Tag: Merlin

Merlin Finalises its First Major Property Sale & Negotiates with Apollo, Amongst Others

22 January 2019 – Voz Pópuli

Merlin Properties has been negotiating the sale of a portfolio of assets with Apollo for several months and it looks like the operation is beginning to take shape. Project Juno comprises assets in secondary locations, which the Socimi does not classify as core, according to financial sources consulted by this newspaper.

The portfolio includes assets such as Miniparc, in La Moraleja; Európolis, in Las Rozas; a building on Calle Josefa Valcárcel and another one on Ronda de Poniente. The portfolio has a market value well below €300 million, given that it comprises assets that are not located in the financial centre of Madrid.

In parallel, the Socimi has created Project Jupiter, a better quality portfolio than Juno, but “very dry”, worth around €300 million.

In that portfolio, Merlin has included the Trianon business park, on Vía de los Poblados; another business park in Las Tablas on Calle Federico Mompou; another building located in Campo de las Naciones; the Elipse building (Manoteras) and the Ulises building, in Arturo Soria.

Merlin Properties is also looking to create a third portfolio following the sale of those two portfolios and whereby unify it with the assets that it does not manage to sell. The Socimi has decided not to award a mandate for these portfolios in order to market them with the greatest discretion possible.

Merlin’s plan

Merlin Properties wants to increase the presence that it has in the office market in Lisbon and acquire other buildings to add to the six properties that it already owns in the Portuguese capital.

The commitment of the Socimi led by Ismael Clemente to the Portuguese market forms part of the slight rethink in the structure of the assets owned by the group.

Currently, office buildings account for 46% of the company’s assets, followed by commercial properties, which represent 40%, and logistics assets, which represent 14%. But given the pull of the logistics market right now (…), Merlin expects to increase the weight of its logistics division to 20%.

At the time of its IPO, four years ago, Merlin reported that logistics assets would account for 15% of its total portfolio.

Original story: Voz Pópuli (by David Cabrera)

Translation: Carmel Drake

El Corte Inglés Puts a RE Portfolio Worth Between €1.5bn & €2bn Up For Sale

21 December 2018 – Expansión

El Corte Inglés is preparing to shatter the real estate market. The distribution giant has engaged PwC to sell a mega-portfolio containing 130 properties with a valuation of between €1.5 billion and €2 billion, which would represent the largest divestment undertaken by the company to date.

The operation includes a large variety of assets, all of which are non-strategic, and includes shopping centres (not large department stores), logistics warehouses, supermarkets, offices and land. Once the period for receiving offers has closed and depending on the offers themselves, El Corte Inglés will reserve the right to reduce the size of the portfolio. According to market sources, the firm’s intention is not to find a single buyer but rather to slice up the assets into packages.

Real estate portfolio

The company chaired by Jesús Nuño de la Rosa is whereby accelerating the divestment plan launched to reduce debt with a view to obtaining an investment grade rating from the ratings agencies over the medium term.

El Corte Inglés is one of the main owners of real estate assets in Spain, with a portfolio worth more than €17 billion, larger even than those owned by the large Spanish Socimis, Merlin and Colonial, whose asset portfolios were worth €12.2 billion and €11.2 billion, respectively, as at June, and those of the large real estate companies such as Amancio Ortega’s Pontegadea, whose assets were worth €8.8 billion at the end of 2017.

With this large exposure to property, El Corte Inglés is taking advantage of the investor appetite in the market for real estate assets to clean up its balance sheet. Last year, real estate investment reached a new record with transactions worth €18.7 billion, including corporate operations, which represented an increase of 46%. Excluding purchases by companies, the investment figure also reached a historical maximum of €10.8 billion, according to data from CBRE.

In the framework of this plan, this summer, the company sold its centres in Parquesur and La Vaguada, both in Madrid to Unibail Rodamco, the largest operator of shopping centres in Europe. Those assets have a surface area of 20,000 m2 each and were sold for €160 million.

Original story: Expansión (by R. Arroyo & V. Osorio)

Translation: Carmel Drake

2018: The Year that Blackstone was Crowned the King of the Spanish Real Estate Sector

17 December 2018 – Eje Prime

Blackstone wants it all and it wants it now. That is the sensation that the US investment fund, the new king of the Spanish real estate market, is transmitting throughout the real estate sector. Its portfolio is worth more than €20 billion after an accelerated period of purchases during 2018.

One of the objectives of the US fund manager has been, precisely, to expand its network in the Spanish real estate sector by entering markets such as the logistics segment. At the beginning of December, the company closed its latest operation in the country with the purchase of a logistics portfolio from Neinver for €300 million.

Nevertheless, the deal involving the giant Neinver is by no means the most significant operation that Blackstone has undertaken this year. Over the last twelve months, the group has taken control of Hispania, to grow in the hotel sector; it has acquired 80% of Testa, to manage thousands of rental homes, and in the logistics sector, it has accumulated 1 million m2 of space with the 55 assets from Neinver and the purchase of an industrial portfolio from Lar España.

Blackstone has disbursed almost €4 billion in the Spanish real estate sector this year, a figure that far exceeds the €127.5 million that it spent on its first investment in the domestic market in 2013. Moreover, that debut was not free from controversy, given that the group purchased 18 residential developments, containing 1,860 social housing units, which the Town Hall of Madrid sold the fund through the Municipal Housing and Land Company of Madrid (Emvsa).

Five years later, Blackstone is one of the largest owners of residential assets in Spain and the leader of the hotel sector. It leapt to first position in the hotel market ranking this year following its successful takeover of the Socimi Hispania. The company paid €1.99 billion for that vehicle, managed by Azora. With that operation, the fund added 46 assets and almost 13,150 rooms in Spain to a portfolio that it started to grow in 2017 with the purchase of HI Partners, the hotel arm of Banco Sabadell, for €630 million. In total, the manager owns 63 assets and almost 18,000 hotel rooms across Spain.

Hispania also provided Blackstone with residential assets worth €230 million, as well as 25 office buildings whose market value exceeds €600 million. Also in that segment, the company added the iconic Planeta office building in Barcelona to its portfolio during 2018, which it purchased from the Lara family in July for €210 million.

Spain, 20% of its global portfolio

Today, Spain accounts for 20% of Blackstone’s global investment. In total, the US firm owns property worth almost USD 120,000 million (€105,387 million) around the world. This real estate giant has become the largest unlisted real estate company in Spain (…).

The superiority of Blackstone’s portfolio in Spain with respect to those of the large domestic real estate firms is clear. The two largest players, Merlin and Colonial, are ranked within the top 15 Socimis in Europe and, yet, their portfolios are worth just half of that of the fund, at €11.785 billion and €11.19 billion, respectively.

Santander’s best friend

As well as mixing with other real estate players, Blackstone has made friends with some of the Spanish financial institutions. The banks, big losers in the previous real estate cycle, have worked hard over the last two years to place their property with the highest bidder, taking advantage of the new boom in the residential market.

In this way, in 2017, Banco Santander agreed with Blackstone the largest operation involving the sale of toxic assets from the real estate sector in the country. The fund manager purchased 51% of Popular’s property, a portfolio with €30,000 million in assets.

The relationship with the bank owned by the Botín family has been strengthened in 2018 with Project Quasar, the real estate firm created by the financial institution and the fund. The joint venture received a capital injection amounting to €300 million in May. Through this vehicle, the transfer of Popular’s assets is being carried out.

In order to place this property into circulation, as part of the operation in 2017, Blackstone also acquired the bank’s servicer, Aliseda, led by Eduard Mendiluce (…), who also manages the Socimi Albirana.

Albirana Properties is one of four residential Socimis that Blackstone currently has listed on the Alternative Investment Market (MAB). The others are Fidere Patrimonio, Corona Patrimonial and Torbel Investments.

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake

Blackstone Obtains a c. €2bn Mega-Loan for Testa

19 December 2018 – Expansión

The Socimi Testa held an extraordinary General Shareholders’ Meeting on Tuesday, where it reduced the number of members of its Board of Directors from 11 to 5. The new governing body includes three people proceeding from the new majority shareholder, the investor group Blackstone.

Testa Residencial is going to sign a mega-loan amounting to €1.943 billion, which it had already agreed in principle after the US fund Blackstone takes control of the rental home Socimi with the purchase of 80.6% of its share capital within the next few days.

The loan, equivalent to the amount that the purchase of the firm has cost the fund (around €1.52 billion) along with the debt held by the Socimi, has been agreed with Bank of America Merrill Lynch, Société Générale and Santander itself, Blackstone’s partner in Testa with 18% of its share capital.

This bank financing was agreed during the first meeting of Testa’s new Board of Directors following the restructuring of the management body conducted hours before, at the General Shareholders’ Meeting, when entry was granted to Blackstone.

By virtue of this restructuring, Testa’s Board has been reduced to five members, from the previous number of eleven. The fund has appointed three representatives to the Board, one of which, Diego San José, will also be the President of the Socimi, a role held until now by Ignacio Moreno.

The other two chairs at the table will continue to be occupied by the current CEO, Wolfgang Beck, and the director Miguel Oñate. In this way, the Board seeks to ensure continuity in the management of the real estate firm and to continue benefitting from Oñate’s experience and knowledge.

New strategy

Despite this continuity in management, at the first meeting of Testa’s Board, with Blackstone in the driving seat, a resolution was taken to approve a new strategy for the company, which had been planning to invest €550 million in the purchase of new rental homes to add to its existing portfolio of 10,700 flats.

The new strategy involves “analysing the eventual purchase of new homes depending on the circumstances at play in each case”. Moreover, Blackstone has raised Testa’s current leverage limit, situated at 35% of its asset value, and has reduced the dividend payment to the “legal minimum”.

In terms of the super-loan, it is being guaranteed by the assets of the Socimi itself, worth €2.3 billion in May when it was considering making its debut on the main stock market, and which will be signed with a two-year term, with the possibility of three annual extensions.

Dividend

Before changing the dividend policy, the Board also agreed to distribute a payment to the shareholders leaving the Socimi as well as to the new shareholders.

Specifically, it is going to pay €7.612 per share to the shareholders that leave the company after selling their stakes to Blackstone, in other words, to BBVA, Acciona and Merlin and to Santander for the proportion of shares that it has also sold.

Moreover, Testa will pay €0.035 per share to those players that will be its shareholders once the sale and purchase agreement has been signed within the next few days, in other words, to Blackstone and Santander, as well as to a group of minority shareholders who own 0.5%.

With the acquisition of this Socimi, Blackstone is strengthening its position as the largest owner of rental homes in Spain, with around 24,000 homes through its various firms and Socimis. Moreover, it is consolidating its position as one of the largest real estate owners in the country, with an asset portfolio worth more than €20 billion.

Original story: Expansión

Translation: Carmel Drake

BBVA Repurchases 166 Bank Branches for €250M

17 November 2018 – Expansión

An unexpected decision from BBVA. The entity, which has made digital transformation the cornerstone of its strategy in recent years, has just repurchased 166 bank branches from Merlin Properties. According to comments made by the Socimi yesterday, the bank, which had been occupying these branches on a rental basis, is going to disburse €252 million to acquire the batch of offices.

The intention of the bank is to gain flexibility for the daily management of the 2,870 branches that it operates throughout Spain, according to sources at BBVA. Since 2007, the entity chaired by Francisco González has embarked on a policy to divest its main assets, such as its former headquarters in Madrid on Paseo de la Castellana, and other iconic buildings in the capital. Between 2009 and 2010, the entity sold more than 1,000 branches to investment funds.

As one of the conditions of those operations, BBVA committed to remain as the tenant of the branches for between 20 and 30 years, with the possibility of extending those rental terms and ultimately repurchasing the properties.

Economic sense

“Some of the branches that have been repurchased are closed and even so, we have still been paying the rent”, explain sources at the bank. That was one of the reasons that caused BBVA to take a different step in its strategy.

In the sector, experts believe that BBVA’s new course of action with the repurchase of branches may respond to a double objective: to reduce recurring costs due to the payment of rent and to take advantage of the upward cycle in the real estate sector with the subsequent ale of these premises. In fact, the bank has just closed the operation to transfer around €13 billion in foreclosed assets to a new company.

The fund Cerberus controls 80% of that joint venture, of which BBVA will retain the remaining 20% in order to obtain possible gains. With the ownership of the branches, the bank could also save time to expand or reduce the size of those premises, according to sources at BBVA.

The Socimi is still the owner of almost 700 BBVA branches. The entity rules out returning to repurchase a new batch from that portfolio, at least in the short term. The bulk of the branches repurchased from Merlin are located in cities with medium-sized populations.

To accelerate its digital transformation, BBVA is planning to close 179 bank branches in Spain at the end of this year. Based on data as at September, the most recent audited information, the entity has already completed more than 80% of the planned adjustment. BBVA’s commitment to digitalisation translates into more business, given that it sells 34% more to those clients considered as online.

The distribution model has changed drastically since 2009 and has focused on digital transformation. In fact, the network is the smallest it has been for 16 years, the latest available data, with fewer than 3,000 branches (…).

Original story: Expansión (by R. Sampedro)

Translation: Carmel Drake

Loom to Open 10 Co-Working Offices in 2019 including a Centre in Barcelona

5 November 2018 – Eje Prime

Loom is on a mission. The company specialising in shared work centres is planning to open a dozen new co-working spaces in 2019. The assets identified, all of which are owned by Merlin, are distributed between Madrid, Barcelona and other Spanish capitals, such as Málaga, Alicante and Valencia, according to Paula Almansa, co-founder and CEO of the company, speaking to Eje Prime.

Currently, the operator is finalising the details for the launch of its third co-working office in Spain. The space, located at number 38, Calle Don Ramón de la Cruz, in the Salamanca neighbourhood of Madrid, will open its doors between May and June next year, after the renovation work on the property has been completed.

Another of Loom’s objectives in the short term is to take its co-working concept to new parts of the country, in particular, to the Catalan capital. “One of the areas that we currently have in mind is the 22@ district”, said Almansa. In this sense, Merlin’s portfolio of assets plays in the company’s favour. In fact, the Socimi has a gross leasable area (GLA) of 31,337 m2, distributed over four office buildings in that district.

One year after it acquired 31% of Loom, the group led by Ismael Clemente has decided to merge it with Twisttt, the brand that it created to debut in the co-working market in 2017. “It is a decision that we have taken together; it did not make sense for us to promote two brands separately when, at the end of the day, we were both pursuing the same objective”, said the director of Loom.

Merlin is now consolidating its position as the main landlord of the company led by the siblings Paula and Jose Almansa, who are already starting to take advantage of the large number of assets that the real estate giant owns all over the Iberian Peninsula. Málaga, Valencia and Alicante are the next destinations in which Loom plans to launch between 2019 and 2020, hand in hand with local partners, followed by Lisbon, “a city that we do not rule out launching in in the future”, said the co-founder.

For now, the company has three co-working spaces in Madrid: one at number 5 Calle Princesa, another at number 11 Calle Huertas and the final centre at number 1 Calle Vandergoten, in the Real Fábrica de Tapices. Nevertheless, the company is not limiting itself when it comes to choosing new locations and it is open to backing areas that “are not considered prime nor are home to too much competition”.

Loom’s project is a long-term venture, although they are aware that the wind will not always blow in their favour. “The co-working industry still has a long way to go, but it is also true that recently, many spaces of this kind have been opened and very high rents are being paid”, explained Almansa, who also believes that it is important to take advantage of moments of crisis to attract more users.

Original story: Eje Prime (by B. Seijo & J. Izquierdo)

Translation: Carmel Drake

Apollo Negotiates Purchase of 14 Offices in Madrid from Merlin

23 October 2018 – Expansión

Apollo is maintaining its interest in the Spanish real estate sector and is considering increasing its footprint in the capital with the purchase of an office portfolio from Merlin. Specifically, the US investment fund is analysing the acquisition of a portfolio comprising 14 office buildings and business complexes located, for the most part, in secondary business areas of Madrid, according to market sources speaking to Expansión.

When consulted on the matter, both Merlin and Apollo declined to comment about the operation.

The offices, which together span a gross leasable area of 126,900 m2, were worth more than €300 million at the end of June 2018. The buildings are located in well-known business districts of Madrid, such as Sanchinarro, Manoteras, Arturo Soria and Avenida de la Ilustración, amongst others. Merlin inherited most of the assets following the integration of Metrovacesa’s real estate business, after the merger of the two groups in 2016.

The assets that Apollo is considering buying include the office building located at number 94 Calle Santiago de Compostela, next to Avenida de la Ilustración, which has a surface area of 13,130 m2; the Euronova business park in Tres Cantos, which has a surface area of 32,663 m2; a property located on Travesía de Costa Brava, in Mirasierra, measuring more than 16,000 m2 and leased to El Corte Inglés; and an office complex comprising two buildings on Calle Francisca Delgado, in Alcobendas, with a combined surface area of 10,896 m2.

Interest

If this operation goes ahead, Apollo, which has put Altamira up for sale, would be committed to Spain again. The investment fund, which made its debut in the country through the European Principal Finance Fund II – the vehicle that acquired 85% of Altamira at the beginning of 2014 and Evo Banco soon after – recently launched the third version of that European fund.

Specifically, as Expansión revealed on 8 October, Apollo has launched the European Principal Finance Fund III, containing almost $5 billion (€4.35 billion based on the current exchange rate). Some of that amount will be allocated to Spain (…).

Original story: Expansión (by R. Arroyo & D. Badía)

Translation: Carmel Drake

Co-Working Spaces in Madrid & Barcelona Rise by 71% YoY to September

23 October 2018 – Eje Prime

Co-working spaces are on a roll in Spain. This global phenomenon in the office market is also reflected in ratios that keep on growing. In Madrid and Barcelona alone, 55,900 m2 of this type of flexible office space was leased between January and September, which represented an increase of 71% with respect to the same period last year.

According to the Flexible spaces in Spain study, compiled by the consultancy firm Cushman&Wakefield, during the first nine months of the year, 26,800 m2 of co-working office space was leased in Madrid and 29,100 m2 in Barcelona.

This growth is the result of the commitment to co-working spaces by large corporations. According to explanations provided in the report, “at the beginning of the 2000s, small spaces predominated, occupied by self-employed people and freelancers; nowadays, those spaces still exist, but the potential of the co-working phenomenon has led to companies such as Banco Santander (Openbank), Accenture and Everis, amongst others, also using flexible spaces for some of their activities”.

The boom in flexible and shared office space intensified in 2014, the first year of the recovery. Besides large corporate groups, which rely on this office model for optimising their real estate resources and the productivity of their employees, international co-working giants have arrived in Spain in recent years to create supply to meet the growing demand.

WeWork and Spaces (owned by Regus), global specialists in this segment, already have expansion plans for the domestic market. The same is happening with the main Socimis, such as Merlin and Colonial, which, in addition to promoting brands that manage co-working spaces, are also adapting several of their properties to convert them into flexible offices.

Madrid and Barcelona are the focus of this market. WeWork already has 35,000 m2 of office space leased in the two capitals. It is managing one fifth, 7,000 m2, from 22@, the technological hub of Barcelona, one of the epicentres of co-working in Spain. Spaces is planning to grow in the same district, where it already has 6,000 m2 of space across several buildings.

In terms of the large Spanish real estate companies, Merlin and Colonial are, to date, the firms that have backed this new trend most convincingly Both have entered the sector by purchasing or teaming up with specialist companies this market. Colonial acquired the brand Utopicus at the end of 2017, as revealed by Eje Prime, and now has a commitment to open ten new co-working centres from 2019, which will span a total of 15,000 m2 between Madrid and Barcelona.

Meanwhile, Merlin has launched the brand Twisttt, through Loom House, a Spanish shared office manager in which the Socimi owns more than 30%. Other domestic players such as Inmobiliaria del Sur have already made investments in this sector. In October last year, the Andalucian real estate firm launched iSspaces, a co-working centre in Sevilla measuring 1,800 m2 (…).

The identity of the next players to enter the stage is a mystery, but the fact that co-working has a long journey ahead in the office market in Spain and around the world is very much a reality.

Original story: Eje Prime (by J. Izquierdo)

Translation: Carmel Drake

El Corte Inglés & Merlin Negotiate an Alliance to Create a Real Estate Giant

11 October 2018 – El Confidencial

El Corte Inglés wants to fulfil the commitments it has made to the financial ratings agencies as soon as possible. At its recent, first-ever bond issue, it promised that it will reduce its €4 billion debt by half over the next 18 months. To this end, Jesús Nuño de la Rosa, President of the distribution group, has decided to expedite the sale of some of its real estate assets, the jewel in the crown of the holding company. According to financial sources, the company is negotiating an operation with Merlin Properties, the largest listed company in the real estate sector in Spain.

The same sources have confirmed the conversations between Jesús Nuño de la Rosa and Ismael Clemente, the CEO of Merlin Properties, the real estate Socimi in which Banco Santander holds a stake and which has assets under management worth €7.7 billion as at 30 June 2018. The negotiations are very open and cover all of the property types that comprise El Corte Ingles’s portfolio, appraised by Tinsa at €17.1 billion for the most recent annual report. Sources close to Merlin declined to comment on this information, whilst official sources at El Corte Inglés indicated that “the firm has not reached a global agreement with any operator”.

According to other sources, the most recent meetings have focused primarily on the purchase and management of the logistics assets owned by the department store company, which were already offered to several agents in the sector almost two years upon the advice of Morgan Stanley. Those conversations did not prosper due to the diversity of the portfolio, which comprises shopping centres, shops and logistics docks, some of which were worth very little at the time and so distorted the value of the portfolio.

But now, having made a commitment to Standard & Poor’s, Moodys and Fitch to reduce the group’s debt, De la Rosa has set himself the priority of divesting all of the assets needed to reduce the liability by around €2 billion. Through that, it will manage to reduce the ratio of debt to operating profit or EBITDA to 2x, compared to the current figure of 4x, which would give it an investment grade rating.

That would represent a very considerable change, which would allow the entity to obtain financing in the markets at cheaper interest rates – now it has paid 3% – given that its bonds could be purchased by all types of investors and not only by those looking to speculate such as now, given that fund managers that only acquire fixed income or equities with a minimum solvency and without risk of default are prohibited from subscribing to below investment grade securities.

Merlin Properties is the entity that is holding the most advanced negotiations with El Corte Inglés, which wants to close an agreement before the end of 2018 or, before 28 February 2019, at the latest, the date that marks the end of its financial year. The current proposal involves the acquisition of some of El Corte Inglés’s real estate assets and the signing of a contract as the manager of the portfolio. The distribution group’s portfolio comprises 94 properties, most of which are in Spain, of which 87% are shopping centres.

Of the total portfolio whose valuation amounts to €17.1 billion, almost €15 billion correspond to points of sale. But the physiognomy of those centres is very heterogeneous, as shown by the fact that whilst four of them are worth €2 billion, most of the assets could be sold for between €100 million and €200 million. But almost one third of the total are what El Corte Inglés itself calls unproductive. In other words, sites where they lose money. The group has tried to convert them into outlets for large brands, but the truth is very few of them have the characteristics to be able to be transformed into places of the calibre of Las Rozas Village and Factory.

In terms of the points of sale considered unproductive, the following stand out: Leganés (Arroyosur), Jaén, Oviedo, Elche, Guadalajara, Talavera, Albacete and Eibar. In addition to these shopping centres (which make losses), the company has another seven sites breaking even, such as those in Cádiz, Castellón, Córdoba and Arroyomolinos. The value of these shopping malls, as they are known in the sector, is more doubtful, given that a sale and leaseback contract could not be signed since the revenues do not cover the debt. Moreover, given their physical structures, most of them do not have windows, their transformation into offices, the main market of Merlin Properties, or hospitals would be more difficult.

Of the €7.7 billion in assets that Merlin manages, €5.5 billion correspond to offices, €934 million to shopping centres and €403 million to commercial premises on high streets.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake

Spain’s Large Socimis are not Perturbed by Podemos’s Proposed Tax Legislation

14 October 2018 – La Información

The Socimis, one of the great tax regimes currently booming in our country, suffered a serious blow on Thursday after an agreement was published between PSOE and Podemos to push ahead with the State’s General Budgets. As a result, the Socimis are going to have to pay tax (at a rate of 15%) on any profits that they do not distribute as dividends, in other words, the funds that remain in the companies to increase their capitalisation. But, which companies are going to be most affected? Only the smallest ones.

In recent months, the large real estate companies on the Ibex and the Continuous Stock Market have been distributing significant dividends, in some cases even exceeding their accounting profits by two or three times. Therefore, the new measure will not affect them, given that only undistributed profits will be taxed. By contrast, the small entities that are listed on the Alternative Investment Market – where they have their own segment – barely exceeded the obligatory dividend distribution of 80% of the profits for that type of company in most cases.

If we take Merlin – a giant in the tertiary sector –by way of example. Last year, it obtained a profit of €114.5 million (after discounting the appreciation of its assets) and it dedicated 205% of its profits to dividends. Even high figures were recorded by Colonial, which distributed 267% of its profits to its shareholders, and Lar España, which is listed on the main stock market, and which distributed 236% of its results after taxes to the owners of its shares.

By contrast, the small companies on the MAB complied with the law in a comprehensive way but without distributing such significant figures. Such was the case of AP67, a Socimi whose assets are primarily residential, commercial and office-based, which distributed just over €240,000 of its total profits of €300,000.

Why do the small companies only distribute the legal minimum? Most of the companies listed on this market are owned by a small number of shareholders, normally those who have been with the entity since the beginning and, therefore, they have no commitment to the owners of those shares. In fact, the movement in shares is so small in the majority of cases that the volume is almost nil.

By distributing 80% of their profits as dividends, they pay tax of up to 25% on those earnings, whilst the remaining 20% is posted to reserves and, previously, there was no requirement to pay any tax on that. With this proposal, the money that is not distributed to the shareholders (in other words, that 20%) would be subject to a tax rate of 15%.

For tax experts, these measures may scare off foreign investors, especially funds, which regard Spain as a good opportunity for investing after the framework for Socimis was brought into line with those governing REITs in countries such as France and Germany. Moreover, “other countries have an advantage over Spain going back many years and they offer more beneficial tax frameworks”, something that the new tax will only serve to dent in the Spanish system.

In light of the possible approval of the draft presented on Thursday by Unidos Podemos and PSOE, the Socimis “will distribute all of their profits as dividends to avoid the double taxation of the same money”, said a high-profile tax advisor consulted by La Información.

Original story: La Información (by Lucía Gómez)

Translation: Carmel Drake