12 February 2015 – Cinco Días
The American fund plans to make the most of the land and assets it acquired last year from Kutxabank and Eurohypo
“We are working to become the leading residential developer in Spain, the largest home builder in the country”, said the European Director of the American fund Lone Star, the Argentinian Juan Pepa, on Wednesday. “We are buying land directly”, he said, explaining that although “in 2012, everyone said that land was worthless”, we are now beginning to see opportunities for obtaining profits from its development.
“We do not regard ourselves as a foreign investor, but as an industrial agent that invests its dividends in the construction of homes”, said Pepa, claiming that 50% of the group’s efforts in Spain over the next decade will focus on the creation of thousands of jobs in the sector, which suffered significant job cuts during the crisis. Pepa was speaking at the presentation of a study conducted by PricewaterhouseCoopers (PwC) about trends in the real estate sector in Europe, which show that the appetite for residential assets is growing.
To achieve its objectives, Lone Star will rely on the two large transactions that it has signed since entering the Spanish market in 2012: the mega-purchase of Eurohypo’s assets and the acquisition of Kutxabank’s real estate arm, Neinor; these were the two largest transactions in their respective fields during the crisis.
The first transaction, signed with JP Morgan last spring, enabled Lone Star to purchase Eurohypo’s mortgage portfolio from Commerzbank for €3,500 million, when the bank valued the portfolio on its own books at €4,500 million. The acquisition will allow the fund to access significant portfolios of land and property that serve as collateral for the loans.
The second transaction, which was signed last December, for €930 million, gave the fund control of Kutxabank’s property management platform, including 90 dedicated employees, as well as 50% of the entity’s real estate assets. The assets mainly comprise land, as well as some completed developments primarily located in the Pais Vasco, Madrid, Barcelona, Murcia and Andalucía.
“The cycle in Spain is just beginning” said Juan Pepa, who spoke about a promising period lasting 10 years…; it is “becoming increasingly difficult to enter the market” and exit as a winner. “We almost missed out completely in Spain” he admits, explaining that the fund arrived in the country in 2012 but did not invest until last year, even though 2013 was “a very good year to make investments”.
For PwC partner Enrique Used, Lone Star’s project is a clear example that investments made two years ago are now beginning to bear fruit, “cranes are the best sign that activity is returning”. In this context….we are beginning to detect interest from new investors – although interest from opportunistic funds is still evident – and the appetite for residential assets is growing, in the face of the thriving office market.
Meanwhile, the vice-president and CEO of the Alternative Investment Market (Mercado Alternativo Bursátil or MAB), Jesús González, said that he expects to see six new real estate investment companies (Socimis) float their shares before the summer.
Original story: Cinco Días (by Juande Portillo)
Translation: Carmel Drake