Tag: real estate sector

Merlin’s Profits Soar By 1,000% After Metrovacesa Merger

2 March 2017 – Expansión

In 2016, the listed real estate investment company (Socimi) Merlin Properties managed to turn itself into one of the largest real estate companies in Europe. It also made the leap onto the selective Ibex 35, which had not featured a single company from the property sector since 2008.

And, it achieved these milestones thanks to the completion of the largest corporate transaction between real estate companies since the burst of the real estate bubble – the integration of the historical firm Metrovacesa, and that had a significant impact on its income statement for the year.

In this way, in 2016, Merlin saw its net profit soar by 1,087% to €582.6 million, thanks in large part to the contribution of Metrovacesa’s assets, which increased the value of its portfolio to €9,824 million.

In the case of revenues, the Socimi generated 362.8 million, the majority of which (€351 million) came from rental income. Last year, the contribution of rental income rose by 64% compared to 2015.

The firm’s operating profit or EBITDA amounted to €303.6 million, whilst its net debt, at the end of the year, stood at €4,471 million.

Dividend

The company, which has just appointed Francisco Javier García-Carranza Benjumea, the Deputy General Manager at Banco de Santander, as its new President, to replace Rodrigo Echenique, has announced the distribution of an extra dividend, amounting to 20 cents, which will take the remuneration per shareholder in 2016 to €0.40 per share.

Likewise, the Socimi, which owns a 16.1% stake in Testa Residencial, has said that it will increase the distribution of profits amongst its shareholders by 10% in 2017 (as a Socimi, it is obliged to distribute 80% of its profits) to 44 cents, which will involve the distribution of more than €207 million.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

PwC: Spain’s RE Sector Retains Appeal As World Uncertainty Intensifies

26 January 2017 – Cinco Días

According to the findings of the Real Estate Market Trends in Europe 2017 report, prepared by PwC and the Urban Land Institute, the real estate market is currently preparing itself to face a 2017 full of geopolitical uncertainties, just like it had to last year when Spain had an acting Government for more than 10 months. The RE report has been compiled on the basis of a survey of 781 of the main players operating in the sector.

In this way, the year that has just begun is probably full of more uncertainties across more countries than ever before (Brexit and up-coming elections in France, Germany and The Netherlands, as well as potential repercussions from the new policies of Donald Trump in the USA) and in the face of such situations, investors tend to react with caution.

In the real estate sector, experts forecast that the market will continue to evolve in a positive way because it will remain attractive thanks to the relationship that exists between risk and return. Within Europe, Spain stands out amongst the major markets thanks to its attractive prices and the potential it has across many segments, such as the hotel sector, residential segments (including halls of residence for students, nursing homes for the elderly and the health sector) and offices for shared services.

In this way, the experts that participated in the preparation of this study agreed that whilst the returns offered by the real estate sector in the main countries in Europe will grow at a slower rate because this business is starting to stabilise, Spain will continue to be one of the most attractive destinations.

In terms of the potential effect of Brexit, most investors agree that its impact is going to be limited to the British real estate sector and will not have a significant impact on property-related investments in other EU countries. What’s more, 76% of those surveyed said that, in their opinion, such investments will be maintained or may even increase. Nevertheless, the expectations in terms of returns from the real estate sector as a whole across Europe are more moderate this year following several years of extraordinary growth.

Moreover, 35% of those surveyed expect to receive lower returns on their assets over the next 12 months and 53% recognise that it will be very hard to improve upon the returns achieved last year. Another aspect described in this report is that the European market in general and the Spanish market in particular is characterised by a scarcity of prime or premium assets and the feeling is, according to 58% of those surveyed, that those assets that are available, are starting to become over-valued. In this environment, “the importance of asset management intensifies as it is the key element for managing risk and return”, explained Rafael Bou, Partner responsible for Real Estate at PwC. (…).

Looking ahead to the future, 91% of those surveyed said that technology “is going to change” the way we use real estate assets. The most important trends between now and 2030 relate to: the boom of the collaborative economy, robotisation, teleworking, self-driving cars and new buying habits.

According to the report, Berlin leads the ranking of European cities with the best investment prospects for the second year in a row. Madrid and Barcelona occupy 9th and 16th positions, respectively, given the “strong outlook for rents and the improvement in the country’s overall situation”.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

ST: House Prices Will Rise By 3% In 2017

18 January 2017 – Cinco Días

House prices will grow by 3% on average this year, driven by the improvement in the economy and employment, but also by the pseudo boom that is happening in the rental sector, in particular in large cities. That is according to Sociedad de Tasación, one of the largest appraisal companies in the sector.

The year that has just started will continue to be favourable in general terms for a real estate sector that, in the words of the Director General of Sociedad de Tasación, Juan Fernández-Aceytuno, is “recovering its sense of judgement”.

Thus, the volume of transactions will continue to grow, the rate of construction will intensify and more mortgages will be signed (although that figure will always fall below the number of house sales); and all of that means that house prices will end the year 3% higher, on average. Nevertheless, Sociedad de Tasación warns against certain risks and key factors that will determine the extent of this improvement in the real estate sector.

The first is what is happening in the rental market. Fernández-Aceytuno again highlighted the large group of potential buyers, such as young people aged between 25 and 35 years old, who are unable to buy a home because of their low wages and because of the precariousness associated with the majority of the new jobs that are being created. Since those people are not buying, many are choosing to rent, which has caused demand in the rental market to soar, along with rental prices. Sociedad de Tasación believes that if no response is given to this insolvent demand, rental prices will continue to rise and that will, in turn, drive up the prices of homes up for sale.

The Director General recalled that the average yield on rental properties in large cities stands at around 6.1% at the moment, which means that the increase in real estate prices in the major cities will be higher than the 3% forecast for the country as a whole.

Moderate pace

Other decisive factors, in addition to the improvement in employment, will be everything relating to financing. The new accounting standards, which the banks must comply with this year, together with the cost of recent court rulings, such as the judgement regarding floor clauses, and the forecast increase in interest rates may have an impact on the conditions for accessing credit over the medium term, which will determine the behaviour of much of the demand.

In any case, the good news, according to Socidad de Tasación, is not only that the main indicators in the sector are going to continue to stabilise, but also that they are doing so in a much more balanced way than in the past. In this sense, the firm gave the example that house prices are growing at more moderate rates now than they did during the previous boom, with rises in line with the number of new Social Security members. Moreover, it highlighted that land prices have not soared by more than house prices, which was also common during the early 2000s.

What’s more, property developers have not started to build homes in an uncontrolled way, even despite the expectation that more new homes are going to be sold. A study compiled by the appraisal company shows that the supply of new homes in Madrid and Barcelona is actually scarce, which means that it will run out within 10 months in the capital and within 14 months in Barcelona. Finally, it describes the rate of property construction along the coast as “very reasonable”.

Original story: Cinco Días (Raquel Díaz Guijarro)

Translation: Carmel Drake

CBRE: House Prices Will Grow By 3%-6% In 2017

16 January 2017 – El Mundo

One out of every two directors in the real estate sector in Spain believe that house prices at the national aggregate level will rise by between 3% and 6% in 2017, compared with only 21% that thought the same in 2016. That is one of the main conclusions of the Real Estate Trends Barometer compiled annually by CBRE, the largest international real estate consultancy and services firm. For the preparation of the Barometer, CBRE has surveyed the 100 main experts in the sector in our country.

This indicator is particularly important because it is the first time since the outbreak of the crisis that experts in the sector forecast an overall increase in prices in the Spanish residential market. That, together with other data, is evidence of the recovery in the housing market. In fact, 56% of the experts surveyed believe that the absorption of housing will gradually increase and half of them think that prime yields will grow in the residential sector.

Similarly, after property developers experienced a revival in 2016, 36% of those surveyed consider that most opportunities will be found in renovations within the residential segment in 2017, followed by new build homes, which means that the number of cranes should continue to follow the rising path that has already begun.

The awakening of property developers and real estate companies

Almost 60% of the experts consulted forecast that private investors and family offices will be more active in 2017 than last year, followed by core plus funds (according to 44%) and institutional investors (30%). Moreover, 58% of the directors in the sector think that opportunistic investors will decrease their activity in the market in 2017, an important change compared to recent years.

Nevertheless, the most striking conclusion is the perception that the people surveyed have of the role that property developers and real estate companies will play this year. In fact, 32.2% of those surveyed think that property developers will play a key role, compared with 6.6% who thought the same last year. Similarly, 44.4% (compared with 26.3% last year) think that their role will increase although in a less marked way.

Meanwhile, in terms of other players, the Socimis are expected to continue to play a key role according to one out of three experts. International investors will also be significant players in 2017, according to 31.5% and finally, domestic investors will remain stable with respect to last year or may even slightly increase their presence according to the vast majority.

Adolfo Ramírez-Escudero, President of CBRE Spain, added that “these forecasts seem to show a continuous line with respect to 2016, a year in which, according to our data, more than 40% of the €13,850 million invested in the real estate sector in our country came from overseas and when Socimis accounted for around 40% of the total capital invested”.

Offices will continue to attract most attention in the market

Like in the previous two years, the office sector will continue to be the most attractive in 2017. Whilst last year, 32% of those surveyed focused their real estate activity in Spain on that segment, this year 35% expect to do so, followed by 19% who are committed to the residential sector. Moreover, interest in the industrial-logistics sector has increased, up from 12% last year to 16% this year. (…).

Original story: El Mundo

Translation: Carmel Drake

PortAventura’s Owner May Buy TPG’s Stake In Servihabitat

30 November 2016 – Voz Populi

The real estate arm of CaixaBank, Servihabitat, is preparing for a possible change in its shareholders. The Italian private equity group Investindustrial (which is headquartered in Barcelona) is holding conversations with TPG regarding the possible acquisition of the 51% stake that the Texan fund owns in Servihabitat. For the time being, no offer has been put on the table, but several financial sources consulted are convinced that a deal will be reached soon and that the group, owned by the Bonomi family, is well positioned to take over the reins of the real estate company.

Investindustrial already has a lot of roots in Spain and above all in Cataluña. The same sources add that Carlo Bonomi, the CEO of the firm, has a good relationship with Isidro Fainé. Both groups completed one of the largest private equity operations between 2009 and 2012, with the purchase of the PortAventura park from Criteria for almost €200 million.

The fund created by the Bonomi family also controls the rental car company Goldcar in Spain and the ambulance firm Emeru. In recent years, it has held stakes in Applus, Euskatel and Recoletos, amongst others. In fact, Investindustrial was one of the groups that submitted a bid for the takeover of RCS (owner of Unidad Editorial), but it was pipped at the post by Cairo Communication.

The possible acquisition of a stake in Servihabitat comes at a time when the financial sector is rethinking its real estate partnerships: Santander has engaged Citi to handle its purchase of Altamira; Popular is negotiating with Värde Partners and Kennedy Wilson to regain control over Aliseda; and Servihabitat has also been the target of rumours in the market. Nevertheless, the sources consulted explain that the Catalan group does not want to regain ownership of 100% of its real estate company, but rather is looking for a new partner whose plans for Servihabitat fit better with its own vision than that of TPG.

This change in strategy has not arisen due to personal differences, but rather due to the new circumstances in the financial sector. When the banks sold their stakes in their real estate companies in 2013, they did so because they needed capital; and they were very successful in this regard. In the case of Servihabitat, TPG paid €310 million for its 51% stake.

Change in strategy

Nevertheless, with the passage of time, the banks are seeing a slowdown in the rate of property sales and are incurring expenses on their income statements as a result of all of the commissions that they are having to pay their property managers.

A priori, the investment in Servihabitat does not fit with the type of investments that Investindustrial usually undertakes. It traditionally backs sectors such as services, consumer and industrial. But, sources in the sector regard Servihabitat as a classic private equity investment, since it is a cash generating machine with potential to grow through corporate operations. In fact, Servihabitat is one of the candidates in the running to buy Portugal’s largest bad bank.

The company generated EBITDA of €111 million last year. Its consolidated profit amounted to almost €44 million.

Original story: Voz Populi (by Jorge Zuloaga)

Translation: Carmel Drake

Banco Popular’s Complex RE Clean Up Continues

24 November 2016 – Expansión

Popular was the most profitable bank in Spain’s financial sector until it decided that it did not want to get left behind in the real estate development business. The problem is that it joined the party too late, when the real estate bubble had already begun to burst (….). The result is that, several years after the outbreak of the crisis…Popular is the bank with the highest proportion of toxic real estate assets on its balance sheet. It also has one of the lowest levels of coverage. The bank’s total real estate exposure amounted to €25,376 million in September, with a coverage ratio of 35%.

In this context, the essential axis of Popular’s clean up plan, designed by the heads of the bank and approved by the supervisory bodies, placed the emphasis on the €2,500 million capital increase that was carried out in June (to reduce the bank’s installed capacity by closing branches and reducing the staff), and, above all, on increasing the coverage for toxic assets to bring the entity in line with the rest of the sector, in such a way that it would make it easier for it to divest these assets.

That is what the entity is looking to carry out with its project to create a separate real estate company using some of its assets. Ownership of those assets will transfer from the bank directly into the hands of the financial institution’s shareholders.

But now, data provided by Popular, when it presented its results for the third quarter, has revealed that the net debt of the real estate and associated businesses amounted to €15,518 million in September and that the provisions amounted to €9,858 million. The total exposure therefore amounted to €25,376 million and the coverage afforded by those provisions stood at around 35%. The rest of the financial sector has provisions to cover up to 50% of their respective exposures.

The bank’s plan is to reduce its non-profitable assets by 45% by 2018 and for the coverage of its toxic assets to increase to 50%. In fact, sources at the bank say that the latter was fulfilled at the end of October (…).

The constitution of these new provisions should facilitate both retail sales, as well as the sale of portfolios of toxic real estate assets, because the entity will be able to sell at more competitive prices in the market without incurring fresh losses in its income statement. The new provisions should also allow the headline figures to be outlined for the real estate company that is pending approval by the financial supervisors and the CNMV. Undoubtedly, when authorisation is granted and the bank ceases to be the owner of real estate assets amounting to €6,000 million (book value), it will represent a huge relief for the bank’s future quarterly results.

However, the question is whether that will be sufficient, or not, for investors to consider that Popular is undertaking the clean up process at the right pace and will ever return to profitability.

Whilst decreasing the volume of toxic assets by €6,000 million involves significant effort, even once that hard work has been completed, the entity will still have a high volume of problem assets on its balance sheet, between €19,000 million and €20,000 million, according to its own accounts. The bank will have two years to reduce its exposure to the real estate and associated sectors by €5,400 million if it is to achieve the established objective of reducing this caption of its balance sheet by 45% with respect to its current level.

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

Spain’s RE Sector Enjoys A Flurry Of Operations

24 November 2016 – Expansión

The real estate sector continues to celebrate. Investors are still very much interested in Spain and real estate operations continue to be signed. The office sector is still one of the major stars of the recovery, along with shopping centres, thanks to the boost from domestic and international investors and fund managers alike.

The increase in liquidity, together with the lack of profitable alternatives – such as the bond market – and the volatility of the global stock markets, have generated a great deal of interest in the sector and the experts predict that, with the resolution of the political deadlock now behind us, several pending operations will likely close within the next few months.

Although the experts forecast a decrease in investment in the sector, after a record year in 2015, large-scale operations, such as Amancio Ortega’s purchase of Torre Cepsa, are a sign of the good health that the sector is enjoying.

The Socimis continue to be one of the most important players, as evidenced by: the agreement reached between Merlin and the shareholder banks of Metrovacesa, for the merger of the two companies; the entry of the real estate company Colonial into the share capital of Axiare; and the decision taken by the US fund Pimco to strengthen its position in Lar España, taking it to almost 20%, according to the latest records from the CNMV.

Besides the activity in the tertiary asset market, the residential market is also enjoying a revival. In this sense, yesterday, the property developer Dospuntos, owned by the fund Värde, announced the launch of its first real estate development in Spain, with 62 homes in A Coruña. This move forms part of the company’s plan to invest €2,000 million in the country over the next six years.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Lone Star Will List Neinor On Stock Market In 2017

27 October 2016 – Cinco Días

The reactivation of the real estate sector in Spain has a future stock market star in the making: Neinor Homes, the former property development arm of Kutxabank, which the US private equity fund Lone Star acquired in May last year. The goal is to list the company on the stock market in 2017 and it has been assigned a preliminary valuation of around €2,000 million.

Neinor Homes belonged to Kutxabank until May 2015, although the sale agreement with Lone Star was signed in December 2014. The US private equity fund acquired the company that groups together properties from the former Basque savings banks, created in December 2012 as a bad bank, under the terms of the royal decree governing the clean up and sale of real estate assets in the financial sector.

The company was sold to the US private equity firm for €930 million, but Lone Star’s goal was not to liquidate the property developments and land that the entity’s property developer owned and pocket the corresponding gains. Instead, Juan Velayos (pictured above), CEO of Neinor Homes, announced as soon as he joined the company – previously he worked for Renta Corporación, but left in 2011 to join PwC – that the mission was to invest in land and construct developments.

Financial sources indicate that the company is already holding negotiations to engage investment banks to assist with its debut on the stock market, expected in 2017. Preliminary appraisal values, pending the publication of the company’s accounts for 2016 and the evolution of the real estate market, amount to around €2,000 million. That figure represents a valuation that is more than 100% higher than the price at which Lone Star purchased the company.

“From day one, the company was designed to list on the stock market. It is the natural step”, say sources at the company. “We are working with investment banks to evaluate the option of debuting on the stock market in 2017, but the final decision has not been taken yet. We will do it when we think that it is the optimal time in the market”, add the same sources.

It will be the first debut by a bread-and-butter property developer on the Spanish stock market in recent times, given that the only debuts in the sector since the crisis have involved Socimis (Lar, Hispania, Axiare and Merlin, which list on the main exchange); and 25 Socimis, which have debuted on the Alternative Investment Market (MAB). Neinor is a rarity, because it has moved away from the traditional real estate ownership model focused on rental income and the office market. At Neinor, revenues are driven by residential property developments.

The last traditional real estate company to debut on the stock market was Realia on 6 June 2007. The share price of that firm, hwich is controlled by Carlos Slim, has plummeted by 86% since that placement.

Velayos designed a €1,000 million investment plan for Neinor’s land. In 2015, the firm recorded sales of €340 million and EBITDA of €25 million. Nevertheless, the latest accounts filed with the commercial registry show a clear split between the two periods –the firm recorded losses of €70.9 million between January and June 2015 and losses of €11.2 million between July and December.

The company has signed an agreement with Kutxabank to administer and manage its assets for an initial period of seven years, extendable on an annual basis, which guarantees it recurrent annual income. The accounts filed with the commercial registry show that the firm recorded revenues of €14.4 million in H2 2015 by virtue of that contract. (…).

Original story: Cinco Días (by P.M. Simón, L. Salces and A. Simón)

Translation: Carmel Drake

Madrid Accounts For 70% Of All New Housing Permits

10 October 2016 – Inmodiario

The Community of Madrid has been boasting to property developers that it represents the real driver of the growth currently being seen in the real estate sector in Spain.

In this way, at the opening of the National Real Estate Conference, the Director of Transport, Housing and Infrastructure, Pedro Rollán, commented on the statistics and highlighted that licences for new residential construction projects in the region increased by 66% during the first five months of 2016, well above the national average increase of 27%.

During his presentation at the conference, organised by the Association of Property Developers and Construction Companies in Spain (APCE), under the title “From recovery to innovation”, Rollán commented that real estate is a strategic sector, whose contribution to GDP is essential for economic growth.

And, to this end, he stated that the sector’s reactivation is necessary to consolidate and strengthen the (overall) recovery. He emphasised the importance of the need to continue working and adapting the (RE) sector to new times, and of innovating to achieve the most accessible, comfortable and least contaminated spaces.

In this sense, the regional Government is managing aid, which will serve to encourage the renovation of homes and the regeneration and refurbishment of urban spaces, thanks to the agreement signed with the Ministry of Development under the framework of the State Housing Plan.

Thus, this year, €14.4 million will be allocated to subsidies for building renovations and €29.8 million will be spent on aid for urban regeneration and renovation.

In the same way, the regional Government is working to create a Single Integrated Assessment Report Register for buildings in the Community of Madrid, which will contain all of the assessment reports relating to more than 40,000 buildings per year.

This register will enable the data obtained to be used to identify weaknesses and deficiencies in the building stock and will help to improve their quality and sustainability, as well as to obtain extensive information to allow policies to be directed appropriately in terms of architecture and housing. All types of buildings may be registered, regardless of their purpose (use) along with the mandatory registration of all buildings that are more than 30 years old.

Moreover, assessments of the degree of conservation of buildings (ITE) are going to be unified into a single document to ensure the safety of all of the buildings in the region; their basic conditions in terms of universal access, to encourage reasonable modifications in this regard; and energy efficiency certifications (CEE) to help achieve the commitment made in terms of energy savings and building sustainability.

Original story: Inmodiario

Translation: Carmel Drake

The Lara Family Sells Roca Junyent’s HQ For €55M+

3 October 2016 – Expansión

The Lara family, owner of Planeta, has sold the historical headquarters of Roca Junyent on Calle Aribau in Barcelona for more than €55 million. The buyer, a real estate fund linked to the Swiss bank UBS, will maintain the long-term lease contract with the law firm Miquel Roca, which occupies eight of the building’s twelve floors. The four remaining floors are leased to the medical centre QMS (Quality Medical Service).

The building has a surface area of 11,000 sqm, of which 8,600 sqm are used offices, 1,360 sqm are used as a commercial space on the ground floor, which is occupied by QMS, and a basement measuring 1,270 sqm.

The Lara family’s real estate company, Inversiones Hemisferio, bought the building from Colonial in 2007, just before the burst of the real estate bubble for €55 million and it has now sold it for a slightly higher figure.

This operation confirms that investment prices of buildings in Barcelona have now returned to their pre-crisis levels, driven by a shortage of assets for sale and the priority of large funds to invest in the real estate sector.

Despite the strong international demand to invest in cities such as Barcelona, the volume of investment in the city’s real estate sector is lower so far in 2016 than it was this time last year. In 2015, the Catalan capital broke records, with total investment of €2,000 million. Of that, 85% came from international buyers.

Despite the sluggish first half of 2016, which the sector attributed to the lack of assets for sale and the political uncertainty, the second half of the year has started with more movement in the investment market and all indications are that the final quarter of the year will be very busy in terms of the closure of operations whose negotiations are already being finalised.

Original story: Expansión (by M. Anglés and J. Orihuel)

Translation: Carmel Drake