JLL: Prime Retail Rents Grew During Q1 2019

23 April 2019 – Eje Prime

The rental prices of prime premises are growing in Spain. In 2018, the rental prices of retail parks rose by 5.4%, whilst high street rents increased by 5% and shopping centre rents by 2.6%.

According to a study by JLL, the growth in the rents of prime premises in Spain is forecast to be amongst the highest in Europe over the next five years, albeit more moderate than in previous years.

Investment in retail assets amounted to €208 million during Q1 2019, with Corpfin’s acquisition of the retail space in Edificio España (Madrid) accounting for the lion’s share (€160 million). Yields remained stable during the quarter.

Original story: Eje Prime

Translation/Summary: Carmel Drake

WeWork to Launch its ‘Custom Buildout’ Business in Spain

28 March 2019 – Idealista

The US co-working company WeWork is studying the rental of entire buildings in Spain to dedicate to its custom buildout business. The service offers large corporations assets fitted out and managed by the brand. The company is already looking at potential properties in Barcelona.

WeWork now has ten co-working office spaces in Madrid and Barcelona (5 in each city), but its plan is to offer large corporations a new service that would house their headquarters and manage all of their needs, leveraging the firm’s know-how in the office management segment.

According to its business model, WeWork speaks to its clients first to understand their needs and desires. It then searches for the best offers, assumes the risks of a long-term contract and the capital investment, and manages the property for the company on an on-going basis, offering services such as fresh fruit, water and security, as well as events for employees.

In this way, the firm would start to compete directly with stalwarts of the sector such as CBRE, JLL, Savills Aguirre Newman and Cushman&Wakefield.

WeWork already offers this service to several corporates around the world, including Starbucks, Facebook, Adidas, Salesforce, Blackrock and Citi, amongst others.

Original story: Idealista (by Custodio Pareja)

Translation/Summary: Carmel Drake

JLL: Investment in Offices in Barcelona Amounted to €611M in 2018

21 March 2019 – Eje Prime

According to the consultancy firm JLL, direct investment in the office sector in Barcelona amounted to €611 million in 2018. That figure represented 24.4% of the total investment in office spaces across Spain, which amounted to €2.6 billion. Direct investment in offices in Madrid reached €1.9 billion last year.

In Barcelona, the largest operation of the year in the office segment saw Blackstone acquire the Planeta building for €210 million.

Meanwhile, 356,000 m2 of office space was leased in the Catalan capital, up by 8%. The real estate firm forecasts an upwards trend with the leasing of office space amounting to 360,000 m2 in 2019, 368,000 m2 in 2020 and 370,000 m2 in 2021.

In terms of rental prices, prime rents grew by 8.6% in 2018 to reach €25.25/m2/month on average. JLL forecast that rents will rise by 5% p.a. until 2021 to €30.34/m2/month within five years.

Original story: Eje Prime 

Translation: Carmel Drake

Lone Star & Cerberus Increase their Commitment to Spanish Property

21 February 2019 – Expansión

The need for the banks to reduce their exposure to property and the funds’ appetite for the Spanish real estate sector have converged in recent years leading to the transfer of portfolios of debt and foreclosed assets worth millions of euros. Blackstone, Cerberus, Lone Star, the Canadian pension fund (CPPIB), Bain, Axactor and Lindorff are the funds that have been behind most of the major transactions involving portfolios of bank debt secured by real estate collateral during that period.

Emilio Portes, Director of Quantitative & Risk Management at JLL for Southern Europe, said that, following a frantic 2017 when more than €55 billion was transacted, last year saw portfolios sold with a gross value of more than €45 billion (…).

In 2018, the indisputable star was Lone Star, which took control of a portfolio worth around €12.8 billion from CaixaBank. Specifically, CaixaBank sold that portfolio along with Servihabitat to a company called Coral Homes in which Lone Star owns an 80% stake. Cerberus was also active last year with the purchase of several portfolios from Sabadell, Santander and CaixaBank with a total gross value of €12.5 billion. Behind it, came CPPIB, Axactor, D.E. Shaw and Lindorff, according to data provided by JLL.

“The sum of the transactions recorded over the last two years exceeds €100 billion, which places Spain as one of the countries with the largest transaction volume in Europe and the most liquid in terms of real transactions”, says Portes. In those portfolios, there are various types of assets, mainly residential, but also land, offices, premises and hotels.

The year ahead

During 2019, the banks will continue to divest assets, although with smaller portfolio sales. “In 2019, we expect a transaction volume of €20 billion, in addition to whatever Sareb ends up doing”, revealed Portes. He explains that most of the large Spanish banks have now reduced their NPA (non-performing asset) ratios to below 5%.

Following the activity undertaken by the large banks, all eyes are now focused on the medium and small-sized entities, particularly those with the greatest property exposure and therefore most pressure, as well as on Sareb, which has assets worth more than €35 billion still left to sell (…).

The heirs of the banks’ property, having purchased at significant discounts, have an average investment horizon of five years before they undo their positions (…)

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Cerberus Starts to Value the 160,000 Assets it has Acquired in Spain Ahead of their Sale

19 February 2019 – Voz Pópuli

Last year, the giant Cerberus strengthened its team with the appointment of the former JLL director Maurice Kelly as its Vice-president of Real Estate in Spain. The professional has become a key person for the fund, given that he is now responsible for meeting with the real estate consultancies regarding the valuation of the 160,000 assets that the investment giant has acquired in recent years in Spain, according to financial sources consulted by Vozpópuli.

Its haul also includes assets acquired in the Apple Portfolio from Santander, a sale that was negotiated in 2018 and which is expected to close between February and March. Moreover, that figure could increase during the coming months due to the great activity that there is in the market at the moment.

The fund wants to generate value from everything that it has purchased from the banks through large portfolios and has now spotted a window to put its acquisitions on the market from April onwards and over the next two or three years. Similarly, the fund is constantly rotating the assets that it acquires and assessing everything that it purchases for its subsequent placement on the market.

New portfolios

The first sale strategy involves the placement of new portfolios, of medium sizes, ranging between €100 million and €200 million, and will be distributed amongst medium-sized funds, above all those from the UK, Ireland and the Netherlands (…).

Another way to sell is through operations involving “unique assets”. In other words, buildings that have added valued and that may be of interest to a private investor or family office. The price of those would be over €50 million.

Finally, the most typical approach will see it sell portfolios of homes, in groups of more or less 500 units, for between €10 million and €20 million apiece.

The valuation of those 160,000 assets is included within the Cerberus European Servicing division and the placement of them is not going to be easy, given that “the fund has purchased a lot” and has “things” that even it does not know about. “It has picked up a lot of parking spaces and assets of that kind that are going to be very difficult for it to place”, warned the sources.

A taste for Spain

Cerberus has invested more than €10 billion in Spain in total and now wants to operate new lines of business such as rental and logistics. It is also planning to multiply its property development activity three-fold by purchasing more land and following its acquisition of Inmoglaciar (…).

Cerberus entered the Spanish market at the height of the financial crisis (between 2010 and 2012) with the aim of taking over banks and real estate firms, like it did in other countries. The former did not work out well following several attempts with former savings banks. But its conquest of property has proved a lot more successful.

Its next acquisition could be the property developer Solvia Desarrollo Inmobiliario (SDIN) from Banco Sabadell, which has put land worth more than €1 billion up for sale. The bid for those assets has already started and financial sources say that the fund has expressed interest in them.

Original story: Voz Pópuli (by David Cabrera)

Translation: Carmel Drake

Coworkings: the New King of the Real Estate Sector

15 February 2019 – Eje Prime

Millennials, flexibility, start ups…All of the socio-demographic trends are inevitably leading to one common place: coworking offices. Flexible workspaces have become the great promise of the real estate sector but their largest operator, IWG, generates just 15% of its revenues from them and WeWork is multiplying its losses year after year. What risks does the model have? Can it withstand a recession without the guarantee of the traditional five years of mandatory occupancy? And what if Amazon and Facebook, its tenants of today, end up becoming its main competition?

In 2017 alone, the total volume of flexible workspace in the twenty largest markets around the world grew by 30%, equivalent to 1 million m2. Since 2014, the sector has doubled, and in cities such as London, they account for 20% of the office space leased, according to a report from JLL. In Barcelona, that figure already amounts to 12%.

The consultancy firm forecasts that the European stock will grow by between 25% and 30% per annum on average over the next five years and will account for 30% of some corporate real estate portfolios by 2030. But those predictions hide the major challenges that are threatening the great promise of the sector.

One of the main challenges facing the model is that the operator is tied to a given property for at least five years, like in the case of a traditional office, but its tenants have contracts that last for months or even hours. When the next crisis hits, what guarantees does the owner have that the operator will be able to continue paying the rent?

“On paper, that does seem like a risk, but the reality is that the coworking phenomenon was launched during the crisis”, explain sources at Savills Aguirre Newman. All sectors suffer when there is a recession, but traditional offices are hit harder because whoever cannot bear those costs can afford a coworking space”, argue the sources at the consultancy firm.

Another of the risk factors is that coworking offices have capitalised on the lack of available office space in the centre of cities and also, on the shortage of appropriate spaces for the new ways of working within traditional companies (…).

“The players driving the sector are multi-nationals that are looking for appropriate spaces for their innovation teams or for project-based work”, says Manel de Bes, Director of the Office department at Forcadell.

But, what will happen when the offices of these large companies have adapted to the new scenario? “At the moment, most companies are in the experimental phase; if they consider that the trials do not meet their needs, they will be able to return to more conventional models”, explains JLL’s report (…).

From rock star to conservative player

Within the coworking phenomenon, the rock star is WeWork. The New York-based company, which became the largest lessee of offices in its home city last year, is worth USD 20 billion, but it recorded losses of USD 723 million in the first half of last year.

“Its model is based on taking over the best buildings, in the most prime areas and then competing with other operators on price: it is not sustainable”, argues a competitor in the sector. “Sooner or later, they will have to raise their prices”, he assures.

IWG’s model is more conservative. That firm has an umbrella of five brands and thirty years of history. “We have gone through three or four cycles and we cover our backs: first, by diversifying in terms of the type of tenant to minimise risk. We also ask the owners to invest and we do not select the best buildings or at any price”, said Philippe Jiménez, head of the group in the Spanish market (…).

De Bes from Forcadell forecasts that “Over the medium term, just four or five operators will remain: those that lease 200 m2 or 400 m2 in secondary areas will exit the market”. In fact, the market is already becoming more concentrated: since 2015, the five most important operators have accounted for 50% of all of the new flexible workspace in Europe (…).

Original story: Eje Prime (by Iria P. Gestal)

Translation: Carmel Drake

Pelayo Capital to Create a New Breogán Park with an Investment of >€60M

15 January 2019 – Eje Prime

Pelayo Capital is throwing itself into the Spanish retail sector during its second year of life. The Galician family office, which is currently working on the conversion of the Dolce Vita shopping centre in A Coruña into a retail park, is planning to replicate the project in other Spanish cities with an investment of more than €90 million, according to Íñigo Veiga, CEO of the company, speaking to EjePrime.

Similarly, the group wants to add high street stores to its portfolio of assets during the course of this year. In this sense, Pelayo Capital is on the hunt for properties located in Madrid, Galicia and Asturias, in particular, in which it plans to invest at least €1 million. “We are not ruling out other cities either, given that our strategy involves working hand in hand with retailers”, said the director.

Breogán Park is the company’s star project, an asset in which the company is going to invest €60 million and which will be inaugurated in the spring of 2021. It is the first project undertaken in Spain to involve the demolition and conversion of a shopping centre into a retail park. “The initiative that takes advantage of the demand for these types of assets in many cities around the country”, said the executive.

The surface area, spanning 45,000 m2, will have 2,500 parking spaces and used to house the Dolce Vita shopping complex until 2014. “It is a great opportunity to build a retail park in A Coruña; we are not going to find any others because there is no land available in the city on which to build a retail park of this size”, explained Veiga.

Pelayo Capital is looking for ways to handle the maturity of shopping centres and the boom in e-commerce in Spain by committing itself to retail parks and commercial premises located on the most prime streets. For this reason, the company has just purchased its first asset at number 103 Calle Hermosilla in Madrid, revealed the director.

“We do not have an investment objective or commitment, because we believe that pressure can lead to errors”, explained Veiga. Saddled between Galicia and Madrid, Pelayo Capital has the support of investors with different profiles and is not averse to the idea of backing the logistics or residential markets in the long term.

The company was created in 2017 hand in hand with Breogán Park, a project that launched it into the midst of the Spanish real estate sector. Although it is also working on the rehabilitation of a residential building in A Coruña, Pelayo Capital has placed its focus on retail and for that reason, it has hired Luis Íñiguez, former director of JLL’s retail division in Spain, as senior advisor to the company.

Original story: Eje Prime (by Berta Seijo)

Translation: Carmel Drake

LaSalle Purchases Repsol’s HQ in Madrid for €100M

7 January 2019 – Idealista

A year of new real estate operations in Spain has begun and one of the first has been completed by an international fund. LaSalle Investment Management has purchased the future headquarters of Repsol in Atocha, in the Méndez Álvaro area of Madrid, from Royal Metropolitan for €100 million.

The building, located at number 23 Calle General Lacy, used to house the headquarters of the real estate consultancy Aguirre Newman, but that firm vacated the property in the summer to move to BBVA’s former tower on Paseo de la Castellana, 81 after it was acquired by the British firm Savills. LaSalle is a fund manager specialising in real estate investments. It is a subsidiary of the JLL group, listed in New York and the parent company of the real estate consultancy JLL.

Dating from the end of the nineteenth century, the building was formerly a Tabacalera warehouse until 1999, when Aguirre Newman undertook the renovation of the property to open its consultancy offices there. In the past, the asset was owned by the fund Zaphir, the manager linked to Aguirre Newman, although it has changed hands several times before ending up with another manager linked to a competitor firm.

LaSalle is one of the 20 largest managers of real estate funds in the world by properties under management, with an asset portfolio worth more than €53.2 billion at the end of the third quarter 2018. With its central headquarters in Chicago, the fund is present in 17 countries. The management firm was reborn following the merger of the British company Jones Lang Wootton and the US entity LaSalle Partners in 1999, which gave rise to the JLL holding company.

Original story: Idealista 

Translation: Carmel Drake

Acciona Sells a Building in Madrid to IBA Capital for €50M

21 December 2018 – Eje Prime

Acciona Inmobiliaria is continuing to divest. The company chaired by José Manuel Entrecanales has sold a building in the Spanish capital to IBA Capital for around €50 million The asset houses some of the criminal courts for the Community of Madrid.

The building, which has a surface area of 20,000 m2, is located at number 31 Calle Albarracín, in the Julián Camarillo area. With this operation, advised by JLL, the courts have a new landlord, according to reports today from Cinco Días.

This is not the first sale that Acciona has undertaken so far this year. The company has divested some of its office properties and hotels in recent months, as part of its divestment plan carried out with the aim of rotating capital to reinvest in other segments.

For its part, IBA Capital is a manager of real estate funds founded in 2013, which manages assets worth €1 billion. The company also manages the Socimi Zambal, which focuses primarily on the office and commercial sectors.

Original story: Eje Prime

Translation: Carmel Drake

Kutxabank Sells a €700M Property Developer Loan Portfolio to Bain

21 December 2018 – Cinco Días

Kutxabank has sold a “problem property developer loan” portfolio with a gross valuation of €700 million to a subsidiary of Bain Capital Credit. The portfolio includes doubtful assets and non-performing loans to property developers, according to a statement issued by the entity chaired by Gregorio Villalabeitia (pictured below).

The divestment includes both loans with mortgage guarantees, secured by land for the most part (48% of the total), as well as finished homes (another 29%). They are located in Andalucía and Euskadi.

The transaction has materialised through a competitive bidding process, which has been coordinated by the investment bank Alantra.

Sources at the vendor bank indicate that there is “a great investor appetite” in the market for this type of asset at the moment, a situation that has encouraged the entity to take the decision to divest these assets, the first operation of this kind that it has undertaken in its history.

The divestment will improve Kutxabank’s results this year and will reduce its exposure in the courts, due to the costs associated with the litigation relating to these assets. The bank has already calculated that, following this operation, its default ratio will improve by 50 basis points to fall below 4%.

The sale of the real estate portfolio will also have a positive impact on the bank’s CTE 1 capital ratio, which will increase by 10 basis points. According to the bank, it will thereby consolidate its position of leadership as the most solvent entity in the country.

Bain Capital Credit, with 200 employees, invests in the entire spectrum of loans, including leveraged loans, high-yield bonds and structured products, amongst others. Bain Capital has been advised in this operation by Copernicus, Aura, JLL and Allen & Overy.

Original story: Cinco Días

Translation: Carmel Drake