE Jewels

7 November 2016 – Expansión

The investment firm Drago Capital, together with the Canadian pension fund manager PSP Investments, has emerged as the clear candidate to acquire the real estate jewels of Gas Natural Fenosa in Madrid. The firm is now holding exclusive negotiations with the energy company to put the finishing touches to a deal that is likely to close within the next few weeks.

According to market sources, the offer from the Spanish real estate vehicle manager, which was presented as part of a consortium with the Canadian fund, has supplanted those submitted by the other suitors also interested in the assets.

The operation values the energy company’s assets in Spain’s capital at just over €300 million, which means that this will be the largest sale and leaseback transaction (sale to a third party and subsequent rental of the property) since 2010.

The firm chaired by Isidro Fainé engaged the real estate consultancy firms CBRE and Cushman & Wakefield in the summer to sell its main real estate assets in Madrid. This process sparked interest amongst private equity funds and investors alike, both at home and overseas.

Other candidates

Specifically, in addition to Drago, the investors Iba Capital, Henderson Park and a family office participated in the bidding until the latest round. Has Capital, which had also expressed its interest in Gas Natural’s properties, withdrew at the last minute as it was unable to raise financing.

The assets up for sale are: the group’s headquarters in Madrid, located on Avenida de San Luis 77; a property on Avenida de América 38; the Acanto complex, at number 11 on the same street; and the Antonio López complex on Calle Antonio López 193.

Altogether, the global surface area of the four complexes amounts to 57,000 m2. In addition, the portfolio of assets includes 1,695 parking spaces. (…) .

Gas Natural’s move comes at a time when its competitors are also divesting their real estate assets.

Specifically, Torre Cepsa – one of the Cuatro Torres in Madrid – was acquired just two months ago by Pontegadea. That purchase – the largest ever undertaken by Amancio Ortega’s investment vehicle – was completed in September and saw the founder and largest shareholder of Inditex spend €490 million.

Meanwhile, Endesa’s headquarters in the capital is owned by Merlin; and Iberdrola’s headquarters in Bilbao is partially owned by Kutxabank.

Repsol still owns its headquarters in Madrid, in Méndez Álvaro, however, there has been speculation that the oil company may sell the asset. (…).

According to the consultancy JLL, real estate investment in the office segment is expected to exceed €2,400 million in 2016. That figure falls below the record €3,170 million achieved last year due to the limited supply of high quality products. During the first nine months of 2016, investment in offices amounted to €1,572 million, with Madrid accounting for the vast majority of that figure (€1,150 million).

Original story: Expansión (by R. Arroyo & M. A. Patiño)

Translation: Carmel Drake

Henderson, IBA, Has & Drago Bid For Gas Natural’s RE Assets

19 October 2016 – Expansión

The bidding for Gas Natural’s real estate gems in Madrid is entering its final phase. The British fund manager Henderson Global Investors, IBA Capital, through its Socimi Zambal, the US investment fund Has Capital and the Spanish management company Drago Capital have all submitted binding offers for the four corporate office complexes that the energy firm has put up for sale in the Spanish capital.

The assets include: the group’s operating headquarters in Madrid, located on Avenida de San Luis 77 (pictured above); a property on Avenida de América 38; the Acanto complex, at number 11 on the same street; and the Antonio López complex on Calle Antonio López 193.

The investors have submitted offers valuing the assets, which have a combined surface area of 57,000 sqm in office space and 1,695 parking spaces, at around €300 million, according to sources in the sector.

The gas firm, which engaged the real estate consultancy firms CBRE and Cushman & Wakefield to sell its main real estate assets in Madrid this summer, plans to chose the candidate during the second half of November and close the deal before the end of the year.

The firm, chaired by Isidro Fainé, is negotiating with these four investors regarding the option of selling the four office complexes in a single operation or awarding the assets in batches. In this sense, both IBA Capital and Has Capital have already submitted offers for all of the assets as well as for different batches, an option that the other candidates may also consider.

The operation, whereby Gas Natural will sell the properties but continue as the tenant, will allow the firm to raise funds without needing to move its employees or look for new offices.

The operation represents the largest sale & leaseback deal in the segment in recent years. (…). The volume of sale & leaseback operations reached its peak between 2007 and 2010, but has slowed down since then. Nevertheless, the formula has been used recently by companies such as Telefónica and Eroski. (…).

The future of sale & leaseback operations

However, new accounting legislation, which no longer allows property sales that are subsequently rented out to be accounted for as off balance sheet financing structures, may put a stop to this option of real estate asset optimisation.

Specifically, IFRS 16 requires companies to recognise rental commitments as debt, except those that have a term of less than a year or relate to low value assets. This standard, which will replace the standard currently in force, IAS 17, eliminates the dual accounting model for lessees, which differentiates between financing lease contracts, which are recorded on balance sheet, and operating lease contracts, which do not require future lease commitments to be recognised (on balance sheet).

Although the new law does not enter into force until 2019, companies are obliged to analyse their lease contracts in advance and make new estimates, which must be updated on a regular basis.

Original story: Expansión (by R. Arroyo and M. A. Patiño)

Translation: Carmel Drake