Tag: International funds

CaixaBank Puts 144 Hotels Up For Sale Worth c. €1,000M

20 May 2016 – Expansión

CaixaBank has launched a mega hotel operation. The Catalan entity wants to sell off the majority of the hotel assets that have come into its possession during the course of the crisis, as well as some that it will soon foreclose. To this end, it has brought Project Sun onto the market, advised by N+1, whereby it is looking to sell its exposure in 144 hotels, valued at almost €1,000 million, according to financial sources.

The operation is divided into two portfolios: one with unpaid loans secured by 112 hotels; and the other with 32 hotel assets already foreclosed by the entity. In total, the properties that CaixaBank wants to sell contain almost 11,000 rooms.

This is the largest financial operation involving the divestment of hotels launched to date in the Spanish market. Bankia undertook a similar operation in 2014, with Project Amazonas, containing hotels worth €800 million, which were awarded to the specialist fund Starwood; and another one in 2015 for €400 million – known as Project Castle, which was sold to Davidson Kempner Capital and Bank of America.

Market trend

Santander and Sareb also wanted to join the party. Last year, the entity led by Ana Botín launched Project Formentera, containing 17 hotels worth €170 million. Meanwhile, Sareb, put a portfolio up for sale containing assets inherited from Polaris World, which were worth €500 million before they were transferred to the bad bank. Both operations have been postponed until this year.

The operation launched recently by CaixaBank has been distributed amongst investors. The entity hopes to close the deal during the month of July. Of the 144 hotels, two thirds are located in Andalucía (37), Cataluña (22), the Canary Islands (19) and the Balearic Islands (17), with an average value of almost €7 million. Both Andalucía and the Canary Islands are regions were CaixaBank increased its presence thanks to the acquisition of Banca Cívica. The other assets are distributed all over Spain.

85% of the hotels are four- and five-star properties, and more than half are holiday properties, situated on the coast. The portfolio also includes rural and urban accommodation. This type of portfolio mainly attracts large international opportunistic funds, such as Cerberus, Apollo, Oaktree, Starwood – specialists in hotels – and Blackstone.

Once they have been awarded such portfolios, investors try to make profits from the operation by selling the hotels to large specialist groups or to local property developers; and by restructuring the debt. Project Sun contains 108 loans, of which 35 are up to date and 75 are overdue. (…).

Clean-up

For CaixaBank, this type of operation allows it to reduce its default rate, obtain profits – depending on the price paid – and release provisions. The Catalan entity held €9,500 million of problem assets (net of provisions) linked to the real estate sector at the end of the first quarter 2016. This figure had decreased by 11% in the last year thanks to the sale of portfolios and foreclosed assets through Servihabitat.

In addition to this portfolio, the Catalan entity has another group of assets up for sale, Project Carlit, advised by PwC, through which it hopes to sell of €790 million in doubtful loans to property developers.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Investment Funds Are Still Cautious About Buying Land

10 May 2016 – Idealista

International funds are still finding good investment opportunities in Spain, above all assets owned by Sareb and the banks. Their main objectives include achieving double-digit returns in the office, retail and residential markets. Meanwhile, they are still hesitant about throwing themselves whole-heartedly into the purchase of residential land and construction of homes, although they regard those an investments that have a future.

The economic crisis and subsequent decline of the real estate sector attracted opportunistic funds in search of opportunities in Spain. Now it is completely normal to find these, and other types of funds, in the real estate sector. “The funds were looking for the best investment opportunities with the highest, fastest returns”, said Pedro Abellá, Director of the Real Estate team at HIG Capital, during a forum about investment in the real estate market organised as part of SIMA, which ran from 5-8 May.

“The Spanish real state market is more mature and the investors that are arriving now are coming to add value to the assets through their management. They are no longer in such a hurry to divest, but they are still convinced by the high returns”, said Abellá.

The general decrease in prices in the sector during the crisis created investment opportunities for these funds, which included not only opportunistic funds, but also more established players. Over the years, and with the sector well on its way towards normalisation, experts are continuing to see investment opportunities, above when it comes to assets owned by Sareb and the banks.

The commitment to invest in real estate assets is currently concentrated in the office, retail and even residential home segments; land for development is also on the list, but the experts urge caution. “Property development requires another type of investment and generates other kinds of returns for investors. Not all of the funds are willing to bear the risk of property development”, said Gregg Gilbert, Director for Spain at Benson Elliot Capital Management.

“We are accustomed to other types of investments, where profits are obtained quickly. We should be aware of the fact that we will find returns from property developments. But it is still too early for those returns to be very great”, he said.

The funds are committed to providing experience and capital to renew the assets that they are acquiring, above all offices and hotels, where some investment opportunities still exist. “The stock of offices and hotels in Spain is vast, but it has become somewhat out-dated. It is time to review the supply, in the absence of assets at reasonable prices offering the returns being sought”, said Gilbert.

Those funds that do decide to invest in land should not hesitate to join forces with property developers and construction companies to build homes, but according to experts in the real estate sectors, they are focusing on buildable land in the best locations, which ends up being a small investment for the market as a whole. “There is still a lot of land that needs to be developed, but it is not buildable and it will take some time for it to become urban land. But that all depends on the laws applied by each administration”, said Mario Verdyguer, Director of Investments at Solvia.

Original story: Idealista (by David Marrero)

Translation: Carmel Drake

Local Property Developers Team Up With International Funds

4 May 2016 – Cinco Días

“The banks are losing market share in the real estate sector, as property developers opt to seek funding from alternative sources, namely funds”. Those were the words of José Luis Suárez, Professor of Financial Management at IESE, speaking yesterday at the Real Estate Conference 2016, ahead of SIMA (Madrid’s International Real Estate Fair), which begins on Thursday. “Construction companies are looking to form partnerships with these funds”, said Suárez.

In recent months, the property developers that have survived the tough real estate crisis, which began in 2008, have been looking for new ways of obtaining resources with which to finance their projects. During the real estate boom period, the banks typically provided financing for every phase of the development, including to purchase land, but that led to a bubble in terms of the prices of those assets. Since then, the entities have stopped granting loans for land, which means that companies are having to fund that first investment using their own funds or other alternatives.

“The funds are financing developments at double-digit interest rates”, said Mikel Echavarren, CEO of the consultancy firm Irea. “The banks are missing out on this business now”, he added. “Those investing in property developments are now opportunistic funds”, he revealed.

These international firms are forming partnerships with developers in lots of different ways. Castlelake, for example, has completed several operations across Spain, by buying land and then teaming up with local real estate companies. Another case is that of Pimco, which is constructing luxury homes on Calle Lagasca 99 together with the Socimi Lar España.

Another veteran property developer, Renta Corporación, which emerged from bankruptcy in 2014, has found an investment partner in the form of the fund Kennedy Wilson for its new projects. In the case of Neinor, the former real estate arm of Kutxabank, it has an €1,000 million investment plan for its new developments thanks to its new owner, the US firm Lone Star.

Meanwhile, Asentia, the former subsidiary of Colonial, has also seen how this type of international investor is controlling its shares. In the case of the listed company Quabit (previously Astroc), KKR has also acquired some of its share capital. Another example is that of InmoGlacier, which has the support of Aquila Capital to construct homes in Madrid.

“These funds are operating by themselves in the market for land purchases amounting to between €15 million and €20 million, they do not have any competition for financing projects. For smaller developments, some companies are using their own funds to buy up land, although then they finance it partially through the banks”, said Echavarren.

This new formula for undertaking developments is helped by the liquidity in the market and the lack of other investments that provide good returns, given that bonds and equities are currently generating very low yields. “These investors are looking for alternative assets, such as the real estate sector”, explained the Professor from IESE, who considers that these alliances between funds and developers are circumstantial. “We must find more orthodox financing structures”, he added.

Original story: Cinco Días (by A. Simón)

Translation: Carmel Drake

Testa & International Funds Have Driven RE Inv’t In 2015

3 December 2015 – Expansión

According to the consultancy firm CBRE, investment in offices, commercial assets, hotels and logistics warehouses will amount to €13,000 million by the end of this year.

Real estate investment will close 2015 at record breaking levels. The arrival of international funds and the launch of the Socimis have driven the purchase of assets to levels exceeding even those seen at the height of the boom in 2007, and are expected to close the year with a total volume of €13,000 million. “2015 has not only seen a strengthening of the recovery that started in 2014, it has also seen growth of 25%, resulting in record levels (of investment)”, explains Mikel Marco-Gardoqui, Head of Investment at the real estate consultancy firm CBRE.

By type of asset, offices continue to be the preferred asset, but all of the sectors have experienced growth in 2015, according to the experts at CBRE. “All of the sectors, including offices and shopping centres, as well as hotels, have grown significantly this year and are now at record levels”, says Lola Martínez, Director of Market Analysis at CBRE.

By type of investor, 70% of the investment volumes have come from overseas investors, including those who have entered Spain by acquiring shares in Socimis.

Some the operations that have most boosted volumes include: the purchase of Testa by the Socimi Merlin Properties for €1,800 million, the acquisition of Torre Espacio by the Philippine businessman Andrew Tan for €558 million and the purchase of Gran Vía 32 by Amancio Ortega for €400 million.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Madrid Leads Global Growth In RE Investment

15 October 2015 – Expansión

The volume of real estate operations in the Spanish capital shot up by 164% during the 12 months to May 2015, to reach €6,347 million. As such, Madrid recorded the highest rate of growth in the world.

Between June 2014 and May 2015, real estate investment in Madrid reached the record figure of €6,347 million, up by 164% compared with the same period a year before. That places the Spanish capital at the top of the global ranking of real estate investment growth, according to a study conducted by the consulting firm Cushman & Wakefield.

“This report clearly shows that the Spanish property market is continuing (to grow) at a very good pace and that both Madrid and Barcelona continue to be in the spotlight of global real estate investors”, says Oriol Barrachina, CEO of Cushman & Wakefield España.

In total, more than €13,000 million was invested in the Spanish market in one year, thanks to purchases by large international funds, as well as by listed real estate investment companies (Socimis). In Madrid, highlights included the purchase of the building at Gran Vía, 32 for €400 million by Pontegadea, the investment vehicle owned by Amancio Ortega, and the Plenilunio shopping centre, for which the French company Klépierre paid €375 million.

Total investment

Despite the significant increase, Madrid still falls well below the major cities in the world that account for the most real estate investment in absolute terms. That ranking is led by New York, with a total investment volume of more than $74,799 million (36% more than in 2014); London, with $55,207 million (up by 13%); and Tokyo, with $37,971 million (up by 0.7%).

In fact, in terms of total investment volumes, Madrid is ranked number 27 in the world, above European cities such as Milan, Dublin, Hamburg and Oslo. “Europe continues to be a very attractive market for cash flows, but North America is the region that has grown the most, demonstrated by the strong presence of US cities in the report”, says David Hutchings, Director of Investment Strategy for EMEA at Cushman & Wakefield. In fact, 14 of the top 25 cities in the ranking are American, compared with, for example, three that are German. In terms of the origin of investments, the USA also occupies the top places in the ranking.

Barcelona, whose investment volumes grew by 46% last year, still does not feature in the top fifty cities by investment volumes. However, the authors of the report are certain that the two Spanish cities will continue to capture the attention of investors over the coming year.

Yields

The furore over real estate assets in Spain has dampened the yields of these purchases somewhat, which now amount to 4.5% in the case of offices, 4% for commercial assets and 7% for logistics properties.

By types of asset, over the last twelve months, investors have chosen to buy commercial, residential and hotel assets in New York, offices in London and industrial assets in Los Angeles. In terms of property development, cities in Asia accounted for the majority of investment. Thus, between September 2014 and June 2015, $29,390 million was spent on these kinds of projects in Shanghai, followed by $23,392 million in Beijing, and in third place, $14,244 million in Chongqing. All three cities are located in China.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

GreenOak Recruits Zarrabeitia From CBRE

16 July 2015 – Expansión

International funds still regard Spain as one of their favourite destinations for investment. As such, one of the most active firms, the US fund GreenOak, has just strengthened its team in Spain to boost its commitment to the market.

The fund, which specialises in the real estate sector, has recruited Javier Zarrabeitia, former director of CBRE España. Zarrabeitia, the son of the CEO of Testa Inmuebles, is a specialist in capital markets. Before joining CBRE, he advised large real estate transactions, such as the sale of BBVA’s building on Castellana, 77 to GMP for €90 million. In fact, GreenOak was one of the finalists in that auction.

In addition to Zarrabeitia, GreenOak is planning to hire three or four other people over the coming months at its offices in Madrid. The firm currently has a team of ten professionals dedicated to the Spanish market, although most of them are based in London.

Francesco Ostuni leads the Spanish team – he is the European Director of Acquisitions at GreenOak, and was formerly a director at Morgan Stanley and before that at the Qatar sovereign fund. In turn, Ostuni reports into the founding director of the fund, John Carrafiell, who led Morgan Stanley’s real estate strategy for several years, and closed operations such as the purchase of Canary Wharf. (…)

GreenOak, which has assets under management amounting to $5,000 million (€4,533 million) around the world, has already made several real estate investments in Spain during the last year.

Background

The US fund took its first big step in Spain last year, when it purchased seven shopping centres from the Dutch group Vastned Retail for €160 million. Subsequently, it tried to enter the office market – it participated in the process to purchase not only Castellana 77, but also Castellana, 89 – Ahorro Corporación’s headquarters – which was ultimately purchased by Corporación Financiera Alba, owned by the March family.

In recent months, GreenOak has been adding to its portfolio of Spanish investments, with the purchase of five logistics assets in the Community of Madrid, encompassing 200,000 m2. The US fund paid between €60 million and €75 million to close that acquisition.

The firm plans to close new operations in the short term, mainly in the logistics segment – where it has agreed to buy three more assets – , as well as the market for shopping centres and offices, after its two previous failed attempts.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

International Funds And Socimis Hire First-Rate Executives

4 May 2015 – Expansión

Director appointments in Spain / Large international investors and Socimis have been recruiting senior Spanish executives to design their strategies in the country and identify real estate opportunities.

Large overseas investors are hiring first-rate advisors to lead the businesses that they have acquired in Spain. Over the last six months, funds such as Cerberus, Apollo and Lone Star have hired former directors of Ibex companies to support them (execute) their strategies in Spain.

Some of the Spanish Socimis have also hired first-rate executives, including Uro Property and the listed real estate company Hispania, owned by Azora.

Through these appointments, investors are taking the third step in a process to strengthen their strategies to conquer the Spanish real estate sector. To begin with, they put certain Spanish-speaking executives in charge of entering the market. Such was the case of Andrés Rubio (Apollo), Juan Pepa (Lone Star) and Michael Abel (TPG).

The next step was the acquisition of real estate platforms, such as Altamira, purchased by Apollo; Bankia Habitat – now Haya Real Estate – acquired by Cerberus; and Neinor, which was awarded by Kutxabank to Lone Star.

Following these purchases, the funds have sought advice from top executives. “Some of the funds’ foreign directors have made successful acquisitions, but they now need highly skilled, top-level, local professionals to implement their business plans”, says Patricio Palomar, Director of Alternative Investment at CBRE.

“The hardest thing in the real estate sector is finding and accessing opportunities, but these experienced professionals have the skills to achieve that”, adds Carlos Ruiz-Garma, Director of Business Development at Aguirre Newman.

New hires

The most active fund in terms of new recruits has been Cerberus, which has hired two senior bankers for its Spanish subsidiaries in the last few months. Franciso Luzón, former board member and Vice President at Santander, is now a board member at Haya Real Estate, the real estate company that inherited Bankia Habitat’s business; and Manuel González Cid, the former Finance Director at BBVA, has joined the board of directors at Gescobro, the firm that specialises in debt collection.

Another big name signing was that of Oscar Fanjul, as a board member of Altamira, the real estate company owned by Apollo. Fanjul is Vice President at Omega Capital and used to be the Chairman of Repsol.

The fund Lone Star has also drawn on the market for former directors of listed companies to strengthen its strategy. This investor, which purchased Kutxabank’s property developer for €930 million at the end of last year, has hired Juan Velayos to lead the project; he used to be a Partner at PwC and who was the CEO of Renta Corporación until 2011. Lone Star will reveal its strategy for Neinor over the next few weeks.

In the face of all of these new signings, one of the largest funds to show its commitment to Spain, TPG – which is the majority shareholder in Servihabitat – substituted the former banker Rodrigo Rato last April.

Socimis

The Socimis, (many of) which are in turn owned by international investors, are also committed to hiring experienced directors. In this sense, the real estate manager Azora, which controls Hispania, hired Juan María Nin as a board member at the end of last year; until June 2014, he was the CEO of CaixaBank.

The Socimi Uro Property has also followed in the same footsteps; Uro owns some of Santander’s (branch) network and it has appointed Carlos Martínez Campos as its Chairman; he was formerly the Chairman of Barclays España until its sale to CaixaBank. The banker also used to chair Prosegur.

In addition to the signings of former directors of Ibex companies, the opportunistic funds have also hired at least a dozen other executives in recent months. For example, Gonzalo Gómez Navarro, from the Empark Group, has joined Altamira; and the former directors of Sareb, Walter de Luna and Juan Barba, joined Acciona Inmobiliaria and Meridia Capital, respectively.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Investors On The Hunt For Prime RE Assets

20 April 2015 – Expansión

Opportunities / The Spanish real estate sector has aroused interest from all types of purchasers, from those that are more opportunistic in nature to those that are seeking lower risk. Offices, shops and shopping centres are the most sought-after assets, but hotels and logistics centres offer the best returns.

The volume of investment has increased from just over €3,000 million to more than €8,500 million in only 12 months. That has been the evolution recorded by the non-residential real estate segment, which reflects the highest level of interest from all kinds of investors in Spain. Thus, the Spanish market has become the second most attractive country for investment in Europe, according to the consultancy CBRE.

But, what are these investors looking for in Spain? Based on the nature of the deals closed last year, offices and commercial assets (both shopping centres and high street stores) are the most sought after. “The transactions that spark the most interest have a value of between €40 million and €50 million, rely on financing for 50-60% (of the price) and generate an initial return of between 5% and 7%. Investors are looking for buildings with: occupancy rates of more than 70%; solvent tenants; and (lease) contracts lasting for around 6 years”, explain sources at JLL, based on data collected in a survey prepared together with the Iese Business School from more than 100 investors.

Excess demand for buildings, and for offices and shopping centres in particular, has led to “very competitive processes for star assets, i.e. those that are best placed in terms of location or that have high rentals, as well as good buildings that require management to improve their profitability”, explain sources at Catella. “Socimis and US funds are very active, along with institutional funds. All of them are creating strong investor pressure”, they add.

The fierce competition has meant that offices and commercial assets no longer offer such high returns, and so many investors have started to invest in other kinds of assets, such as logistics and industrial centres and hotels. Thus, whilst deals involving offices in prime locations offer a return of 5.5%, well-located industrial assets generate a return of 8.25% and logistics centres in secondary areas produce returns of up to 9.5%, explain sources at Deloitte Real Estate.

In the hotel segment, the experts predict that the volume of investment in 2015 will exceed that recorded last year (€1,081 million) thanks to deals involving distressed assets and the activity of debt portfolios, given the shortage of attractive assets.

Renovation

Another possibility being considered by investors looking to enter the Spanish market and make a good return is the recovery of out-of-date properties or those without good lease contracts, through their renovation. “On the one hand, Socimis are looking to purchase offices, logistics assets and shopping centres that guarantee a return of between 6% and 7.5%. On the other hand, we have the real estate funds owned by private equity firms, which are looking for riskers assets that offer higher returns, such as properties that require renovation or land that needs developing. The expected returns in those cases can exceed 15%”, explain sources at Deloitte RE.

“Investors are becoming increasingly sophisticated and demanding. As has happened in other European countries, the most efficient buildings are going to be the key and, in the case of the financial district in Madrid, they have the lowest availability rates in Europe for that type of asset, which opens an important niche, both for investment as well as for the renovation of existing properties”, say source at Knight Frank.

Original story: Expansión (by R. Ruiz and Y. Blanco)

Translation: Carmel Drake

Who Are The New Property Owners?

20 April 2015 – Expansión

Plans / International funds and Socimis are the main players in the sector

Apollo, Blackstone, Cerberus, HIG, Hispania, Intu, Lone Star, Merlin and Oaktree have gone from being virtually unknown names to being the key players in the Spanish property market (in a matter of months).

Over the last year and a half, large international funds have been investing hundreds of millions of euros in the purchase of property in Spain, both directly as well as through listed real estate investment companies (Socimis).

Värde, Apollo and Lone Star all burst into the market by purchasing real estate platforms from financial institutions. The latter has said that it wants to become the largest land developer in Spain and to that end, it is considering purchasing not only portfolios of land but also small and medium-sized (land) developers. Lone Star has already purchased the real estate arm Neinor from Kutxabank for €930 million, as well as Eurohypo’s loans in Spain for a further €3,500 million.

HIG and Castlelake are looking to buy land in Spain too.

Another investor that is backing Spain with more strength than ever is Blackstone. The largest fund manager in the world has purchased 1,860 homes for rent, as well as a group of office buildings, located in Madrid and Barcelona. One of the players that is most interested in the office market is the Spanish fund Meridia Capital, led by the former Sareb (director) Juan Barba; it has purchased a portfolio of office buildings from General Electric. It is competing against IBA Capital – the French manager has created a Socimi, which has not yet been listed, with headquarters and commercial buildings.

Along with these offices, the other assets that are sparking the most interest amongst investors are shopping centres. Green Oak has already invested €160 million together with Baupost on the acquisition of 6 properties from Vastned. The British group Intu wants to become the leading player in this segment in Spain and to that end, it paid €451 million for Puerto Venecia. Oaktree spent €100 million on Gran Vía de Vigo.

Other important players in this new era for the real estate sector are Socimis. Axia RE, Hispania, Lar España and Merlin have invested almost €3,000 million in assets, which include hotels, offices, logistics centres and warehouses. This last type of asset is attracting considerable interest. The fund Colony has just formed a partnership with the Spanish company Neinver to purchase 16 logistics warehouses.

Finally, in the hotel segment, Cerberus and Orion have purchased Sotogrande, the real estate subsidiary of NH for €225 million.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Large Funds & Socimis Invest €2,500M In RE In Q1 2015

20 April 2015 – Expansión

Q1 2015 / Major international investors and Socimis purchased more non-residential property in Spain during the first quarter of 2015 than during the whole of 2012.

The investor frenzy that began in the Spanish real estate sector at the end of 2013 and intensified last year is on track to smash all historic records (this year), including the peak levels of the boom years. Between January and March, large international funds, companies from Spain and the rest of Europe and new listed real estate real estate investment companies (Socimis) made purchases worth €2,463 million, according to the consultancy firm C&W, i.e. three times the volume recorded during the same period last year.

This figure exceeds the total volume of investment made during 2012 in its entirety, when the global crisis really hit the Spanish real estate sector and only €2,087 million was invested in the market, according to Deloitte Real Estate. Having been boosted by domestic and international purchasers who spent more than €8,500 million in 2014, the start of this year reflects a “unique” time in the sector for various reasons, according to market experts.

On the one hand, the Spanish economy is recovering well, which is resulting in higher consumption and more recruitment, which is in turn influencing commercial and office buildings.

On the other hand, the decrease in prices, of up to 40% in the case of assets, has meant that many opportunities exist in terms of price in the Spanish market, in contrast to what is happening in other European countries. “The low profitability of fixed income assets has turned real estate into an important sector in terms of investment portfolios. Furthermore, prices are stabilising, access to credit is opening up and the economy is growing”, say sources at Aguirre Newman. The confluence of these elements has led all of the players in the real estate sector to show their support Spain: from the most opportunistic funds seeking properties with significant discounts to more institutional investors, such as sovereign and pension funds, and including Spanish and foreign real estate companies.

Battle for assets

All of this has led to a real war for the best assets (known in real estate jargon as trophy buildings), which means that this year looks set to be a record year in terms of purchases. “We expect to see great figures in 2015, approaching €7,000 million in terms of direct non-residential investment”, explain sources at JLL España.

“If the level of interest in Spanish real estate assets from major global investors continues for the rest of the year, then we could see historic record figures in 2015, even higher than the peak recorded in 2007, when transactions with a total value exceeding €12,000 million were closed”, add C&W.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake