Oaktree Expresses Interest in Buying Sabadell’s Real Estate Arm

6 July 2018 – Cinco Días

The Spanish house building business is continuing to spark interest amongst international private equity firms. This was demonstrated yet again by the recent agreement signed between the fund Oaktree Capital and Solvia – the real estate arm of Banco Sabadell–, which created a joint venture to purchase land from Iberdrola, in a deal that may be extended in the future into an even greater alliance.

In fact, the US fund has just informed Sabadell of its interest in acquiring a majority stake in its property development business, in a company called Solvia Desarrollos Inmobiliarios, according to two sources in the financial sector. In this way, it would take another step forward in its strategy to position itself in the house building business.

For the time being, after closing the agreement in June to create the real estate joint venture, contact has now been made between the parties with a view to a possible purchase. Oaktree is expected to specify the details of its bid over the next few days and whereby the sales process would begin. Sources at the bank deny knowledge of any negotiations or offers at the moment. Meanwhile, Oaktree declined to make any comment.

Solvia is currently the parent company of Sabadell’s real estate business, which is divided into three arms. On the one hand, Solvia operates as a servicer to the bank; it also has a real estate agency division; and, finally, it has a property development arm, in the form of Solvia Desarrollos Inmobiliarios, which is the part that Oaktree is interested in, to develop land for own and third-party projects and to build homes.

Last month, Solvia and Oaktree announced that they have created a joint venture in which the fund owns 80% of the capital and Sabadell, through its subsidiary Bitarte, controls the rest. This company, which will be dedicated to identifying, acquiring, developing and marketing plots of residential land in Spain, received approval from the European Competition Authorities in June. The joint company’s first operation is the purchase of land belonging to Iberdrola, for almost €100 million, on which to build homes in several places across Spain.

But financial sources explain that Oaktree wants to deepen its commitment to house building and, for this reason, wants to purchase Solvia’s property development business from Sabadell. It is not known whether the bank is open to bids from the fund or not.

Oaktree’s intention through this corporate move is, primarily, to acquire a team with experience in the house building sector in Spain, according to the same sources. The US firm, meanwhile, has huge financial capacity and also owns several important real estate assets in Spain, acquired from financial institutions such as Bankia, the German bad bank and Sareb. In Spain, it has a subsidiary Sabal, led by Eduardo Bóveda, to manage those bank portfolios.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

British Firm Collegiate Plans its Arrival in Barcelona After Opening Student Halls in Madrid & Valencia

9 January 2018 – Eje Prime

Spain is already a reference country in Europe for investment in student halls, as evidenced by the entry of foreign capital into the domestic market. The latest company to look for returns in this sector is Collegiate. The British firm is searching for an enclave in Barcelona, after opening student halls in Madrid and Valencia. The company has already announced that it plans to make its debut in the Catalan capital “soon”.

Collegiate is a company specialising in the management of student residences with a notable presence in the British Isles, where it owns assets in most of the capital and large cities. In Spain, the firm arrived first in Madrid with a hall of residence in Aravaca with 213 prime private rooms, whilst in Valencia, it entered in the maritime area with 350 rooms.

Both buildings have common areas that are typical for these types of prime assets, including a swimming pool, a fitness room, a cinema and a study area with library. The price per person in the Madrilenian hall ranges from €204 to €238 per week, depending on the features of the room, whilst staying in the building in Valencia costs between €196 and €204 per week.

Currently, Collegiate is embarking on an expansion process across Europe, as evidenced by its upcoming openings in Portugal, in Porto, and in another town with a great university tradition in the neighbouring country, Coimbra, which will be added to the hall of residence it recently opened in Lisbon. In Spain, nevertheless, its next major project is yet to come, given that the company has announced its upcoming arrival in Barcelona, a destination city for students from all over the world.

Investment in student halls amounted to €560 million in 2017 

The commitment from this international company to Spain comes in addition to those that have been made over the last year by a market that is clearly booming. In 2017, investment in student halls grew to €560 million, according to data from the real estate consultancy JLL. The significant growth, which compares to the barely €50 million that was invested in 2016, was driven primarily by transactions known as Erasmus and Rio.

Project Erasmus involved the sale of the portfolio of assets owned by the Resa Group, the largest in the country, to Greystar in an operation that was appraised at around €500 million. As a result of the purchase, the manager now owns 37 assets (33 of which are already operational) in Spain and is supported financially by a joint venture formed by the international investment funds AXA Real Assets and CBRE Global Investment Partners.

Meanwhile, the operation known as Rio involved the British manager GSA (Global Student Accommodation), which acquired Nexo Residencias from Threesixty Developments, a company owned by the fund Oaktree Capital, as part of an investment plan in which it plans to spend €300 million over the next five years. In addition, another recognised player, the investor group Catella, has also set its sights on this alternative investment business in Spain, with the acquisition of La Campana hall of residence in Pamplona.

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake

GSA Buys Oaktree’s Student Halls In Madrid & Barcelona

21 June 2017 – Expansión

GSA (Global Student Accommodation) has reached an agreement with Oaktree Capital to purchase its student halls of residence in Spain (which are owned and operated by an entity called Nexo). This operation, whose financial details have not been revealed, comes less than a year after GSA purchased Oaktree’s platform of halls of residence in the United Kingdom, comprising 7,100 beds, back in September 2016.

Both operations have been advised by the real estate consultancy firm JLL.

Nexo is one of the largest developers and operators of student halls of residence in Spain and currently owns a portfolio of approximately 2,300 beds located in Madrid and Barcelona – split between operational assets and those under construction.

The firm has three operational halls of residence in Madrid – Galdós, with 370 beds; El Faro, with 358 beds; and Claraval, with 186 beds – as well as the Lope de Vega University Residence, also located in the Spanish capital, which will open its doors in September 2017 and which will house 468 students, from both Spain and overseas.

The operation also includes two additional projects under development in Barcelona, which will be ready for use in 2019 and which increase the total number of beds to 2,234. The first centre, Barcelona Sants, will have 348 beds and the second, Campus Sur Diagonal, will have 504 beds.

Nicholas Porter, founder and President of GSA, said that the firm is continuing to fulfil its plans for rapid expansion in Europe with its focus on higher education markets.

Interest from funds in this segment has increased in recent months. In order to benefit from this situation, Azora and Grupo March have put RESA up for sale – it is the largest student residence management platform in Spain, with 9,000 beds – and interest has already been expressed by Axa, Round Hill, the Canadian pension fund CPPIB, CBRE Global Investment and Partners Group, amongst others.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

Student Halls In Spain: A Wise Alternative Investment?

17 February 2015 – Idealista

When we talk about real estate investment in Spain, we tend to mean the purchase of offices, hotels and shopping centres. Nevertheless, there is another type of property that may also generate high returns: student halls of residences. However, unlike in other European countries, this accommodation does not totally convince investors looking for assets in Spain. The lack of companies that know how to optimise them, and the shortage of the ideal product are some of the reasons why no transactions are being closed in this segment, despite considerable interest.

Spain had around 1.41 million students enrolled in universities during the academic year 2013-2014, according to the Ministry for Education, Culture and Sport. That is, a little over 3% of the Spanish population were university students. This percentage places Spain ahead of other countries such as Germany and France. The majority of these students (77%) studied courses in their home province, but 20% moved to another province to study and around 3% were from overseas.

Delving more deeply into their lifestyle: approximately 64% of university students live at home with their parents or other family members. At the other extreme, those who live away from home only have two options: rent (either in a shared house or on their own) or live in halls of residence. Specifically, only 2.8% choose to stay there.

In the opinion of the experts consulted, these figures are justified by the “very low” availability of public university halls. “Although there are significant cultural differences, certain aspects indicate that the market for university halls of residence in Spain will have to converge with that of the rest of Europe”, says a report published by JLL.

The consultancy firm is convinced by its analysis that the implementation of the Bologna education reforms will promote cross-border studying between European universities, “which tend to have much high percentages of students living in halls”. In Spain, it is normal for students to opt for this type of accommodation during the first and second years only.

“The flow of students travelling to study in other countries will increase over the coming years and not only in relation to Erasmus placements”, says Patricio Palomar, Director of Office Advisory and Alternative Investment at CBRE. In his opinion, issues such as the language (Spanish), the lifestyle and the affordable prices in comparison with neighbouring countries, are just a few of the attractions that draw many foreign students to choose Spain as their destination.

The main drawbacks

Unnim, the entity created from the merger of Cajas de Manlleu, Sabadell and Terrassa, is active in this market. The bank, which was acquired by BBVA in 2011, inherited this line of business from Caixa Terrassa. The former caja constructed its first hall of residence on the Avenida Parallel, 101, in the Poble Sec neighbourhood of Barcelona back in 2007.

According to the latest data available for Unnim, this business line generated a return of 7%. Sources in the sector explain that the net return on these types of assets can reach 10%, well above the rates offered by offices, hotels and shopping centres. In countries such as the UK and USA, this business generates returns of between 11% and 15%.

Juan Manuel Ortega, Director of Investment Offices at JLL, recognises that British firms are over-valuing these types of assets in Spain. These investors are looking for halls of residences that are larger than 5,000 m2 and that have between 60 and 150 rooms. Palomar also acknowledges this trend “the same funds that operate in the UK for example are looking (for opportunities) in Spain. The problem is that the same product is not available in other countries”.

Palomar maintains that student halls in Spain are obsolete and that many of them are stuck in the 1960s. That does not happen in cities such as Amsterdam where student accommodation is modern, hotel-like and less than 10 years old.

Another one of the pitfalls that affects this business is the ownership of these spaces. Most belong to the public universities, many of which have serious financial problems and cannot afford to finance the investment needed to optimise the assets. At the same time, they cannot sell the land and allow private companies to enter the sector.

This has a very direct effect on competition; it is low, which does not lead to an improvement in the facilities either. Similarly, experts recognise that the administration of these complexes is not simple, they require professional management.

Nevertheless, Palomar states that new student halls of residence are appearing in the outskirts of cities and near private business schools. “I think Spain should focus on other kinds of tourism, beyond the holiday market; educational and health tourism (have significant potential)”.

A trickle of transactions

The lethargy in this market is such that transactions are very scarce. The last known deal involved the purchase of the Galdós halls of residence in Madrid in 2012. The British firm, Knightsbridge Student Housing paid €20 million for the property, it was the first acquisition made by the company outside of the UK. Knightsbridge Student Housing was created in 2010 with the backing of Oaktree Capital Management.

Another of the most talked about transactions involved Lazora (Concha Osácar) when it acquired the Resa Group in 2011. Resa was created in 1994 and currently manages more than 8,000 beds in 32 halls of residence. The construction company Acciona also has give halls of residence (in Albacete, Cádiz, Castellón, Lleida and Murcia), which it has tried to sell in the past.

Further proof that this branch of real estate activity in Spain is still light years away from what is happening in other countries, is that Socimis dedicated to student accommodation already exist overseas. In 2013, GCP Student Living constituted the first REIT (Real Estate Investment Trust) in the UK.

Original story: Idealista (by Estefania Fonseca)