Merlin & Hispania Prepare To Issue Bonds In 2016

26 November 2015 – El Confidencial

(…). The new kings of the Spanish real estate sector have begun the second phase of their adventure in the markets and, after starring in the bulk of the stock exchange’s IPOs over the last 1.5 years, they are now preparing to issue bonds.

The two key players in the sector, Merlin and Hispania, have taken the lead and are already working with the main ratings agencies to receive their ratings in 2016 and, as a result, make bond placements in order to adjust their financial structures.

The Socimi led by Ismael Clemente is more advanced in this process, because it began to work with the three ratings agencys – S&P, Fitch and Moody’s – to obtain an investment grade rating as part of its process to purchase Testa for €1,800 million.

The company’s plans include registering a bond program, which would be divided into between two and four placements, through which it expects to raise between €800 million and €1,000 million. Although the company’s timings are slightly delayed with respect to its initial plans, its objective is to have everything ready during the first half of next year.

Hispania is working to a similar time frame, conscious that in an environment marked by zero and negative interest rates, fixed income securities represent the perfect way of raising capital, above all in the case of real estate companies, such as Socimis, which make significant block investments to acquire assets that have long-term business plans.

In fact, Merlin and Hispania’s interest in obtaining an investment rating is leading the way for other companies in the sector, a general move in line with the group movements that these companies have been making over the last two years.

Natural step

In this way, whilst in 2014, the general trend was towards IPOs, through which they raised their first significant capital inflows, in 2015, the major trend was towards capital increases, through which the largest players in the sector alone – Merlin, Hispania, Lar and Axiare – raised almost €2,000 million.

The next natural step, therefore, is for these entities to request investment ratings to enable them to go to the debt market. Nevertheless, this is not an unfamiliar step for some companies in the sector. Uro Property, Santander’s landlord, has already completed a €1,350 million bond issue; whilst Lar launched a €140 million bond issue at the beginning of the year.

The difference with respect to the step that Merlin and Hispania are taking is that those placements were made outside of Spain, in Luxembourg and Ireland, respectively, without first obtaining a rating. In the case of Uro, the Socimi that exclusively comprises Banco Santander branches, it managed to achieve a rating for its placement equivalent to that of its tenant, although the Socimi has no been assigned its own rating.

Meanwhile, Lar completed its placement to raise funds, unlike Merlin and Hispania, which are aiming at taking advantage of the low interest rate environment to reduce their financing costs and, moreover, adjust all of their financing to suit their vocations as long-term businesses.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

S&P: House Prices To Rise By 2.5% In 2015 & 2016

3 August 2015 – La Razón

The ratings agency Standard & Poor’s (S&P) expects house prices in Spain to increase by 2.5% this year and next, and to rise by 4% in 2017, driven by the economic recovery, which is gaining strength, and low interest rates.

If these forecasts are correct, house prices will rise again after years of decreases following the burst of the housing bubble.

According to data from S&P, the downwards trend was finally broken in 2014, when prices remained stable.

The improving economic conditions and low interest rates will also push prices up in other European countries.

In fact, within the Eurozone, real estate prices are set to record the greatest increase in Ireland this year, which will see growth of 9%, followed by Germany (5%), Portugal (4%) and the Netherlands (3%).

The markets in Ireland and the Netherlands, which were amongst the worst affected by the crisis, will continue to improve in 2016, with average price rises of 5% and 3.5%, respectively.

Just like in Spain, prices are also expected to stop falling in Italy this year, although unlike in Spain, they are not expected to increase, rather they will remain stable.

Only the French and Belgian markets are expected to register decreases this year, of 3% and 2%, respectively. In the case of Belgium, the downwards trend is forecast to continue into 2016.

Beyond the Eurozone, S&P expects that prices will continue to grow from strength to strength in the United Kingdom, specifically by 7%, although at a lower rate than in 2014 (10%).

The Bank of England may increase interest rates this year and whereby curb the increases over the next few years, to 5% in 2016 and 2.5% in 2017.

In the case of Switzerland, house prices will experience a slight recovery, with an increase of 1.5% this year, after rising by just 0.1% in 2014.

Original story: La Razón

Translation: Carmel Drake