Tag: political uncertainty

Spanish Real Estate Sector Strong Despite Political Risk

9 October 2019 – By the end of this year, Spain will have had four elections in as many years. While it doesn’t reach anywhere near the level of Italy, which has had 45 governments since World War II, the uncertainty would normally be expected to impact growth.  In addition, Catalunya’s independence movement did, in fact, have a temporary, but major impact on growth in Barcelona.

Nevertheless, market sources say that major real estate players have learned to live with some level of political risk.  And things are not just complicated in Spain.  The United Kingdom is going through the long, drawn-out and self-inflicted trauma of Brexit. Italy is still having its usual political problems and the United States are going through the never-ending turbulence of having Donald Trump as their president.

Spain, in terms of economic and legal stability, is still seen as a relatively safe harbour, especially, since all of the main Spanish political parties are committed to remaining in the eurozone.

Original Story: Cinco Dias – Alfonso Simón Ruiz

Adaptation/Translation: Richard D. K. Turner

JLL: Foreign Investment in Catalan Real Estate Rose by 137% in 2018

15 June 2019 – La Vanguardia

According to data published by the real estate consultancy JLL, overseas investment in the Catalan real estate sector rose by 137% during 2018, despite the fact that total investment fell from €1.13 billion in 2017 to €995 million in 2018.

In fact, domestic investment plummeted by 85% to €363 million from €859 million, but almost all of that decrease was offset by the arrival of funds from overseas. Of those, investment funds deposited 57% YoY more in 2018 (€574 million) and Socimis invested 47% YoY more (€326 million).

Having overcome the political uncertainty seen in 2017, international investors showed their commitment to Cataluña in general and Barcelona in particular, not least because the city has been declared as one of the world’s influencer cities by JLL.

In the business context, the city is particularly attractive for investment in the office, logistics and commercial sectors, ranking in first place in all 3 markets when compared with its European counterparts.

Specifically, the Catalan capital’s offices generate yields of 3.75%, whereby outperforming Milan (3.6%), London, Madrid and Stockholm (all 3.5%). Its logistics assets generate returns of 5.10%, compared with 5% in Madrid, and its shops in central locations generated yields of 3.25% in Q1 2019, compared with Madrid (3.15%) and Paris (2.75%).

All of this is welcome news for the region that has been hit hard by the political uncertainty of recent years.

Original story: La Vanguardia (by Pilar Blázquez)

Translation/Summary: Carmel Drake

Ministry of Development: 100,733 New Build Permits were Granted in 2018

28 February 2019 – Idealista

In 2018, 100,722 building permits were granted to construct new homes, 25% more than a year earlier; a figure not seen since 2009, when 110,849 permits were granted, according to data from the Ministry of Development. Of the total figure, 79,453 were granted to build blocks of flats and 21,254 to build houses.

In this way, building permits have now recorded five consecutive years of increases. In 2013, they hit a historical low (34,288 units), a figure that represented a decline of 96% from the peak year of 2006 when 865,561 permits were granted.

Despite the good results in 2018, the construction sector considers that a healthy market is one that is capable of generating around 150,000 new work permits per year.

Why is it so hard to build 150,000 homes per year?

Daniel Cuervo, Director at Asprima, points to several factors:

– Building permits take a long time to be granted (…). In general, Town Halls take 14 months to grant a licence, on average (…).

– Financing has returned to the real estate sector, but it is not immediate (…).

– Urban planning in Spain is paralysed due to the high level of legal uncertainty (…).

Meanwhile, Daniel del Pozo, Director at Idealista/News, provides some additional explanations:

– Lack of awareness about how the market works and of the real demand by the Public Administration (…).

– The main land portfolios are owned by the banks, Sareb and the funds (…) which are all waiting for prices to rise before releasing the most sought-after plots.

– The political uncertainty, the threats of interventionalism and/or changes in regulation in the real estate market also play their role (…).

Original story: Idealista 

Translation: Carmel Drake

Testa’s Shareholders Approves its Debut on the MAB

16 July 2018 – Expansión

The General Shareholders’ Meeting of Testa Residencial has approved its debut on the Alternative Investment Market (MAB), which will likely happen before the end of this month (July) through the listing system, according to reports from sources at the company speaking to Europa Press.

The rental home Socimi in which Santander and BBVA hold stakes, had initially planned to make its debut on the main stock market in June, but delayed that move until the end of September due to the political and stock market uncertainty. It has now decided to make its debut on the MAB at the end of this month to comply with Socimi regulations. In this way, in order to not lose its status as a Socimi, which establishes a period of two years from constitution to debut on the stock market, Testa Residencial will list on the MAB before the end of this month, although it does not rule out making the leap onto the main stock market in a second phase.

Through the listing system, the company can request access to trading without the need to launch a public sale offer (OPV). This formula gives its shareholders the opportunity of having their shares trade on an organised market without having to place the shares with new investors. Also, there will be no reference price, but rather the price will be determined based on the purchase and sales orders received during the adjustment period.

Testa Residencial became the second company after Azora to decide to delay its planned debut on the stock market, although in the case of the real estate asset management company, the delay was motivated by the takeover bid that Blackstone formulated for Hispania, one of its main clients.

In the case of Testa, the firm had initially planned to start trading on the stock market during the second half of June, and one of its possible IPO dates was 22 June. At the end of May, and due to the political and stock market uncertainties, the firm decided to delay that debut until the end of September (…)

Other firms in the sector that had also planned to make stock market debuts before the summer, such as Vía Célere and Haya Real Estate, the servicer owned by the US fund Cerberus, may now wait until a window of opportunity opens in October, depending on the conditions of the market. In the case of Haya, the firm’s debut is currently conditional upon the signing of asset management contracts that it is negotiating with BBVA and Sareb.

In terms of Testa Residencial, by virtue of the OPV, the Socimi Merlin Properties had also planned to exit its share capital, with the placement of the entire 17% stake that it held in the firm.

The market also expected Santander and BBVA to sell some of their stakes in the rental home company, which amount to 37% and 26%, respectively. Acciona, for its part, had still not taken a decision about its 20% stake in the company.

Testa Residencial is one of the largest rental home companies in the country, given that its portfolio contains 10,700 homes and is worth €2.275 billion.

With its debut on the MAB and its likely subsequent debut on the main stock market, the firm seeks to consolidate its position as a new, unprecedented real estate giant in the country, given its specialisation in primary residences for rent, at a time when that sector is experiencing a real boom.

Original story: Expansión 

Translation: Carmel Drake

Testa Postpones its Stock Market Debut Due to Political and Market Instability

29 May 2018 – Europa Press

Testa Residencial has postponed its debut on the stock market, initially planned for June, in light of the volatility on the stock market due to the political instability in the country, according to sources at the company speaking to Europa Press.

The rental home Socimi in which Santander and BBVA hold stakes has also decided to debut on the Alternative Investment Market (MAB) rather than list directly on the main stock market as originally planned.

In this way, in order to not lose the status of Socimi, which establishes a deadline for the firm to debut on the stock market, Testa Residencial will have to list on the MAB before 30 September, although it does not rule out debuting on the main stock market in a second phase.

Testa Residencial is whereby the second company, after Azora, to decide to delay its planned debut on the stock market, although in the case of that real estate asset management firm, it attributed its postponement to the takeover that Blackstone has launched over Hispania, one of its main clients.

In the case of Testa, the firm had planned to start trading on the stock market during the second half of June, and was looking at the 22nd of the month as the likely debut date.

The rental home Socimi had planned to make its debut through a public offering of shares (OPV) and a public subscription offering (OPS) of new shares, the latter for €130 million, both aimed at institutional investors.

Second postponed debut

In this way, Testa was going to become the second entity to debut on the main stock market this year, after Metrovacesa in February, but now it is the second real estate company to decide to postpone its debut.

The decisions by Azora and Testa may influence other firms in the sector that had also planned to make their own stock market debuts, such as Vía Célere and Haya Real Estate, the servicer owned by the US fund Cerberus. In that case, the firm’s debut is dependent on the closure of the asset management contracts that it is currently negotiating with BBVA and Sareb.

In terms of Testa Residencial, by virtue of the OPV, the Socimi Merlin Properties had planned to exit its share capital, by placing on the market its entire 17% stake in the firm.

The market was also expecting that Santander and BBVA would sell some of their shares in the rental home company, which amount to 37% and 26%, respectively. Acciona, meanwhile, had not yet taken a decision regarding its 20% stake in the company.

Testa Residencial is one of the largest rental home companies in the country, given that it owns a portfolio of 10,700 homes, worth €2.275 billion.

With its leap onto the stock market, the firm intends to consolidate its position as a new real estate giant, unprecedented in the country, given its specialisation in primary home rentals, at a time when that segment is experiencing in a boom in Spain.

Original story: Europa Press

Translation: Carmel Drake

S&P Warns of Deceleration in Catalan Housing Market

7 February 2018 – El País

The Spanish real estate market is going to continue growing, but the Catalan crisis may have a negative effect on the housing market in the region. “Although Barcelona has recorded some of the highest property prices since the start of the recovery, in 2018, Cataluña could see a recession in its real estate market”. That is what the ratings agency Standard and Poor’s (S&P) thinks, according to its report about the real estate market in Europe, which indicates that “economic growth should continue to be strong this year and next, but the political uncertainty may have a more negative impact on companies and consumers. The main risk is the impact of the Catalan crisis, given that it is the largest economic centre in Spain, accounting for 20% of the country’s nominal GDP”.

Leaving aside Cataluña, the agency indicates that the strong economic conditions in Spain will continue to drive up the volume of house sales and will help to reduce the stock of homes. In fact, it forecasts that the volume of transactions in Spain will grow by around 8% this year.

Moreover, although interest rates bottomed out at the end of last year, they will continue at very attractive levels for house purchases. Nevertheless, the agency points out that accessibility ratios continue to be high, even though the number of years of salary needed to buy a home has decreased from 7.7 years at the height of the boom to 6.6. years in 2016. And it adds that second-hand house prices are going to continue to increase, although to a lesser extent that over the last two years.

The S&P agency considers that the Spanish economy will exceed the figures recorded in 2017, when average prices increased by 4.2% YoY in the last quarter, according to data from Tinsa. The city of Madrid exceeded Barcelona with an annual increase of 17% compared to 14.8% in the Catalan capital, where prices fell by 1.7% during the last three months of 2017. The volume of transactions amounted to 455,000 during the first 11 months of the year, compared with 375,000 in the previous year. Purchases by foreigners accounted for 17% of the total.

Original story: El País (by S. L. L.)

Translation: Carmel Drake

Banco Sabadell Sells its Hotel in Boí Taüll Ski Resort

13 December 2017 – Crónica Global

This December, Banco Sabadell has completed the sale of Aparthotel Augusta, an establishment located in the Catalan ski resort of Boí Taüll. The operation has been advised by the international consultancy firm Christie & Co and has been closed for €1.5 million, according to sources in the sector.

The buyer is the Kesse Invest group, a company specialising in managing mountain tourism experiences (…).

Start of the ski season

Aparthotel Augusta is a four-star establishment containing 39 one-, two- and three-bedroom apartments. It offers additional services such as a 1,200 m2 Spa and an outdoor swimming pool, two features that differentiate it from other accommodation options in the area, according to the same sources.

The transaction has been closed just after the start of the ski season in Boí Taüll, which opened on 1 December. The Catalan ski resort owned by the Nozar group expects a repeat of the good performance recorded last year, the best for a decade, with a 40% increase in turnover and 20% more skiers.

These figures are encouraging the Nozaleda brothers, the managers of the ski resort, to try and negotiate with the Generalitat to obtain an extension of the concession granted to them by the public company Actius de Muntanya, which runs until 2023. That process has not been started yet due to the on-going political situation in Cataluña, which first started in the summer and which has led to the calling of elections on 21 December.

Sabadell’s hotel divestment

Banco Sabadell, which has declined to confirm the details of this transaction, indicates that the deal forms part of its strategy to divest its hotel business. After selling its HI Partners division to Blackstone for €630 million (at a profit of €55 million) on 17 October, it was left with 11 (hotel) assets on its balance sheet, which it holds through the company HI Holdco Gestión Activa.

In addition to the establishment in Boí Taüll, a month ago, the bank sold a hotel it used to manage in Jerez de la Frontera (Cádiz) to Hotusa – the hotel in question was the 4-star Eurostars Asta Regia.

Original story: Crónica Global (by Cristina Farrés)

Translation: Carmel Drake

Mount Street Takes Over the Management of WestLB’s NPLs in Spain

12 December 2017 – Expansión

The British firm also wants to negotiate agreements to manage the portfolios of Spanish banks and Sareb.

A new operator has arrived in the Spanish market for the management of debt in default or with a high risk of non-payment. Mount Street London Solutions has taken over a platform that manages the “toxic” portfolio of the former German entity WestLB and has whereby acquired an office in Madrid. Through this deal, the firm aspires to obtain new clients in Spain, including financial institutions and investment funds operating in the sector.

Mount Street was owned by the fund Greenfield Partners until February when its directors purchased the firm with support from the German bank Aareal Bank, which took over 20% of the share capital. In October, the loan manager took a leap in its business with the purchase of EAA Portfolio Advisors, an entity created in Germany to administer WestLB’s non-performing assets after the bank was rescued by the German Government in 2008. Its function is to try to recover those loans, restructure them, sell them on or foreclose the assets that secure them.

Of the €200 billion in problem loans that WestLB held, €22 billion remains, under the management of EAA. The portfolio includes loans, primarily to firms in the renewable energy sector, which WestLB granted in Spain before the crisis. By acquiring EAA, Mount Street has purchased its office in Madrid along with the 6 employees that manage its portfolio.

The objective of Mount Street is to use this foothold in Spain as a platform to grow towards new business areas, especially in the real estate debt segment. “The team that we have incorporated in Spain has been working for years to restructure debt in the infrastructure sector, in particular, in the solar energy segment, and we are now able to contribute our specialisation in the real estate area that we offer in the rest of Europe”, said Ravi Joseph (pictured above), Founding Partner of Mount Street, in an interview with Expansión.

The firm, which is headquartered in London, sees several opportunities for accessing the Spanish property market. On the one hand, he hopes to negotiate agreements with financial entities and/or with Sareb (…) to manage some of their portfolios of problem loans. Another option is to help those property developers struggling to make their repayments to allow them to “repurchase” their loans from the investment banks that acquired their debt from the banks back in the day. The final option is to collaborate with small investors that are still arriving in Spain interested in acquiring non-performing loans (…).

In Joseph’s opinion, the appetite of international investors to enter Spain is still very high despite the political crisis in Cataluña. “The major international investors are still very interested in Spain. Much more so than in Italy. Spain has entered a virtuous circle (…). The uncertainty in Cataluña may affect growth somewhat, but the overall trend will continue to be upward”.

After acquiring EAA, Mount Street now manages debt amounting to €48 billion in total.

Original story: Expansión (by Robert Casado)

Translation: Carmel Drake

Aguirre Newman: Tertiary RE Inv’t to Exceed €10bn in 2017

30 November 2017 – Expansión

After the odyssey experienced during the years of the crisis, with the drastic fall in the volume of investment, the tertiary real estate sector in Spain is now going through a stage of consolidation. As such, for the third year in a row, the volume of transactions involving non-residential assets is going to exceed the €10 billion threshold again in 2017.

According to the conclusions of a seminar organised by Aguirre Newman and KWM, which included presentations from some of the main players in the sector, this positive trend will continue for the next few years, despite certain risks in the environment, such as the political uncertainty, the inevitable rise in interest rates in Europe, the ageing population and the salaries that continue to stagnate.

At the meeting, which was attended by the main executives and directors of listed companies such as Merlin, Neinor, Aedas and Colonial, amongst others, as well as by property developers and investors such as Grupo Inmobiliario Roca, Morgan Stanley Investment Management, Grupo Ibosa, ASG Iberia and Stoneweg. Together, they discussed the evolution of the sector and the challenges for 2018, amongst other topics.

“The tertiary investment market is going through a growth consolidation phase after the deep recession that we suffered between 2008 and 2013. According to our estimates, the volume of investment in tertiary assets will exceed €10 billion for the third year in a row in 2017”, explained Susana Rodríguez, Director General of the Consultancy division at Aguirre Newman.

According to data from the consultancy firm corresponding to the first three quarters of this year, hotel assets have been one of the stars of the real estate sector, with investment of €1.9 billion during the 9 months to September, up by 29% YoY. The high street segment also experienced significant growth, of 37%, with an investment volume of €605 million. Whilst, investment in the logistics segment amounted to €665 million, up by 26% YoY. By contrast, investment in offices during the first three quarters decreased by 23% to €1.9 billion and investment in shopping centres decreased by 3% to €3 billion.

Slow down

In terms of the threat of a rise in interest rates in Europe, the experts agree that there will be at least one or two years of stability and that when the time comes for the rate hike, it will be managed in a moderate way: “They do not consider that it will affect the valuation of assets, given that we are in a phase of growing rents”.

Another one of the challenges facing the sector is caused by the political uncertainty generated in Cataluña following 1 October. The speakers agreed that, for another year, the country risk is going to be one of the issues that concerns investors.

Rodríguez said that the figures in the Catalan market are “very positive” at the end of the third quarter. Specifically, the leasing of offices in Barcelona rose by 8% to 265,470 m2 and the average prime rent rose by 9% to €18.25/m2/month.

“It is undeniable that, since October, we have felt a slowdown in the volume of real estate operations. Both business people and investors alike are postponing decision-making whilst they wait to see how the political tensions and uncertainties that are affecting the market today are resolved”, she added.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Sale of Hesperia Tower Threatened by Catalan Political Uncertainty

27 November 2017 – Eje Prime

The political situation in Cataluña is also affecting the sale of tall buildings, such as that of the NH Collection Tower in Barcelona. Known until last year as the Hesperia Tower, this five-star hotel owned by Grupo Inversor Hesperia (Gihsa) is struggling to find a new owner due to the governmental instability and, therefore, economic uncertainty that exists in the region.

Located in L’Hospitalet de Llobregat, the asset is situated next to the Fira complex in the suburban town and has been on the market since December 2010. The Hesperia Group put this hotel, along with five others, on the market, due to the debt that was weighing down the company at the time, estimated to amount to more than €600 million.

Now, the interested companies are not willing to go ahead with the purchase of the asset due to the political situation in Cataluña, amongst other factors, according to Crónica Global.

A year ago, the hotel company repositioned Hesperia Tower within a plan agreed with NH Hoteles, which took over the management of 31 assets from the entity led by José Antonio Castro after paying €31 million. Hesperia’s current portfolio contains around thirty hotels in Spain, as well as a 9% stake in the NH hotel Group.

Original story: Eje Prime

Translation: Carmel Drake