Tag: Irea

Land Prices In Madrid & Barcelona Have Doubled Since 2012

24 February 2016 – Real Estate Press

The price of urban land in Madrid and Barcelona has more than doubled since the lows of 2012 and is now threatening the recovery of the real estate sector, as property developers are being forced to put homes on the market at prices that consumers are unable to afford.

Domestic property developers are being the most active in denouncing the increase in land prices, driven by the scarcity of urban plots and the difficulties involved in obtaining licences for new developments.

In the case of Valdebebas, a development located 21 kilometres from the centre of Madrid, the ‘repercussion value’ per m2 has increased from €700/m2 at the beginning of 2014 to €1,200/m2 last year, with values now reaching €1,600/m2. “Land prices are increasing at an alarming rate in Madrid and Barcelona”.

According to the real estate consultancy firm Irea, the volume of land purchases tripled last year to reach €929 million (representing 7% of total real estate investment). According to the report, the majority of transactions involved plots of land assigned for development, which accounted for €706 million of the investment, whereby multiplying the figure recorded in 2014 by 7x.

Domestic investors accounted for just 1% of this investment, with real estate companies, many linked to international funds, accounting for 43%. Nevertheless, the bulk of the funds were direct investments by funds (38%) and Socimis (18%), which together invested €523 million.

The largest land purchase operations last year were seen in Barcelona and Madrid. In Cataluña, Neinor Homes, the property developer controlled by the fund Lone Star, purchased land worth €200 million, where it plans to construct 1,500 homes. Moreover, Vía Celere invested €78 million in the development of homes in Barcelona (Magòria and El Fòrum) as part of a joint venture with the fund Chenavari. Meanwhile, Corp acquired land in Sant Boi, Arenys de Mar and Molins de Rei to construct 850 homes. In Madrid, the US fund Castlelake bought a batch of four plots of land for residential use in Boadilla del Monte from Sareb, and Grupo Lar and Pimco joined forces to buy a plot of land in the centre of Madrid for €120 million.

The recovery of land prices is being driven by a rise in prices and sales in the wider real estate market, and has led the primary owners of land, namely Sareb and the financial institutions, to reduce their land sales and opt for direct development instead. Sareb will begin work on 13 housing developments imminently, ten of which will be constructed by Solvia, the real estate arm of Banco Sabadell, one of the most active banks in the development segment, with more than one thousand homes under construction across Spain.

Original story: Real Estate Press

Translation: Carmel Drake

The Spanish Real Estate Sector Is Getting Ready For A “Digestion” Of The Investment Made In 2016

12 February 2016 – Expansion

After a record year in asset transactions, the Spanish real estate sector is getting ready for a “digestion” of the investment made in 2016, according to the the forecasts of the consulting company Irea, which considers that, despite the total volume of investments will decrease at around 15% -as it already happened in 2015-, the sector will maintain the pulse thanks to the strong activity in residential land and hotels.

Residential land and hotels shall lead the real estate sector

“It is not that the party is over but that, rather than a race for the massive investment, it will be a year of “digesting what was purchased “explains Irea CEO, Mikel Echavarren to EXPANSION.

Record year

By business segments, Echavarren emphasizes activity in hotels and residential land, which will remain as supports of the sector. The hotel investment volume reached 2,614 million euros in 2015, 142% more than in 2014. “It is not expected to be so high, but it will still be awesome, after consecutive years of tourists entry record, due to the euro devaluation, the instability of North African rivals and the price of oil hitting rock-bottom,” he explains .


Regarding residential land, Echavarren remarks that there are areas in Spain where demand is “undeniable” and prices are even rising. “Investment in construction, finalist and well located land at last has a controllable risk,” he added.

However, all in all, this year Irea foresees a reduction in assests investment (residential property, offices, shopping centers and hotels, among others). In 2015, the total investment volume of assets was 12.848 million euros, representing an increase of a 33%. “This year could be between 8,000 million and 9,000 million euros,” he anticipates. 
As for the sale of debt portfolios, which started strongly in 2013, the number of transactions is expected to be reduced, as well as its volume, following last year’s trend. Thus, if the volume of debt transactions decreased by 36% up to 8.117 million euros in 2015, for next year forecasts are that the figure does not to exceed 6,000 million. 
Echavarren explains that the reason for this reduction is that the assets backing the debt held by banks and SAREB are more fragmented so, to place homogeneous packages, these should be smaller.

Political concern

Regarding the political situation, Echavarren recognizes that some Spanish funds are already more reluctant to invest in some segments, such as city councils of “uncertain political management or high urban risk”. “They are not considering leaving Spain, but certainly being more selective,” he adds. In contrast, international investors are more concerned about the situation of the global economy, but “they are certainly not happy “with the current situation. 
With regard to the involvement of certain political decisions, such as the hotel moratorium, both in investment and real estate, Irea CEO recalls that in Barcelona, hotels prices have increased significantly. “Buying a five star hotel knowing you’re not going to have new competition for several years increases the interest of investors.” He says. 
As for similar measures in Madrid, “it makes no sense” to Echavarren, since the problem in the capital is not the  excess of offer but the demand attraction. “In Madrid we do have cruises coming in by the Manzanares” he jokes.

Original story: Expansion (by Rebeca Arroyo)

Translation: Aura Ree

Irea: Hotel Investment Amounted To €2,470M In 2015

15 January 2016 – Expansión

Hotels are establishing themselves as one of the most sought-after assets in the real estate sector. The historically high RE investment level in 2015 boosted the hotel segment in particular, which accounted for 20% of total commercial real estate investment volumes during the year – excluding residential – compared with 11% in 2014, according to a report about the hotel investment market in 2015, prepared by the consultancy Irea.

Last year, 132 hotels were sold containing 29,081 rooms for €2,470 million, significantly more than the 50 operations that were closed in 2014. Moreover, properties worth €144 million were sold for conversion into hotels. In total, the hotel investment market amounted to €2,614 million in 2015, compared with €1,091 million a year earlier. Spain was the third most active country in Europe, behind the UK and Germany, and accounted for 14% of all European investment, up from 7% a year before.

54% of hotel investment in 2015 was focused on the holiday segment, which reflects “a return to normality for the Spanish market, where more sun and beach properties have traditionally been sold than city hotels”, according to Miguel Vázquez, Managing Partner of Hotels at Irea. This trend will be maintained in 2016.

The Canary Islands was the most sought-after region in 2015, accounting for 28% of total investment. It exceeded Madrid and Barcelona, where political uncertainty put investors on alert. By category of hotel, 62% of investment in the sector was focused on four-star hotels, although unique individual assets, such as the Hotel Ritz in Madrid (pictured above), were also sold.

40 of the 132 hotels sold were transferred through portfolio operations – involving two or more assets – and the Socimis were the main purchasers, together with domestic and international hotel chains, willing to invest in strategic assets.

Another significant milestone in 2015 was the purchase of land in Málaga for the development of new hotels, which was seen for the first time since before the crisis. Nevertheless, Vázquez thinks that, “land purchases will be few and far between in 2016: right now it is more profitable to buy a hotel and renovate it than to construct one from scratch and financial institutions are not ready to provide finance yet”.

Debt portfolios

Nevertheless, the experts do expect that there will be more operations involving the sale of debt portfolios secured by hotels in 2016. They amounted to €466 million in 2015. (…).

Irea expects that 2016 will be a good year, but the firm thinks that it will be difficult for the strong figures recorded last year to be repeated. Madrid will continue to be the preferred investment target and capital inflows there may have exceeded €582 million in 2015. Barcelona, where investors perceive more risk, will remain frozen to investment in new projects. For existing hotels, record figures in terms of price per room may be reached.

Original story: Expansión (by Y. Blanco)

Translation: Carmel Drake

Hispania Buys 4 Hotels In Gran Canaria For €75M

21 October 2015 – Expansión

Hotel assets are whetting the appetite of investors once again and proof of this is the firm commitment made by the real estate company Hispania for that kind of establishment. The company, which channels most of its investments through its subsidiary Socimi Hispania Real, has spent €780 million buying hotel assets, out of a total amount invested (including debt) of €1,300 million since the company debuted on the stock exchange in March 2014.

“Hotels have been strategic assets for us ever since we launched Hispania, because we already had experience in Azora – the managers of Hispania – which manages 12 hotels through a fund”, explains Javier Arús, Head of Hotels at Hispania.

The latest milestone in this strategy has been the purchase of five hotels through two operations. Firstly, it has agreed the acquisition of Hotel Holiday Inn in Madrid for €25 million. (…).

Secondly, the real estate company has also agreed to purchase four hotels located in Maspalomas, in the south of Gran Canaria, which together have 1,183 rooms. “We have been working on this deal since April 2014. It has been a very complex process, given that the company filed for bankruptcy in June. Now we have drafted a proposed agreement to purchase the debt from the creditors and recapitalise the company, and we are waiting for the legal confirmation”. Hispania will invest €75 million to acquire these establishments (three 4-star hotels and one 3-star) and will spend a further €9 million on their repositioning.

Bay

Following these transactions, the company in which George Soros and John Paulson hold stakes, will have more than 9,000 rooms, spread across both the urban and holiday segment. Many of these hotel apartments are owned by Bay, the Socimi that Hispania and the hotel chain Barceló have just launched, in which Hispania holds a 80.5% stake.

Nevertheless, some of the assets that Hispania owns outright could also be moved into the joint venture. “The Dunas portfolio – recently acquired in Gran Canaria – or Bahía Real – in Fuerteventura – may end up in Bay, since it would be logical for the whole holiday portfolio to end up in this company, some operations that must be approved by the Socimi’s Steering Committee”.

Currently, Bay owns 11 hotels, managed by Barceló, with 3,946 rooms, to which Hispania will soon add another five establishments also managed by its partner.

Hispania plans to continue on its shopping spree, despite the fact that there are many investors looking for opportunities in the Spanish hotel sector. “The market in Spain is very large and there has been very little institutional money until now, since investors used to be the hotel chains themselves. We will continue working to sign a couple more operations before the end of the year”, said Arús.

Between January and September, total investment in the hotel sector amounted to €1,273 million, up by 54%, according to the consultancy firm Irea, which forecasts that 2015 will surpass the record of €1,780 million registered in 2006. JLL estimates that that figure will reach €2,000 million. The experts in the sector agree that (this level of) investment will continue into 2016.

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

Translation: Carmel Drake

Irea: Hotel Investment Rose By 54% To €1,237M In YTDSept15

13 October 2015 – Expansión

Hotel investment is soaring in 2015. During the 9 months to September 2015, 77 transactions were closed involving 15,800 rooms, with deals ranging from the sale of hotels (already in operation) to the conversion of buildings into hotels. Investment volume amounted to €1,237 million, an increase of 54% compared with 2014, according to data published by the consultancy Irea.

Nevertheless, despite the record figures, the pace of investment slowed down during the third quarter, as a result of the election effect. In total, 14 transactions were closed between July and September, amounting to €196 million, compared with €699 million during Q2 and €342 million during Q1. Activity has been driven up by the sale of portfolios of assets, which accounted for 34% of investment volumes and 54% of rooms. The most noteworthy transaction in this category was the creation of Bay, the first pure hotel Socimi, by Barceló and Hispania; there was also the partnership signed between Meliá and Starwood Capital, with the aim of repositioning the Sol brand.

The sun and beach segment accounted for 68% of investments, with the Canary Islands leading the ranking as the star destination – €369 million was invested there. The Costa del Sol and Madrid also recorded significant increases, in contrast to Barcelona, where investment decreased by 15%, due to the impact of the hotel moratorium imposed by the city’s mayoress, Ada Colau.

By category, most of the transactions so far this year have involved 3-star and 4-star hotels, which has led to a decrease in the average price per room of €22,500, despite the rise in the number of rooms sold, which has increased from 6,192 in 2014 to 15,800 this year.

Socimis

In terms of the profile of investors, Socimis continue to lead the ranking. During the 9 months to September 2015, they invested €302 million, i.e. five times more than in 2014. Also noteworthy is the growing activity of international investors such as the Olayan Group (Saudi Arabia) and the Kangde Group (China), which have acquired the Hotel Ritz in Madrid and the Hotel Santiago de Tenerife, respectively.

Irea expects that 2015 will exceed the previous record registered in 2006 (€1,780 million) and that the level of investment will be maintained in 2016. Foreign Socimis and investors will continue to be the most active investors and hotel property groups are expected to start invested once again.

Original story: Expansión (by Y. Blanco)

Translation: Carmel Drake

Election Fallout: Uncertainty May Deter Investors & Delay Large Deals

28 May 2015 – Cinco Días

Experts predict that there will be an impact on the rental market and on the sale of debt portfolios. They warn that Madrid and Barcelona will be affected by anti-eviction initiatives.

The rise of political parties advocating the suspension of mortgage foreclosures, the relocation of evicted families (to vacant properties owned by banks and Sareb), and the end of sales of public properties to private owners, at the elections last Sunday, has put the international investment funds, which have been arriving in Spain in recent years with a renewed hunger for property, on alert.

Experts in the market say that although we are still waiting to see the specific impact of these initiatives by the governments, which depend on pacts that are just as uncertain, the situation will cause funds to reduce their already low purchase offers and to postpone large transactions until they know the results of the general elections, scheduled for the end of the year.

“Madrid and Barcelona are the showcase for the country”, explains Mikel Echavarren, CEO of the real estate consultancy firm Irea, predicting that the expected appointment of Ada Colau (Barcelona en Comú) and Manuela Carmena (Ahora Madrid) as the mayoresses of the two large capital cities, “will cause investors’ interest to disappear for four years” in all areas “that depend on decisions by local councils”.

In his opinion, there are three areas of particular concern. On the one hand, the suspension of evictions – or their delay, because, as Echavarren points out, municipalities do not have the legal power to eliminate them altogether – because that would result in a penalty for the budding rental market and above all “longer timeframes, more uncertainty and lower prices” in the offers made by funds for packs of credit with real estate collateral.

Secondly, proposals such as the one made by Colau to suspend the opening of new hotels in Barcelona, “which is one of the most important hotel markets in the world”. And thirdly, the review of the general urban plans in Madrid and Barcelona.

“Either you have a local council that is “pro-business” or investors pack their bags and take their money elsewhere”, warns the director of an investment fund who asked to remain anonymous, stating that “Anglo-Saxon capital does not understand it when urban development is not encouraged”.

“Any change represents uncertainty and money flees from uncertainty”, says Julio Gil, Chairman of the Real Estate Research Foundation (Fundación de Estudios Inmobiliarios or FEI), bearing in mind that as a minimum “funds will consider their investments in Spain to be more risky and therefore will demand high returns”.

Nevertheless, Gil states that for the time being this support for social rather than economic policies is only being seen at the local government level and, to a lesser extent, at the regional government level, but he thinks that the fear of what might happen in the general elections this year may well “delay several (large) transactions” as investors wait to see the outcome.

“The greatest risk is that we drop off of the radar of investors”, warned sources yesterday at ETC Real Estate, a new platform for the management of debt and mortgaged assets, promoted by TDX Indigo, Equifax and Cobralia.

Its partners expect that funds will lower their asset purchase offers, but argue that the change in the political paradigm will make it necessary to promote alternative means of eviction, such as discounts and “daciones en pago” (delivery of the deeds in lieu of payment), amongst others. A management model they promote, they assure, to the funds and banks to whom they render services.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake

BBVA Seeks Buyers For 14 Hotels

13 April 2015 – El Confidencial

The hotels are located all over Spain – in Lloret de Mar, Jaén, Benidorm – but according to sources, some of them have been closed.

This is not a transaction involving debt with hotel collateral, but rather the sale of the assets themselves, of their flesh and bones, of their cement and brick. BBVA has hung a “For Sale” sign over fourteen hotels that have been sitting on its balance sheet since various non-performing loans were foreclosed, according to a number of sources. Aguirre Newman has received the sales mandate, but neither the consulting firm or the bank have wanted to make any declarations in this regard. The transaction has been dubbed Project Othello.

The hotels in question are located all over the Spanish peninsular – in Lloret de Mar, Jaén, Benidorm – but according to various sources, some of them are currently closed, with the consequent saving in terms of management and operating costs – the payment of salaries, for example.

BBVA’s decision to put these assets up for sale comes at a time when investors’ appetite for Spanish assets is growing rapidly, thanks to confidence in the growth of the Spanish economy, the record number of foreign visitors to our country, as well as legal certainty.

There is activity in the real estate market, and specifically, within the hotel segment. In 2014, transactions with a value of €1,080 million were closed, representing an increase of 37% over 2013, and twice the figure recorded in 2012, according to data from the consulting firm Irea. It represented the third highest investment volume in the last twenty years, only behind €1,095 million in 2007 and €1,780 million in 2006, an exceptional period for the sector.

Nevertheless, hotel experts consider that it is unlikely that BBVA will find a single buyer for all of these hotels; instead they think that the most likely option is that the entity will end up selling the assets individually to private investors.

BBVA’s is not the only hotel transaction currently on the market. In addition to the sale of these assets, other entities are also negotiating the sale of various debt portfolios that are secured by hotels as collateral. Such is the case of Bankia’s Project Amazona, worth €400 million, secured by around fifty hotels and Project Gaudí, a portfolio of real estate loans worth €750 million, held by the German “bad bank”, which at the time was used to buy the Hotel Arts in Barcelona. Likewise, the experts do not rule out the creation of hotel Socimis over the next few months, following in the footsteps of Hispania and Barceló.

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake

Irea: Real Estate Transactions Tripled In 2014

5 February 2015 – Cinco Días

A study conducted by Irea validates renewed interest in the sector

More than €23,000 million was invested in the real estate sector in Spain in 2014, of which 84% was dedicated to direct investment in assets and the acquisition of real estate-backed debt portfolios. The remaining 16% related to transactions involving shares in real estate companies and servicers.

At a press conference on Wednesday, the CEO of Irea, Mikel Echavarren, explained that the increase in activity in 2014 “has helped to unclog the pipes of the financial sector and bring the sector out of its coma”. It is interesting to note that most of the investors that have shown interest in the Spanish real estate sector, are foreign: on the one hand, the main players included large funds, such as Blackstone and Lone Star, and on the other hand, listed real estate investment companies (Socimis) also played an active role, in particular Merlin Properties, which have a significant percentage of foreign capital.

In the specific case of investment in assets, Irea said that shopping centres accounted for 26% of all of the capital invested in assets in 2014 (€2,501 million), followed by offices (24%) and hotels (11%), with these last two segments in full ascent. Residential assets accounted for barely 8% of total investment, including both land and finished homes. Furthermore, 85% of those transactions related to finished assets, with land representing only 4%.

With all of this, Echavarren highlighted the “merit” of this low percentage of land sold, since it is an asset that will have to be sold at a later date. In the current context, 4% seems like an achievement, since although many developers “want to purchase land, they do not have sufficient capital to do so and it is very difficult for them to obtain financing”.

Irea’s CEO repeated that international investors accounted for 53% of all investment activity in assets, followed by Socimis, which were responsible for 24%. Developers accounted for only 3%. On the vendor side, investors sold 24% of all assets, whilst financial institutions disposed of a further 22%.

The appeal of debt portfolios

Although residential assets were not sufficiently attractive for investors in 2014, that was not the case for debt portfolios linked to residential assets. Overall, the volume of debt portfolio transactions amounted to €9,683 million, of which 48% related to the residential segment. Nevertheless, the majority of this amount related to the portfolio sold by CatalunyaCaixa to Blackstone. In this segment, international investors acquired 100% of the debt portfolios sold, and 91% were purchased by investment funds. On the opposite side, 90.6% of the vendors in this case were financial institutions and 9.3% were other entities. In addition, shares in Metrovacesa and Colonial (both listed) amounting to €820 million (22%) changed hands during 2014, whilst the remaining €2,866 million of shares in real estate companies that changed hands were not listed.

Original story: Cinco Días

Translation: Carmel Drake