16 November 2017 – Expansión
Spain’s principal Socimis are continuing to register record-breaking numbers and improve their balance sheets thanks to the on-going real estate boom and the appreciation of their assets. In this way, during the first nine months of the year, Merlin, Colonial, Hispania, Axiare and Lar España saw their combined net profits soar by 68% and the value of their property portfolios rise by 35%.
In total, the largest five Socimis that trade on the Spanish stock market earned €1,306 million during the nine months to September 2017. Their revenues during the same period amounted to €797 million, up by 30% compared to the first nine months of 2016. The reason why these companies earn more (profits) than they turnover (revenue) stems from the significant capital gains that they record from the appreciation of their real estate portfolios. In this way, for example, Merlin Properties and Hispania recorded €332.6 million and €204.82 million, respectively, for this concept, during the first 9 months of 2017.
These five real estate companies, which, with the exception of Colonial, debuted on the stock market just three years ago, currently own combined assets worth €24,295 million. Of that volume, two of the companies stand out due to their size: Merlin, which although it did not update its portfolio in the third quarter, is still the largest entity with an asset volume of €10,556 million; and Colonial, which owns properties worth €8,253 million.
The success of the Socimis, together with the good times that the real estate sector is enjoying, has led these companies to enter a new phase. In this way, after years of intense competition, the companies are starting to rotate their assets, by selling the properties that are not strategic as well as those that have reached a certain degree of maturity in their portfolios.
Such is the case of Merlin, which at the start of the year sold its hotel portfolio to Foncière de Murs Lar, for €535 million, and has deconsolidated its residential branch through Testa. Lar España has done something similar, given that in September it sold an office building to Colonial for €32.5 million, to focus on its current strategy of commercial assets.
Meanwhile, Hispania, which will focus its activity on hotels until its extinction, planned for 2020, is continuing with the unitary sale of homes and is also preparing the sale of its office portfolio, although it has had to postpone that operation until the first quarter of next year in light of the Catalan crisis.
These real estate companies are also backing investments that involve the revaluation of the assets they have acquired. Such is the case of, for example, Merlin, which after absorbing the real estate portfolio from Metrovacesa, is updating its portfolio, with an investment of €95 million to renovate six shopping centres. The Socimi in which Santander and BBVA hold stakes is also investing another €46 million in the construction of a new office tower (Torre Chamartín) in Madrid and in the renovation of Torre Glòries. Meanwhile, Lar España has managed to increase the value of its portfolio by more than €230 million with respect to the purchase price of its properties.
Moreover, the market is preparing for consolidation between the Socimis. The first move in this sense came last Monday with the launch of a takeover by Colonial for Axiare. The former announced the purchase of an additional 13.3% stake in Axiare on Monday and a takeover bid for the remaining 71%.
Merlin, Hispania, Axiare and Lar raised almost €2,560 million in their respective debuts on the stock market and they have a combined market capitalisation of €9,060 million.
Including Colonial, whose General Shareholders’ Meeting approved the adoption of the special tax regime for Socimis in June, with retroactive effect to January, the stock market value of the large Socmis amounts to €12,038 million. In addition, Colonial’s bid for Axiare has raised its stock market value by €154 million in three days.
Original story: Expansión
Translation: Carmel Drake