Vukile’s Socimi Plans to Grow its Asset Portfolio by 2.5x to €1bn in 3 Years

25 June 2018 – Expansión

Castellana Properties is accelerating its growth plans with the aim of becoming the largest Spanish Socimi specialising in the retail sector in Spain and fighting off competition from its rivals Lar and Merlin. The company controlled by the South African fund Vukile Property is seeking to grow its asset portfolio to €1 billion over the next three years, which would see it multiply the size of its current portfolio, comprising 15 properties with a value of around €400 million and spanning 197,000 m2, by 2.5 times.

“We are going to do this through organic growth, in other words, by buying new assets”, explains Alfonso Brunet, CEO of Castellana Properties. The director has extensive experience in the real estate sector, in particular in retail, after his time at the fund Pradera and the consultancy firm CBRE.

“We are an income fund – over the long term – and we seek stable, predictable rental income, with potential for future growth. Given the current macroeconomic environment and recovery, we see clearly that there is upwards potential in the retail market”, he says.

To achieve its objective, the Socimi is analysing the purchase of both portfolios and individual assets, above all in secondary cities and prime locations. Currently, the company “is studying operations worth €2 billion”.

In terms of its immediate plans, Castellana Properties will make its debut on the Alternative Investment Market (MAB) before September. “We are not going to undertake any capital increases ahead of the MAB debut. We want to grow in size so that, in the future, we will be able to attract new investors to help us grow”, he adds.

The firm’s objective involves achieving sufficient volume to make the leap onto the main stock market. “Our main shareholder is Vukile, which is a Reit (an entity equivalent to a Socimi) and it is interested in securing new investors.

Background

Castellana Properties started life in December 2015 with the purchase of two office buildings in Madrid and Sevilla. A year later, the South African fund Vukile purchased 98% of its share capital and prepared its next major operation: the purchase of a portfolio of nine retail parks spread over several Spanish towns for almost €200 million. The latest acquisition in May of this year involved the purchase of the Habaneras shopping centre in Alicante for €80 million.

Currently, the firm owns 13 retail parks and shopping centres and two office buildings, and its activity accounts for 21% of Vukile’s business.

Brunet acknowledges that, after the start of the recovery in Spain, the prices of real estate assets have risen due to interest from investors. “We think that there is a lot of potential for rental incomes to rise following the decreases of the crisis. Given that we are an income fund, that is what interests us the most”, he adds.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

ST: Rental Yields Soar in Sevilla, Valencia & Tenerife in Q1

2 April 2018 – Expansión

The three cities recorded increases of more than 16% during the first quarter, whilst the national average improved by 7.6%. Barcelona offers returns of 8.7% and Madrid 7.5%.

Buying a home to let it out has become one of the most attractive investment options of recent times. The returns offered by renting a home, in an environment of low interest rates and moderate inflation, are greater than other options, such as those generated by debt and deposits. In this way, during the first quarter of 2018, the average rental yield in Spain amounted to 8.2%, according to the Real Estate Sector Trends Report for 2018, compiled by Sociedad de Tasación. Although Barcelona is the province that offers the highest return (8.7%), the overheating of prices there is reducing margins, making it a safer location but with less potential. In that context, Sevilla, Valencia and Sant Cruz de Tenerife are emerging as interesting targets.

The evolution of residential yields in Spain, which soared by 7.6% during the first quarter of this year, suggests a sustained trend over the coming months, favoured by an increase in demand, the strong performance of the economy and the growth in house prices, which rose by 4.3% in April.

The increase in prices is still more pronounced in Spain’s provincial capitals. In Barcelona, for example, prices rose by 10.2% in 2017. In that province, rental housing generated a return of 8.1%, representing an asset with “very limited risk”, according to analysis from Sociedad de Tasación. It was followed by Lérida, also in Cataluña, where rental housing offered a return of 8.45%.

Although prices are high in Barcelona, they have not had an impact on rental yields, something that has happened in other areas, such as the Balearic Islands. The return offered by a rental home in the islands fell by 3.2% during the first quarter. That reduction could be due to the increase in house prices in recent years due to the tourist rental boom, which has reduced the scope for further increases. In Palma de Mallorca, for example, the number of beds from unregulated tourist rental platforms now exceeds the supply of hotel beds by 100%, according to data from Exceltur, which may, in turn, have an impact on prices. In fact, the Balearic Islands is the autonomous region where the most effort is required to buy a home in all of Spain.

An average citizen would need to allocate his entire salary for 14.9 years to be able to buy an average home in the Balearic Islands, twice the national average (7.5 years). That conclusion can be deduced from Sociedad de Tasación’s real estate effort index, which shows that, despite the increase in incomes, buying a home in many cities in Spain is still prohibitive for many.

In this context, markets such as the one in Valencia are interesting. Not only is it the province with the third highest rental yield (8.11%) in the country, it also ranks highly, in second place, in the increases in returns: an increase of 16.7% that more than doubles the evolution of the most profitable province, Barcelona, which saw its yields rise by 5.2% during the first quarter.

In terms of Madrid, although the average rental home in the province offers a yield of 7.46%, which is below the Spanish average, that is due to the differences between the rental market in the capital and other cities in the province.

Sevilla is the province that leads the yield increases. During the first quarter, yields there soared by 17.7%, well above the rises in Madrid (6.2%). In third place was Santa Cruz de Tenerife, where letting a home is now 16.2% more lucrative than it was a year ago.

Original story: Expansión (by I. Benedito)

Translation: Carmel Drake

Madrid Is The 3rd Most Attractive City For Hotel Inv’t

19 May 2017 – Iberian Property

Madrid is the third city to attract the most hotel investment in Europe, appearing on the recently published top 10 from Savills.

This list is based on factors such as the overnight visitor market, GDP and employment growth forecasts, stock levels relative to demand and indicative prime yields as of Q1 2017. Dublin and Milan head the list, in 1st and 2nd positions respectively.

After Madrid, London is in 4th place, followed by Barcelona in 5th, Amsterdam, Budapest, Rome, Paris and Berlin, the final city in the top 10.

According to this report, the top 10 cities have strong perspectives relative to income security alongside capital preservation and capital growth.

Tim Stoyle, head of hotels valuation at Savills, comments, “The analysis highlighted there are still a number of cities in Europe that offer good ‘value’ prospects in light of the outlook for operational performance going forward.” He went on to give Dublin as an example: “Dublin for example has been one of the best performing European cities in terms of RevPAR (revenue per available room) growth over recent years, which looks set to continue as new development remains constrained,” quotes Europe Real Estate.

Rob Stapleton, Director of the Hotels team at Savills, adds that, “Across Europe, we are seeing increasing interest from investors looking for both the income and capital value growth provided by hotels. Dublin has experienced a recent rise in institutional investment whereas markets like Milan and Madrid are being driven by private equity investors and owner-occupiers looking for hotels with both development and income growth potential.”

Original story: Iberian Property

Edited by: Carmel Drake

Ministry of Development Invests €870M In Housing Plan For 2017

23 November 2016 – Expansión

Yesterday, the Minister for Development, Íñigo de la Serna, announced in the Senate that the State Plan for Housing and Refurbishment 2013-2016, which is due to expire at the end of this year, will be extended for another year. The Government is finalising a Royal Decree to avoid “the subsidies for housing being suspended from 1 January”, said De la Serna. Thanks to this extension, which the Council of Ministers will approve over the coming weeks, the number of families receiving subsidies of up to €200 to pay their rent will increase to 100,000.

The ministry was unable to provide details about how many recipients currently benefit from the Plan, but the initial objective was to cover the needs of 200,000 families. So far, it has not managed to help even half that number, but that is the aim for next year.

The commitment to subsidise rental payments instead of awarding social housing was very well received by all social agents, as well as by the opposition party. Through the State Plan, the Ministry of Development pays for between 33% and 40% of the monthly rent of households with incomes of less than €22,365 per annum who rent homes for less than €600/month.

During the Government control session in the Senate, the Minister revealed that this one-year extension will allow the Ministry of Development to allocate more than €321 million to rental and refurbishment projects in 2017. Moreover, almost €90 million will be contributed by the regional governments in the form of co-financing and €458 million will be provided through induced private investment, taking the total investment to almost €870 million.

“The extension of the term will not only help lots of families pay their rent, but also will continue to incentivise participation in the private sector and create business opportunities, which will result in the generation of employment and, therefore, also in new resources for the State”, said the Minister. In fact, next year, “35,000 homes will be refurbished or renovated”, which will create 13,000 jobs, said De la Serna.

In parallel, more than 70,000 families will continue to receive help with their mortgage payments to acquire social housing properties in 2017. Another €150 million will be allocated to that cause.

The Minister also announced that the Sectoral Housing Conference will be convened on 15 December with all of the autonomous communities, to start to prepare a State Plan for the period 2018-2021. De la Serna said that this will be “the fruit of consensus and dialogue” not only with the autonomous governments, but also with agents, associations and other players in the sector. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

BNP: Inv’t In Logistics Assets Reached €662M In 2015

8 June 2016 – Mis Naves

According to the real estate consultancy firm, BNP Paribas, “2015 was an exceptional year” for the logistics sector in Spain, with total investment amounting to €662 million, whereby exceeding the figure recorded in the previous year to register the highest investment volume in the last eleven years.

The data available for 2016, corresponding to the first quarter, confirms this rising trend, with total investment exceeding €320 million between January and March 2016 – this figure essentially relates to three large portfolios: Metrovacesa, Zaphir and Prologis.

For the analysts at BNP Paribas Real Estate, the good performance of consumption and industrial output, which began three years ago, has continued to boost the logistics market in 2015 and so far in 2016. Moreover, the shortage of high quality products has led to a slight increase in income and above all, to a stabilisation of prices. Thanks to the availability of land, new developments may go on the market at these rental prices. For this reason, the consultancy considers that 2016 offers good opportunities for buying and selling logistics assets.

It is worth highlighting two key milestones that are shaping the evolution of the logistics real estate sector and boosting the strong outlook for this sector.

On the one hand, 2014 and 2015 were the years when the highest ever investments were made in logistics warehouses. More than 50% of the high quality logistics warehouses changed hands during that period. The market saw a generational change in owners, with the disappearance of some and the appearance of others. The latter group includes international investors, which have been positioning themselves in the market, including several specialists, such as Prologis, which have strengthened their positioning; and the Socimis, which have secured capital overseas and invested it in this segment to create significant portfolios of logistics warehouses. During the first quarter of 2016, the main Socimis and funds interested in logistics assets invested around €320 million.

On the other hand, consumer habits have changed with the crisis, which has led to a very significant increase in the volume of purchases made online, to the detriment of in-store shopping. In this vein, e-commerce is growing at an average rate of 20% p.a.. To the extent that the volume of purchases made online increases, so too does demand for logistics spaces designed to provide support for these types of businesses. In 2015, around 17,000 sqm of logistics space was leased for e-commerce use. Even so, in Spain, online shopping accounts for just 3% of overall consumption, which reflects the potential for growth in the country, above all if we compare it with other markets such as Germany and the UK, where e-commerce accounts for 10% and 13.5% of all shopping, respectively. (…).

During 2016, consumption is expected to continue to grow with the same energy, along with the leasing of logistics space. Income will continue to increase and yields will continue to decrease due to the shortage of high quality logistics products. The e-commerce business will grow and so too will demand for cross-docking and XXL warehouses. The main Socimis and funds will continue to expand their portfolios with logistics assets. (…).

Original story: Mis Naves

Translation: Carmel Drake

Bankia Sold 6,100 Properties In 9m To Sept

20 October 2015 – Expansión

Bankia sold 6,100 properties during the first nine months of the year, 77% more than during the same period last year. It generated income of more than €384 million from these sales.

Original story: Expansión

Translation: Carmel Drake

Metrovacesa To Capitalise €730M To Reduce Its Debt

6 April 2015 – Expansión

Metrovacesa is continuing its debt reduction process. After generating income of €1,546 million from (the sale of) its 27% stake in Gecina last summer, the real estate company will propose a capital increase of almost €730 million at its next shareholders’ meeting.

The aim of the capital increase is to convert some of the group’s liabilities into shares, according to an announcement made by the real estate company regarding the agenda for its general shareholders’ meeting. At the meeting, which will take place on 28 April at its headquarters in Las Tablas (Madrid), the leaders of the real estate company will present the results for 2014. In 2013, the most recent year for which figures have been presented, Metrovacesa recorded losses of €349 million, i.e. 29% more than in the previous year.

In that year, the group’s financial debt exceeded €5,088 million, a liability that it has managed to reduce following the sale of its stake in the French real estate company Gecina. In June, Metrovacesa agreed the sale of its 26.7% stake in the French company to Norges Bank, Crédit Agricole, Blackstone and Ivanhoe Cambridge for €1,546 million. These funds were mainly used to repay a syndicated loan amounting to €1,600 million.

The debt for equity exchange will be accompanied by a capital increase through a cash contribution, with preferential subscription rights. The objective is to allow the 4,000 smaller shareholders to maintain their minority stakes, if they so wish, without any dilution of their ownership.

The main shareholder of Metrovacesa is the Santander group. The financial entity holds 55.8% of the (real estate company’s) capital, after it acquired the 19% stake that Bankia held in December (2014). Santander paid €100 million in that transaction.

The bank, chaired by Ana Botín, first invested in Metrovacesa’s share capital in 2008, when the real estate company was unable to pay its debts to its then largest shareholder, Román Sanahuja. Other banks also participated in that transaction (and still hold stakes today), namely: BBVA, which holds a 18.31% stake; Sabadell, which holds a 13.04% stake; and Popular, which owns 12.64%.

In 2013, these entities approved the de-listing of the real estate company from the stock exchange and, since then, they have focused on restructuring the debt.

New directors

At the shareholders’ meeting, Metrovacesa will also propose the appointment of four new directors: Rodrigo Echenique, Vice-President and Executive Director of Santander; Abel Matutes, Chairman of the Matutues business group; Juan Ignacio Ruiz de Alda, Director at Santander; and Manuel Castro; Director of Global Risk Management at BBVA.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake