Tag: Operación Canalejas

Irea: What Led to Last Year’s Record Inv’t in Spain’s Hotel Sector?

12 January 2018 – Hosteltur

Last year saw investment in the Spanish hotel sector break all records, with investors spending €3.907 billion on transactions involving existing hotels, properties for conversion into hotels and land for the construction of hotels. That figure represents an increase of almost 80% with respect to 2016, according to Miguel Vázquez, Managing Partner of the Hotels Division at Irea; and was the result of the sale of 182 establishments comprising 28,813 rooms, with an average price per room of €119,000, compared with an average price per room of €92,000 in 2016 and of €85,000 in 2015, which represents an increase of 40% in just two years (…).

According to the Irea Director, this investment boom was driven “not only by the greater number of operations but also by the fact that the prices of the assets sold were higher as they were coming onto the market after being repositioned in recent years. The types of investors have also changed, as have their demands in terms of returns: around 5-6% in the urban segment and around 6-7% in the holiday segment, given that we are no longer seeing as many opportunistic funds entering the market (…)”.

In fact, he has quantified that “more than 2,000 holiday hotels still need to be renovated and repositioned. There is a wide range of opportunities that the funds are focusing on, in search of agreements with small chains at times of generational changes and when they are interested in selling…or not, because the strong buyer pressure is continuing to motivate owners who are not typically sellers to put their assets on the market, especially independent operators. And that is leading to the entry into the market of large holiday hotel portfolios, which is what investors are backing Spain for, as well as independent hotels”.

Forecasts for 2018

And after “the stratospheric data of 2017”, in the words of Vázquez, “the inertia with respect to 2018 is very positive, the year is starting off very well”, although he thinks that hotel investment will moderate and “the effect of the uncertainty in Cataluña will make it very difficult for us to see a repeat of last year’s figures”.

Nevertheless, he cites three operations that should be resolved during the first few months of this year: the completion of the purchase of the Alua portfolio by Hispania (…); the sale of a portion of the Ayre hotel portfolio, which is currently on the market; and the launch of a hotel Socimi by a financial entity with 15 establishments, which could take place soon.

Vázquez estimates that the investments already committed for the first few months of the year identified by Irea amount to €4 billion, comprising mainly new build projects, taking advantage of the increase recorded in the purchase of land for the construction of hotels, with operations in Bilbao, San Sebastián, the south of Tenerife, Barcelona and Sevilla.

In terms of the strengths in the market, besides the repositioning of hotels that is leading to an improvement in competitiveness and the appeal of Spain as a destination, the Director highlighted “the magnet effect of qualified investors such as Blackstone, which are reinforcing Spain as a destination for hotel investment” (…).

Weaknesses: overheating

Vázquez highlighted the overheating of prices that is happening in destinations such as the Canary Islands, where the average (sales) price per room has increased to €152,000, compared to the national average of €119,000, although, it should also be taken into account that “the operation that carried the most weight in terms of those figures was Sabadell’s sale of HI Partners to Blackstone (…), involving high quality, repositioned hotels, which increased prices”.

In fact, the most expensive prices were recorded in Barcelona and Madrid, which holds the record for the sale of the most expensive room with Operación Canalejas, for approximately €1.4 million, whereby exceeding the figure of €1.2 million recorded during the sale of Hotel Villa Magna (…).

In the Balearic Islands, as the director acknowledges, “there is still more margin because there are a lot of hotels there that still need repositioning and, although there is price inflation, it is not as marked as in the Canary Islands, which benefit from having year-round demand and five years of high occupancy rates, which drives up prices”.

Original story: Hosteltur

Translation: Carmel Drake

RE Funds Puts Their Investments On Standby

27 January 2016 – Expansión

The major European real estate funds have strict internal rules and so are not willing to make political assessments. But the firms that work with them confirm that these funds demand the same rigour that they apply internally from the governments in the countries in which they invest. Investors need stable legal frameworks and “are starting to feel nervous”, say their intermediaries in Spain.

Juan Antonio Gómez Pintado, President of the property developer Vía Célere, which has recently invested in Spain in partnership with several overseas funds, says that “operations are currently on standby”. “Given their Anglo-Saxon mentality” he says “since 20-D, investors think that the parties that received the most votes will join forces, but the issue is getting more complex and so they are getting nervous”.

The President of Vía Célere says that “the funds are extrapolating what has happened in Cataluña. “It is not that they doubt Spain’s economic viability, they are still evaluating operations, but they are waiting to see what the outcome of the (latest political) agreements will be”, he said.

And this question mark over the future Spain’s government is just one of several uncertain scenarios affecting the country, such as the Catalan independence process and the change in the local governments in Madrid and Barcelona.

The Managing Partner of Cushman & Wakefield in Spain, Oriol Barrachina, said that the political change that has caused the greatest concern for overseas investors has been the change in local governments. The arrival of Manuela Carmena and Ada Colau (last May) stalled projects, such as Operación Canalejas in Madrid and the (renovation of the) Deutsche Bank building in Barcelona.

The Vice-President of CBRE in Spain, Enrique Martínez Laguna, says that “any situations involving uncertainty, such as the one we are currently experiencing, impacts investor confidence, both in the real estate market as well as in other sectors. And the CEO of Neinor, Juan Velayos, says that “it would be much simpler and better for everyone if we could work in a more certain (political) environment”.

Original story: Expansión (by Marisa Anglés)

Translation: Carmel Drake

Axa Buys The Cine Rex Building On Gran Vía For €42M

11 December 2015 – El Confidencial

Another high profile operation on Gran Vía. Axa Real Estate, the real estate arm of the French insurance company, has just added another property to its portfolio on the most sought-after thoroughfare in Madrid. This week, the company has reached an agreement to acquire the building that houses Hotel Rex and the historical cinemas of the same name, for €42 million.

The entity won a sales process that was launched at the start of the year by the firm Equity Inmuebles SL, controlled by the Mazon, Calero (owner of the Vincci hotels) and Briones families, which opened the bidding at around €28 million, but which, thanks to the huge appetite that exists to purchase assets on this street, has ended up selling the property for 50% more, according to comments made by several sources in the know.

This is the second operation of this kind that the French firm has closed on this thoroughfare, which last year acquired the former Avenida cinema, at number 37 Gran Vía for almost €80 million. It paid that high figure thanks to the “sweetener” afforded by having the Swedish fashion chain H&M as a tenant; it opened its most iconic store in the capital there in 2009.

For this new operation, Axa’s plans to remodel the building, which measures around 9,000 m2 and to operate it by combining its two current uses as a hotel and retail space. Moreover, the entity is willing to respect the protected nature of the cinemas, which have been closed for several years and which occupy a surface area of almost 700 m2.

Currently, the building houses a 3-star hotel with 147 rooms, managed by the owners of the property. Axa’s idea is to open a high-class establishment, which will add to the resurgence that Gran Vía is experiencing thanks to the boost that Operación Canalejas is generating in the whole area.

Hotel fever

The real estate development, which is being led by OHL Desarrollos, includes the opening of the first Four Seasons hotel in the capital. The hotel chain is proving to be a real magnet, attracting brands of high standing to the Gran Vía area. In fact, experts expect that Grupo Wanda will end up choosing a chain of such standing to manage the hotel that it will open in the Edificio España, although for the time being, the only clue is that it will be a 5-star establishment.

The majority of the new hotels being planned on this thoroughfare are 4-star and 5-star properties, such as: the one due to be opened in the building on Calle Montera, 25-27, owned by the Díaz Estrada family; Gran Vía, 10, which houses the Ministry of Education and which has been acquired by Generali for conversion into a hotel operated by Vinnci; and the Barceló, which has been opened in Torre de Madrid in Plaza de España.

Through this operation involving the Edificio Rex, Axa Real estate joins several other high profile players in the hotel business in the centre of the capital and diversifies its interests, which until now have been very concentrated in the office sector, above all after it acquired 381 Santander branches from the Socimi Uro and after it purchased the headquarters of the Generalitat de Catalunya.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Madrid Leads Spain’s Property Development Drive

23 October 2015 – Expansión

The Barcelona Meeting Point, which has been held this week and the Autumn edition of SIMA, which starts in Madrid today, are both proving to be of particular interest to the Spanish real estate sector. And it is no wonder, given that those two regions are leading the way in terms of property development at the moment. But the reactivation of the real estate sector is not proving to be homogeneous: it is slow, uneven and focused on certain large urban areas. Investment funds and real estate companies have acquired offices and commercial assets amounting to €10,800 million so far in 2015, already exceeding the total figure invested in 2014 (€10,200 million). And investors’ interest, which began in the tertiary sector, is now extending to the residential sector, at the hands of a winning formula: the partnership of large investment funds and local property developers.

Interest in ‘ready-to-build plots’ (‘suelo finalista’) has been increasing in Madrid since the end of 2013, however, given the shortage of land in the capital, attention is now starting to focus on other development land (‘suelos con gestión de desarrollo previo’), according to findings from CBRE in its latest report Market View Residencial. The lack of property developments to meet future demand is already a concern for the sector, and that perception has only increased since the change in the municipal government, given that the brakes seem to have been put on several projects: Chamartín, Mahou-Calderon and Canalejas.

According to Servihabitat’s latest report about the residential sector, house sales will have increased by 25.6% by the end of this year, to total more than 400,000 operations. The entity expects the rising trend to continue in 2016, with more than 460,000 house sales, up by 14.5%. As a result, it expects house prices to rise by 2.6% this year and by 6% in 2016. All of the experts agree that the lack of land will end up impacting house prices.

In the centre of the capital, large one-off operations continue to abound, such as the ones closed last year by Domo Gestora, which acquired a plot of land on Raimundo Fernández Villaverde for €111 million; and Ibosa, which was awarded the former Metro depot in Cuatro Caminos. Another highly anticipated operation is the sale of a plot of land on Calle Padre Damián, 52, owned by the Ministry for Foreign Affairs, measuring 15,000 m2, where 200 homes are going to be built. The auction date has not been set yet, but Domo, Larcovi (with Ruiz-Larrea Architects), Comunidades Santa Gema, and the strong partnership between Los Jardines and El Olivar, have created four cooperatives interested in this plot worth around €100 million.

In terms of other future projects, within the M-30 radius, all eyes are focused on Operación Chamartín (17,500 homes), Operación Campamento (10,700 homes) and the smallest project of all Operación Calderón (2,000 homes). For Samuel Población, National Director of Residential Property and Land at CBRE, all three are very interesting projects and, in his opinion, Chamartín is the most necessary. “It will be the vertebral axis between the Castellana and the developments in the North, it has the blessing of the owners and it will take almost 20 years to complete. It doesn’t make any sense, either commercially or development wise, to delay it any longer”. However, the new mayoress of Madrid considers that this urban planning project cannot be resolved “in two months” and has said that no decision will be taken until after the general elections. This uncertainty, which will exist until the final version of the General Plan for Madrid is reviewed and the new Town Hall’s plans are presented in more detail, is not good for the sector, at a time when real estate investment has shot up by 51%, says Samuel Población, who also points out that, the project now known as Distrito Castellana Norte is planned in several phases, which means that its launch is not incompatible with subsequent adjustments.

Scarcity on the horizon

The lack of supply has been felt most notably in the PAUs (‘Proyectos de Arquitectura y Urbanismo’ or Architecture and Urban Planning Projects)  in the north of Madrid: Sanchinarro, Las Tablas, Montecarmelo and Arroyofresno; and is starting to become apparent in Valdebebas. Currently, around 5,000 homes (unsubsidised and subsidised) have been delivered or are about to be in that development alone, out of a total projected number of 13,500. The Junta de Compensación is selling new plots for the construction of social housing, with plans for 1,000 subsidised homes to be built; after that, the supply of protected land in Valdebebas will have run dry.

In the south of the city, the Ensanche de Vallecas area is also showing signs of the shortage: in 2007, there were almost 3,000 homes for sale there, and now there are just 150.

In the southeast, other important developments are planned, such as Valdecarros (48,000 homes), Los Ahijones (15,400 homes) and el Cañaveral (15,000 homes), however there is not yet sufficient demand in those areas to match the vast supply.

Madrid’s residential market is a very polarised and so, despite the fact that there appears to be stock, there are pockets where scarcity is just around the corner.

Luis Corral, the CEO of Foro Consultores, reminds us that  improvisation does not work in the housing sector: “To develop homes, land needs to be created and that takes time, which means developers need to have developable land in their portfolios”.

Original story: Expansión Special ‘Casas’ Supplement (Loreta Ruiz-Ocaña)

Translation: Carmel Drake