Knight Frank: Investment in Offices Amounted to €1.3bn in Q1 2019

7 May 2019 – Eje Prime

According to data compiled by Knight Frank, investment in the office sector amounted to €1.3 billion during the first quarter of 2019.

By type of investor, in Madrid, 45% of buyers were funds, 25% were institutions, 18% were real estate companies, 9% were corporates and 3% were Socimis. Meanwhile, in Barcelona, 64% of purchasers were investment funds, 19% were corporates, 13% were private investors and 4% were real estate companies.

Yields in the prime areas remained stable at around 3.75% in Madrid and 4% in Barcelona, which are in line with previous years and similar to those observed in other major European cities.

The average prime rent in Madrid also remained stable at around €30.50/m2/month, with prices rising to €38/m2/month in some of the most sought-after spaces in the CBD. In total, 124,000 m2 of office space was leased in the capital during Q1 2019, up by 4% YoY.

Original story: Eje Prime 

Translation/Summary: Carmel Drake

Rental Boom Triggers Investment in Madrid & Barcelona

27 January 2018 – Expansión

Markets are booming / The central parts of Spain’s two largest cities are the most sought-after by those investing in housing in search of returns, but rental prices are increasing more quickly in the districts on the outskirts of those cities, with rises of more than 10%. The experts forecast an accentuation of this trend, given that the supply of rental properties in the prime districts is starting to prove insufficient to cover all of the demand.

The real estate recovery is happening at three speeds. On the one hand, the large cities and most established areas along the coast are experiencing significant house price rises, a notable increase in sales, an increase in rental prices, a rise in non-residential investment and even a shortage of land for sale. On the other hand, medium-sized cities have left the lethargy behind and are now recovering, although with less energy than the large real estate centres. Finally, the less populated provinces are still recording ups and downs, although even there it is clear that the worst of the crisis is now over.

A large part of this improvement is due to the country’s underlying macroeconomic performance, but not all of it. The impact of private investors is playing a crucial role in the strengthening of the two large real estate centres, whose prime areas are the most sought-after by those looking to buy homes to put them up for rent, where they can obtain returns of more than 10%. Why? Because, in addition to the immediate increase in value that they are obtaining, a kind of rental boom is also happening in Madrid and Barcelona.

That said, “rental prices may be starting to peak in cities such as Barcelona and Madrid” says Beatriz Toribio, Head of Research at Fotocasa. “The market is normalising”, and so “although rental prices will continue to rise during 2018, they will do so at a lower rate than they did in 2017”, she adds.

The district of Chamberí exceeded the district of Salamanca in 2017 as the most expensive in the capital for renting a home. The average price of a rental home in Chamberí is €16.41/m2/month, followed by Salamanca (€16.07/m2/month), Tetuán (€14.94), Chamartín (€14.46) and Retiro (€14.35). At the other end of the spectrum, the district of Villaverde, with an average rental home cost of €8.91/m2/month was the most affordable. It was followed by Vicálvaro (€9.58), Moratalaz (€9.68), Villa de Vallecas (€9.90) and Usera (€10.15).

Almost all of the districts in the capital saw rental prices increase with respect to 12 months earlier. The district that rose by the most was Hortaleza, which increased by 13.1%, followed by Puente de Vallecas (12.9%), Ciudad Lineal (11%), Usera (9.4%), Retiro (9.1%) and Tetuán (9%) (….).

In Barcelona, the same thing is happening. The two districts that closed 2017 with decreases in rental prices are two classics in the rental market: Eixample (-1.4%) and Ciutat Vella (-1.2%). How come? “The rental boom started in the best locations and so when those areas reach very high prices, demand starts to withdraw from these areas and move to other more peripheral neighbourhoods”, says the real estate consultant José Luis Ruiz Bartolomé, Managing Partner at Chamberí AM. “The push from investors is also moving to other less central neighbourhoods, which are very well connected and cheap compared to the city centre”, he adds (…).

Specifically, the district of Ciutat Vella is the most expensive in all of Spain when it comes to renting a home. The average price there amounted to €17.16/m2/month in December 2017, despite the decrease seen YoY. It was followed by the second most expensive district, Sarrià-Sant Gervasi, whose average price amounted to €16.63/m2/month in December (…). Compared to 2016, prices rose in eight districts in the Catalan capital. The leader of that ranking was Sant Andreu, where prices rose by 12%, followed by Gràcia (9.5%), Les Corts (8.1%), Sants – Montjuïc (6.7%), Nou Barris (6.4%), Horta–Guinardó (4.8%), Sarrià-Sant Gervasi (3.9%) and Sant Martí (2.7%).

Gustavo Rossi, President of Alquiler Seguro, adds that “2017 will be remembered as the year in which the supply of rental housing became insufficient to meet demand”. The sector needs to be professionalised and the owners of empty properties need to realise that putting them on the market is a good option”, he says.

“Over the last decade, rental has established itself as the preferred option for young people and new families. In 2018, we are going to move closer than ever to the European model, where the rental segment has many followers”. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Optimum III Acquires Office Building in Madrid for €10.2M

28 November 2017 – Eje Prime

Optimum III, the residential Socimi owned by BMB Investment Management and the US fund Bluemountain, is continuing to fatten up its asset portfolio with new purchases. The company has acquired part of an office building in Madrid. The purchase of this property has involved an investment of €10.2 million for the group.

The property is located at number 59 Calle José Abascal in the heart of the capital. The operation, according to the Socimi “involves the purchase of 950 m2 on the first floor; 976 m2 on the second floor; 546 m2 on the third floor; and another 546 m2 on the fifth floor”. In total, the company has acquired 3,000 m2.

The rest of the building is mixed use. The company’s plans involve leasing space to one or more companies that want to locate their offices in the property. To this end, the Socimi is planning “to undertake a small renovation to give the space a facelift”.

Optimum III is continuing to grow its asset portfolio. The Socimi’s most recent purchases include the acquisition of a residential building in the Sarrià-Sant Gervasi neighbourhood in the upper area of Barcelona, for €6.6 million. That property is located at number 46 Calle Calaf, in one of the most expensive districts in the Catalan capital.

The Socimi was created to take advantage of the decline in the real estate market in Barcelona. That was when BMB launched its third fund, Euro Re Optimum III Barcelona, focused on the residential market in the Catalan capital. BMB wanted to take advantage of its operational experience and its knowledge of the market in Barcelona to invest in residential properties for rent acquired at below market prices, contributing its experience in terms of optimisation and portfolio sales in the city. According to its backers, it is a tailor-made fund for private investors and family offices.

Optimum III’s business is different from the activity carried out by its predecessor Optimum Real Estate in several respects. Firstly, due to the reactivation of the real estate market, the average price of its acquisitions are now, approximately, €2,500/m2 in Barcelona and €2,800/m2 in Madrid, according to the group. Secondly, the capital of Spain is gaining greater weight in the portfolio; whereas Madrid accounted for 20% of the previous Socimi’s portfolio, it now accounts for 30%, compared with Barcelona’s 70%.

Moreover, leveraging the work already performed by BMB for Optimum Re Spain between December 2016 and February 2017, Optimum III has now acquired five properties in the two cities. In Barcelona, it has acquired buildings located at the intersection of Avenida Diagonal with Calle Girona; and at the junction of Calle Bruc and Calle Aragó, amongst others. BMB’s intention is to make a total investment of €100 million, between acquisitions and improvements. In this way, the portfolio of Optimum III will comprise more than twenty buildings.

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

Flagship Stores Become The Bastion Of Large Retailers

19 October 2017 – Expansión

The unstoppable rise of e-commerce, the tsunami of digitalisation and the new buying habits of consumers have revolutionised the retail sector forcing operators to adapt to the new times to stay competitive.

The e-commerce sector is now turning over €24,000 million per annum in Spain, with a growth rate of 20% p.a. In this context, consumers are increasingly using the internet to manage their purchases, resolve queries and optimise their visits to stores. As such, they are visiting stores less frequently but they are spending more time there when they do go, according to a report from CBRE about the retail sector.

In this context, large international brands are backing the flagship store model as a gateway into Spain; and operators that have traditionally based themselves on the outskirts of cities are now moving into flagship stores in the centre. By way of example, the French firm Kiabi opened a store on Paseo de Gràcia a few months ago. In the same way, operators who have traditionally had stores in retail parks are now making space for themselves in the city centre, such as Media Markt, which opened two stores in the centre of Barcelona in 2016. Before the summer, the electronics firm also opened its new its flagship store in Plaza del Carmen, Madrid, just a stone’s throw from Gran Vía.

Ikea is joining this trend too, with a store on Calle Serrano; as is Leroy Merlin, which is planning to open a shop on Calle Fontanella, next to Plaza de Catalunya in Barcelona

Interest in Spain

“Physical stores are still the favourite channel for consumers, but it is harder to get people out of the house. To attract them, retailers are opening large flagship stores focused on the shopping experience and expanding the range of services, supported by new technologies that allow marketing strategies to be customised”, explains Gonzalo Senra, National Director of Retail at CBRE España (…).

Given the interest from large brands in Spain and encouraged by the upwards cycle of the economy and the improvement in consumption, many overseas institutional investors have decided to back the Spanish market. For example, the US investor Hines has purchased four important prime premises in Madrid and Barcelona in the last year.

These types of investors are the main buyers of flagship stores in well-located premises, involving investment volumes of more than €20 million. Moreover, sources at the consultancy firm have noted a change in the trend in this market with the entry of several insurance companies bidding for large prime assets.

By contrast, the market for smaller acquisitions is dominated by Spanish private investors and family offices – they tend to be particularly interested in assets worth less than €10 million.

Overall, investment in high street premises amounted to €800 million in 2016. The rate of investment continued during the first half of this year, with an investment volume of €515 million, according to data from the consultancy firm (…).

The high level of demand has accentuated the typical shortage of well-positioned products and resulted in a reduction in returns. According to the report, the downward trend in yields continued in 2017 to reach 3.25% in some cases for the most prime products in Madrid and Barcelona (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Optimum RE Looks Set To Buy 3 Assets In Barcelona For €7M

21 June 2017 – Eje Prime

The real estate investment vehicle manager BMB Investment Management and the US fund Bluemountain are continuing their shopping spree in Spain, through their Socimi. Optimum Real Estate will spend €7 million on the acquisition of three new assets in Barcelona, according to sources at the group. Optimum’s objective is to close the year with a portfolio of properties worth more than €70 million.

To this end, the second Socimi to be promoted and managed by BMB, is currently studying the acquisition of three assets in the Catalan capital, the city where the majority of the properties controlled by the group are located. The first is located at the junction of Calle Girona and Calle Aragón and has a surface area of 825 m2. For this residential asset, Optimum is looking at spending €2 million.

The second property for which Optimum is bidding is located on Calle Cartagena, also in Barcelona. Located in the El Eixample neighbourhood, this residential property measures 837 m2 and would require an investment of €1.8 million for the Socimi.

The last asset that Optimum is interested in incorporating into its pipeline is located at the junction of Calle Nápoles and Diagonal. It would be the most expensive of the three, given that the Socimi could end up paying almost €3 million for it – it would also be the largest, with a surface area of 1,091 m2. If Optimum were to complete these three purchases, it would end the year fulfilling its objective of owning a portfolio of assets worth more than €70 million.

“Nevertheless, although the negotiations are in an advanced stage, we are not ruling out the possibility of changing our plans and acquiring other assets over the next few months instead, whereby exceeding our objective”, explain sources at Optimum.

Currently, the asset portfolio owned by the Socimi, which was created following the success of two vehicles constituted in 2007 to buy residential buildings in Berlin (Germany), comprises fifteen assets located in Barcelona, in central areas such as El Eixample, Gran Vía, El Born and Ramblas, as well as one in Madrid, located at number 8 on Calle San Bernadino.  Optimum’s portfolio is currently worth €63.7 million.

Optimum III

In order to take advantage of the falling prices in the real estate market in Barcelona, BMB launched its third fund, Euro Re Optimum III Barcelona, focusing its experience on the residential market in the Catalan capital (…). This is a tailor-made fund aimed at private investors and family offices (…).

BMB’s intention is to invest €100 million in total with the new vehicle, through acquisitions and improvements. In this way, the portfolio of Optimum III will comprise more than twenty buildings.

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

Europe’s Finance Ministers Consider Creating An EU Bad Bank

4 April 2017 – Expansión

According to working documents to which Efe has had access, the European Union’s (EU) Economic and Finance Ministers will meet on Friday to discuss the possibility of creating a bad bank in order to offload the non-performing loans accumulated by European banks in the market.

The text, drawn up by Malta in its role as the current Presidency of the EU, will serve as a basis for reflecting on the actions that may be adopted at the EU level, to reduce the burden of non-performing loans on European entities, during an informal meeting of the ministers in Malta.

These non-recoverable loans account for 5.4% of the total loan portfolio and are worth more than €1 billion (equivalent to more than 7% of the EU’s GDP).

In addition to the creation of an asset management company, widely known as a bad bank, consideration will also be given to the option of creating a secondary market in the EU for these types of loans, to improve supervision, strengthen insolvency regimes and tackle the accumulation of pending court cases.

“Experience suggests that the creation of asset management companies can help to tackle the accumulation of non-performing loans (NPL) regardless of their capital structure (public, private or mixed)”, said the document.

The Maltese Presidency highlighted that the establishment of this company “would very likely” represent a boost to the secondary market for these assets, by creating a transaction history, and at the same time, grouping together these loans would reduce the information gap between buyers and sellers and would facilitate access to the market for smaller banks.

Nevertheless, the Presidency explained that in the past, there have been cases in which these bad banks have served only as a “cushion for removing NPLs from the banks’ balance sheets” and that there have only been “limited sales” in the market.

As a result, it advocates a hypothetical bad bank that fulfils certain “success factors”, such as suitable governance agreements and proactive strategies to maximise the value of its portfolio.

The current EU Presidency considers that this measure should be accompanied by a “substantial boost” in investment in impaired assets in the EU, by private and public investors alike.

In this sense, it underlines that the creation of this company should be executed “in line” with EU rules regarding bank resolution and State aid.

Meanwhile, the Economic and Finance Ministers will analyse the options for boosting a secondary market in which these loans could be offloaded, which is currently being hampered by a lack of reliable information about the quality of the assets and differences in information between sellers and buyers.

In this sense, it opens the door to the creation of “state-sponsored” platforms for transactions involving non-performing loans.

Original story: Expansión

Translation: Carmel Drake

JLL: Hotel Inv’t Amounted To €1,030M In First 7M 2016

3 August 2016 – Expansión

(…). Hotel investment in Spain amounted to €1,030 million during the 7 months to July 2016, which represents a 41% decrease compared with the same period last year. Nevertheless, it also represents the second highest figure recorded since 2007, according to a report prepared by JLL.

Specifically, as at 31 July this year, 81 (hotel) assets had been sold, for a combined investment volume of €1,030 million through 68 operations, compared with 92 assets sold as at July last year, with a combined investment volume of €1,752 million through 55 operations.

The most noteworthy operations so far this year have featured: Hotel Villa Magna, which was acquired by the Turkish group Dogus for an estimated €180 million; and Hotel Pullman Barcelona Skipper, which was purchased by the Saudí Royal Family for €90 million.

Excluding those two operations, Spanish investors accounted for 80% of the total volume invested in Spain.

In this vein, the most active investors in the hotel market have been the investment fund HI Partners (a subsidiary of Sabadell) and Hispania, which have completed transactions amounting to €110 million and €71 million, respectively.

Meanwhile, on the sell side, hotel groups have accounted for 41% of all hotel assets sold, followed by real estate companies (26%) and private investors (13%).

For Manuel Climent, Vice-President of JLL Hotels & Hospitality Group, the decrease in investment this year reflects, in part, the lower number of hotel portfolio transactions sold this year, after they soared in Spain in 2015.

Specifically, last year, up to eleven portfolios were sold, containing 74 hotels in total, for a combined investment volume of €1,450 million. So far this year, seven portfolios have been sold, containing 21 hotels and a combined investment of €174 million.

Climent forecasts that activity will intensify in terms of hotel portfolio transactions during the second half of the year, with HI Partners and Hispania leading the way.

For Climent, the moratorium in Barcelona has caused lots of investors who had purchased assets with a view to converting them into hotels, to become more cautious again. By contrast, some owners have put their hotel assets up for sale as they think that now is a good time to sell, given the lack of supply, which is raising prices in a space that is still very attractive for tourism.

The Vice-President of JLL Hotels & Hospitality Group considers that, although some important transactions are expected to be closed before year end, total investment volumes will fall below last year’s record of €2,740 million.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Deloitte: Inv’t In Shopping Centres Exceeded €1,500M In 2015

26 January 2016 – Expansión

Shopping centres are once again the most desirable assets for real estate investors, together with offices. The decrease in the price of all assets in general and the outlook for the recovery in consumption have placed shopping centres at the top of the list for funds and Socimis once again.

Although the final operations from last year have not been formalised yet, Deloitte calculates that investment in shopping centres amounted to €1,500 million in 2015, a figure than may increase by a further €100 million as a result of the transactions currently being closed, according to a study by its Financial Advisory team.

“29 operations were closed in 2015 and two or three more deals may be added to the list, once the final numbers have been formalised, which would increase total investment by around €130 million”, says Javier García-Mateo, Partner in the Financial Advisory team at Deloitte.

During the 10 months to October, investment in shopping centres in Spain amounted to €1,196 million, which fell below the figure recorded during the same period in 2014 (€2,247 million), but was higher than the amount spent in 2013 (in €867 million). Over the last three years, purchases of shopping centres accounted for around 25% of total investment volumes.

Highlights in this segment in 2015 include: the acquisition of the Plenilunio shopping centre in Madrid, for which the French group Klépierre paid the fund Orion €375 million. Lar España’s purchase of the Megapark in Bilbao, which also came in above the €100 million mark – the Socimi paid €170 million for that shopping centre. “The types of investor are very varied. Socimis and private equity funds are dominating the stage, but private investors are also making sizeable acquisitions in light of the ever lower yields being offered in the market for high street premises”, says García-Mateo.

Revaluations

The progressive increase in the interest for shopping centres has resulted in a decrease in the yield on these operations, which has fallen by 100 points in the last year, to reach 4.75%. As such it is now in line with the yields seen in other large European real estate markets such as Belgium (4.75%) and the UK (4.5%).

Another consequence has been the revaluation of this type of property. In less than two years, some shopping centres have experienced revaluations of more than 20%, says Deloitte.

Another key is the return of bank financing for the purchase of these assets. “The Spanish banks are positioning themselves strongly as financing sources against the funds of debt that have been financing shopping centre purchases until now”, added García-Mateo.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

JLL: Hotel Investment Exceeded €2,650M In 2015

12 January 2016 – Expansión

2015 was a record year for investment in the hotel sector, driven primarily by Spanish buyers. The Canary Islands and Madrid were the stars in terms of location. Last year, 143 hotels were sold in Spain worth €2,650 million, which represents an increase of 65.6% compared with 2006, the previous record-breaking year; and more than double the investment volume recorded in 2014 – €1,180 million.

Spain was the third most popular European country for investors, behind the UK and Germany, according to a report by the consultancy firm JLL Hotels & Hospitality Group. And Spanish investors returned to the spotlight, thanks to the improvement in the domestic economy. In 2015, 74% of total investment was made by domestic buyers, compared with 58% a year earlier.

In this regard, the Socimis were the great discovery of the year. Merlin and Hispania, the two largest Socimis by market capitalisation, spent €965 million on hotels, whereby accounting for 36.4% of the total volume invested in Spain.

In terms of Spanish investors, the Socimis and investment funds were followed by Spain’s hotel chains, which accounted for 13.5% of total investment. The Catalan hotel chains H10 and Hotusa were the most active in 2015. They were followed by private investors, such as family offices, which accounted for 8.9%.

In the meantime, overseas investors accounted for 26% of total investment in Spain, with buyers from France being the most active – Accor’s acquisition of four Novotel hotels was a key deal – behind those from Germany – IFA paid €48 million for two properties in the Canary Islands – and Hong Kong – Mandarin purchased the Ritz in Madrid, together with the Saudi group Olayan-.

By type of investor, the funds increased their weight significantly during the year, specifically, up from 30.4% to 53.6% of the total. Hotel groups and private investors lost steam, in contrast to the real estate companies, which recorded a slight rise.

The Canary Islands accounted for 29.6% of total investment, benefiting from the upturn that Spain’s tourism industry is experiencing at the moment due to (political) instability in other competing countries in the Mediterranean. 31 hotels were sold there in total, primarily as a result of the partnership between Meliá and Starwood Capital, as well as due to the creation of Bay, the first pure hotel Socimi, by Barceló and Hispania.

Recovery

Madrid was the second most popular destination, accounting for 23.5% of total investment. The price paid for the Ritz hotel – €778,000 per room – was the highest recorded in Spain. Half of the operations involved five-star hotels and 43% involved four-star hotels.

Occupancy rates have improved in the Spanish capital, but the average price there continues to fall below its pre-crisis levels.

In the Balearic Islands, hotels worth more than €445 million were sold – 16.8% of the total – , above Barcelona, where 14 transactions worth €340 million were signed – accounting for 14% – above all, involving four-star properties. Despite the moratorium imposed by the mayoress Ada Colau, the Catalan city is the country’s leader in terms of profitability and the outlook there is positive.

Another trend in 2015 was the sale of hotel portfolios. 78 of the 143 hotels that changed hands belonged to a larger batch. This year, more operations of this type are expected, albeit smaller in value; and overseas Socimis and investors are expected to play a more active role. According to JLL, investment in 2016 could reach similar levels to those seen last year.

Original story: Expansión (by Yovanna Blanco)

Translation: Carmel Drake

Sareb Unlikely To Meet Its Property Sales Goal In 2015

14 July 2015 – Expansión

The President of Sareb acknowledged today that the bad bank will probably need the entire 15-year period originally granted to it, to sell all of its assets.

Speaking at a briefing organised by Europa Press and Servihabitat this morning, Jaime Echegoyen recognised that it will be hard for Sareb to meet the goal it had set for 2015 of selling 15,000 properties to individuals. During the first half of the year, the bad bank only sold 5,400 homes, i.e. 33% fewer than during the same period in 2014.

Sareb’s President insisted that the entity is selling its assets slowly (on purpose) to protect the capital of its investors. 51% of the bad bank’s capital is owned by private investors – all of the major banks except for BBVA, insurance companies and other entities – and the remaining 49% is held by the State.

Echegoyen has said that Sareb will probably need the entire 15-year period originally granted to the entity to sell all of its assets. “I would go as far as to say that we will end up needing all of the time originally granted to us. We are planning to use up the entire period, but if we manage to sell all of the assets sooner, then we will”, he said.

Carmena and Colau

The head of the bad bank also said that he wants to hear the proposals that the mayoresses of Madrid and Barcelona, Manuela Carmena and Ada Colau, respectively, are going to make. Echegoyen confirmed that he is meeting Carmena tomorrow and Colau next Friday and that his position ahead of those meetings is to be “flexible and listen carefully”.

Echegoyen also repeated the message he delivered to Congress’s Economic Committee last week, saying that Sareb has made 2,000 (social housing) homes available in several autonomous communities, and he reaffirmed that he hopes to sign more agreements in more regions soon.

Original story: Expansión

Translation: Carmel Drake