Britons As Number-One Spanish Real Estate Buyers

5/01/2015 – Money Market UK

According to official data, investors from the United Kingdom account for 18.06% of property sales to foreigners sealed in Spain, followed by the French (10.48%), Russians (7.5%), German (6.45%), Belgian (6.19%) and Swedish (6.08%).

Furthermore, non-Europeans also enforced their purchasing share with Chinese representing 3.95%, Moroccan 2.34% and Algerian 1.96% of the sales. Spain’s real estate listing prices have overally increased by 7%. Demand for second homes hits record high showing a 40% rise from the boom peaks.

Foreigners residing in Spain have been demanding more and more since a collapse driven by the recession. Home salesmen performed best in Valencia, the Canary Islands and the Balearics. They sold most in year-on-year terms in Madrid (up 30.4%), Extremadura (25.7%) and Navarra (19.3%).

Aguirre Newman advisors state the strong demand coming from foreign buyers is due to low prices along the Costa del Sol coastline, additionally seeing new property developments being started. Around 90% of the overseas investors is able to buy a housing unit without a mortgage.

Real estate experts have admitted that the Golden Visa scheme which hands over Spanish residency for an investment for half a million euros or more had not come up to the expectations so far.

 

Original story: Money Market UK (by editorial staff)

Summary: AURA REE

BBVA: Property Sales Down 1.1% in October

5/01/2015 – Expansion

Housing sales declined in last October but they continue to show ‘a positive trend’ over the year, whereas prices are nearing stability, informs bank BBVA in its Flash of Spanish Real Estate report.

Production ‘maintains the progress added up in the last months’ by, for instance, Social Security data which points at a 0.7% increase in October and November.

During the month of October, home sales went down by 1.1% which, nothwithstandingly, ‘does not interrupt the growth path’ observed over the past months as the transactions sealed since January have already reached a 17.3% upsurge from the previous year.

Employment is heading upwards and financial circumstances are going stable but the customer confidence ‘lags behind as limited optimism about the future Spain’s economics persists’.

Likewise, activity in the mortgage market has been increasing and new loan approval for house purchase in October showed a staggering 23% year-on-year rise, supporting the trend climbing up.

In turn, there was a 21% increase in land deals registered in the third quarter of the year.

 

Original story: Expansión

Translation: AURA REE

 

Supreme Court Revolutionizes Real Estate Industry By Justifying Rent Reductions Due To The Economic Crisis

22/12/2014 – El Confidencial

Court Rules In Favor of Accor Hotel Chain

The Supreme Court has ruled on a delicate issue. Last Thursday, the highest judicial body ruled in favor of a rent reduction under the clausula rebus sic stantibus (Latin for ‘things-thus- standing’ clause). The Civil Chamber has considered a legal doctrine which states that: “The clauses in contracts are set forth given the existing circumstances at the time of the conclusion of the contract. Any fundamental change in those circumstances may allow for amendment of the clauses.”

The particular case that has led to the Supreme Court’s decision affects the Spanish subsidiary of Accor Hotels, represented by the law firm, Ashurst. The Supreme Court has accepted the luxury hotel brand’s request for a rent reduction in a contract that was in force. The appeal was brought against an earlier ruling of the Provincial Court of Valencia that had denied them application of clausula rebus sic stantibus in a rental agreement for a hotel situated in Valencia.

According to the ruling, the rent agreed-upon in the contract is to be reduced by 29% and the landlord (who, prior to litigation, refused to renegotiate the contract) is to be obligated to return 29% of the rent paid from the date on which the lawsuit was filed. The Supreme Court justified the flexible interpretation of the legal doctrine by taking into account that a contract may be amended if exceptional or unforeseen circumstances arise after signing the contract; this applies to circumstances that may drastically change the economic basis of the contract, thereby making it onerous to enforce compliance.

As stated in writing, “…hereby proceeds the amendment of the contract, dated February 25th, 1999, regarding the rental agreement of Hotel Ibis [the brand under which Accor operates], in order to reduce the annual rent by 29% with respect to the rent agreed-upon at the time the lawsuit was filed.” In addition, it specifies that, “The rent reduction shall apply from the filing of the application for this lawsuit until the beginning of the fiscal year 2015, with the consequent return of rent charged in excess throughout the course of these proceedings.”

To date, this classic legal doctrine has only been applied under very exceptional circumstances. In this case, the Supreme Court understands, after partially accepting the demands of the appeal, that the economic crisis experienced over recent years is a factor that the interested parties could have never foreseen at the time in which the contract was signed, and that this factor may fundamentally change the circumstances related to the obligations set in the agreement. The Supreme Court also acknowledges as a valid argument the 50% rent and hotel rating reduction (down to 4 stars) which another hotel chain, Eurostars, managed to obtain from its landlord.

According to the legal team led by Oscar Franco and Juan Racionero, from the department of Litigation and Arbitration at Ashurst, we can expect the Supreme Court to uphold this criterion in future cases, which could greatly impact hotel companies, shopping malls, and businesses from other sectors entering into important real estate agreements in order to exercise their economic activities. “The implications of this legal precedent are very relevant for the hotel and real estate sectors, since they were particularly affected by the economic crisis.”

Original article: El Confidencial (by Carlos Hernanz)

Translation: Aura REE

JB Capital Teams Up With A Fund To Buy Up Mortgages

22/12/2014 – Expansión

JAVIER BOTÍN’S COMPANY / Savia, a subsidiary of JB Capital, and US investor Axonic finalize purchase of Celeris’ foreclosed assets and mortgages.

Javier Botín enters the housing market. Savia Asset Management, a subsidiary of its holding financial entity –JB Capital Markets–, completed purchase of about 60 million euros in assets remaining in Celeris, the financial company which created ten savings banks in 2006, according to financial sources consulted by Spanish economic newspaper, EXPANSIÓN.

Advisor of Santander and President of Botín Foundation, Javier Botín has partnered in this operation with a new fund that landed in Spain: Axonic Capital. This American investor relies on assets estimated at $2.4 billion (€1.95 billion). Its founder and head is Clayton DeGiacinto, Goldman’s ex-vice president of the fixed income, currency and raw materials division.

The Celeris operation might not be the only one for Savia and Axonic to close jointly in the coming weeks: sources from the financial sector indicate that they will be among the final bidders for any doubtful lenders’ portfolios on sale – CaixaBank, Sabadell, SAREB, and BMN.

Javier Botín’s company has specialized in brokerage of financial transactions between the Spanish banking sector and international investment funds, mainly American ones. Before Axonic, Savia has worked with D. E. Shaw, Marathon, Perry Capital and York Capital, among others.

For portfolios of defaulted and doubtful loans, Savia invests jointly with foreign investors. Javier Botín’s company has participated in purchasing loans of CaixaBank, BBVA, Ibercaja, Popular, BMN and Bankia, estimated at over 5 billion euros.

Real Estate Turn

The loans purchased over the last two years have been mostly bad consumer debt. Now Savia is shifting its focus on real estate assets.

Furthermore, Celeris’ portfolio is comprised of 860 assets, half of which prime mortgages and the rest sub-prime real estate. These loans and real estate assets were estimated to be worth roughly 120 million euros, which is why Savia and Axonic will purchase them at a discount of slightly more than 50%.

The purchase does not entail a provision of financial services, which Celeris abandoned last year.

This financial institution was created in 2006 by ten banks led by CCM and Caixanova, which had an ambitious growth plan based on credit cards, car loans and mortgage refinancing. CaixaBank, Ibercaja, BBVA, BMN, Ceiss, Liberbank, Abanca and Bankia are currently having a stake in it.

In 2013, Celeris sold its portfolio of consumer loans, with the workforce included, to the Pepper and Goldman fund.

Original article: Expansión (by Jorge Zuloaga)

Translation: Aura REE

Socimis Bring Spanish Housing Back to Life

17/12/2014 – Expansion

The year 2014 is set to come down to history as the pivotal point for the economy of Spain, heavily hit by the recession. After seven years of being a no-go, within twelve months, the country has transformed into the hottest market for large international funds and fortunes. Undoubtedly, the year belongs to Spanish REIT vehicles.

Known as Socimis, the vehicles were created to invest exclusively in rental assets, offering tax incentives and generous returns to their shareholders. Both arrival of funds and an amendment in the law regulating the trusts have contributed to favorable circumstances in which the Socimis could raise 2.56 million euros and spend 2.33 million of them year-to-date.

Hispania, a Different Kind of Reit

Hispania Activos Inmobiliarios debuted on the Spanish stock exchange market last March 14th. The trust, chaired by directors of manager Azora, raised 550 million at its Initial Public Offering (IPO), backed by such prominent investors as George Soros and John Paulson. Originally, it did not have a Socimi status, later on given to its affiliate Hispania Real. Due to not being tied up by requirements for Socimis, Hispania has purchased diverse types of assets. For instance, it bought out the real estate arm of ONCE, Oncisa (a 90% stake), including over 400 homes. Last month, the company announced alliance with Fortress, King Street and Goldman Sachs to submit a takeover bid for famous Realia.

Merlin, a Tycoon With Assets of BBVA

On the last day of June, Merlin Properties went public, gaining support from Marketfield, UBS and Moore Capital and raising 1.25 billion. Unlike other Reits, Merlin became listed with a purchase pre-agreement in hand, regarding 880 banking branches and five office buildings fully let to BBVA. As the Socimi has run out of almost all the IPO funds but not the acquisition ideas, it started to negotiate with banks on refinancing of a 825 million loan.

Lar, a Spanish Expert With Mighty Allies

It was the first Socimi to float on the Continuous Market. Managed by developer Lar, well-experienced in the Spanish real estate industry, it raised 400 million euros while going public, put from such key international players as Pimco, Franklin Templeton and Cohen & Steers.

Lar has spent only 230 million euros of its funds, primarily on retail assets.

Axia, €350 Million and Five Months to Meet Objectives

In turn, Axia Real Estate was the last Socimi to debut on the stock in 2014. After capturing 360 million euros in July, the company has already invested 100% of the equity and went to banks to close the most recent purchase, including four office buildings and a retail space.

Next to Go Public: Quabit & Urbas

This year’s four successful debuts convinced businessmen to the Spanish Socimis. Two more are set to float in 2015, Quabit and Urbas. Although already listed, the firms will change their structures to become the Reit vehicles.

GMP, a Real Estate Big Fish to Become Listed

Property manager GMP, specialized in management of office buildings in Madrid’s downtown, has been undergoing the transformation since October. Not long ago, the firm let the Singapore Sovereign Wealth Fund into its capital in exchange for a 200 million euro equity injection. However, the new Socimi will not become listed in short term (it disposes of 2 years for that) but what we know for sure is it will do the property shopping for an amount exceeding 250 million euros.

 

Original story: Expansión (by Rocío Ruiz)

Translation: AURA REE

Where to Find Your Spanish Dream House?

12/12/2014 – Expansion

Countless opportunities have emerged in the real estate sector this year. After seven years of doom and gloom, deals in the market began to flourish. Housing sales jumped up by 13.7 per cent year-on-year in September and showed 27.024 transactions in total, reported the National Statistics Office of Spain (aka INE).

Logically, rock-bottom prices might have triggered the upsurge. According to the latest update by Tinsa Tasaciones Inmobiliarias, home values in the country dropped by 41.5 percent on average from the 2007 peaks. Slumps picture different in each region and ‘in some of them adjustment may be still pending’, Tinsa claimed.

Projections remark that prices will continue to fall in areas of a great surplus and no demand. ‘We predict that in 2015 correcting trend will prevail. In big city centers, home values seem to have stabilized and in prime areas some rebounds are expected’, said Dario Fernandez, Residential Head at JLL.

The market analysts agree that this is the right moment to buy a dwelling but it is advisable to study the situation in each region ahead. They also positively value private buy-to-lease deals. Average Spanish home (80 sqm at 1.450 euros each, at a rent of 542 euros monthly) returns 4% annually. The yield may reach 8% in line with property location and type, experts assure.

The Regions of Spain

Real estate market shows fresh traces of stabilization in metropolises like Madrid and Barcelona where huge bargains may soon fall short, above all in their centers and prime areas. In these cities, housing prices dipped by 2.2 percent from the last year, the least among other places in Spain. ‘Still, there exist some interesting opportunities in specific areas demonstrating economic growth potential and referring to pre-owned properties, but their prices are closer to reality’, points out Luis Leirado from TecniTasa.

Resales in Madrid and Barcelona became by 45 percent and 47 percent cheaper over the last eight years, informs portal fotocasa.es.

Vicenç Ramon, executive of RtV Grupo Inmobiliario, maintains the view and thinks the best deals are found in residential zones and mature neighbourhoods of both cities, where the economic level and demand are high, ensuring good, mid-term returns.

But to poach truly discounted properties, one should rush to the Mediterranean Coast, specialists encourage. Average depreciation of houses there in many cases crosses 50%. For example, in Valencia, there is an abundant supply with nice outlook due to tourist flows. The same conditions apply to some areas of Andalusia, above all to those located at the fringe of the coast.

Moreover, in these areas housing supply is usually represented by repossessed units at dramatically low prices which sometimes do not compensate for the cost of construction. In addition, lending terms and conditions are attractive, including 100% mortgages. However, experts warn that such a bargains are often situated far away from prime zones. Discounts applied by banks reach 60 percent.

Before You Buy

Analysts conclude that home buyers should take a selective approach and consider other factors before signing the contract. ‘A private purchaser should dispose of a saved amount equal to 20-35 percent of the final price, especially when it is not a REO unit, as banks usually finance 80 percent of their properties’ appraisal values. What is more, the buyer will have to bear additional costs which may be around 10-15 percent of the final price’, specialists remind.

Other Aspects

On the other hand, the investor must be up-to-date with taxation laws currently in force, as although the new amendment which will become valid in 2015 will affect mostly the vendors, purchasers may also feel its impact in shape of transaction costs. Marta Garcia, Product Manager at Tinsa, calls for paying a close attention to energy certificate of the home, which may range from A- to G-class. An average apartment usually has a B-class (second most-efficient), meaning expenses of 400 euros annually, while if the same dwelling had a G (the least efficient), it would generate a cost of 2.100 euros annually.

 

Original story: Expansión (by D. Esperanza)

Translation: AURA REE

Tinsa: Home Prices Will Hit the Bottom in 2015

11/12/2014 – Expansion

According to Spanish appraisal firm Tinsa, home values could bottom out during the next year, depending on the economic development and employment. Moreover, the company portends a considerable recovery for the industry in 2015.

Tinsa’s head of the Product and Diversification department Pedro Soria said that although the outlook for growth and employment are optimistic and since 2013 housing prices have been stabilizing, new jobs give lower salaries, they are usually temporal and part-time, resulting in poor buyers’ solvency and weak demand.

After floor-level year 2013 with sales reaching barely 300.000 properties, Tinsa estimates that an improvement in expectations observed since the beginning of 2014 will be translated to an increase of between 15 per cent and 20 per cent in terms of sold homes.

Referring to the stock and its absorption, the appraiser calculates it will show 340.000 dwelling units.

Mr Soria believes the volume may be digested significantly in 2017. However, this does not mean that a certain surplus located badly and demonstrating doubtful quality will disappear as well.

Also, Tinsa predicts that in 2015 there will be a notable reactivation in housing development, above all because the ongoing year has already seen positive numbers of new building permits.

Thus, 2014 may close with 40.000 permits but 2015 will probably double that, reaching 80.000, which will allow to avoid supply deficit in 2017.

In regard to the main players in the industry next year, Tinsa’s executive reckons the principal role will belong to the Socimis (Spanish REITs), vehicles that mostly target properties other than residential but this asset class also starts to appear in their strategies.

Foreign demand will continue to monopolize coastal areas and the islands. In fact, the litoral zones registering pricing stabilization or even first rises are dominated by international investors.

 

Original story: Expasión

Translation: AURA REE

The Municipalities Where Major House-Buying Power Comes in Handy

5/12/2014 – El Economista

According to official statistical data, housing prices keep dipping in most of the Spanish citites. However, given the current economic circumstances, the financial effort which needs to be made to purchase a home is still considerable. And the affordability gap between cities and municipalities spreads wide.

Ad rem, Malaga’s municipality of Nerja requires a as its inhabitants must intend their 10.5 year’s earnings to be able to buy a property, reports Idealista.com.

Also, more than ten years to pay their home off need households in Eivissa and Santa Eulalia del Rio, Ibiza (10.2 years in both). Sant Just Desvern, Barcelona, takes the fourth position with a need of 9.7 years’ savings on average.

Still, more than 9 years’ rates are shown in Mogan (Las Palmas, 9.5 yrs), Sant Josep de Sa Talaia (the Balearic Islands, 9.2 yrs) and Sanxenxo (Pontevedra, 9 yrs). The top 10 list closes at Sant Antoni de Portmany (the Balearic Islands, 8.9 yrs), Baiona (Pontevedra, 8.9 yrs) and San Bartolome de Tirajana (Las Palmas, 8.6 yrs).

What About Less Effort?

One the other side, the Valencian Community and its municipalities of Onda and Villareal (Castellon area, 2.5 and 2.6 yrs on average respectively), as well as in Ontinyent (2.6 yrs), Mollerusa (Lleida) and Tortosa (Tarragona) with 2.7 years both, show better affordability rates.

Main Provincial Cities

The study also analyzes provincial capitals with Barcelona opening the ranking with 8.1 years, followed by Cadiz (7.4 yrs), A Coruña (7.2 yrs) and Madrid (7 yrs). Further on, there position Salamanca (6.5 yrs), Santander (6.5 yrs), Malaga (6.2 yrs) and Seville (5.8 yrs).

When it comes to residential markets, the biggest effort is required from citizens from municipalities surrounding Barcelona: Hospitalet de Llobregat (7.8 yrs), El Prat de Llobregat (7.6 yrs), Cornella (7.6 yrs), Badalona (7.4 yrs), Montcada i Reixac (7.3 yrs) and Sant Adria del Besos (7.2 yrs). Among Madrid’s cities, only San Fernando de Henares (7.7 yrs) lives up to the bar.

According to the information source, Lleida‘s inhabitants make the smallest effort (3.3 years of income), and so do citizens of Castellon (3.8 yrs), Guadalajara (4.3 yrs), Huesca (4.4 yrs) and Alicante (4.5 yrs).

In order to prepare the report, portal idealista.com employed official average taxable income rates per contributor and compared them with an average price of a 80 square meter apartment in each of the municipalities included in the study.

 

Original story: El Economista

Translation: AURA REE

Andalusia’s 70 Public Buildings Sell to WP Carey For €300 Mn

5/12/2014 – El Confidencial

Regional authorities of Andalusia led by Susana Diaz (pictured) agreed to sell 70 public properties for a €300 million total to fund manger WP Carey Inc, which sealed the deal through its Spanish arm Inversiones Holmes. The amount is slightly higher than the asking price set at €292 million and the tender winner has deposited €15 million as a warranty, equal to 5% of the total value of the transaction. Marbella-based branch of CBRE advised on it.

Precisely, this sale-and-leaseback deal permits the Andalusian government to preserve the administrative use of the buildings as it will stay in them as a tenant for the next 20 years, paying €23.6 million annually.

‘The transaction demonstrates trust in foreign investors and more dynamic exploitation of the public properties, so much necessary in the economic recovery times’, stated a speaksperson of the Junta at a press conference.

Describing the transferred buildings, they dispose of 949 attached parking spaces and they are scattered around eight Andalusian provinces. 92% of them is located in big cities and their centers, although none of them is listed as a site of Cultural Interest. Around 36% of the properties, representing 44% of the total floor area and assigned as headquarters of the regional Administration, are situated in Seville. Specifically, 25 buildings stand in Seville, 9 in Huelva, 8 in Cadiz and the same quantity in Cordoba, 7 in Jaen, 5 in Almeria and in Malaga and 3 in Granada.

A Fund With Expertise

WP Carey is a real estate investment trust (REIT) specialized in corporative financing through sale-and-leaseback and purchase deals on single-tenant properties. Until now, it has invested more than 18 billion USD.

As of 30th September 2014, the company is valued at 9.8 billion USD. Aside from its global real estate portfolio, WP Carey manages several non-listed funds embracing 8.3 billion worth of assets.

 

Original story: El Confidencial (by Elena Sanz)

Translation: AURA REE

Citi Establishes an Investment Club For Foreign Fortunes Willing to Buy Spanish Property

5/12/2014 – Expansion

In spite of the challenges the financial and economic crisis keeps putting in front of Spain, the country is a tidbit from the investment point of view and world’s biggest fortunes took it at the aim.

In order to streamline the increasing interest, above all in the Spanish real estate, Citi and its local partner Mazabi decided to create an investment club for the grand property managers.

Fernando Lopez Muñoz, the General Director and the Head of Citi Private Bank for Spain, Italy, Portugal and Latin-America inside the EMEA (Europe, Middle East and Africa), explained that ‘the club foresees spending a minimum of €200 million in the country, an amount which, if leveraged, could rise to €400 million‘.

The investee ‘will comprise equity of 15-20 families owning a minimum of €100 million worth of property each. They will declare a soft commitment, meaning an input of €10 million for opportunities proposed by Mazabi‘, the executive pointed out.

‘Great majority of groups belonging to the club – which is still being constituted – proceed from Southern America (mainly from Mexico and Chile) and the Middle East, but also U.S. investors are among its members. From Europe, some interest was shown in the United Kingdom and in Spain itself’.

‘The vehicle should disburse the equity within a three years’ term which is extendable to five years. In any case, we believe the core of the investment will be sealed in 2015 and in the first quarter of 2016′, Mr Lopez said.

Bearing in mind the current point in the cycle and the experience from other investment clubs enhanced by Citi Private Bank, the director estimates that the Internal Rate of Return (IRR) may post 15% annually.

A Value-Adding Partnership

Mazabi, specialized in detecting opportunities on the Spanish territory, has intially pointed at assets located mainly in Madrid and Barcelona, and also in Bilbao, Valencia, Seville and other provincial main cities. The properties are of residential, tertiary, industrial and hotel types.

Lopez underlined that ‘Mazabi is not a mere intermediary broker but a partner who adds a huge value to the partnership‘. In fact, Mazabi has been providing real estate advisory services to Citi since 2010.

Citi Private Bank, having USD 310 billion  under management, employs 24 private bankers in Spain. Each of them works with 20 clients and it is predicted that next year, two to four more experts will join the team.

‘One of the main indicators of this business is soaring up in the country: the potential of property management services, cooperating together with private banking and equity markets’, Lopez remarked.

 

Original story: Expansión (by Ana Antón)

Translation: AURA REE