Private Companies Start Building VPO Rental Homes Due to Lack of Public Resources

11 June 2019 – Idealista

Housing and the need for public-private partnerships to build affordable homes was one of the hot topics during the recent election campaigns. But the reality is that the public administrations do not have the resources to fund any substantial residential programs.

In addition, Spain has traditionally been a country of homeowners and so most of the few affordable homes that the state has been building have been sold rather than put up for rent. This represents a major problem for the growing population of renters in the country, which some estimate currently account for 23% of total demand, compared with the European average of 34%. The Bank of Spain’s official figure for 2017 was 16%. Regardless, private companies are entering the market to fill the gap.

One such example is Azora, which has been managing social housing for rent since 2004 through its fund Lazora. It estimates that Spain needs 2.5 million mostly affordable rental homes to bring it in line with the European average. That would require an investment of approximately €300 billion over the next few years, a mammoth figure.

Azora actually sold its Lazora portfolio, containing almost 7,000 homes (private and social) to CBRE and Madison in 2018. They committed to continue investing capital in the sector and have already committed more than €200 million in various projects to build 1,200 more homes.

Azora still manages almost 14,000 social and private rental homes across the country and has recently been joined in the sector by the property developer AQ Acentor, the real estate arm of the German fund Aquila Capital. Specifically, AQ Acentor is planning to build 1,450 VPO rental homes in Villaverde, Barcelona, Valencia and Málaga. The numbers are not huge but they will go some way to plugging the gap.

Meanwhile, in the public sector, according to data from the Ministry of Development, 5,167 VPO homes were built in 2018, of which just 353 (6.8%) were dedicated to rental. In 2017, 4,938 VPO homes were constructed, the lowest absolute number since records began, of which 355 (7.1%) were dedicated to rental. Madrid accounted for most of the new VPO homes in 2018 (2,418, of which just 78 were dedicated to rental).

Azora considers that more institutional investment is required to make up for the housing deficit and that “to attract such capital, we need solutions and policies that promote and facilitate the construction of new rental homes”. It remains to be seen whether the politicians can put their ideological differences aside and come up with a clear and consensual housing policy for the benefit of the country at large.

Original story: Idealista (by P. Martínez-Ameida & Ana P. Alarcos)

Translation/Summary: Carmel Drake

Catella to Invest €200M in Offices and Parking Lots

22 April 2019 – Expansión

The Swedish manager, Catella Asset Management, wants to continue expanding its footprint in Spain, where it has invested €250 million over the last three years.

To this end, the investment firm, which has focused on the housing, student hall and retail sectors until now, is planning to invest €200 million in the purchase of office buildings and parking lots in Spain and Portugal over the next 2 years.

In addition to the major cities of Madrid, Barcelona and Lisbon, the company is also analysing operations in secondary cities such as Valencia, Málaga, Bilbao, Zaragoza and Porto.

Original story: Expansión (by Rebeca Arroyo)

Translation/Summary: Carmel Drake

BBVA Research: The New Rental Decree & AJD Law Will Dissuade Investment in Housing

15 April 2019 – Expansión

BBVA Research is predicting a slowdown in the increase in residential investment this year and next, with forecast growth of 4.6% in 2019 and 4.3% in 2020, after the sector closed 2018 with growth of 6.9%.

According to the Spain Watch report compiled by the research house, the main driver behind the expected slowdown is the regulatory changes that “are affecting the sector and increasing legal uncertainty for landlords, which are reducing the incentives to entry for large investors and making purchases in regions with exposure to the tourist sector less attractive”.

The legal uncertainty first emerged at the end of 2018 when changes were made to the rental law and to who is responsible for paying Stamp Duty (AJD). Previously it was the purchaser; now it is the lender bank. That has resulted in a deceleration in residential sales, which may only be temporary, but at this stage is too early to say.

Meanwhile, BBVA Research has revised down its forecasts for the construction sector for this year and next, with increases of 4.8% and 4.7%, respectively, in light of the above.

Original story: Expansión

Translation/Summary: Carmel Drake

The PSOE Proposes that Town Halls Buy Homes to Rent Them Out

21 February 2019 – Eje Prime

The PSOE wants to create a public stock of rental homes, with reference prices, which will end up affecting market prices. To this end, in its framework program for the municipal elections to be held on 26 May, the party led by Pedro Sánchez is proposing that Town Halls purchase (already built) homes for rental, although without considering those that come from evictions executed by the banks.

The text reflects the “absolute priority” of creating a public rental stock that is “sufficiently large” with which to develop active policies that facilitate access to housing for citizens and which “affect the prices in the rental market”, according to reports from Europa Press (…).

In terms of public subsidies for the rental sector, the socialists propose taking into account the different life needs of each cohort, such as young people who want to buy their first home and older people who are looking for family consolidation projects. Similarly, they foresee the creation of a stock of rental homes for young people (…).

Original story: Eje Prime 

Translation: Carmel Drake

30% of the New Builds in Barcelona’s 22@ District will be Social Housing Units

19 November 2018 – La Vanguardia

The mayor of Barcelona, Ada Colau, neighbourhood organisations and economic and social change agents have signed an agreement to modify the 22@ district, to provide it with more social housing and public transport and to avoid the gentrification of the neighbourhood. In this way, the main transformation will be that the percentage of land reserved for social housing in the northern area of the Catalan capital will increase from 10% to 30%. And most of that will be rental housing, although the plan is to also grant some land to cooperatives and social entities so that they can build protected flats in another form. Similarly, The Town Hall wants the 22@ district to be a space for trials and experimentation in the search for solutions to issues relating to housing and mobility.

The 22@ district comprises 200 hectares in Barcelona, which started to be transformed in the year 2000 and which has turned Poblenou into a hub for small and large technological companies. It is a model for long-term success that is now going to change its strategy to obtain a mixture of uses between tertiary and residential. For that reason, on the 80 hectares that are still left to be developed – above La Diagonal – the surface area dedicated to public housing is going to be increased. In total, between 5,000 and 6,000 new flats will be constructed in the space.

Ada Colau has highlighted the critical efforts that many players have made to be able to sign the document that reviews the 22@ district after 18 years of development. “It is a transcendental agreement for the city. Technological innovation is not enough to make a city”, said the mayor. In this sense, she highlighted the importance of building more housing to bring life to the neighbourhood.

The agreement that has been signed this morning establishes two areas within the technological district that will require Modifications to the General Metropolitan Plan in order to carry out the new transformation. On the one hand, the neighbourhoods of Provençals del Poblenou and Maresme, and on the other hand, the areas of Bogatell, Trullàs and Plata del Poblenou. Whilst in the first spaces, the idea is to obtain an equilibrium between offices and housing, increasing the land available for the construction of public homes, in the second, the plan is to declassify the whole area to preserve the old fabric of Poblenou. The experts understand that these buildings, due to their morphology, are not ideal for housing technological activities (…).

Original story: La Vanguardia (by Silvia Angulo)

Translation: Carmel Drake

Andorran Banks Finance FC Barcelona’s Repurchase of Land in Can Rigalt

16 October 2018 – Eje Prime

FC Barcelona has obtained Andorran financing to purchase Can Rigalt. The Catalan club has signed a €20 million loan over four years with MoraBanc to comply with the ruling won by the real estate company La Llave de Oro for the plots of land, located in L’Hospitalet de Llobregat, according to the sports newspaper Palco23.

The operation in Can Rigalt dates back to 1998 when the board, chaired at the time by Josep Lluís Núñez, acquired those plots near the Camp Nou to build a sports city. Nevertheless, the project was abandoned and it was not until 2005 when the former-President Joan Laporta managed to transfer them to the real estate firm La Llave de Oro for €35.4 million. Nevertheless, the purchase contract included a series of clauses whose breach allowed the company to undo the purchase and recover its money. And that is what has ended up happening.

The most important point and the one that ended up tipping the balance against FC Barcelona during the arbitration proceedings was the obtaining of permits to build homes. The first arbitration award established that 30 July 2014 was the deadline for the club to fulfil and ensure that the Town Hall of L’Hospitalet and the other players involved had facilitated the urban planning process. Nevertheless, the burst of the real estate bubble left the operation up in the air and the group requested a new arbitration award to resolve the operation.

That ruling came in June 2016, when the Arbitration Court of Barcelona corroborated that, after ten years, the requirements established in the purchase contract had not been met. For that reason, it forced the sports entity to return the €35.4 million that it had charged for the land, as well as some legal interest amounting to €11.6 million. The entity tried to negotiate a discount, although its annual report confirms that, in the end, it made the payments established in the ruling.

In the Camp Nou offices, there is not too much hope regarding the future of these plots, which spans 10,000 m2 and have a significant volume of buildable space. In fact, a decision was taken to impair the potential of this asset by €29 million in the accounts for 2016-2017, placing its accounting value at €8.44 million, as revealed by this newspaper. It is “a reasonable valuation established by an independent expert”, says the entity, which trusts that the evolution of technology will allow it to reduce the costs of converting the electricity sub-station next to the land and its transformation is what makes the real estate operation unviable today.

This is not the only urban planning project that FC Barcelona has faced problems with. Laporta also forecast the construction of Barça Park in 2007-2008, a thematic space, next to the Barcelona-El Prat Airport. The club paid €18.74 million for the land, but never managed to overcome the administrative procedures due to the breach of several environmental rules that prevented the development there of any kind of sporting, leisure or training activity. Last year, it applied an additional depreciation of €1.13 million and today its value amounts to just €3.07 million.

Original story: Eje Prime (by M. Menchén)

Translation: Carmel Drake

Government & Podemos Agree to Allow Town Halls to Regulate Rental Prices

11 October 2018 – Eje Prime

The Government has said yes to public control of the rental market in Spain. The Executive led by Pedro Sánchez (below left) has agreed to the regulation of rental prices by Town Halls, according to explanations provided in a Budget agreement reached on Thursday by the PSOE and Unidos Podemos. The measure is established provided its application is “temporary and exceptional” and is carried out only in those urban areas where there has previously been an “abusive increase” in rents.

Rent has formed the focus of the new Government’s action plan in terms of housing. In parallel to the regulation of prices, the Executive has announced that it will advocate the extension of the minimum term of lease contracts from three years to five, and, in those cases where the owner is a legal entity, the lengthening of the commitment between landlords and tenants to seven years. Moreover, the tacit renewal of contracts will be increased from one year to three, provided the intention to not renew the agreement is communicated by either of the two parties at least six months before it is due to terminate.

In addition, the PSOE and Unidos Podemos have agreed that damage deposits (fianzas) to enter rental flats will be capped at a maximum of two months and that the signing of bank guarantees will no longer be demandable by landlords. In the event that an owner wants to recover his home before the term agreed with the tenant, then that scenario must be formally explained in the contract in force.

More funding for the development of rental housing

The agreement, which will now have to be approved by Congress, includes a measure that supports the development of public housing. In the event that it receives the green light from the chamber, the Government will increase the housing budget for next year to €630 million. In 2020, it will increase that pot further still to €700 million and in 2021, to €1 billion. According to the text, in ten years, Spain will invest between 1% and 1.5% of its Gross Domestic Product (GDP) in public housing.

One of the objectives of the public housing plan is “to avoid “homes” from being sold to vulture funds or sold for a profit”, so as to ensure that “particularly vulnerable people” have the possibility of accessing a rental home.

Original story: Eje Prime

Translation: Carmel Drake

Eurofund Gets Green Light for its Retail Macro-Project in Lleida

8 October 2018 – Eje Prime

Eurofund Group has been given the green light for its macro-project in Lleida. Last Friday, the plenary of the Town Hall of Lleida capital approved the commercial development of the Torre Salses project, a retail park complex with a surface area of 56,000 m2. The construction work is expected to begin in the autumn of 2019, according to comments from sources close to the operation speaking to Eje Prime.

The plots on which Torres Salses is going to be built are located between the Magraners and La Bordeta neighbourhoods and “will involve their integration with the city centre”, explained the spokeswoman for the municipal government, Montse Mínguez, recently.

After passing the Town Hall’s filter, Eurofund is now only awaiting the commercial licence to be able to start work on the development of the land. On 21 September, the Informative Committee for Management and Development Policies in the City and Sustainability for the Town Hall of Lleida reported favourably regarding the urban planning process for Torre Salses. It also endorsed both the execution of the widening and extension of the Víctor Torres road and the modification of the urban development order for SUR 42.

The Town Hall approved those files on the understanding that, amongst other aspects, the construction of the complex would strengthen interest in the area for the development of large areas of amenities in the neighbourhoods of La Bordeta and Magraners. Moreover, Eurofund will bear some of the costs of the work to build the roads to access the future retail park complex.

Similarly, the Town Hall trusts that the commercial macro-project will facilitate the development of residential projects, in particular, those dedicated to social housing units. According to the Town Hall of Lleida, Torre Salses will have an economic impact of €362 million on the city.

Owner of Puerto Venecia and Dolce Vita 

Eurofund currently owns more than €3.5 billion in commercial assets, including developed centres and those under construction. The fund manager was founded in 1994 and its first major development was Parc Vallès in Terrassa (Barcelona).

With the new upward economic cycle, the company led by Ian Sandford (pictured above) reactivated its investment in the commercial real estate market with Puerto Venecia, a mega shopping centre spanning 206,000 m2 inaugurated in Zaragoza in 2012.

Original story: Eje Prime (by J. Iquierdo & P. Riaño)

Translation: Carmel Drake

Residential Assets Displace Offices as the Leading Investment Choice for New Socimis

23 August 2018 – El Confidencial

The configuration of the investment map of the Socimis on the Alternative Investment Market (MAB) has changed drastically following the recent incorporation of the company owned by Santander, BBVA, Acciona and Merlin Properties. With a portfolio comprising 10,700 homes, Testa has placed the residential segment in first position on the investment ranking of new listed companies, relegating the office sector to third place.

In this way, of the 14 new joiners to the MAB so far this year, 30.8% have housing as the main or significant target of their investments, compared with 12.8% of the 20 new companies that made their MAB debuts in 2017. With this boost, offices, which had led the ranking until now, have been relegated to third place with 15%.

The weight of retail premises is also striking since they have increased from 6% to 23%, according to data from Armabex. Beyond specialisation, registered advisors also highlight the leading role of international investors, which account for 43% of the new listed companies.

“The rate of new joiners is expected to continue and this year, we are going to comfortably exceed the total figures recorded last year (44 companies), to more than 70”, said the President of Armabex, Antonio Fernández. Currently, there are 59 Socimis trading on the MAB, which account for 60% of the one hundred or so companies that participate in the Alternative Investment Market.

In terms of the upcoming debuts, the Socimi from Bankinter specialising in the hotel sector, Atom Hoteles, is planning its launch. Other examples include Haya Real Estate, Vía Célere and Azora, whose plans to debut on the stock market have been delayed due to the instability in the international financial markets, the political uncertainty in Spain and the evolution of the businesses themselves. The most recent to debut, at the beginning of August, was Mistral Patrimonio, whose activity focuses on rental homes.

“These companies have evolved towards greater specialisation. They started leading tertiary assets to move towards housing and, now, they are opening up to other segments such as hotels, residences, healthcare complexes, gas stations, etc.”, says Fernando Vives, Technical Director at Alia Tasaciones.

An annual valuation

To ensure transparency, the regulations require that these investment vehicles are listed on a regulated European market, be it the main stock market, the Euronext or the Alternative Investment Market, in a maximum period of two years following their constitution.

Nevertheless, the stock market listing is not the only method of transparency. The MAB has just introduced a new requirement that obliges companies to issue more reports. They will be obliged to undertake an annual valuation of their assets, beyond the initial assessment. (…). “The measure obliges Socimis to provide more information and to incur expenses, but it is very positive at the macroeconomic level and for investors”, says Antonio Fernández (…).

“The Socimis have brought confidence back to the real estate sector after the real estate bubble burst. They are here to stay, taking advantage of the upwards cycle and they will continue to activate the real estate market, above all for tertiary use until at least the end of the cycle (…)”, says Vives.

Original story: El Confidencial (by E. H.)

Translation: Carmel Drake

Sánchez Reveals that the Housing Law will Extend Rentals to 5 Years

12 September 2018 – El Diario

The President of the Government, Pedro Sánchez (pictured below), has demanded agreement from the political groups this afternoon regarding the next Housing Law, which will include, amongst other measures, an increase in the terms of rental contracts, and their subsequent extensions, to 5 years from their current duration of 3 years.

Sánchez posted the request on his Facebook account, with a link to Twitter, where he indicated that he was “appealing to all political forces to reach a pact that will convert housing into a right for citizens, far removed from speculation”.

The President of the Government highlighted that he wants to “shield” the “social function” of housing and he revealed several aspects in this regard.

Besides the increase in the duration of rental contracts and their subsequent extensions to five years, Sánchez highlighted “a shock plan for 20,000 rental homes to increase supply and whereby reduce the pressure on prices”.

Similarly, he promised an “improvement in the fiscal framework to stimulate supply and moderate prices”, a “review of the aid programs for young people”, and the “regulation of tourist apartments”.

Sánchez also mentioned an “improvement in the financing of housing developments through the ICO”, the Official Credit Institute, as well as a “reorientation of the State Housing Plan to promote and protect a public housing stock that is sufficient and affordable, and which allows us to attend, in particular, to the needs of the most vulnerable people in society”.

As the Head of the Government concluded, “Achieving social progress that will change the lives of thousands of people is in our hands”.

The Minister for Development, José Luis Ábalos, reported last week that an inter-ministerial group was working on specific proposals for housing, and he said that in terms of addressing the rise in rental prices, they are studying legal reforms regarding rental contract terms and extensions, amongst other measures (…).

Original story: El Diario 

Translation: Carmel Drake