Tag: latent gains

Mapfre Divested Non-Strategic Assets Worth €130M in 2017

7 May 2018 – Eje Prime

The insurance company Mapfre is still interested in the Spanish real estate sector, but it is divesting certain assets that it considers to be non-strategic in the country. The company sold properties worth €130 million in the Spanish market last year, according to information presented in the group’s annual report for 2017. The most high profile sales were carried out in Madrid and included the Luchana building, amongst others.

During the year, divestments amounting to around €130 million were carried out in Spain and Portugal. Highlights include the sale of a plot of land in Valdemarín (Madrid) for €5.5 million and two plots in Palma de Mallorca for €22.5 million, plus a series of other smaller assets for €24.5 million in total.

One of Mapfre’s main divestment operations last year was the sale of the Luchana building to GMP for €72 million. It is an exempt asset, dating back to the beginning of the 1980s, located just six minutes from Paseo de la Castellana by foot.

GMP is currently renovating that property, which spans a gross leasable area of 14,424 m2, spread over eleven above ground floors in total, ten office floors and one commercial-use floor at street level. Its main tenant is Mapfre, which houses the headquarters of its General Regional Management team for Madrid and Verti in this building.

In total, all of the operations signed in the Iberian Peninsula generated gains of more than €65 million for Mapfre, according to the annual report.

Investment in its asset stock in Spain 

But Mapfre has not only been selling assets in Spain, it has also been feeding its portfolio by investing in the renovation of its properties. The insurance group has undertaken improvement work on its portfolio in Madrid, where it has finished work on an asset it owns on Calle Sor Ángela de la Cruz amounting to €8 million, where the General Regional team for Madrid is located; and work on Plaza de la Independencia amounting to €7.39 million. That building has already been leased out for the most part (70% of the leasable surface area).

In addition, Mapfre has started refurbishment work on the facilities of its property on Calle Mateo Inurria, a building that has been leased in its entirety to the Ministry of Finance for a rental cost of €5.04 million per year. Improvement work on its offices on Calle General Perón is still underway with an investment of €5.81 million in 2017. Work is also still underway on the tower in Barcelona amounting to €22 million in 2017, which is expected to be completed during the first half of 2018.

At the end of 2017, the market value of Mapfre’s real estate investments in Spain amounted to €2.945 billion, “with latent capital gains of more than €750 million”, explains the group. Of the total, approximately 58% corresponds to properties for own use, and the remaining 42% relates to properties that are rented out to third parties or are on the market for sale. The occupancy ratio of the rental properties amounts to 83%, considering that at the moment, more than 7,500 m2 of its space is being renovated for repositioning on the market from 2018 onwards.

Commitment to Europe 

In March, the insurance group announced its partnership with GLL to launch a fund to invest up to €300 million in the purchase of prime offices in Europe over a two to three year period.

The new vehicle launched by Mapfre and GLL aims to enter large capitals cities across the continent (Germany, France, Italy, the Netherlands and Belgium) with the aim of achieving returns of between 4% and 6% per year and diversifying its portfolio against other types of financial assets (…).

Original story: Eje Prime

Translation: Carmel Drake

Mapfre Sold Non-Strategic Properties for €130M in 2017

1 March 2018 – Expansión

In 2017, Mapfre focused the management of its properties on the sale of non-strategic assets for a total of €130 million, of which €124.5 million corresponded to assets located mainly in Spain. That activity generated a profit of €65 million for the insurance company.

The entity sold the building it had occupied on the Madrilenian street Calle Luchana (pictured above) for €72 million, plus two plots of land in Palma de Mallorca for €22.5 million and other smaller assets for €30 million in total.

At the end of 2017, the market value of Mapfre’s real estate investments amounted to €2.9 billion, with latent gains of €750 million. That figure would offset a decrease in the price of its properties amounting to approximately 26.28% of the market value of the portfolio.

Of that total, €1.0 billion relates to properties that the insurance company uses in its normal activity, whilst the remainder, €1.3 billion comprise group investments.

Mapfre’s real estate portfolio accounts for 4.4% of the insurance company’s total investments, which amount to €49.6 billion.

Its government-backed fixed-income securities account for most of its portfolio (55%) at €27.4 billion, although they have reduced their weighting by 2.3 percentage points, given that previously they accounted for 57.3%. Corporate fixed-income securities accounted for 19% of the total, at €9.6 billion, compared to 20.2% a year earlier.

Insurance companies are natural investors in these types of assets, but in light of the decrease in interest rates, most entities are reducing the weight of their investments in those portfolios and increasing their presence in others that may offer higher returns, although also higher risk.

Equities are the caption that is growing the most within Mapfre’s portfolio, up by 44.2% in one year to reach €2.4 billion. Their weight amounted to 4.8% at the end of 2017, compared with 3.4% a year earlier.

Spanish fixed-income assets, both public and corporate, amounted to €18.2 billion at the end of last year, almost half the total amount, which reached €37.0 billion. The United States of America, with €3.7 billion and Brazil, with €3.4 billion, were placed in second and third position in that ranking.

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake

Insurance Companies Have Unrealised Gains Of €2,400M From RE

26 August 2016 – Expansión

Mapfre, Mutua Madrileña and Catalana Occidente own the majority of the real estate in the insurance sector, whose total portfolio amounts to €4,475 million.

Insurance companies in Spain are accumulating a cushion of unrealised gains in their real estate investments amounting to €2,433 million, according to data from the Director General of Insurance and Pensions.

This amount is the difference between the value that the companies assigns these assets on their balance sheets and the market price of these assets, according to the mandatory appraisals that have to be performed periodically by independent appraisers.

These latest gains in the insurance sector are still well below the threshold of €4,226 million achieved in 2009, at the beginning of the burst of the real estate bubble.

Unrealised gains are recognised in the accounts of entities if the properties are sold at a profit. They are also included in the calculation to measure the solvency margin of the entities, which measures the firms’ strength to deal with unforeseen events using their uncommitted assets.

Insurance companies have traditionally invested in properties, given that they are a particularly appropriate asset for the long term over which they conduct their activity. They also generate regular income in the form of rental payments.

In addition, insurance companies have had to diversify their portfolios following the decrease in interest rates in recent months, which makes the investment strategy of these entities more complicated; they have traditionally focused on public debt, primarily in Spain.

Purchases

Insurance companies are risk averse in their investments and in the face of this new panorama, they have made several purchases that have increased their real estate portfolios, particularly important for the Spanish capital firms Mapfre, Mutua Madrileña and Catalana Occidente, which own the majority of the sector’s total portfolio of €4,475 million, according to data from the Director General of Insurance and Pensions. In recent months, these three entities have been involved in several real estate purchases amounting to more than €250 million. (…).

The Mapfre Group, which has a presence in fifty countries, reported latent gains of €975 million in its accounts for 2015 on the basis of the book value of its total real estate portfolio (€2,267 million) and the market price (€3,242 million). Most (56% or €1,835 million) correspond to real estate investments, whilst the rest (44% or €1,406 million) are properties used by Mapfre. (…).

Meanwhile, Mutua has accumulated a piggy bank of unrealised real estate gains amounting to €462 million, with total assets worth €1,443 million at market prices and €981 million on the balance sheet. Its assets are concentrated in Madrid, where historically it has owned a handful of individual buildings on Paseo de la Castellana. (…).

Grupo Catalana Occidente’s investment in real estate amounts to €1,024 million, which includes unrealised gains amounting to €465 million. The insurance company, which has a presence in more than fifty countries, acquired a building measuring almost 4,000 sqm in the 22@ district in Barcelona in July.

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake