Tag: Real Estate Investments

Barings Acquires Five Office Buildings in Avalon Business Park in Madrid

    

Barings Real Estate has acquired five office buildings within Avalon Business Park, Madrid, Spain, as part of a Pan European value add investment strategy on behalf of an institutional investor. The seller is Meridia Capital. The five office buildings comprise 24,495sqm and are best in class in this submarket. The buildings are 97% occupied with more than 20 tenants mainly from the IT/technology and engineering sectors. Additionally, there are 1,291sqm of retail space and 421 underground parking spaces.

The Avalon Business Park comprises in total nine office buildings with 46,952sqm. The business park is located in Julian Camarillo, a 950,000sqm, consolidated office sub-market within the city of Madrid, one of the largest submarkets in terms of take-up in 2018. Formerly an industrial area, Avalon Business Park has already undergone big changes in the past years. It is in very close proximity to the city centre and the airport (15 minutes by car to each). The metro station is within eight minutes walking distance, and the property is served by several bus lines.

“We are delighted to announce our seventh acquisition in Spain and our first investment in the Madrid office market, where we see significant rental and value growth over the coming years. This is a new milestone in the development of our investment strategy in the Iberian Peninsula after a significant capital deployment in both the retail and the logistic markets. As our local team grows, we continue broadening our investment horizon, not only across different asset classes but also in terms of risk profile, from core product to value-add and opportunistic transactions,” Adolfo Favieres, Country Head Real Estate, Spain at Barings, said.

Barings was advised by Dentons (Legal), Deloitte (Financial), Arcadis (Technical) and Knight Frank (Valuation). Meridia Capital was advised by Garrigues and Savills Aguirre Newman.

Spanish Hotels Change Hands As Tourism Booms

16 August 2018

Spain is a tourist country par excellence: beaches, sun, good weather and hotels. It is a country where tourists can find a comfortable place to spend their holidays, while at the same time, investors see an interesting potential for profits. In this manner are the parallel tales of the splendour of Spain’s tourism interwoven with the non-stop action in the local hotel sector real estate market.

Last year, investments reached 3.750 billion euros, according to real estate consultancy CBRE, a record figure that gives an idea of the market’s momentum. The frenetic pace of acquisitions didn’t stop for a rest this summer either, as the sector awaits the result of the Thai International’s takeover bid for NH Hoteles.

The hotel scene is undergoing a paradigm shift and the business model that has been used since the 1980s, where the property owner and hotel operator were the same, is moving towards a more Anglo-Saxon profile, where the owner is an investor, and lifelong hotel sector professionals are primarily responsible for management. The sector is still highly fragmented and dominated by individual owners and independent managers (55%), although their relative participation is decreasing. Funds, socimis and family offices have gained prominence in recent years and are responsible for most of the operations currently being executed, to the detriment of traditional groups. Consequently, 57% of the total invested in the year up to June corresponded to that group of investors, compared to 40% for the traditional hotel chains.

The reason for the change is, again, the bursting of the real estate bubble. Many hotel owners experienced difficulties and, in some cases, were unable to cope with their debts to banks, which in many cases took over the assets; then came the venture capital funds that, honouring their nickname – vultures –, took advantage of the situation to snap up those hotels at firesale prices. The funds then follow a familiar path after that, and the same story is repeated in other segments of the real estate market: the funds invest in the completion of moribund projects or to upgrade older assets, run the businesses at a good profit until they find an opportunity to unload their investment, obtaining attractive returns in the process.

“[The funds] obtain annual yields of around 6.5-7% and aim to achieve between 12% and 15% with an eventual sale of the asset,” says Bruno Hallé Boix, founding partner of the consultancy Magma Hospitality Consulting.

Divestment will be the next phase of the current cycle, but for now, market players are focusing on repositioning the businesses and their subsequent consolidation. Investment forecasts for 2018 are positive, although they are not expected to return to the highs of last year. In the first semester of this year, the total volume invested shrank by 55%, to 960 million euros. In that same period, 70 hotel assets were transacted, 8,500 rooms were built, together with another 1,800 in as yet incomplete buildings, lots and projects sold.

“It is becoming harder every day to find good assets, that’s why it’s a good time for skilled opportunity seekers,” Mr Hallé Boix stated.

Mergers and acquisitions

One of the most important transactions this year starred Blackstone, which has established itself as Spain’s hotel giant after finalising its takeover bid for Hispania. The US fund already owned more than a dozen assets stemming from a previous real estate transaction with Banco Santander and HI Partners. With its acquisition of Hispania, Blackstone added another 46 hotels and more than 13,100 rooms to its portfolio.

With that operation over, all eyes are now on NH Hoteles. The chain has been on the block for months after an unsuccessful attempted merger with Barceló, and so far, Minor International seems likely to take the prize. The Thai company, also planning on creating a hotel sector behemoth, is offering 6.4 euros per share the Spanish chain, which had a relatively cool reception.

While awaiting the outcome of this latest page-turner, almost no one is ruling out additional transactions in the coming months. 83% of Spanish and international chains surveyed for Magma Hospitality’s Hospitality Hotel Management 2018 study demonstrated an interest in moving ahead with possible mergers or acquisitions with other hotel groups in Spain during 2018 and beyond. At the same time, the growth of specialised socimis will continue to add dynamism to the sector.

For investors, including both socimis and the traditional operators, holiday resorts are seen as the next big bet, accounting for 78% of investments in the first half of the year, compared to the 22% that went to urban hotels. Baleares (27%), Canarias (26%) and Andalucía (9%) were the main targets of regional investment, with others such as Madrid (5%) and Barcelona (4%) following far behind, according to CBRE.

In 43% of the cases, the average sale price for the assets valued the hotels at between 60,000 and 120,000 euros per room, according to the report. At the same time, there was an increase in acquisitions where buyers paid more than €120,000/room, another example of the boom in the sector.

Original Story: El Mundo – María Hernández

Translation: Richard Turner

 

Analysis of the Logistics Sector in Spain

21 August 2018

Companies and developers have discovered the logistics sector and are beginning to invest in warehouses and facilities in Spain. This is the conclusion of the CBRE consultancy’s study of the logistics market.

As it does during every edition of SIL, the real estate company CBRE Real Estate presented the results of its Logistics Market report, which focuses on issues surrounding demand, supply and capital regarding the main logistics centres in the country. CBRE’s director of its Industrial and National Logistics Area, Alberto Larrazabal, summarised the trends that define the market today.

Madrid

The central zone is currently home to 10,000,000 square meters of logistics warehouses. Vacancy in the mid-range of Madrid and surrounding areas is around 4.5%, and last year, a record 920,000 square meters were contracted. 42% of all the facilities rented were for e-commerce, of which almost 60% are located in the Henares Corridor and 20% in the A-4 highway. During the first quarter of 2018, 240,000 square meters were contracted. According to Larrazabal, the data is very positive: the phenomenon of e-commerce is causing an increase in logistics contracting in general and, therefore, the increased allocation of warehousing facilities. It is important to note that, in Madrid, during this year and next, more than one million meters of facilities that are to be built this year and next will be placed on the market. 400,000 square meters of those will already be built in 2018. Almost all of the facilities under construction (in Madrid and throughout Spain) are being successfully allocated. Although there are a large number of facilities that are being placed on the market, many were placed immediately.

Barcelona

Last year, 450,000 square meters of facilities were contracted in the Barcelona area. This year, 120,000 square meters were placed in the first quarter. The data points to a strong year for the sector. The contracted area still fell short of the record-breaking year of 2016, when more than 700,000 meters were contracted, but the main reason for that was a lack of space coming onto the market. Of the contracted area, 25% was related to e-commerce. The market is highly dynamic, vacancy rates in the first and second metropolitan belts stand at 1% (there is almost nothing available in these areas). Consequently, developers are erected a large number of facilities, especially in Barcelona’s second belt.

Valencia

Similar to Barcelona, there is almost nothing available (non-contracted capacity is at approximately 2%), and that is facilities are being built without a specific end-user. Contracted area last year was about 120,000 square meters, again due to a lack of space coming onto the market. Demand is very high, and the sector is the focus of developers and investors in general.

Bilbao/Malaga

There is no official data on contracted space because there is next to no availability. There are almost no quality facilities available in either Bilbao or Malaga. The problem in both cities is a lack of land: there are no planned industrial facilities in either Bilbao or Malaga, and the latter city has the added problem of being situated on a floodplain, and the subterranean water prevents any major developments, the head of Logistics at CBRE explained.

Sevilla

Sevilla has available land, but no high-quality facilities. Prices are slightly higher as the city is not a traditional focus of the industry like Malaga, Bilbao, Valencia or Madrid. However, the market has attracted a lot of interest and land is available (about 50,000 square meters).

Zaragoza

Unlike in the other cities, there is a lot of land available in this city. Contracted area stood at roughly 40,000 square meters last year, a relatively low figure since few facilities are coming onto the market, even considering the wealth of available land. Though land is accessible, few developers have stepped forward, and consequently, there is practically no unallocated capacity.

E-commerce boosts demand

According to CBRE, 2017 was a record-breaking year for investments (almost 2 billion euros) in logistics warehouses. In 2016, the total investment reached €1 billion, and at the time it was believed that the figure would not be surpassed.

There is a lot of existing liquidity, financing, international investors, Asian capital and a very limited amount of product. This combination is leading to a number of joint ventures between local and national developers and international funds. Many facilities are being developed at risk, without having a final user. The influence of e-commerce is highly important: traditional logistics has been transformed into e-commerce logistics. No change is expected to the trend in the short term: there is a lot of investment demand and little supply, explains Alberto Larrazabal.

Original Story: Transporte Profesional

Translation: Richard Turner

 

Transactions and Prices for Land Recovering on the Canary Islands

26 August 2018

Transactions for land are once again taking off thanks to the housing market, particularly rentals. In the first quarter of 2018, 182 operations were carried out for 36 million euros, up 35% y-o-y.

The land market is once again taking off in the Canary Islands. The observation comes from data published by the Ministry of Development and is largely due to the growing demand for housing, especially for rental. In the first quarter of this year, the most recent available data, 182 urban land transactions were carried out on the Spanish archipelago, an increase of 29% over the previous year. The increase reached 10% with regards to the previous quarter.

The figure places the Canary Islands among the Spanish regions with the highest increase in land operations. When broken down by province, there was the same number of transactions in Las Palmas as in Santa Cruz de Tenerife, though the rebound in the eastern province was higher in relative terms, going up by 34% compared to 25%. These are the highest figures for land operations since 2009. In recent years, less than one hundred plots of land were being sold per quarter, according to the Ministry’s data. Before the crisis, nearly 1,000 plots of land were sold on a quarterly basis.

The transactions for land included a total area of 195,000 square meters, almost 20,000 more than a year before. The figure is similar to the 165,000 square meters transacted in the first quarter of 2008, although the crisis even saw a few years with high levels of square meters of land sold, such as 2016 when transactions were made on 463,900 square meters or 475,600 2014.

These operations, however, stem from construction records not always linked to housing.

Despite the improvement, the total amount of square meters sold continue to be well below those before the crisis, when sales exceeded one million square meters per quarter. However, the quantity of funds involved has shown a real recovery. The 182 transactions in the first quarter had a value of 36 million euros, 35.4% more than the previous quarter and 36.2% more than the previous year.

This upturn explains the rise in the housing prices of around 4-5% this year.

At the provincial level, the land in Las Palmas has greater value, since 91 transactions were closed for more than 20 million euros, while in Santa Cruz de Tenerife the same number of transactions was carried out for less than 16 million euros.

The last year that saw such a high level of sales was in 2009. Then, 282,200 square meters were sold for 36 million euros.

The quarter that saw the lowest value since the beginning of the crisis and to date was the first quarter of 2010. At the time, 72,000 square meters of land sold for a value of 12.5 million euros. The cost per square meter of land reached 195.6 euros in the first quarter, according to the Ministry of Development’s data.

The trend in land transactions in the Canary Islands in the first quarter is in tune with its growing real estate market, especially in city centres. These days, it is possible to see cranes and buildings under construction and land being prepared for new buildings in the cities in the Canaries. The new reality is still a far cry from the boom years. Experts believe that those records will never be reached again.

Original Story: canarias7.es – Silvia Fernández

Translation: Richard Turner

 

Major Real Estate Projects in Madrid to Attract €10.5 Billion in Investments

21 August 2018

Some of the outsized projects for the coming years include the northern Madrid construction, the expansion of the Barajas airport and the Canalejas project.

Madrid will soon be the target of multi-billion euro investments in major real estate and urban development projects, upgrading the Spanish capital’s image in the coming years. The investments will lead to the construction of housing, skyscrapers, hotels, shopping centres, university campuses while also renovating some football stadiums and demolishing others.

Madrid Nuevo Norte, under development by DCN; Aena’s real estate project for Barajas; the Canalejas and Caleido project, along with the renovation of the Bernabeú stadium and the Mahou-Calderón development will involve total investments of €10.5 billion.

Four new skyscrapers

Madrid Nuevo Norte is the most ambitious project and the one that has been the longest in the making. Formerly known as Operation Chamartín, the project involves the construction of 365 new buildings in Madrid, including 10,500 flats and three skyscrapers in the vicinity of the Chamartín train station, in the north of the capital.

Construction of the project, which had been paralysed for a quarter of a century, is expected to begin in 2019. If the developer manages to keep to the announced deadlines, reparcelling and development will start by the end of next year or early 2020, and the first homes will be ready by 2021 or 2022.

Considering the sheer magnitude of the project, which will have a buildable area of 2.66 million square meters, construction is expected to last for more than two decades. Madrid Nuevo Norte will require €6 billion in investments and should create roughly 120,000 jobs during the construction phase and 94,000 posts after its completion.

A building known as the fifth tower will be erected in the area surrounding Madrid Nuevo Norte. The Caleido project will involve investments of €300 million and should be ready by the end of next year. Inmobiliaria Espacio, of the Villar Mir Group, was awarded the development and operationalisation of the project on public land in 2014 and is leading the development together with Megaworld, a conglomerate held by the Filipino billionaire Andrew Tan.

The project will include a 36-floor, 165-meter tower, which will house IE’s new, vertical campus, and a second building, 280 meters long and 60 meters wide, that will host a sports medicine centre operated by Quirónsalud.

Aena’s planned project for the land adjacent to the Barajas airport also stands out. The airport manager is forecasting a total investment of €2.997 billion over the next 40 years.

The project, with 2.7 million buildable square meters, will have logistics warehouses, offices, hotels and even a shopping centre. The company chaired by Maurici Lucena is searching for partners to develop its plans and, for now, the Blackstone fund and other major investors have demonstrated interest.

The Canalejas project, under development by OHL and Mohari Limited, a company owned by the Israeli executive Mark Scheinberg, is located in central Madrid. The venture, which will link seven historic buildings, will host Spain’s first Four Seasons hotel, along with luxury homes and a shopping area. The project is expected to involve €300 million in investments and is expected to be ready by 2019.

Madrid’s real estate and urban development plans will also affect the iconic Santiago Bernabéu stadium. In April, the city council gave the green light to a plan for reparcelling land for the new stadium, which will involve an investment of about €400 million.d

Housing at the Calderón

1,300 homes will be built on the grounds of another stadium, the Calderón, the former home of Atlético de Madrid. The sale of the land is expected to raise about €175 million in investments from any future buyers (developers), in addition to the more than €42 million stemming from the reparcelling project for the stadium and the grounds of the old Mahou factory.

Original Story: Expansion – Rebecca Arroyo

Translation: Richard Turner

 

Villar Mir Sells its 32.5% Stake in Canalejas to OHL for €50 Million

14 August 2018

Grupo Villar Mir has left the Canalejas project (Madrid), selling the 32.5% that it held in the development to its subsidiary OHL for 50 million euros. In this way, Canalejas will be equally owned by OHL, which already had 17%, and Mohari Limited, a company controlled by the Israeli executive Mark Scheinberg. Villar Mir sold 50% of Canalejas to Mohari in February 2017 for €225 million.

The transaction also includes the acquisition, by OHL Desarrollos, of the credit rights agreed to by Grupo Villar Mir with regards to the project for €9.8 million.

As the company explained to the CNMV, this price could be adjusted upwards to reach a maximum of €60 million (an additional €10 million). depending on “possible capital gains generated in a subsequent sale of these shares.”

Reduce debt

This operation will allow Grupo Villar Mir to continue reducing its debt. The Spanish industrial corporation sold 12% of the Spanish construction company last July for €98 million, reducing its stake in OHL to 38% compared to its previous 50%.

The Canalejas project will feature the Canadian luxury chain Four Seasons’ first hotel in Spain, a commercial complex and exclusive homes. The complex will bring together seven historic buildings, some of them built at the beginning of the 19th century, in a single unit, through an investment of 525 million euros.

Expansion – Rebecca Arroyo

Spain, the Fifth Biggest European Destination for Real Estate Investments

14 August 2018

With more than €6.1 billion invested in the year to June, Spain consolidated its position as one of the favourite destinations for investors, behind the United Kingdom, Germany, France and Holland.

The Spanish property market is still monopolising the flow of investment capital to Spain. With 6.161 billion euros invested in the first half of the year, Spain accounted for 5% of the total volume invested in the European market and has consolidated its position as the European country with the fifth highest volume transacted until June, behind the United Kingdom, Germany, France and Holland.

Overall, investment in the real estate market in Europe exceeded 120 billion euros, 10% less than in the same period of the previous, record-breaking, year, according to a report prepared by the consultancy CBRE.

By country. The United Kingdom is the leader in investments, with 34.4 billion euros, followed by Germany with 24.5 billion euros. In both cases, investments fell by 6%.

Behind these countries is France, with 11.9 billion euros; Holland with €10 billion; Spain with €6.1 billion; and Sweden with €5.1 billion.

By asset type. The office market was, once again, the segment that attracted the largest volume of investment in Europe, with 52 billion euros, 41% of the total; followed by alternative assets – student and senior citizen residences and healthcare facilities – with 21%; retail (20%), logistics (11%) and hotel management, 7%.

A takeover bid for Axiare

Spain. Colonial’s bid for Axiare encouraged investment in the sector during the first six months of the year, which, despite everything, came in at 15% below that registered in the same period of the previous year.

The acquisition of Axiare, which specialises in offices, by its rival Colonial, accounted for 30% of the total volume transacted in the first half of the year and leveraged the total investment in offices, to 2.036 billion euros.

The most active segment behind offices was retail. With 1.689 billion euros transacted in the first six months of the year, retail accounted for 27% of the total, thanks to the large volume invested in commercial centres with, among others, Redevco and Ares’ purchase of 70% of Parque Corredor for 140 million euros.

Operations focused on high street stores also encouraged investment in retail. Last January, the German fund manager Deka finalised its acquisition of 16 stores owned by Inditex, of which 14 are located in Spain, for some 400 million euros.

The next most significant segments by volume transacted were hotels, with 869 million euros, and logistics, with 716 million euros. 589 million were also invested in the residential sector, almost the same figure as in the first half of 2017, while purchases of alternative assets saw investments of 125 million euros.

Upward forecasts

As for forecasts for the end of the year, CBRE believes that the recovery in the real estate market in Catalonia that, after the independence referendum of last year, has experienced a certain measure of paralysis, along with the finalisation of some large operations currently under negotiation, will see the conclusion of 2018 reaching investment levels similar to those of previous years. Investments in 2017 reached 12.9 billion euros.

The director of Capital Markets at CBRE Spain, Mikel Marco-Gardoqui, explains that taking into account the various “large-scale” operations in advanced negotiations and the return of activity to the investment market in Catalonia, the prospects for the end of the year are “rosy.”

Among these operations is the purchase of four shopping centres owned by Unibail Rodamco for 490 million euros by Vukile. Specifically, the sale of Los Arcos (Seville). Bahia Sur (Cadiz), Faro (Badajoz) and Vallsur (Valladolid) by the South African fund was finalised at the end of July and will be counted, therefore, amongst the transactions closed in the third quarter.

Also, the finalisation of the sale of the three shopping centres sold by CBRE GI and Sonae – Gran Casa (Zaragoza), Max Center (Bilbao) and Valle Real (Santander) – for around 500 million euros is expected in the coming months. According to Expansión, the Slovak fund J&T, in alliance with Sonae, is a favourite to acquire this portfolio of commercial assets.

Corporate operations will also continue to boost the sector in the second half of the year. Among the operations that will boost the real estate market is the purchase of Hispania by Blackstone. The American investment fund finalised its takeover of Hispania last July, after taking control of almost 91% of the Socimi.

The offer from Blackstone, which already held 16.56% of the socimi’s capital, values Hispania at 1.992 billion euros and makes the US fund the largest hotel owner in Spain.

Marco-Gardoqui explains that Spain’s benign macroeconomic prospects, the potential for revenue growth in the office sector, the strong growth of electronic commerce and the need for adequate logistics spaces will continue to undergird the real estate sector.

Likewise, the consultancy underlined the opportunities in the alternative asset segment, which have an extensive need for development and professionalisation. Together with the availability of low-cost capital at low cost, the sector is expected to attract additional capital.

Expansion – Rebecca Arroyo

Vidanova Parc Shopping Mall to be Inaugurated on September 27

10 August 2018

The official inauguration of Vidanova Parc is scheduled for September 27, according to Lar España Real Estate’s project director, José Antonio García. The shopping centre will thus open to the public on the last weekend of September. However, the new shopping centre, the most important one between Valencia and Castellón, is already operating on a partial basis, since Leroy Merlin opened its doors to the public on June 22 to take advantage of the summer months, which are some of the most important, in terms of sales, for the French multinational.

Mr García highlighted the fact that 100% of the stores have already been allocated to different operators. As has been reported, Vidanova Parc will have about 40 top-flight brands, including Leroy Merlin, Decathlon, C&A, Worten, Urban Planet, Yelmo Cinemas, Norauto, Fifty Factory, Conforama, Casa y Más y Más, guaranteeing a well-rounded commercial offering encompassing sports, DIY, fashion, entertainment and leisure. There will also be a food hall, with restaurateurs such as Grupo Vips (Ginos and Smart VIPs), Burger King, KFC, Lizarrán, Volapié and Pans & Company, among others.

The stores will be dispersed among the more than 45,000 square meters of gross lettable area at the complex, which occupies a total of 120,000 square meters, including parking for more than 2,350 vehicles.

Lar España Real Estate stated that Vidanova Parc has an excellent location, considering that nearly 250,000 people live close to the shopping centre, and also factoring in the thousands of tourists who spend their vacations in the region.

The shopping centre underwent a total investment of some 93 million euros. Lar España Real Estate contributed €53 million, while different operators contributed the rest. One of the larger secondary investors was Leroy Merlin, which opened an 8,000-m2 store within a 10,000-m2 plot of land, investing 17 million euros.

Inauguration initially slated for 2012

On February 9, 2012, at the offices of the company Alser, Julián Castelblanque and José Antonio García, a press conference was held to present a project for the then-named Cruce de Caminos Shopping Centre, whose opening was scheduled for 2014. However, the project had to overcome all sorts of obstacles and complications that eventually tripled the time needed to open the mall, because instead of 2014, it will finally be inaugurated in 2018, four years later.

Original Story: Eleconomico.es

Translation: Richard Turner

Costa del Sol, the Epicentre of the Real Estate Investment Boom

9 August 2018

Housing on the Costa del Sol has become synonymous with rehabilitation, new construction and luxury. Both Málaga and the coast have experienced continual and growing demand for housing since 2015. The trend has been fuelled by the influx of foreign tourists, who are spending increasingly longer periods of time in Spain, along with the boom in tourist flats as an investment in the short and medium terms. This demand, in turn, has resulted in steep price increases, which in some cases have returned to pre-crisis levels. However, experts say that opportunities can still be found.

“The Costa del Sol is a reference for the coastal market and Malaga is the focus of interest for investors since it has all the necessary services: AVE (high-speed rail), airport, seaport, cultural and gastronomic facilities… It meets all the requirements so that Spaniards and foreigners can enjoy their old age,” says Jesús Gil, CEO of the luxury real estate brokerage agency, Gilmar.

With these characteristics, the Costa del Sol has once again become a reference for investors, of which there are currently three types: institutional, small investors and local investors, who buy homes as a means of saving.

Despite the boom in the market, “the outlook is still very attractive, mainly due to the capital gains that people who bought during the crisis achieved,” explains Ivan Rodríguez, CEO of iKasa, who believes that the market will continue its growth during another three to four years.

The executive also highlighted the residential rental market, since most international buyers rent before buying. Finally, for tourist rentals, “where profitability can reach 10 to 12% and where there is as much interest as in the main capitals of Madrid and Barcelona,” Mr Rodriguez said.

Álvaro Marcos, head of sales for Aedas Homes, believes that this is one of the great attractions of this market, since “the new coastal market offers clients the opportunity to rent their second home, combining the enjoyment of [the home] with a good investment. It is something that we see a lot of at Aedas Homes.”

The British are still the biggest property buyers, but clients from Sweden, Belgium, Germany and France are also highlighted

The coast was, according to experts, the first market whose appeal to foreigners began to recover after the crisis. “It is a market dominated by international customers, who are increasingly stable and more diversified in origin. While the British continue to lead, other buyers, especially from Sweden, Belgium, Germany and France, are appearing. It is a destination that covers the desires and needs of these customers, who are looking for good weather, the beach, golf courses, good infrastructure and services. This has given the market new life, growing by double digits,” says Ignacio Peinado, the director of Eastern Andalusia for Neinor Homes.

Strong demand has caused price increases in some specific areas, such as “Marbella, Estepona and Benahavís, where currently there is nothing for less than 300,000 euros, as average prices range from this base to half a million euros, along with multi-family homes that go for sale a million euros,” says Susana de la Riva, director of marketing and communication for Tinsa. She added that ” flats costing 120,000 euros can only be found in more degraded areas.”

Ms de la Riva stated that “the coast of Mijas, Fuengirola and Estepona is the most dynamic area after Benalmádena and Torremolinos, where new construction is more contained and the prices, after the change in trend seen in 2016, have stabilised.”

The principal challenge for the Costa del Sol is providing greater legal security to investors and developers

Estepona is the most dynamic area in the Costa del Sol’s real estate development market since it combines a strategic location with all the services that tourists seek and an agile administration that grants certainty to projects. Also, there are two clear markets in the city, one for first homes, and the other, which is aimed at an international clientele.

On the other hand, Álvaro Marcos, from Aedas Homes, points out that the most significant challenge facing the Costa del Sol is providing greater legal security for investors and developers. “The governments need to give legal certainty and confidence regarding the deadlines for land development processes. Otherwise, we as developers are unable to do our jobs, since buyers don’t know if the project will be cancelled or stopped.”

Biggest developers buying land

The boom has not failed to attract the attention of Spain’s biggest developers, who have worked to position themselves on the Costa del Sol since late 2015 and early 2016, buying land. “In the city of Malaga, there is no more development-ready land available. Whatever there was has already been added to the portfolios of the main developers. For example, the largest number of developers is concentrated in the Teatinos area, and there, Neinor Homes has two projects that will add more than 400 homes,” Ignacio Peinado affirmed. In the rest of the province of Malaga, “this market is returning to normal and most of the consolidated vacant and developing land (including paralyzed developments) belongs to financial entities, which are already marketing them to developers in the area (for the quick start of medium-small developments) or investment groups that focus on acquisitions from the financial institutions,” a report on the coast by Tinsa stated, highlighting the increase in prices.

Original Story: ElEconomista.es – Luzmelia Torres

Translation: Richard Turner

Spain’s Four Largest Socimis Already Control €30 Billion of Real Estate

8 August 2018

The largest of these real estate companies multiplied their assets fourfold since their first major acquisitions in 2015. Axiare left the continuous market and Hispania will soon follow as the sector undergoes a period of concentration.

The success of the socimi regulatory regime since its launch in 2013 is reflected in the gigantic portfolio of assets that these real estate companies have amassed in the last few years. The four largest listed companies have already accumulated portfolios of properties worth nearly 30 billion euros in three or four years of operation, according to the companies’ financial reports for the first quarter of 2018.

The development of a regulatory regime for these listed real estate investment companies was helmed by the then Minister of Finance Cristóbal Montoro, as these companies were exempted from paying corporate taxes in exchange for obligations such as having to distribute at least 80% of their dividends (which is taxed) and a listing on the stock exchange, guaranteeing transparency, among other requirements. The regulatory regime followed the example of REITs (Real Estate Investment Trust), which have a long history in the US and Europe.

These companies are focused on the property business, and they lease their properties, which are principally offices, shopping centres and commercial premises, hotels, rental homes and logistics warehouses.

The launch of the regulatory regime coincided with the recovery in international confidence in Spain (after the sovereign debt crisis and doubts about its financial system) as some foreign firms (mainly investment funds and later institutional capital such as insurers) that returned to the market, betting on a recovery in the reactivation of the Spanish real estate market. Moreover, socimis have been one of the principal channels for investing these international flows of capital in this type of asset.

At Least €15 Billion More on the MAB

Spain’s Alternative Stock Market. The MAB found a way to grow through the socimis. 59 of these real estate companies have already listed on the market, often as purely tax vehicles, with no major movements in their limited free float and which also do not carry out large purchases. Among them, three big ones stand out: GMP (owned by the Montoro Alemán family and Singapore’s sovereign wealth fund, GIC), Uro Property (with Santander’s banking offices) and General de Galerias Comerciales (owned by the executive Tomás Olivo). At the end of last year, there were 44 of these companies in the MAB, with a value of 12.221 billion euros (+60% y-o-y), according to data from Armabex, a registered advisor.

Testa Residencial. Among the 15 socimis that joined the MAB in the last months, Testa, which is owned by Santander, BBVA, Acciona and Merlin, stands out. Testa debuted at the end of July with €2.275 billion in rental housing. Along with other companies that launched on the market this year, there are now 59 firms with at least €15 billion in property. Initially, Testa had planned to debut on the continuous market, but market doubts in June led the company to opt for its plan B. The company still plans on a move to the continuous market in the future.

Records for investments in this type of property were broken in 2015, 2016 and 2017. In the past year, 13.99 billion euros were allocated to acquisitions, according to the real estate consultancy JLL, with international funds and socimis as the main players.

The growth of these companies over the last three years has been spectacular. In the first semester of this year, when the socimis published updated property valuations, the big four had €27.336 million in their portfolios (up 3% compared to the end of 2017). The four include Merlin Properties, Colonial, Hispania and Lar España. Taking the first quarter of 2015 as a baseline, when the largest of these companies were already active and began to make their large purchases, these same companies had a total of €6.691 billion. That is a fourfold increase in three years.

If one takes into account that Colonial had not yet become socimi that year (the developer changed status in 2017), the jump is even greater since, at the time, Axiare (absorbed a few months ago by the Catalan company) is one of the top four, with only €465 million in its portfolio. At that point, Merlin, Hispania, Axiare and Lar España had total assets of €4.2 billion, 6.5 times less than at the present date.

The success of these companies has led them to be targets of large corporate operations in the sector in recent months, in a period of concentration that experts believe will continue for the time being.

The largest then, as now, is Merlin (listed on the Ibex-35), which has Ismael Clemente as its CEO. The socimi already owns properties worth €11.755 billion, mainly offices and shopping centres and commercial premises, although with increasing investments in the thriving logistics warehouse sector. The company was launched after convincing investors, mainly Americans, to acquire the so-called Árbol (Tree) portfolio and its 800 BBVA banking branches.

The socimi debuted on the stock exchange in 2014 and grew rapidly with the acquisition of Testa from Sacyr in 2015 (€1.8 billion cost) and the integration of Metrovacesa’s tertiary assets (buildings valued at €1.67 billion) in 2016. At this point, Santander became its largest shareholder, with 22.6% of the capital. The rest is highly diluted, with large international funds as the most common investors. Its flagship buildings include the Torre Agbar, where Facebook will open an office (through the CCC outsourcing company) to monitor and control harmful content on the social network.

Merlin is closely followed by Colonial (Ibex 35), which has assets valued at €11.19 billion, compared to €2.185 billion in 2015. The historic real estate company began operations in Barcelona in 1946 and decided to become a socimi last year for the tax benefits. It has made major strides through its investments, including its recent takeover of Axiare, for which it paid €1.7 billion, giving Madrid a greater weight in its portfolio. The portfolio, mainly offices (91%), includes properties controlled by its French subsidiary SFL, with buildings in Paris (33% of the total value). The core of Colonial’s shareholders includes the Mexican investor Carlos Fernández González (18.3% of the capital), the Qatar Investment Authority (10.6%), the Colombian group Santo Domingo (7.3%) and the perfume family Puig (5.1%).

The other major socimi that has been the protagonist of a recent corporate deal is Hispania, listed since 2014, which was recently taken over by the giant American fund Blackstone. In fact, Blackstone has controlled 90.5% of the socimi since the end of July and is expected to abandon the socimi tax regime in the coming weeks. The company has €2.185 billion in real estate, 66% of which corresponds to hotels. The US fund plans to use Hispania’s assets to create a large hotel platform after having also acquired the HI Partners from Sabadell for €630 million.

After the acquisitions of Hispania and Axiare, the only large company that will remain on the continuous market is Lar España, which is managed externally by Grupo Lar, with the Pimco fund as its main shareholder (19.6%). It was the first socimi to make the jump to the stock market and has assets of €1.58 billion, of which 82% are shopping centres, following its strategy of focusing on the retail sector. With that in mind, the company announced the sale of its logistics park to Blackstone for €120 million at the end of July.

Original Story: Cinco Días / El País – Alfonso Simón Ruiz

Translation: Richard Turner