Mercal Analyses Hotels As It Seeks To Diversify Its Portfolio

12 May 2016 – Expansión

Mercal, the Socimi listed on the Alternative Investment Market (MAB) since July 2014, is analysing new business opportunities to diversify its portfolio and is looking at hotel assets in particular. “We are focusing on urban hotels”, explained the CEO of Mercal, Basilio Rueda, who specified that his firm is looking to acquire assets worth up to €20 million (maximum), whose day-to-day operation will be left in the hands of professional managers.

The company’s real estate assets are currently distributed as follows: commercial premises (60%), a hospital in Málaga (30%) and offices (10%). “We want to grow but in an orderly and realistic fashion, ever mindful of our commitment to generate returns and fulfil our dividend promises”, said Rueda. Mercal’s General Shareholders’ Meeting recently approved a capital increase for a maximum of €3 million.

The group debuted on the MAB with a share price of €29 and since then, its stock value has increased by almost 18%.

The CEO of Mercal explained that the company has ruled out certain operations so as not to “distort” its profitability. “Some of the operations being undertaken in the market are generating returns of 3%. Personally, I have my doubts as to whether the Socimis can keep investing for such returns without their dividends being affected”, he explained. In this sense, Mercal’s CEO highlighted that the company’s gross profitability currently exceeds 7%.

In any case, Rueda was categorical when it came to ruling out a bubble involving the Socimis and he said that he thinks that there is still scope for the development of these real estate investment vehicles. “The spread between the expected dividends from a Socimi and the return on a 10-year bond is enormous. This makes the Socimis very attractive and means that the capital that is not willing to bear the risk of variable-rate securities is being channelled into the real estate sector instead”, he said.

Rueda acknowledged that the political uncertainty is affecting investment. “Investors are willing to invest in Spain, but many are waiting to see what will happen over the next few months”, he said. Nevertheless, he considers that the current economic trend indicates that Spain will continue to grow. “The real estate sector is 100% aligned with the economic situation in the country”, he added.

Original story: Expansión (by R.Arroyo)

Translation: Carmel Drake

Socimis Account For Almost One Third Of The MAB

14 March 2016 – El Economista

Almost one third of the 49 companies currently trading on the Alternative Investment Market (MAB) are Socimis. The real estate investment vehicles have a combined market capitalisation of €1,600 million and have led the debuts on this market, which have accompanied the recovery of the sector.

The first Socimi to make the move onto this growing business market was Entrecampos, which debuted in November 2013, a year in which Promorent also joined the exchange. In the middle of 2012, the Ministry of Development decided to improve the regulations governing Socimis – created in 2009 – whereby relaxing the requirements for their constitution, in relation to capital and the number of shareholders.

Despite that, in 2014, only two Socimis debuted on the MAB, namely Mercal and Obsido; the latter specialises in hotel assets.

The presence of Socimis was almost symbolic until in 2015, when there was also a change of direction in the real estate sector and this type of company – very common in other countries similar to our own – burst onto the MAB, which had been questioned after having witnessed some high profile failures (Gowex, Grupo Nostrum and Bodaclick, amongst others).

Last year, seven Socimis debuted on the MAB. They included Trajano Iberia, which is managed and promoted by a division of Deutsche Bank; Uro Property, whose portfolio mainly comprises bank branches leased to Santander; Corpfin Capital Prime Retail II; Autonomy; Fidere; Zambal; and Zaragoza Properties, which owns a stake in the Puerto Venecia Shopping Resort shopping centre in Zaragoza.

So far this year, four Socimis have debuted on the MAB, namely, Heref Habaneras, owner of the Habaneras shopping centre (in Torrevieja); Corpfin Capital Prime Retail III; Inversiones Doalca and Jaba I Inversiones Inmobiliarias. Indeed, the last two made their debuts on Friday.

Zambal is the Socimi with the largest market capitalisation on the MAB, almost €570 million, followed by Uro Property (€218 million) and Fidere (€192 million). Promorent and Obsido have the smallest market capitalisations in the Socimi segment on the MAB, with €4.3 million and €6.6 million, respectively.

The tax advantages of these vehicles for investors (they are exempt from Corporation Tax, although they must distribute almost 80% of the profit that is not reinvested in the form of dividends) are part of their appeal.

Nevertheless, even though the MAB is still growing and increasingly more companies are joining it, the heavy weight Socimis are listed on the main stock market (Hispania, Axiare, Lar España Real Estate) and Merlin Properties is even listed on the Ibex 35.

Original story: El Economista

Translation: Carmel Drake

Up To 15 Socimis Are Planning To Go Public In 2015

12 February 2015 – El Economista

Since the first Socimi debuted on the stock exchange – Entrecampos was the pioneer at the end of 2013 – seven companies of this kind have now floated on the stock market. And according to Jesús González Nieto, the Vice-President and CEO of the Alternative Investment Market (el Mercado Alternativo Bursátil or MAB) the number of listed Socimis will increase this year to include seven or eight more, with two of them planning to go public this quarter.

Nevertheless, market sources close to these transactions claim that the number of vehicles of this kind preparing to go public is even greater: with “up to fifteen” (currently involved in the process).

“Around fifteen Socimis are planning to go public within the next year, with assets ranging from €20 million to €400 million”, said one of the people responsible for placing the shares of these new real estate companies in the market. “Most of them are investments being made by foreign funds in Spain, which are buying up premium assets (hotels and above all, shopping centres). In parallel, there is a stream of hoteliers, who are seeing the benefits of putting their hotels into these vehicles because it allows them to dissociate the business from the properties”, he added.

According to the same source, there are two main reasons as to why non-residents above all are incentivised to constitute Socimis. Firstly, it is easier to exit an investment in one of these type of companies than it is to exit an investment in a specific building, “Socimis represent an easier way of buying (when you have a view) to sell”, he said. And secondly, there are tax advantages: Socimis are exempt from paying corporation tax, and also receive a 95% discount oon property transfer tax. For investors, however, the main appeal of these companies is that the rules require them to distribute 80% of the companies’ gross operating profits in the form of dividends, although at the moment, none of them are expected to make a profit this year.

“For these types of Socimis, those that are businesses, the average IRR of their portfolios is at least 8%”, say a number of financial sources. But amongst the fifteen Socimis that are preparing to float, there are also some property managers. As such “families are using these vehicles as a way of organising their assets to convert immovable property into movable property, whereby allowing it to be easily distributed”, they explain.

The regular stock market or MAB?

What remains to be seen is the market they will choose to list on – namely, the regular stock market or the MAB? The latter allows these types of companies to be valued on a discounted cash flow basis rather than on the basis of their NAVs (net asset values), which is the more accurate ratio used for valuing real estate assets in general and REITs (the US version of Socimis) in particular.

To date, the stats are as follows: of the seven Socimis that have debuted on the stock market in recent years, three have done so on the MAB (Entrecampos, Mercal and Promorent). And the other four have listed on the regular stock exchange: Lar España, Merlin Properties, Hispania and Axia. But, what determines whether these companies list on one market or another? “In reality, all of the Socimis that list today should do so on the MAB. Nevertheless, some of them have jumped onto the regular stock exchange because the investment funds behind them are subject to regulation 401k, which requires them to list on an official exchange, and MAB does not quality; it is regulated but not official. This means that some Socimis were forced to list on the regular stock exchange”, say market sources.

For the time being, the only thing we know about the six or eight companies on MAB’s radar (where they may list, according to comments made by MAB’s Vice President on Wednesday) are their timelines. “Two this quarter” and another “three or four before the summer”. One of them is “a very big player, with a large volume of capital”.

González Nieto explained that he regrets the slow speed of the mechanisms that process the files of these companies; a Socimi has two years from when it first registers to fulfil all of the conditions required to begin its activity, which means that this year is the deadline for those that first signed up in 2013. It is time for the interested parties to “get on with their homework if they regard it as a good opportunity”, he said.

Original story: El Economista (by C. García and J. Gómez)

Translation: Carmel Drake

Mercal the Socimi Appreciates 1.4% At Flotation

3/07/2014 – Expansion

Newly listed Socimi (a Spanish counterpart of a REIT firm) Mercal Inmuebles has jumped up in price by 1.4% at its debut on the alternative stock exchange market (or MAB), reaching 29.4 Euros a share.

During the first session of the company, 200 shares jointly valued at 5.800 Euros found a new owner. Initial price had been set at 29 Euros per share.

The social stake of Mercal is made u of 876.266 shares at 6.01 Euro nominal value each.

The vehicle targets urban properties with view to renting them, mostly to highly solvent firms.

Basilio Rueda, CEO of the company, said Mercal relied on three pillars: customer portfolio, austerity and the indebtness level. He filed for listing the vehicle as a Socimi in September last year.

The first to become listed in 2014 was Lar España Real Estate, followed by another REIT Hispania Activos Inmobiliarios. The most recently, Merlin Properties the Socimi started to sell on the stock with the record IPO raised at its flotation (€1.25 billion).

Moreover, the next in the queue is Axia Real Estate expecting to raise €400 million debut amount, whereas currently forged Socimi of Quabit will strive at selling the first shares for the total of €500 million.

 

Original article: Expansión

Translation: AURA REE