Goodman Real Estate Rings Out 2019 With Acquisition in Madrid

4 January 2020 Goodman Real Estate has finalised its acquisition of a plot of land in Getafe, Madrid, from Lonestar, CaixaBank and the Masaveu family for thirty million euros. The land, where Goodman will invest 90 million euros to build a new logistics facility, is located in the southern zone of Madrid.

The deal is an example of the type of logistics operations that are driving the Spanish sector, as the rise of e-commerce and a focus on last-mile facilities are ramping up demand. According to estimates by JLL, investors ploughed a record 1.818 billion euros into the sector in 2019, an increase of 27.5% year-on-year.

Approximately 50% of the logistics facilities sold in 2019 were in Madrid, while a further 25% were located in Barcelona. Secondary markets, such as Bilbao and Zaragoza, are also gaining prominence. The increase in investor interest has also squeezed profitability in the two largest markets, falling from 5-6% to just 4.75%.

En español

Goodman Real Estate ha finalizado su adquisición de un terreno en Getafe, Madrid, de Lonestar, CaixaBank y la familia Masaveu por treinta millones de euros. El terreno, donde Goodman invertirá 90 millones de euros para construir una nueva plataforma logística, se encuentra en la zona sur de Madrid.

El acuerdo es un ejemplo del tipo de operaciones logísticas que están impulsando el sector español, ya que el aumento del comercio electrónico y un enfoque en las instalaciones de última milla están aumentando la demanda. Según las estimaciones de JLL, los inversores invirtieron un récord de 1.818 millones de euros en el sector en 2019, un aumento del 27,5% interanual.

Aproximadamente el 50% de las instalaciones logísticas vendidas en 2019 se encontraban en Madrid, mientras que otro 25% se encontraba en Barcelona. Los mercados secundarios, como Bilbao y Zaragoza, también están ganando protagonismo. El aumento en el interés de los inversores también ha reducido la rentabilidad en los dos mercados más grandes, cayendo del 5-6% a solo el 4.75%.

Original Story: El Confidencial – E. Sanz / C. Hernanz

Translation/Summary: Richard D. Turner

Ghost Towns Still Haunt Spain in Property Rebound a Decade After

25 November 2018 – Bloomberg

Juan Velayos’s biggest headache these days is getting licenses fast enough to hand over new homes such as the upscale condos his company is building in the northern suburbs of Madrid.

Less than 60 miles away, Ricardo Alba’s neighborhood tells a different story about Spain’s property market. The fencing instructor is one of only two occupants at a block of apartments whose development was frozen in its tracks when banks pulled the plug on credit.

“The real estate sector’s recovery in Spain is developing at two clearly different speeds,” said Fernando Rodriguez de Acuna, director of Madrid-based real-estate consultancy R.R. de Acuna & Asociados. “While one part of the country is consolidating the recovery of the sector and even expanding, another part of the country is stagnating and is showing few signs of returning to pre-crisis levels in the medium- and long-term.”

A decade after the financial crisis hit, Spain’s real estate recovery is a tale of two markets. Key cities and tourism hot spots are enjoying a fresh boom, fueled by interest rates that are still near historic lows, an economic recovery and a banking system that’s finally cleaning up its act. Private equity firms such as Blackstone Group LP are picking up once-toxic assets worth tens of billions of dollars and parsing out what’s still of value, often using their playbook from the U.S. real estate recovery to convert properties into rentals.

But travel a little beyond the bustling centers, to the outskirts of smaller villages, and ghost towns still litter the landscape — once ambitious developments, often started on agricultural land that was converted into building lots just before the crisis hit. They still stand half-finished, unable to find a buyer.

The “Bioclimatic City La Encina” where Alba began renting an apartment two months ago is one such development. Situated on the edge of the village of Bernuy de Porreros, about 10 kilometers (6 miles) from Segovia, it promised to be Spain’s first environmentally-friendly town, providing solar energy and recycled water for 267 homes, comprised of two-, three-, and four-bedroom chalets and apartments. A faded billboard speaks of the dreams that were sold, including communal swimming pools and gardens for residents who would “live… naturally.”

Today, only about a dozen of the homes are occupied. One street has finished homes but half have their windows bricked up to discourage break-ins, locals said. Alba does have solar panels heating his water, but his electricity comes from the local network. On the far side of the development, trees sprout out of the middle of a street that was never paved. Brightly-colored pipes and cables protrude from the ground. Bags of plaster on a pallet have long hardened.

Spain’s housing crash was fueled by a speculative frenzy combined with loose restrictions and corruption that allowed plots of farmland in rural villages to be converted to feed a demand for homes that never truly existed, said Velayos, who is chief executive officer of Neinor Homes. At the height of the boom in 2006, authorities approved 865,561 new home licenses when even in an economic boom demand is no greater than 250,000 homes, he says.

Banks were handing out loans to developers who had little to lose if a project didn’t find a buyer because the money wasn’t theirs. The result was an almost total collapse of the market and close to $200 billion of soured assets.

About half of them were bought in 2012 by Sareb, a bad bank set up by the government to help lenders. Sareb spent about 50 billion euros to acquire assets that were once valued at twice that amount, mostly loans to developers and real estate. Among the latter are also 97 of the 267 properties at La Encina. None of them are currently for sale as Sareb works through legal issues and construction of many isn’t finished.

Other assets were picked up by deep-pocketed investors such as Blackstone, which has 25 billion euros invested in Spain, according to Claudio Boada, a senior adviser at the firm. The New York-based company — the world’s largest private markets investor — is doing what it did at home after the financial crisis: renting out homes instead of selling them in a bid that fewer people can afford to own. Spain had a relatively high home ownership rate before the crisis but it has since come down.

Blackstone’s Bet

“We’re holding most of what we own and looking to rent it out for the foreseeable future,” said James Seppala, head of real estate for Europe at Blackstone. “There’s a meaningful increase in demand for rental residential around the world, including in Spain, driven by home ownership rates coming down.”

Private equity investors also backed a new breed of real estate developers that are bringing a different rigor to the industry. Companies such as Neinor and Aedas Homes S.A.U. are more tech-savvy when assessing markets, and emphasize industrial production techniques to improve efficiency. They’re behind a surge in licenses for new homes to 12,172 new homes in July, the highest monthly total in a decade.

But demand is uneven: Madrid is enjoying its most robust year of home construction since 2008 with an average of 2,151 licenses awarded per month in the first seven months of the year. In Segovia, just 27 minutes from Madrid on the state-run bullet train, an average of 25 homes licenses have been approved per month in 2018, compared with an average of 180 homes a decade earlier.

The volume of residential mortgages sold in Spain peaked in late 2005 before hitting a low in 2013. Since then they have gradually picked up, with 28,755 sold in August, a seven percent annual increase.

Velayos, chief executive officer at Neinor, said business is starting to pick up beyond Madrid and Barcelona to smaller cities and the coast. His company plans to hand over 4,000 homes by 2021, more than 12 times as many as in 2017. The biggest challenge has been getting licenses approved on time. Velayos had to cut his delivery target for 2019 by a third as often understaffed local councils cause bottlenecks in the production process.

More significantly, Spain’s real estate is now funded by investor’s equity and not credit, said Velayos. Neinor was bought by private equity firm Lonestar Capital Management LLC from Kutxabank SA in 2014 and went public in March 2017. Aedas is backed by Castlelake, another private equity investor, and was floated the same year. Metrovacesa SA, owned by Spain’s biggest banks, held an initial public offering earlier this year.

Shares of all three developers have declined this year at more than twice the rate of the local stock index, a reminder that the market’s recovery remains fragile, with higher interest rates and an economic slowdown on the horizon.

For the Bioclimatic City La Encina, that means it may take longer still until Alba gets new neighbors. Prices for half-finished chalets were slashed by half, according to residents. Some now sell for as little as 16,700 euros, half the cost of a mid-range car.

Alba doubts such cuts will lure buyers. Then again, that may not be a bad thing, he says in summing up the development’s advantages: “It’s very peaceful.”

Original story: Bloomberg (by Charlie Devereux)

Edited by: Carmel Drake

Which Players Will Shape The RE Sector In 2017?

5 December 2016 – Expansión

The end of 2016 will mark not only a new record in terms of real estate investment in Spain, but also the start of a new phase in the sector, after three years of recovery.

“In mid-2013, funds like Blackstone started to close operations, at a time when the market was completely paralysed. That prompted a magnet effect, which, together with the creation of Socimis and the reorganisation of the banking sector, launched the recovery of the sector”, said Adolfo Ramírez-Escudero, President of CBRE.

Thus, after closing last year with an investment volume of €12,884 million, the expectation is that the figure will reach €13,900 million by year end 2016. “We may reach record investment figures by year end, as new property owners, with a more institutional profile, enter the market, such as German investment funds, insurance companies, etc.”, he said.

The investment figure may be maintained next year if corporate operations continue, say sources at the consultancy firm. “We are living in a different Spain, with GDP growth of 3.2% this year and forecast GDP growth of 2.5% next year. That has a direct correlation with employment and, therefore, with real estate”, said Ramírez-Escudero.

For this new phase, one of the most important players will be the large Socimis, which have continued to close operations this year, but in a more measured way as they have been more focused on managing their properties; as well as German funds, such as Invesco Real Estate and the real estate division of Deutsche Bank.

Nevertheless, these more risk-averse investors will share the stage with another kind of player in the Spanish real estate sector in 2017. “We are pretty convinced that there is going to be a new property developer cycle, given that the real estate companies have now been established, with new capital. Next year, the property developers will be building new products”, said the Head of CBRE.

Residential segment

These new players will include Neinor Homes. The real estate company, created by the fund LoneStar with the former subsidiary of Kutxabank, has become a key player in the property development sector, with projects underway across Spain. In 2017, the company led by Juan Velayos will debut on the stock market, whereby restoring the profile of property developers, such as Martinsa Fadesa and Reyal Urbis, which fell from grace following the burst of the bubble.

Another player in the residential sector will be Avantespacia. The new real estate company, in which Inveravante (Manuel Jove’s company) owns a 70% stake and Anida (BBVA’s real estate arm) owns a 30% stake, will promote almost one thousand homes during its first phase of development. Its first project in Málaga, with 135 properties, is already being sold, whilst in Madrid, the new company is preparing a development in the Francisco Silvela area.

But development will not only be happening in the residential segment, major projects are also planned for the office and shopping centre segments. In the former, Merlin Properties is expected to play an important role. Spain’s largest Socimi is currently working on the development of an office building in the Isla Chamartín area, in the north east of Madrid.

In addition, it has just completed the purchase of the Adequa business park, a complex that comprises four office buildings and a shopping area, with space for the construction of a 24-storey skyscraper, with a total surface area of 29,000 m2.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake