Large Companies Also Focus On The Rental Housing Market

26 September 2016 – El Mundo

The rental market is becoming one of the symbols of the new real estate cycle. It has gone from being an almost residual market to becoming one of the stars of the residential sector. Gone are the prejudices that used to weigh down on this regime – it seems like the best is yet to come: all indications are that the sector has a promising future ahead thanks to its potential for professionalization.

Currently, the rental market accounts for around 25% of the residential stock. The latest official data comes from 2014, when, according to Eurostat, 21.2% of Spaniards lived in rental accommodation. According to the experts, that percentage that has been increasing ever since and it is much higher in the major cities. Spain has not had this many tenants since the 1960s.

Despite the significant increase in rental accommodation, Spain is a long way below countries such as Germany (where 47.5% of homes are rented), Austria (42.8%), Denmark (36.7%), the UK (35.2%) and France (34.9%). On average, 29.9% of homes in Europe are rented. This European reality indicates that the rental market in Spain still has potential for growth.

Experts agree that one of the maxims of the new real estate cycle will be a more balanced relationship between ownership and rental. They agree that to reach this goal, the sector, which is currently mainly in the hands of individual landlords, will have to be professionalized. This professionalization has been underway for years and is now starting to consolidate itself on a large scale.

Testa Residencial

A recent example is the maturity of the professional leasing market is Testa Residencial, the new subsidiary of Merlin Properties, created following the merger of the residential portfolios previously owned by the Socimi and Metrovacesa. This joint venture, which is still in its gestation period and which is expected to adopt the Socimi structure, was born with 4,706 homes, all operated under leases. Merlin’s major commitment to residential leasing is even more important if we take into account the fact that it has become the largest real estate group in Spain and the eighth largest in Europe.

In addition, Testa Residencial’s extensive supply will grow even more thanks to upcoming injections of properties (in exchange for shares) from Banco Santander, BBVA and Banco Popular, three shareholders inherited from Metrovacesa. (…). As such, the firm will end up managing a portfolio of 10,000 units, allowing it to complete with the main real estate companies in this market.

Testa Residential is launching itself into a sector in which two large companies have competed until now: Azora and Larcovi. The first, founded in 2003, has more than 12,000 rental homes under management in different funds and companies (for example, Azora and Hispania) and is the largest private entity in this market. (…).

Concha Osácar, the founding partner at Azora, takes it as read that the rental market will continue to grow for several reasons: the increase in geographical mobility for employment purposes, the limited access to credit to make (house) purchases, the elimination of tax incentives to acquire a home, the change in mentality (“especially amongst young people”) and growing demand from families looking for better homes.

Alongside Azora, Larcovi represents the tip of the iceberg of the professionalization of the sector. It manages more than 9,000 units (…).

“To satisfy the growing demand, the supply will have to be increased. We estimate that Spain will need between 1 million and 1.2 million additional rental homes to bring it into line with its European counterparts”, says Osácar. (…).

Original story: El Mundo (by Jorge Salido Cobo)

Translation: Carmel Drake

Socimis Turn Their Attention To The Rental Housing Market

26 September 2016 – El Mundo

The real estate market is constantly evolving and adapting to new times and players, such as, for example, Listed Real Estate Market Investment Companies (Socimis). These investment vehicles, which have significant tax advantages and whose structure was created in 2012 to promote the leasing of properties, is now becoming a major player in the residential rental market.

To date, large real estate firms have created most of the Socimis in the market. They have spent billions of euros on investments, with the primary aim of managing tertiary and commercial assets. There have been a handful of purely residential Socimis on the scene, but they have been mostly driven at a family level. But that is now changing, after several high profile firms linked in one way or another to housing have decided to launch new Socimis. This is being perceived as a real declaration of intent that will lead to the professionalization of the rental housing market.

This professional boost will happen through initiatives such as those launched by Quid Pro Quo Alquiler (the Socimi being prepared by Alquiler Seguro) and Domo Activos Socimi (Domo Gestora), amongst others. They are just two of the new companies that are being called upon to define the before and after in the rental housing sector.

Why is this change happening in the real estate sector? “Nothing in particular has happened. We are seeing a normal process in terms of the evolution of the Socimis. At the beginning, it made complete sense to use them to acquire offices and shopping centres, because it was easier to find those products and at good prices. The situation was completely the opposite in the residential sector, where there were few packages of private homes available to buy. Over time, it has made sense for companies to start to group together large residential portfolios and commit to that formula”, explains José Luis Ruiz Bartolomé, real estate consultant and partner at Certus Capital.

Sources at Hispania, one of the leading Socimis in Spain, confirm that housing is less attractive. “The asset is very intense in terms of management and it requires a certain condensed critical mass to be profitable. Portfolios of very diverse homes should be avoided as they make management more difficult and increase costs”, said Cristina García, CEO at Hispania. For this reason, Hispania only investments in whole buildings, “because that means that we are able to renovate entire assets, increase their values significantly and optimise costs”, said García.

In this sense, it is worth highlighting that the new Socimis are backing the rental of diverse homes. The best example is the Socimi owned by Alquiler Seguro – a firm that specialises in brokering leases -, which will settle for properties purchased by qualifying investors from their current clients (it manages more than 50,000 contracts). On the other hand, Domo Activos Socimi will be the first property developer Socimi in Spain; it will focus on acquiring buildable land and constructing apartments for rental.

Alquiler Seguro’s initial plans involve capturing €50 million in funding and for the Socimi to launch with around 500 homes. Within four or five years, it hopes to raise up to €500 million and expand the portfolio to include around 6,000 units. Antonio Carroza, CEO at Alquiler Seguro, confirms that Quid Pro Quo’s goal is “to professionalize leasing and provide the market with a constant, homogenous and continuous supply”. (…).

Original story: El Mundo (by Jorge Salido Cobo)

Translation: Carmel Drake