Tag: JLL

Student Halls In Spain: A Wise Alternative Investment?

17 February 2015 – Idealista

When we talk about real estate investment in Spain, we tend to mean the purchase of offices, hotels and shopping centres. Nevertheless, there is another type of property that may also generate high returns: student halls of residences. However, unlike in other European countries, this accommodation does not totally convince investors looking for assets in Spain. The lack of companies that know how to optimise them, and the shortage of the ideal product are some of the reasons why no transactions are being closed in this segment, despite considerable interest.

Spain had around 1.41 million students enrolled in universities during the academic year 2013-2014, according to the Ministry for Education, Culture and Sport. That is, a little over 3% of the Spanish population were university students. This percentage places Spain ahead of other countries such as Germany and France. The majority of these students (77%) studied courses in their home province, but 20% moved to another province to study and around 3% were from overseas.

Delving more deeply into their lifestyle: approximately 64% of university students live at home with their parents or other family members. At the other extreme, those who live away from home only have two options: rent (either in a shared house or on their own) or live in halls of residence. Specifically, only 2.8% choose to stay there.

In the opinion of the experts consulted, these figures are justified by the “very low” availability of public university halls. “Although there are significant cultural differences, certain aspects indicate that the market for university halls of residence in Spain will have to converge with that of the rest of Europe”, says a report published by JLL.

The consultancy firm is convinced by its analysis that the implementation of the Bologna education reforms will promote cross-border studying between European universities, “which tend to have much high percentages of students living in halls”. In Spain, it is normal for students to opt for this type of accommodation during the first and second years only.

“The flow of students travelling to study in other countries will increase over the coming years and not only in relation to Erasmus placements”, says Patricio Palomar, Director of Office Advisory and Alternative Investment at CBRE. In his opinion, issues such as the language (Spanish), the lifestyle and the affordable prices in comparison with neighbouring countries, are just a few of the attractions that draw many foreign students to choose Spain as their destination.

The main drawbacks

Unnim, the entity created from the merger of Cajas de Manlleu, Sabadell and Terrassa, is active in this market. The bank, which was acquired by BBVA in 2011, inherited this line of business from Caixa Terrassa. The former caja constructed its first hall of residence on the Avenida Parallel, 101, in the Poble Sec neighbourhood of Barcelona back in 2007.

According to the latest data available for Unnim, this business line generated a return of 7%. Sources in the sector explain that the net return on these types of assets can reach 10%, well above the rates offered by offices, hotels and shopping centres. In countries such as the UK and USA, this business generates returns of between 11% and 15%.

Juan Manuel Ortega, Director of Investment Offices at JLL, recognises that British firms are over-valuing these types of assets in Spain. These investors are looking for halls of residences that are larger than 5,000 m2 and that have between 60 and 150 rooms. Palomar also acknowledges this trend “the same funds that operate in the UK for example are looking (for opportunities) in Spain. The problem is that the same product is not available in other countries”.

Palomar maintains that student halls in Spain are obsolete and that many of them are stuck in the 1960s. That does not happen in cities such as Amsterdam where student accommodation is modern, hotel-like and less than 10 years old.

Another one of the pitfalls that affects this business is the ownership of these spaces. Most belong to the public universities, many of which have serious financial problems and cannot afford to finance the investment needed to optimise the assets. At the same time, they cannot sell the land and allow private companies to enter the sector.

This has a very direct effect on competition; it is low, which does not lead to an improvement in the facilities either. Similarly, experts recognise that the administration of these complexes is not simple, they require professional management.

Nevertheless, Palomar states that new student halls of residence are appearing in the outskirts of cities and near private business schools. “I think Spain should focus on other kinds of tourism, beyond the holiday market; educational and health tourism (have significant potential)”.

A trickle of transactions

The lethargy in this market is such that transactions are very scarce. The last known deal involved the purchase of the Galdós halls of residence in Madrid in 2012. The British firm, Knightsbridge Student Housing paid €20 million for the property, it was the first acquisition made by the company outside of the UK. Knightsbridge Student Housing was created in 2010 with the backing of Oaktree Capital Management.

Another of the most talked about transactions involved Lazora (Concha Osácar) when it acquired the Resa Group in 2011. Resa was created in 1994 and currently manages more than 8,000 beds in 32 halls of residence. The construction company Acciona also has give halls of residence (in Albacete, Cádiz, Castellón, Lleida and Murcia), which it has tried to sell in the past.

Further proof that this branch of real estate activity in Spain is still light years away from what is happening in other countries, is that Socimis dedicated to student accommodation already exist overseas. In 2013, GCP Student Living constituted the first REIT (Real Estate Investment Trust) in the UK.

Original story: Idealista (by Estefania Fonseca)

Only 490 Homes Sold In Exchange For “Express Visas”

17 February 2015 – El Mundo

The Government has raised €369 million in 15 months from its offer to grant residency to those buying property for more than €500,000.

Spain does not attract as many foreigners as Portugal does through its program.

The controversial express visas that the Government introduced through the Entrepreneurs Act, in order to raise foreign capital, have only attracted 530 international investors in the 15 months since the legislation came into effect, according to data provided by the Secretary of State for Trade. The millionaires that have moved to Spain in exchange for a residency permit have invested only €446.8 million, of which only €369.7 million has been spent on house purchases.

These figures are much lower than those recorded in Portugal for its golden visa program. The neighbouring country has managed to secure more than €1,100 million for the 1,649 golden visas that it has granted (figures to November 2014).

Given the limited interest from the very investors that the Government sought to attract by granting them permanent residency in an EU country, and given the suspicion with which the European Parliament views these types of programs, the Government is preparing rules for the enforcement of this legislation which, amongst other things, will give more guarantees to investors.

The so-called golden visas were approved, not without controversy, in the summer of 2013 as part of the Entrepreneurs Act. The idea of the Executive was to attract foreign investment through these permits and whereby reduce the huge stock of housing in Spain. As a result, it was decided that residency permits would be granted to those investors buying properties worth more than €500,000 (excluding taxes) and those deciding to invest significant quantities in Spanish company shares, domestic bank deposits, public debt or any other general interest project.

A year and three months after the Act came into force, the program has only facilitated the sale of 490 properties (out of a total of 830,000 properties sold during this period), according to the National Institute of Statistics (el Instituto Nacional de Estadísticas or INE) and investors have been incentivised to close only 29 transactions to purchase shares and another 12 transactions of general interest, according to data from the Secretariat that reports to the Ministry of the Economy.

Portugal has had more success with these visas and the key reason for this lies in the fine print of the legislation, which is more favourable for investors. “In Spain, we grant residency in exchange for investment, rather than nationality for investment like in other countries. Moreover, in Portugal, it is possible to become a citizen once you are a permanent resident. By contrast, in Spain, permanent residency only lasts for two years, rather than five years, which means that documentation must be renewed and residency justified on a more frequent basis”, explains Pamela Mafuz, Associate in Employment at Baker & McKenzie.

However, Portugal’s first-mover advantage is also behind its success. “Portugal was able to get ahead and be one of the first to implement this policy and that always has a positive influence” says Borja Ortega, Director of Private Wealth at JLL.

Whilst in other countries, such as Malta, there has been a lot of overseas publicity about the existence of the programs to grant visas to rich people, the Spanish Government has barely promoted its initiative, partly for fear of controversy.

Most of the beneficiaries of the visas granted to date are Russian and Chinese citizens. But, Baker & McKenzie report that their office also receives lots of questions from investors interested in these visas from the Persian Gulf, Egypt and Jordan.

“Many Latin-American investors are also interested in purchasing property (in Spain), due to the special bond that they have with the country. But, for them the visa is usually a secondary consideration because they tend to have other means of obtaining residency”, says Margarita Fernández, also an Associate at Baker & McKenzie.

Just like with the large funds, the majority of the investors seeking golden visas want to buy homes in big cities. “Housing is in highest demand. Specifically, single family homes and in terms of location, the region of Madrid is clearly the preferred destination”, says Ortega.

Original story: El Mundo (by María Vega)

Translation: Carmel Drake

Mandarin Oriental Enters The Bidding War To Buy The Ritz

12 February 2015 – Cinco Días

A new chapter has begun in the bidding war to buy the Ritz in Madrid, one of the most emblematic hotels in the capital. The property has been on the market for almost two years, but may have a new owner in a matter of days. Mandarin Oriental, one of the largest Asian luxury hotel chains, has set its sights on the hotel, which is currently controlled by Orient-Express and Omega Capital, the investment company owned by Alicia Koplowitz.

The owners of the Ritz have been looking for a buyer for the property for almost two years, which, despite its prime location and the power of its brand, has lost much of its appeal in recent years, due to a lack of investment. This has meant that all of the operators that have shown an interest in acquiring the property have identified the need to undertake a major refurbishment, which has played against a quick sale.

Despite that, Orient-Express, now known as Belmond, and Omega have remained steadfast in their price expectations, which led Marriott to placing an offer for €130 million on the table; the transaction fell through at the last minute, when it seemed like every blessing had been given. The problem was that, by adding the purchase cost to the amount required to reform the property, the buyer considered that the final result was infeasible.

Fairmont took over the reins in the bidding process during the second half of last year, by offering €120 million for the property, whose refurbishment it valued at around €60 million. The luxury hotel chain analysed all kinds of options to try to close the transaction successfully, ranging from reselling the rights of the Ritz brand to Marriott – which would have allowed its rival to use the brand throughout the Iberian Peninsular – to addressing the possibility of operating the asset under its second brand, Raffles.

But, according to several market sources close to the negotiations, Fairmont has now also withdrawn from the bidding, leaving the way open for Mandarin. The Asian player may end up closing this complex transaction, mediated by JLL, through an agreement whereby it takes on a management role, but which, in any case, will allow the Asian chain to establish itself in Madrid, a market that it has been analysing with much interest for over a year.

After acquiring numbers 38 and 40 on the exclusive Paseo de Gracia in Barcelona, overlooking Casa Batlló, the Hong Kong firm opened its first property in Spain at the end of 2009. With this investment now well established, the Asian hotel chain has plans to grow in the country, both in Barcelona and, above all, in Madrid.

Luxury hotels arrive in Madrid

The emergence of Four Seasons in the capital, which has reached an agreement with OHL Desarrollos to open the luxury Canalejas complex, has been a catalyst for the Madrilenian hotel market. The large international chains have set their sights on the city and deals are expected to be signed for properties such as the Hotel Villa Magna, the Hotel Miguel Ángel and the old headquarters of Asturiana de Minas; without forgetting the Edificio España, which was acquired by the Chinese Group Dalian Wanda.

These deals will follow others agreed in the last few months, such as the opening of Barceló’s four star hotel in the Torre de Madrid, the conversion of the Hotel Asturias into a boutique hotel and the transformation of the historical Tio Pepe building into a 5 star hotel.

Omega Capital and Belmond acquired the Ritz twelve years ago for €125 million. The strong impact of the economic crisis on the hotel sector in the capital, with declining tourist numbers and low prices, in addition to the cost of the pending renovation of the emblematic hotel, has taken its toll on the brand, for which an impairment loss of €12 million was recorded in 2013, the last full period for which official results are available.

Original story: Cinco Días (by R. Ugalde)

Translation: Carmel Drake

Recovery Has Investors Stocking Up On Spanish Malls

11 February 2015 – WSJ

The Spanish shopping experience is getting a multibillion-dollar makeover as the nation’s economy improves and foreign investment flows in.

After a year of tepid recovery from recession, consumer spending is picking up. Retail sales rose 1.9% in November from the same month in 2013, the fourth consecutive monthly increase, after six years of decline. Although nearly a quarter of the workforce remains unemployed, the economy is expected to expand by 1.7% this year, compared with 1.1% in the euro area as a whole, according to the Organization for Economic Cooperation and Development.

That, in turn, is helping to fuel investment in the retail property sector. In all, investment in retail real estate totalled €3.34 billion ($3.78 billion) in 2014, nearly triple the amount of the previous year and topping the record of €3.1 billion in 2006, according to property consultant JLL, formerly known as Jones Lang LaSalle. At least 67% of investments came from outside Spain. There was more investment in retail than in any other class of commercial real estate over the past year, according to JLL.

International investors are expected to pump more money into retail properties this year, including new construction, according to Adolfo Ramirez Escudero, president of property consultant CBRE Group Inc. in Spain.

Much of the money will go toward large-scale projects that mix shopping and entertainment, known as retail resorts, as well as outdoor outlet malls that resemble small cities where shoppers can find discounted designer brands.

Developers see opportunities for strong returns because prices of land and buildings are still depressed six years after the financial crisis. With the prices of many commodities at relatively lower levels and Spain’s unemployment so high, builders can also construct projects at a reduced cost. Meanwhile, the number of tourists to Spain is at a record, bringing with them money to spend.

The entrance of big global investors is a sign that the Spanish market is stabilizing, said Pedro de Churruca, general director of JLL in Spain.

“People are clearly coming back to shopping centers as a consequence of higher disposable income,” said Ismael Clemente of Merlin Properties Socimi SA, Spain’s largest real-estate investment trust, which in July purchased Marineda City shopping center in La Coruña from a local developer for €260 million. The three-year-old retail complex is the second-largest in the country.

The shopping center opened “in probably the worst possible moment in Spain,” said Mr. Clemente, referring to Spain’s economic doldrums. “We saw that there was a clear upward movement expected in rent, so we thought it was an interesting bet.”

The U.K.’s Intu Properties PLC purchased Spain’s largest shopping center, Puerto Venecia in Zaragoza, for €451 million in December. The British real-estate investment trust also announced a partnership with Spanish developer Eurofund to build four more retail resorts in Spanish cities as part of a plan to invest £1.2 billion ($1.8 billion) over 10 years.

Construction on the first of these projects, Intu Costa del Sol in the Malaga suburb of Torremolinos, —is scheduled to begin in the second half of 2015 and be completed by 2018. The 1.9-million-square-foot development will include amenities Intu is known for: a minitheme park, a surf lake, artificial ski slopes and a gourmet market, as well as shops and restaurants of high-end chains.

Intu owns 18 U.K. shopping centers, but Spain is the company’s first international market, which it entered in 2013 with the purchase of Parque Principado shopping center in Oviedo.

“We’re keen to keep growing, and if we focus on the prime, best shopping centers in the market, there are few opportunities in the U.K.,” said Martin Breeden, regional director of Intu. “Spain is a market that seemed open to international investment and where, frankly, there are not a lot of good shopping resorts in existence.”

Intu has purchase options on land for similar developments in Valencia, Vigo and Palma de Mallorca.

The Intu Costa del Sol site is about 3 miles from Malaga’s most-visited shopping center, Plaza Mayor, which opened in 2002. Sonae Sierra of Portugal, which owns and manages Plaza Mayor, has joined with U.K.-based McArthurGlen Group and U.S.-based Simon Property Group Inc. to expand the 572,400-square-foot shopping area to include a designer outlet mall. The €115 million development will add 324,000 square feet of leasable area and be the first large-scale outlet mall in Andalusia. Construction is scheduled to begin in the second half of this year, and the first phase is set to open in 2017.

Joan Jove, McArthurGlen’s regional development director, said Plaza Mayor is a “very strong, established retail scheme” and the planned adjacent outlet mall will be one-of-a-kind in the region. Mr. Jove said the project is mainly targeted at the 10 million tourists who visit Costa del Sol each year.

Intu’s Mr. Breeden said he wasn’t concerned about competition. “We’re very confident that there will be fantastic demand for our project.”

Sonae Sierra said it also plans to spend €55 million to update four of its other shopping centers around Spain within the next five years.

Elsewhere, TIAA-CREF, a U.S. money manager, has formed a joint venture with Neinver, a Spanish outlet-mall developer, to create TH Real Estate, which will own properties in Spain and other countries. Among their projects is the €80 million Viladecans The Style Outlets in Barcelona, which is scheduled to open in 2016.

“There is still plenty of money chasing product, and plenty of people with big debt who want to sell product,” said CBRE’s Mr. Ramirez. “I expect big volume this year.” He said large transactions could start to level off by next year as prices increase.

Original story: WSJ (by Shaheen Samavati)

Edited by: Carmel Drake

Talus To be Ortega’s Neighbour On Gran Vía

29 January 2015 – Cinco Días

Two buildings on the same street in Madrid have changed hands within just over a week of each other. The fund Talus Real Estate has agreed the acquisition of the building on Gran Vía 30 (on the corner of Calle Valverde) for €42 million. On Monday, the company Drago Real Estate announced the sale of its building on Gran Vía 32 to Pontegadea, the company that owns Inditex’s real estate assets and receives its dividends on behalf of Amancio Ortega, the founder and primary shareholder of the fashion group.

According to sources close to the negotiations, JLL and Aguirre Newman have participated in the sale of the property on Gran Vía 30, as advisory consultants. However, the companies involved did not want to confirm this information yesterday.

The same sources said that the buyer plans to refurbish the property. The fashion chain Sfera, owned by El Corte Inglés, has a store that occupies two floors of the building.

Talus Real Estate’s main executives are David Finkel and Jordi Moix and its headquarters are located in Madrid. According to the company’s website, before joining Talus, Finkel worked for Westbrook Parners, where he co-directed their business in London. Westbrook Partners is a real estate investment group that was founded in 1994, has offices in the US, London, Munich, Paris and Tokyo and has invested USD 10,000 million to date. Prior to that, he worked for the Japanese entity, Nomura and for iStar Financial, another international real estate investment group.

Moix has held senior positions in the Spanish real estate companies Reyal Urbis, Metrovacesa, Layetana and Habitat; he has also worked for IAG and Citibank. Currently, he is vice-president of FC Barcelona’s real estate business.

Gran Vía is trading up

The sale of the property on Gran Vía 30 is the latest in a series of transactions undertaken on the Madrid street that will change its appearance as it approaches its 105th birthday.

The fashion group Primark will occupy several floors of Gran Vía 32, when it opens its largest store in Spain there. Talus Real Estate will also refurbish the Gran Vía 30 building. In Plaza de España, the Chinese group Wanda will convert the Edificio España into a luxury hotel and shopping centre. Next to the building sold by Santander, the hotel chain Barceló will take over some of Torre Madrid to open another hotel.

Late last year, Axa Real Estate, a subsidiary of the insurance company Axa, acquired Gran Vía 37, where the fashion retailer H&M has its largest store in Spain and which used to house the Avenida cinema, for €80 million. Also last year, the Community of Madrid sold Gran Vía 20 for €20 million to Caja Rural de Almendralejo Sociedad Cooperativa de Crédito.

2015, another big year for real estate investment

With the sale of Gran Vía 32 and the upcoming sale of the Plenilunio shopping centre, the amount of investment in Madrid will amount to €800 million. According to sources familiar with the transaction, the sale of the shopping centre will reach a figure close to €400 million.

In 2014, investment in real estate in Spain amounted to between €6,000-€9,000 million, almost twice the figures recorded in the previous three years.

During the year ahead, Socimis, which revolutionised the sector in 2014, will continue to invest, as will investment banks, whereby replacing opportunistic funds. The liquidity injection announced by the ECB will boost the sector. The expected sale of Realia will be another major transaction. Industry experts are also drawing attention to investment in logistics platforms.

Original story: Cinco Días (by Alberto Ortín Ramón)

Translation: Carmel Drake

Blackstone Drives Boom In The Purchase Of Logistics Assets

26 January 2015 – Expansión

Investors spent €620 million on logistics assets in 2014, compared with €100 million in 2013 / The total spend on warehouses amounted to more than €500 million for the first time since 2008.

From €100 million to €600 million in twelve months. That was the trajectory of the investment market in industrial and logistics assets in Spain in 2014.

Interest from large international funds and the launch of Socimis drove the volume of investment in the logistics sector through the roof in 2014, in a similar way to shopping centres. From minimal levels in recent years, the figures have increased sixfold.

According to data published by the property consultant JLL, €620 million was invested in logistical and industrial assets in Spain last year. In 2013, this figure was €100 million. “Investment in these types of assets has exceeded €500 million for the first time since 2008”, comments JLL.

The turnaround has been characterised not only by an increase in the number of transactions, but also in their size. Blackstone closed one transaction amounting to more than €60 million, and another for €132.8 million. “Blackstone closed 35% of all the transactions in the market, followed by the Socimis, which accounted for 36% of total volumes”, highlights the report. In just two years, the US investment fund has acquired a portfolio of logistics assets in Spain covering 600,000 square metres.

The listed property companies Axia Real Estate, Merlin Properties, and Lar España purchased logistics properties worth more than €200 million.

Another example of the boom in the sector is that the asset purchases have not been restricted to the major markets, says the consultancy in its report. “Madrid, Guadalajara and Barcelona continue to be the preferred locations for investors, but cities such as Sevilla, Valencia, Zaragoza and others are also in the mix”. The experts at JLL believe that, over the next few years, the funds with a more opportunistic nature will make way for those that have a more conservative profile.

In the case of recruitment, the numbers did increase with respect to the previous year, but not as significantly as the investment data. Nevertheless, demand for large warehouses, especially those that occupy more than 25,000 square metres, has skyrocketed, as companies such as Amazon and the textile groups realise their need to increase their storage capability in the face of increases in online sales.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

JLL Appoints Benoît du Passage As CEO In Spain

23 January 2015 – Expansión

Benoît du Passage (pictured), the current Chairman of the real estate consultancy firm JLL in Spain, has taken over as CEO of the group as well, where he will lead an ambitious strategic plan that the multinational company has for Spain over the next few years.

Original story: Expansión

Translation: Carmel Drake

Spain’s Real Estate Sector Closed 2014 With A Record High

02/01/2015 – Expansión

The arrival of international funds and the implementation of large REITs have increased investments, with respect to previous years, up to 9 billion euros. Both the total figures and number of operations have skyrocketed. Well-located large shopping centers and office buildings have been the most desirable assets in 2014.

After more than five years of decline in business, the Spanish real estate sector predicted that recovery would arrive in the year 2014. However, the more optimistic reality has exceeded all expectations.

In anticipation of the year-end figures, this is already the second best year in the last decade, surpassed only by 2007, in the boom of the Spanish economy. “The market this year has been proportionally more active than in 2007. A higher number of assets have been purchased, and the prices, when compared with 2007 figures, are much higher,” explained representatives from the research department of JLL Spain.

So far this year, more than 6.18 billion euros have been invested in real estate for tertiary use (i.e. non-residential), according to Deloitte Real Estate.

This figure soars to 9 billion, according to the consultancy group, Aguirre Newman, if we take into account multiple debt portfolios whose securities were real estate assets, and the sale of land and housing.

These figures are double those recorded in 2013, 2012 and 2011, and are explained by a combination of several factors. “2014 was a year in which all the elements were present to favor real estate investment: the improvement of the overall economic situation, the emergence of new players with liquidity and the pressure to invest (the REITs), the return of funding and the need to sell certain closed funds,” says Javier Garcia-Mateo, director of Deloitte Real Estate.
New investors

The new players in the real estate sector, the REITs, are among the most influential reasons for investment growth. Only four major listed real estate companies, Merlin Properties, Hispania Real, Lar España and Axia Real Estate, have invested over 2.4 billion euros. Among their investments was the purchase of Marineda City, a shopping center located in La Coruña (Galicia), by Merlin Properties for 260 million euros, the largest purchase of a shopping center until December 24, 2014.

A few days ago, the British real estate company, Intu Properties, beat this record by paying 451 million euros for Puerto Venecia in Zaragoza. With these last transactions, investment in shopping centers in 2014 amounted to 3 billion euros, the same amount invested across the real estate sector in 2013.

Shopping centers are not the only commercial properties to be the star of large operations. Street storefronts have also been key players in investments. Thus, companies such as Mango bought property in Madrid and Bilbao to create large retail stores; while international funds, such as Axa Real Estate and Deka, bid for being the landlords of the main brands along the Gran Via in Madrid.

As for office buildings, investment has soared over 200% from January to September to 2.4 billion euros, according to CBRE. These figures are due to the purchase of portfolios such as the four buildings located in Barcelona and Madrid held by Blackstone, in addition to the other four buildings that the same fund bought from SAREB a few days ago.

Also noteworthy is the purchase of two properties in Barcelona — Torre Agbar and Paseo de Gracia 111 — which will be transformed into luxury hotels, and the numerous buildings sold by public administrations such as the Generalitat.

“A year of great investment activity has closed and the market should expect the same level of activity for the next year, albeit with some changes in the profile of investors,” says Jaime Pascual, Executive Managing Director of Aguirre Newman.

Original article: Expansión (by Rocío Ruiz)
Translation: Aura REE

Real Estate Sector To Close A Record Year In Spain

30/12/2014 – Expansión

BOOM INVESTOR / The arrival of international funds and launch of large investment REITs have increased investment over previous years to 9 billion euros. Both number of operations and total figures have soared. Large shopping malls and prime-location office buildings have been the most sought-after assets in 2014.

After more than five years of business decline, it was forecast that recovery would come to the Spanish real estate sector in 2014. However, the most optimistic scenario has played out in reality and exceeded all expectations.

Awaiting the year-end figures, this is already the second best year over the past decade, surpassed only by 2007, amidst the boom of the Spanish economy. “The market this year has been considerably more active than back in 2007. A larger number of assets and in higher volumes have been purchased, when compared to the 2007 prices,” explained experts from the Research division of JLL España.

So far this year, more than 6.18 billion euros have been invested in real estate for tertiary use (i.e. non-residential), according to Deloitte Real Estate.

This figure goes even further up to 9 billion, according to the Aguirre Newman consultancy, taking into account various debt portfolios secured with real estate assets as well as sale of land and housing.

These figures are double those recorded in 2013, 2012 and 2011 and attributable to a combination of several factors. “2014 was a year in which we had all the factors to foster investment: overall improvement of the economic situation, the rise of new players with liquidity and willingness to invest (the REITs), the return of funding and the need to sell certain close-ended funds,” says Javier Garcia-Mateo, director of Deloitte Real Estate.

New investors

Among the factors which most influenced the increase in investment are the new players in the sector: the REITs. Only four major listed real estate companies – Merlin Properties, Real Hispania, Lar Spain and Axia Real Estate, have invested over 2.4 billion euros. Among those investments made by December 24 was the purchase of the largest shopping mall in 2014: the Marineda City in La Coruña, by Merlin Properties for 260 million euros.

Just three days ago, the British realtor Intu Properties beat this record by paying €451 million for Puerto Venecia in Zaragoza. With these transactions, investment in shopping malls in 2014 amounted to €3 billion, the same amount invested in the entire real estate sector back in 2013.

The malls are not the only type of commercial property that has defined large-scale transactions. Street locations have also been blue-chip investment. Thus, companies such as Mango bought properties in Madrid and Bilbao to open large stores, while international funds, such as Axa Real Estate and Deka seek to be the landlords of the major brands on Gran Via in Madrid.

In the case of office space, investment has soared from January to September over 200%, up to 2.4 billion, according to CBRE. These figures are due to the purchase of portfolios, as for example, in addition to its four buildings in Barcelona and Madrid, Blackstone has acquired other four from SAREB a few days ago.

In terms of offices, it’s worth noting the purchase of two properties in Barcelona — Torre Agbar and Paseo de Gracia 111 — that will be turned into luxury hotels, as well as the numerous buildings sold by public administrations like that of the Generalitat.

“We are at the close of a fiscal year of a great deal of investing activities and we should expect the same level of activity for the next year on the market, though with certain changes in the investors’ profile,” states Jaime Pascual, CEO of Aguirre Newman.

Original article: Expansión (by Rocío Ruiz)

Translation: Aura REE

Shopkeepers Fear the End of the Old Rental System

19/12/2014 – Bloomberg

Many shopkeepers which have been present in the most-visited streets of Madrid like Gran Via since always, fear the night of the New Year as with the twelfth stroke the new regulation introduced under dictatorship of General Francisco Franco will come down to history, causing a real stir on the CRE rental market.

The law is going to force the shops that are unable to pay new rents (raised from 5.000 to 12.000 euros monthly like in case of jazz club Café Central in Madrid) to shut down or relocate to cheaper premises, freeing up highly demanded retail space.

As Madrid-based director of high street properties for JLL, Angeles Perez, said, the move is a pure business as prime asset tenants paying market prices cannot operate next to others who pay almost nothing.

Spanish trade union UPTA said about 65,000 firms may be affected by the law and 190,000 people may lose their work positions.

Introduced in 1964 under the rule of Franco, the 1964 law was subsequently amended and extended in 1985 and later in 1994. This regulation aimed at providing social housing and affordable premises for the hunger-driven immigration flows into big cities.

Fair Rents

In 2015, the moratorium on retail rental contracts signed before 5th May 1985 will disappear. Insuring low rents, the law have not passed the time test.

Positive Impact

Many shop-owners fear they will not manage to pay the new amounts. However, the regulation may have a positive effect on prime assets in big cities by liberating utterly demanded retail units.

More spacious stores give jobs and attract tourists who then spend money in nearby bars and restaurants, boosting general economy, assured Perez.

As per data from JLL, Luis Vuitton and H&M have had considerable shares in the total of 330 million euros spent on retail space in high streets of Spain so far.

In the entirety of 204, total investment in hotels is likely to reach 450 million euros.

 

Original story: Bloomberg (by Sharon Smyth)

Summary: AURA REE