Dragados is Asking for c. €180M for 88,000 m2 Buildable Plot in Tetuán (Madrid)

6 August 2018 – El Confidencial

A new and powerful land operation is taking shape in the centre of the Spanish capital. The star is Dragados, one of the heavyweights in the construction sector in Spain. The subsidiary of ACS has been trying to sell several plots, which together span a buildable surface area of just over 80,000 m2, on Paseo de la Dirección in the Tetuán district in the north of Madrid and just 2 km from the Cuatro Torres, for almost a year. And this area has just received the green light from the Town Hall of Madrid, which approved a Partial Plan on Tuesday that will undoubtedly favour land transactions since it means the urban planning risk has disappeared.

According to the sources consulted, the plots have been on the market for a year, but the high price expectations of Dragados – which amount to around €180 million – have prevented the sale from being closed, until now. Large property developers, investment funds and family offices have all expressed their interest. The construction company is being advised by Colliers International, which declined to comment on the deal.

On the table is a real gem, given that the plots are all finalist, in other words, ready to be built on. Such assets are in very short supply inside the M-30. Specifically, the site comprises two plots for the construction of private housing and two other plots for the construction of social housing properties (VPPL) and mixed-use assets (offices and tertiary).

For the former, which have a buildability of around 40,000 m2, Dragados is asking for around €2,500/m2 (…), in other words, around €100 million, which would make it one of the largest land operations in the capital in recent months. “That price would mean selling the future homes at prices of around €5,000/m2, which is way above current market prices in the area”, say the same sources. House prices in the area amount to around €2,400/m2 – €3,000/m2, depending on the types of homes.

For the plots to be used for social housing and offices – which also have a buildability of approximately 40,000 0m2 – the vendor’s price expectations amount to around €80 million. Despite the boom in the capital, these figures exceed the prices that the potentially interested parties are willing to pay.

Ten years in the making

With the approval this Tuesday from the Town Hall of the new planning order for the area, it seems that finally, and after more than a decade, work is going to begin on this ambitious urban remodelling project. It will involve the construction of around 2,000 new homes, most of which will be protected in some way (VPPB and VPPL), including two rehousing buildings and several 25-storey towers. To put that into context, the Cuatro Torres have between 45 and 58 floors (…).

Historically, Paseo de la Dirección has been a downtrodden area in the north of Madrid with numerous substandard homes that would benefit greatly from the definitive launch of Madrid Nuevo Norte – formerly Operación Chamartín – just 2km away. What’s more, the site is very close to the capital’s financial district par excellence, Azca, as well as to Plaza Castilla, the hub for much of Madrid’s land transport network (…).

Original story: El Confidencial (by E. Sanz & R. Ugalde)

Translation: Carmel Drake

Deloitte: Tertiary Real Estate Inv’t Amounts to €9.7bn in 2017

27 December 2017 – Expansión

An increase in property prices has led to a 22% reduction in the purchase of non-residential assets in 2017 with respect to 2016.

The boom that has marked the real estate investment sector in Spain since 2014 is starting to show signs of slowing. That is according to the most recent non-residential investment figures, which, with just a few days to go before year-end, are reflecting a decrease of 22% with respect to 2016.

According to a market study performed by Deloitte Real Estate, investors spent €9.7 billion this year on tertiary properties (offices, hotels, commercial and logistics assets) compared with €12.4 billion in 2016 and €11.8 billion in 2015.

“With just a few operations still left to close before 31 December, which will amount to between €0.5 billion and €0.6 billion, tertiary investment has fallen by 22%. This decrease in activity is a sign that we have crossed the equator of the bullish cycle and that we are possibly starting a period of greater stability”, explained Javier García-Mateo, Partner in Financial Advisory at Deloitte.

The 22% decrease is due to a weaker second half of the year in terms of the rate of investment (…). During the third quarter, investment fell from €6.6 billion in 2016 to €1.6 billion this year, says Deloitte in its report. During the fourth quarter, the difference was a decrease of 42% (€2.8 billion compared with €1.8 billion). The decrease is more pronounced in the property segments that tend to lead absolute investment, namely, offices and retail assets. In the case of the former, investors have spent €2.3 billion in 2017, less than half the amount recorded in 2016 (€4.9 billion) and 2015 (€5.3 billion) (…). “Offices tends to be the segment that traditionally leads investment, but this year it has decreased by 55%. This is not due to a lack of supply, but rather the gap between the expectations of sellers and the offers from buyers. Moreover, some operations have been abandoned, such as the sale of Hispania’s portfolio”, said García-Mateo.

In this way, unlike in previous years, where large operations were closed during the final quarter of the year, such as Torre Foster – sold for €490 million at the end of 2016-, Torre Espacio – sold in November 2015 for €550 million – and Torre Picasso – sold for €400 million in December 2011 – this year, the most significant operation has been the sale of 50% of Torre Caleido on Paseo de la Castellana, for around €150 million, closed during the first quarter of the year.

In the case of retail assets, investment in shopping centres fell by 29% to €2.7 billion, despite record operations such as the one involving Xanadú, whilst the purchase of shops fell by 36% to €421 million.

“After 4 years of increases in valuations and the consequent decrease in yields, investment in offices and retail property is significantly less attractive than in the hotel and logistics segments, where there are up to 3 points of differential per year”, say the sources at Deloitte. The large hotel operations this year have included the purchase of Edificio España by the Riu Group and the sale of HI Partners, along with its 14 establishments, by Banco Sabadell to Blackstone for €630.73 million.

Cataluña

The 22% decrease comes at a time that is being characterised by the independentist challenge in Cataluña, although the uncertainty being generated in that region does not seem to have had an impact on real estate investment, at least not yet, according to García-Mateo. “In Cataluña, the absorption of office space has fallen and sales in shopping centres have also decreased, by around 10% with respect to Q4 2016, but investment has not been hit, as evidenced by Meridia Capital’s recent purchase of the Barnasud shopping centre and Invesco’s acquisition of the Mango facilities in Palau de Plegamans (Barcelona)”, he added.

In this way, the experts justify that the decrease in investment is due to a change in the cycle, following four years of rapid growth (…).

Nevertheless, the €9.7 billion spent during 2017 represents the fourth-highest figure in the historical series (dating back 13 years).

It was only in the last two years, as well as in the record year for the sector (2007), when investment amounted to €12.6 billion, that investment in non-residential assets exceeded the €10 billion threshold, according to Deloitte.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Pontegadea, Deka & CPPIB Submit Bids For ‘Torre Espacio’

8 July 2015 – Expansión

Amancio Ortega’s investment company Pontegadea, the German investor Deka and the Canadian pension fund CPPIB have all submitted bids to acquire the Madrilenian skyscraper from Villar Mir.

The sales process for Torre Espacio, the skyscraper owned by Villar Mir in the Madrilenian Cuatro Torres complex, is progressing according to plan. Yesterday, one month after the property was first listed on the market, Villar Mir received offers from some of the companies it had selected to participate in the process.

Villar Mir, which owns the building through its real estate company Espacio, worked together with the real estate consultancy Aguirre Newman to select and invite around a dozen investors to participate in the sales process, rather than opting for a mass tender, in order to close the deal as soon as possible. Those selected included the German funds Deka, Reef and Patrizia, the Abu Dhabi fund Asia, the Socimi Merlin Properties, the real estate company Colonial, Amancio Ortega’s investment company Pontegadea, the sovereign fund Singapur GIC (which invests in Spain jointly with the real estate company GMP) and the Canadian pension fund CPPIB.

Of those, Deka, Canada Pension Plan and Pontegadea all submitted proposals yesterday. Indeed, the investment arm of Amancio Ortega has been one of the favourites to take ownership of the property since the process was launched, on the basis that the company has access to immediate liquidity and the building would be a perfect fit with its existing portfolio, which includes other large office and commercial buildings in major European capitals, such as London and Madrid, as well as in the USA.

The aim of the group controlled by Juan Miguel Villar Mir was to sell the property for between €650 million and €700 million, and whereby benefit from the investor boom that is taking place in the Spanish real estate market. The company invested €400 million on the construction of the building, including the amount it paid to Real Madrid for the land (€187 million). Nevertheless, according to sources close to the process, the offers received range between €500 million and €600 million. (…).

Tenants

Torre Espacio opened in 2007 and has office space of c. 60,000 m2, distributed over 57 floors. The tower is 236 metres high and its tenants include large international corporations, such as British American Tobacco and Red Bull. It has an occupancy rate of 85% (84.3% at the end of 2014). Other tenants include the embassies of Australia, Canada, the Netherlands and the UK.

Furthermore, 55.1% of the building is occupied by the Villar Mir Group. OHL occupies around ten floors.

To make the purchase more attractive, the owner of OHL has offered to continue as a tenant and guarantee the new landlord rental income of €34/m2/month. However, the market does not believe that such a rental price can be maintained considering that the maximum rent in the best buildings on the Castellana barely exceeds €30/m2/month. (…).

Following the receipt of the bids, one or two candidates will be chosen to participate in exclusive negotiations, with a view to closing the transaction in October. Nevertheless, the proposed structured of the transaction, as well as the difference in terms of price expectations between the vendor and the buyers, may hamper the completion of the transaction. (…).

Original story: Expansión (by R. Ruiz and D. Badía)

Translation: Carmel Drake