Marathon Acquires 2 Office Buildings in Madrid from CaixaBank

14 February 2019 – El Confidencial

The US fund Marathon Asset Management, one of the first to back the recovery of the residential property development sector in Spain, has set its sights on the peripheral office market. According to sources speaking to this newspaper, the firm has purchased a complex measuring 17,557 m2 in Madrid from CaixaBank.

The complex comprises two office buildings and 300 parking spaces, as well as several commercial premises and is located at number 43 on Avenida Institución Libre de Enseñanza in the Julián Camarillo area, which is home to the offices of companies such as Atos, Indra and Prisa.

It is the second operation of its kind that Marathon has carried out in the past three months, given that in November, it acquired a mixed-used complex, also in this area from Credit Suisse. That complex comprised an office building and a hotel managed by Barceló.

Specialising in value-added operations, as demonstrated in the past, with its anticipation of the recovery of the residential property development market with its investments in Habitat and San José Desarrollos (now Vía Célere), the fund is convinced about the potential of the secondary office market in Spain, which it has placed at the centre of its investment target.

In fact, Marathon is interested in closing more acquisitions of this kind both in Madrid, where it plans to continue growing in the Julián Camarillo area, and in Barcelona, where it is looking at opportunities in areas such as 22@.

Last sale by CaixaBank

The fund, which has been advised in its purchase from CaixaBank by Cuatrecasas, Arcadis and Doble Dígito Brokerage, is planning to carry out a comprehensive repositioning of the asset, given that its current occupancy rate amounts to just 30%, according to market sources. They also indicate that the acquisition price will have amounted to around €15 million.

This complex was originally promoted by Grupo Veintidós in 2010, a company that ended up transferring ownership of the complex to CaixaBank, which lodged it in its real estate subsidiary Building Center.

Meanwhile, the bank reached an agreement with Lone Star last year to sell 80% of its real estate business, which means that this could be one of the last operations that the real estate subsidiary carries out under the control of the entity.

Original story: El Confidencial (by R. Ugalde)

Translation: Carmel Drake

The Polanco Family Sells Ritz-Carlton Tenerife To HI Partners

21 April 2017 – El Confidencial

The Polanco family has resorted to selling the jewel in the crown of its personal wealth, the luxury Ritz-Carlton Abama resort in Tenerife, to obtain some financial breathing space in order to try and balance out its complicated economic situation.

According to real estate sources, the former majority shareholder of Grupo Prisa has reached an agreement with the hotel group HI Partners (HIP) to sell 49.99% of the listed establishment for almost €50 million, a quantity to which another €25 million of investment will have to be added to expand the hotel’s facilities with its residential complex. Sources at Timón, the holding company of the editorial giant, have acknowledged the transfer, but have not revealed details of any amounts or commitments.

As El Confidencial revealed several weeks ago, the problems of Prisa, whose shares are trading at their lowest value for a year and a half, have been transferred to the Polanco family, who has requested help from its creditor banks in light of the difficulties it is facing to meet its loan obligations. Its request has been answered by Santander and CaixaBank, its two primary lenders.

To this SOS, a new loan amounting to €60 million has just been agreed, which forms part of the sales operation to HIP. According to sources familiar with the deal, Sabadell, the owner of HIP, has granted this 18-month loan, with the aim of enabling the Polanco family to put its accounts in order.

Once that period has elapsed, and provided the loan has been repaid or transferred to another entity, HIP will acquire 49.99% of the luxury resort, an operation that, between the sales value and the money to be allocated to new investments, would mean that Prisa’s shareholders will obtain another €75 million.

In the event that the Polanco family breaches that obligation during the 18 month period, the hotel chain will not become a shareholder of Ritz-Carlton Abama and the financial problems of the giant will get worse, given that Sabadell would increase its list of creditors to include the aforementioned €60 million. (…).

With losses of €7.5 million at the end of 2015, the most recent period for which figures are available, and sales of €55.25 million, this luxury tourist resort comprises the five-star Ritz-Carlton Abama hotel, a residential development where 148 villas are planned and Abama Golf, a 72-hole golf course. (…).

HI Partners owns 31 establishments and manages €850 million of hotel debt on behalf of Banco Sabadell. Moreover, a year ago, the firm signed an alliance with the giant Starwood Capital Group, to create a joint venture aimed at investing €500 million over the next three years.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Duro Felguera Puts Its Non-Core Properties Up For Sale

4 November 2016 – Expansión

Liquidity crisis / The engineering group has two large corporate headquarters in Madrid and Gijón, which it is looking to sell to cover its financial commitments whilst it resolves several legal disputes overseas.

Duro Felguera explained yesterday during the presentation of its results for the 9 months to September 2016 that it has ordered the sale of its “non-productive assets” to avoid the deterioration of its cash balance whilst it resolves legal disputes overseas for unpaid invoices amounting to more than €300 million. According to the sources consulted, the assets under analysis include the company’s two major headquarters in Madrid and Gijón, the proceeds from which could amount to several tens of millions of euros.

For the time being, the company has issued a sales mandate but has not specified which formula it will use for the divestment. In recent years, many of Spain’s large corporations have sold their headquarters through sale and leaseback contracts, whereby the company sells the property but remains as the tenant for a certain number of years. Ferrovial, Acciona, Prisa, Telefónica, Santander, Gas Natural and Endesa, amongst others, have all used this formula in recent years.

Duro Felguera’s office building in Madrid has been on the company’s balance sheet for two years, after it acquired it for €20 million in 2014. The previous owner was the real estate company GMP. The headquarters is located on Vía de los Poblados, in the north of Madrid, alongside the M-40 ring road and the Campo de las Naciones business park.

Duro Felguera’s headquarters in Madrid has a useful surface area of 13,791 m2. It is an eight-storey building – five of the floors are used for offices, two are used for parking and one contains an undercover space for storage and other facilities.

In Gijón, the company chaired by Ángel Antonio del Valle owns of one of the best complexes in the city’s Scientific and Technological Park. That building has a surface area of more than 9,000 m2.

Legal disputes

Duro Felguera will have to use the proceeds from its divestments to cover several urgent obligations. In December, for example, the company is due to repay a loan amounting to €35 million.

In parallel, the group is looking to encompass its financial commitments into the process of recovering its unpaid invoices overseas. Yesterday, the company stated that “it is holding negotiations with various credit institutions (Bankia, Santander, Popular, BBVA, Sabadell and CaixaBank) to adjust the maturity dates of its debt to bring them in line with the expected resolution dates of these conflicts.

In Australia, the group is fighting against one of its client, the Korean firm Samsung C&T, for overruns on the mining project Roy Hill. The court of arbitrage in Singapore calculates that DF may recover almost €140 million (the last invoice amounted to €40 million, plus €90 million in avals). The Australian courts are claiming €46 million, of which €9 million has been already recovered. In Argentina, Duro is claiming another €150 million for overruns at the power plant in Vuelta Obligado. Finally, in Venezuela, the Government led by Nicolás Maduro still owes the Spanish group €101 million.

Original story: Expansión (by C. Morán)

Translation: Carmel Drake

HI Partners Buys Hotel In Tenerife From The Polanco Family

26 July 2016 – Expansión

The founding family of Prisa will use the funds (received from the sale) to reduce its debt with the banks and repay a loan from Banco Santander.

HI Partners is pushing ahead in its offsensive to become one of the largest owners of hotel assets in Spain. The subsidiary of Banco Sabadell has acquired the Hotel Jardín Tropical, located in Costa de Adeje, in the south of Tenerife, from the Polanco family, founder of Prisa.

This is a complex operation that, on the one hand, will allow the repayment of a €20 million loan that the hotel holds with Banco Santander. In parallel, the Polanco family will reduce the bank debt that it holds with several financial institutions, according to sources close to the transaction. This is HI Partners’ second acquisition in the Canary Islands, after it purchased Hotel IFA Catarina in Gran Canaria a few days ago, from the Lopeson group.

Through the investor holding company Timón, the Polanco family controls several hotels, which it operates through My Way. This company will continue to manage Hotel Jardín Tropical, which has 419 rooms and has a 4-star rating. The hotel, constructed around thirty years ago and located on the beach front, was designed by the architect Melvin Villarroel, known for integrating architecture with nature. Thus, the hotel has 12,000 sqm of sub-tropical vegetation and a saltwater swimming pool.

The aim of HI Partners is to renew all of the rooms to modernise the tourist complex, located in Spain’s fourth most important destination by RevPar, the indicator used to measure the profitability of hotel assets. The company led by Alejandro Hernández-Puértolas now has 26 hotels in its portfolio and manages €850 million of Banco Sabadell’s hotel debt.

Original story: Expansión (by S. Saborit)

Translation: Carmel Drake

Amancio Ortega’s Real Estate Offensive

2 February 2015 – Expansión

The owner of Zara has bought the former headquarters of Prisa. The founder of Inditex has allocated €1,215 million to the expansion of his non-residential asset portfolio in Spain since 2010 and is now the second largest investor, behind Merlin.

Amancio Ortega’s scouts are back out on the streets of Spain. The founder of Inditex resumed his real estate activity in Spain last week, with the purchase of Gran Vía 32, the former headquarters of Prisa, which is now being refurbished. The property will house the largest store of the fashion retailer Primark in Spain.

Pontegadea, owned by Ortega, acquired the building from Drago Capital for €400 million.

Through this transaction, the owner of Zara, who was advised by Aguirre Newman and Broseta, reactivated his real estate offensive in Spain. Since 2010, Ortega has spent €1,215 million on the expansion of his non-residential assets in Spain (office buildings and high street shops). Pontegadea holds these properties to benefit from their rental yields and to generate profits from their sale.

This outlay makes Ortega the second largest investor in non-residential assets during this period, according to data provided by Real Capital Analytics. He is exceeded only by Merlin Properties, the largest Socimi currently listed in Spain.

Pontegadea has also acquired properties overseas during this time, in the USA, Canada, France, Italy, Germany and Great Britain, amongst others. Altogether, the book value of his investment property amounted to €4,207 million in 2013, the latest data available. His investments outside of Spain amounted to €2,536 million.

The market value of these assets is unknown, but sources close to Ortega estimate it amounts to €6,500 million.

Most of his spending in recent years has been used to buy office buildings, as well as retail outlets and hotels. Pontegadea diversifies its risk across a variety of non-residential assets and has a more stable profile than other companies that invest only in a single segment, such as offices.

The businessman always acquires assets that have intrinsic value, due to their strategic location and because they have first-rate tenants. This allows him to generate an average annual yield of between 4% and 7%, according to market sources, at a time when interest rates are at around 0%.

In some cases, the Galician businessman’s company leases his non-residential assets to the various Inditex brands. Nevertheless, he also leases stores to Inditex’s competitors, such as in the case of the former headquarters of Prisa, which will be leased to Primark. His annual rental income amounts to around €200 million.

Pontegadea pays for the real estate assets it acquires with liquidity that it obtains from the clothing business, above all with dividends from Inditex. Ortega is the majority shareholder of the clothing business; he holds 58% of its total equity. The businessman also relies on debt from credit institutions to pay for his purchases. At the end of 2013, bank debt amounted to €748 million. The real estate company had mortgaged assets amounting to €1,237 million to support this debt.

“Ortega diversifies his assets and has a significant international presence in another sector. As an investor, he benefits by acquiring properties at the best time and he almost always pays in cash” and therefore buys cheap, explains Manual Romera, Director of the Financial Sector at IE Business School.

Pontegadea paid €400 million for the Torre Picasso, when valuations of the Madrid skyscraper prior to the sale were rounding the €800 million mark. Ortega’s offer prevailed over the one made by the American real estate giant Tishman Speyer, owned by the business tycoons Robert Tishman and Jerry Speyer. Pontegadea took ownership of the skyscraper that Esther Koplowitz, shareholder of FCC and the former owner, was loath to sell.

With the Torre Picasso, he is guaranteed rental yields of around 6%.

The real estate company is led by Roberto Cibeira and headquartered in A Coruña. The Board is support by Pontegadea executives in each country, including Marcos Fernández (US) and Manuel Criado (UK). In addition, Ortega engages legal counsel (Broseta) and real estate advisors, such as Aguirre Newman, which advised on the purchases of Torre Picasso, Gran Vía 32 and Rio Tinto.

Original story: Expansión (by Gemma Martínez)

Translation: Carmel Drake