Mutua Owns Prime RE Assets Worth €1,200M

9 April 2015 – Expansión

The real estate subsidiary of the insurance company owns more than twenty assets, including 15 (properties) on the Paseo de la Castellana, Madrid’s prime (real estate) axis.

Mutua Madrileña is not only one of the largest insurance companies in the Spanish market, it is also one of the largest owners of office buildings. Through its real estate subsidiary, led by Emilio Colomina, Mutua manages a portfolio of more than twenty real estate assets, with a (combined) surface area of around 200,000 square metres.

Fifteen of the buildings in the portfolio are particularly noteworthy; they have a (combined) surface area of approximately 175,000 square metres and include several properties located on the prime axis (the most sought after area) of Madrid. Mutua Inmobiliaria owns numbers 31, 36, 50 and 110 on the capital’s main thoroughfare, the Paseo de la Castellana, as well as the Torre de Cristal, located in the Cuatro Torres complex, at number 259.

And just a stone’s throw away from La Castellana, in the heart of the capital’s financial district, the company also owns the Alfredo Mahou building (pictured), which has a surface area of around 24,000 square metres; as well as the Torres de Colón.

At the end of 2014, these fifteen buildings had an appraisal value of €1,200 million, representing a slight increase on the previous year, with unrealised gains of €356 million.

In 2014, the real estate company recorded turnover of €46.8 million from rental payments, and (its buildings) had an occupancy rate of 90%, i.e. 2% higher than last year.

“The favourable development of Mutua Inmobiliaria’s business is due, to a large extent, to the investment plan that the company launched in 2008 and completed in 2014. As a result, the company modernised its (portfolio of) buildings”, explains the insurance company.

During this period, Mutua invested around €150 million in upgrading (its buildings, including) the Torres de Colón, for example – work there began in late 2011 and involved a budget of around €25 million. “The investments made have allowed us to build loyalty and retain customers, sign new rental contracts, at maximum prices, and reduce operating costs, which has increased the attractiveness and efficiency of our properties”, says Colomina.

The new (rental) contracts include: the move of the law firm Hogan Lovells to Castellana 36-38 late last year, where it leases 4,608 square metres, and KPMG’s upcoming move to Mutua’s skyscraper in the Cuatro Torres, which has a surface area of 20,000 square metres.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Aquila To Convert A Building On C/Huertas Into A Hotel

6 April 2015 – Expansión

Project / The German fund has acquired an old residential building, which it will convert (into a hotel), including a retail space.

A new hotel project is beginning to take shape in Madrid, led by a German fund. The building is located on Calle Huertas, 16, in one of the most important tourist areas of the city. “Previously, the property was owned by a Spanish investor. We were looking for a building in the area to convert into a hotel and we are now working on the renovation”, explains Marcos López, Director of the consulting firm Ascana in Madrid, the company that advised the transaction.

According to real estate sources, the purchaser of the building is the German fund Aquila Capital, which will invest €28 million in the operation. Ascana declined to confirm the identity of its client.

The building, which has a surface area of 3,600 square metres, was used for residential purposes until now. Those homes will now give way to a boutique hotel or hostel, a type of accommodation that is very much in vogue in Europe’s major capitals. “There is significant demand in the market from funds looking for buildings located in the centre of Madrid and Barcelona to convert them into hotels. This interest is very much focused on prime areas from a real estate, tourism and retail perspective, since investors are looking for a balance between achieving good returns and securing a safe investment, through a well-located building”, says López.

The new owner paid around €17 million for the property, which together with the renovation work, will result in a total investment of €28 million. The refurbishment work is expected to take 18 months.

Created in 2011, the fund Aquila Capital holds investments in the real estate, wind energy and agricultural sectors, amongst others. In August 2014, the German fund acquired the Husa Chamartín hotel, located next to the train station of the same name in Madrid, with 378 rooms. The property is managed by the tourism group Gowaii, which won the rights (to operate the hotel) in a legal auction in June last year for €2.25 million.

Aquila is currently looking for an operator for the hotel (on Calle Huertas), as well as tenants for the two retail stores, which have a combined surface area of 400 square metres.

In 2014, total investment in the hotel sector in Spain amounted to €1,000 million, i.e. 50% more than in the previous year.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Housing: Completions Exceed New Starts For 7th Year

30 March 2015 – Cinco Días

It is not easy to measure how robust activity is in the real estate sector. But if there is one indicator that has been taken into account historically to assess the sector’s health, it has been the volume of housing starts. That is where the problems begin. The permits that developers have to obtain to enable them to begin construction work did not always used to correspond to the exact number of homes that were built in the end, and so the gross figure that was published, had to be carefully extracted.

And this market suffers from another peculiarity. Since house building is a slow process, which tends to take between 12 and 24 months, it is not easy to halt developments that are already underway, even once it has been established that most of the homes under construction may not be sold upon completion.

These two aspects help us to understand what has happened in recent years, when we analyse the data for housing starts and completions. If we take the year 2000 as a starting point, when nobody doubted that the real estate market was heading towards a boom of as yet unknown proportions, the number of house starts began to open up a sizeable gap over the number of completed homes, of more than 40%, approximately. The former moved in the vicinity of 500,000 homes, whilst the latter remained at just over 350,000.

Right after that, house production volumes climbed to more than 600,000 per year, spurred on by demand for a primary residence by one of the largest population cohorts in Spain’s recent history (the baby boomers), strong employment and the almost unlimited access to very cheap financing over almost “eternal periods”.

Thus, the gap between the two variables continued to grow until 2008, when everything came to an abrupt end. In fact, that year closed with 264,795 housing starts, when just a year before the figure had amounted to no fewer than 651,427. In 12 months, activity had collapsed by 59%, but the majority of the construction work underway continued to run its course (only a minority of developments were left unfinished even during the worst years of the crisis), which explains why since then, the number of finished homes has exceeded the number of house starts, year after year, for seven years in a row.

Shortage of new supply

In 2014, this trend was almost reversed, but in the end it was not. Last year, construction of 34,873 houses began, which represented a slight increase of 1.7% compared with the figure a year before, but still a long way below the 865,561 homes that developers began building in 2006, during the height of the boom. This means that today, the number of homes being constructed accounts for barely 4.02% of the volumes that were being constructed during the economic boom. Moreover, the figure is slightly lower than the number of homes that were completed last year (46,795), which in turn represented 7.29% of the number of homes that were finished in 2007 (the peak of the series), when 641,419 homes were completed.

All indications are that this year will be the first year that the two curves cross again, in such a way that more homes are started than are completed. In fact, if this does not happen, there could be problems due to a shortage of stock of new homes in places where the stock has already been absorbed and demand is beginning to intensify. Another important indicator for the sector, namely the consumption of cement, also indicates the same trend. During the first two months of this year, cement consumption has increased by 6.6%, to amount to almost 1.6 million tonnes, which corroborates the theory that the cranes are returning, albeit in a selective way.

Another business niche, which is key to the recovery of the construction sector, but which does not seem to stop decreasing is: refurbishments. According to figures from the Spanish Confederation of the Construction Product Manufacturers Association (Cepco), 2014 closed with 22,428 permits for the renovation or refurbishment of homes, down 0.80% on the previous year. And the number of building permits barely grew (rising by only 2.8%).

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

‘Dear Hotel’ Overtakes Wanda In Plaza de España

2 March 2015 – Expansión

In Madrid’s Plaza de España, the hubbub of construction work is accompanying tourists as they journey into the commercial heart of the capital: Gran Vía. The Edificio España remains in tact (for the moment), as Wang Jianlin, the owner of Dalian Wanda, finalises the designs for his megaproject, which will include a hotel, shopping centre and homes.

The site that will house the future Hotel VP Plaza de España remains empty, but scaffolding is now up on the Torre Madrid, where Metrovacesa is refurbishing the building that will house a Barceló hotel – on one of the corners that Plaza de España shares with Gran Vía.

Plaza de España is also where the first of the hotels that is intended to revitalise the area will be opened. The area has been in decline since 2005, when Intercontinental closed its Hotel Crowne Plaza, which was located into the Edificio España building. Now, work is nearing completion on the Dear Hotel, a property that the Sebrango family acquired in 2012, after exercising a call option that Renta Corporación held over the building. The Sebrango family, which also owns the Hotel Chiqui (in Santander) have designed a four star hotel, with 162 rooms and it is scheduled to open on 15 May, on the day of San Isidro, one of the most important fiestas in the Spanish capital.

Roof terrace

The Dear Hotel project, which will have its entrance on Gran Vía, 80, has required an investment of €30 million – including the purchase of the building and the work required to refurbish it. Previously, the property housed homes and offices.

The hotel will have 12 floors and there will be a roof terrace and restaurant on the top floor, which its owners hope will become an iconic space for the hosting of special events in the capital. The style (of the property) will be elegant and modern, and in terms of prices, the average room will cost between €150 and €160 per night. The price of the suites will range between €250 and €300 per night and the hotel will create between 70 and 80 new jobs.

“It will be a four star hotel due to the individuality of the building, but the service and quality will be on a par with a luxury establishment”, explains its director, Francisco Sebrango. According to the owner’s forecasts, more than 60% of the hotel’s guests will be foreigners.

Since purchasing the building, the Sebrango family has received numerous offers to sell or transfer the operation of the hotel. Nevertheless, they have decided to pursue their original strategy and operate the hotel themselves. “We considered the option of a franchise agreement, but in the end we ruled that out. We want to create a unique hotel and we believe that it has the most value in our hands”.

Original story: Expansión (by Yovanna Blanco)

Translation: Carmel Drake

Madrid To Build A Conference Centre & Luxury Hotel Opposite The Bernabeu

19 February 2015 – Expansión

The Town Hall will approve the operation of a conference centre and the construction of a five star hotel in exchange from the renovation of the complex, which will also include a retail area.

It is one of the most iconic buildings in Madrid’s financial district, in particular due to the mural on its facade, designed by the artist Joan Miró.

Built in the 1960s and located on the Paseo de la Castellana, opposite the Santiago Bernabéu stadium, Madrid’s Conference Centre (Palacio de Congresos) has been closed for two years due to the poor state of its facilities, which violate basic safety standards.

But today, the Town Hall expects to approve a plan for the comprehensive remodelling of the site and in addition, to construct a luxury hotel that could have up to 23 floors.

According to sources close to the transaction, the Town Hall will invite tenders for the renovation of the Palacio and the construction of a hotel that do not result in any cost to the taxpayer: the successful bidder will complete the building work, estimated to amount to €86 million, in exchange for a licence to operate the entire complex.

In other words, the management of the Palacio and hotel will be in private hands, but ownership of the space will continue to remain with the public. “The role of the State should be to promote different types of tourism, but given the quantity of highly prestigious tour operators in our country, the best option is for them to take care of the management to ensure we provide state-of-the-art facilities”, explained an internal document about the operation.

Both the Town Hall and the Ministry of Industry, Energy and Tourism, have been very involved in the process. They want the new Palacio to be an engine for attracting “sophisticated, profitable” tourists with “higher added value and greater spending power”, which is why one of the requirements of the tender is that the hotel be a five star facility, “capable of meeting the highly specialised demand for conferences and meetings”, said the document.

In theory, the Government will oversee the aesthetics and architectural modelling of the project, which will not affect the Miró mural under any circumstances. The halls in the new building, designed especially to host professional conferences and large events, must have the latest technology and the best audiovisual facilities and scenography. Similarly, the new complex will have to provide a catering service for at least 1,800 diners.

The current surface area of the Palacio is 40,000 square metres, although since the partial remodelling plan approved in 2001, it has been allowed to increase that to 47,000 sqm; additional space that could be used to build the hotel. Moreover, the space available to construct “compatible” businesses (shops, high-end boutiques, travel agencies, etc.) will increase from 25% of the current total surface area up to 35%. The only business that the tender excludes from being housed in this space are large superstores, reflecting its goal of ensuring that the Palacio does not become a kind of shopping centre. “Other compatible uses will be permitted, but the main use will continue to be as a conference centre”, says the report.

Original story: Expansión (by Yago González)

Translation: Carmel Drake

NH Has Raised Its Room Rates By Between 15% & 40% After Renovating Hotels In Spain

13 February 2015 – Expansión

The CEO of the NH hotel Group in Spain, Hugo Rovira, says that “customers are not fools, if you offer them quality, then they are willing to pay for it”, but he recognises that “if you give out peanuts, then you will attract monkeys”, after sharing his opinion that “retaining customers through low prices is not sustainable, there will always be cheaper competitors”.

The NH Hotel Group is spending 25% of its turnover on the renewal of its gastronomic offer, a major commitment for the hotel chain, which regards high quality gastronomy as the “saviour” of the sector as a means of differentiating itself.

And so it is with good reason that NH has invested almost four million euros in the renovation of its gastronomic offer, a fundamental part of the transformation that the chain is undertaking in virtually all of its hotels.

The renovation of its facilities has resulted in “an increase in the room rates at NH hotels across the country, of between 15% and 40% of the original cost, depending on the establishment”, according to the CEO of the NH Hotel Group in Spain, Hugo Rovira.

Rovira stresses that “it is hard to see how it could have got any worse in Spain” and that the commitment to high quality culinary tourism has led to the “salvation” of the sector, differentiating NH accommodation thanks to its wide-ranging gastronomic menu, without renouncing the commitment to offer customers the best service.

“Coffee for everyone is not good” said Rovira categorically to journalists on Thursday morning at a business breakfast. Specifically, the executive was referring to NH’s decision to provide a top class service both in room and in its restaurants.

By way of example, Roviro explained that NH continued to serve the best products in its minibars throughout the crisis and generated more or less the same volume of sales, with an increase of up to 20% in recent years.

Rovira also wanted to highlight the trend towards recovery in the Spanish market and he noted a “slight recovery”, although he made it clear that “we still have a long way to go, but at least we are on the right track”.

Positive outlook for 2015

In fact, the outlook for 2015 in our country is “good”, according to the CEO, who said that results from the last quarter of 2014 showed signs of recovery “both in terms of corporate clients and families”.

And he said that “clients are not fools, if you offer them quality, then they are willing to pay for it”, but he recognises that “if you give out peanuts, then you will attract monkeys”, after sharing his opinion that “retaining customers through low prices is not sustainable, there will always be cheaper competitors”.

NH seeks to differentiate itself and continue to maintain its image of high quality service through two clear commitments (a line of restaurants that serve products with Designation of Origin (Denominación de Origen or DO) and “show-cooking” or “Domos”, led by renowned chefs and apprentices from the hotel chain’s culinary school).

Renovations and relaunches

The NH Hotel Group is immersed in its renovation and relaunch plan, for which it has a total budget of €220 million to spend between 2013 and 2018; 55 hotels have signed up to the plan, of which 20 are located in Spain.

Other lines of action, such as the so-called “open bars” represent another model for the local market, as the company offers a service “similar to those provided in VIP lounges at the airport” in which clients can access “self service” bars.

Original story: Expansión

Translation: Carmel Drake

Wanda’s Plans For Edificio España Get Green Light

30 January 2015 – Expansión

Yesterday, the Governing Board of the Community of Madrid gave the green light to the refurbishment of the Edificio España, owned by the Chinese group Wanda, controlled by the magnate Wang Jianlin.

The businessman, who also owns 20% of the football club Atlético de Madrid, will invest €114 million in the renovation of the property, located in Madrid’s Plaza de España, which it purchased from the Santander Group for €265 million. Inside the Madrid skyscraper, he will create a luxury hotel, more than 300 homes and a retail space, which he plans to expand to 15,000 sqm.

The permission to refurbish the Edificio España has been granted in parallel to the negotiations that the Wanda Group’s team is conducting with the Madrid and central Governments to create a macro-complex on the site of the old barracks in Campamento, in Madrid.

To this end, the Secretary of State for Defence, Pedro Argüelles, met yesterday with the CEO of the Wanda Group, Laurent Fischler, to discuss the purchase of that land, which covers around 200 hectares, and where Jianlin plans to invest €3,000 million in the development of a residential, housing and leisure complex.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Jianlin Presents His Plans For Edificio España

29 January 2015 – Expansión

The Wanda Group, controlled by the Chinese magnate Wang Jianlin, will invest €114 million on the refurbishment of the Edificio España in Madrid and a further €30 million on the project to regenerate the surrounding area.

The plans of the Chinese businessman Wang Jianlin, owner of the Wanda Group holding company, to convert the Edificio España in Madrid into a luxury hotel, residential and retail complex, take an important step forwards today. The Executive of the Community of Madrid will discuss the modification to the General Urban Development Plan at their Government Board meeting. Following approval by the Town Hall of Madrid, it is expected that the Government of Ignacio González will also vote favourably.

The proposal, presented by the Santander Group (which owned the building until last summer, when it sold it to Wang Jianlin for €265 million) and supported by Wanda Madrid Development (which formalised the purchase of the building before a notary of 30 July) will result in changes not only to the historical building in the capital, but also to the area surrounding it.

Jianlin has committed, together with other businesses, such as the VP Group, controlled by Vicente Pérez, to finance some of costs of the area’s regeneration, which includes the expansion of the pedestrian area (by 12,500 sqm) and the construction of an underground walkway between Calle Ferraz and Calle Bailén. Jianlin will contribute around €30 million of the total €79.5 million to be invested, according to sources close to proceedings. 51% will be borne by the concessionary companies to be awarded the new car park in the area, according to the Town Hall.

In addition to the €265 million Wanda paid Santander to acquire the property and the €30 million it will invest in the regeneration of the plaza, the Chinese group will invest a further €114.085 million in the renovation of the building, designed by the architectural firms Foster and Lamela, which have worked together before on other projects, such as the construction of Terminal T4 at Madrid’s Barajas airport.

Comprehensive renovation

The Edificio España will be fully refurbished on the inside (the building will be completely gutted), whilst on the outside, only the main façade will remain, together with part of the sides and the existing chamfer on the rear façade (located between Calle los Reyes and Calle Maestro Guerrero).

The new project will put an end to the rear façade, designed as a “comb”, which creates five interim patios and provides access to the San Marcos church and the neighbourhood of San Bernardo from Plaza de España.

In addition, the new Edificio de España will have almost 10,000 sqm of underground space, which will be used to expand the parking area, increasing it from its current size of 2,473 sqm to 12,000 sqm, which will result in 318 more parking spaces.

In exchange for the extension of the car park, Wanda must grant 10% of this space to the Town Hall for public use or pay for that space separately. According to the proposal presented to the town hall, the Chinese investor will choose the second option.

The size of the residential area, which will include around 380 homes, and the hotel space will barely change: decreasing from 40,883 sqm to 37,916 sqm in the case of the former and from 22,720 sqm to 22,000 sqm in the case of the hotel.

The main change proposed by Wanda will affect the retail area, whose space will be increased from 3,687 sqm to almost 15,000 sqm. The aim is to create a “large retail space” between the ground floor and the third floor. “We expect to house a variety of retail activity, primarily clothing and accessory stores”, they say in the proposal.

The building work will take place between 2016 and 2020 and it is expected that the homes will be completed between 2019 and 2021. The construction work is expected to create almost 4,000 jobs, between direct and indirect roles. Once completed, 185 people will work in the hotel and retail space in the Edificio España.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Renta Plans To Buy €500m Worth Of Buildings In Spain

23 January 2015 – Expansión

The real estate company Renta Corporación has begun 2015 with its eye once again on acquisitions. With a healthy balance sheet and the threat of bankruptcy behind it, the company has agreed an alliance with two overseas funds to buy buildings amounting to €500 million in Madrid and Barcelona this year.

Under the plans, Renta Corporación will contribute 10% of the capital and will act as the manager of the transactions, whilst the funds will provide the remaining 90%. Together, they will spend €250 million and the other half, up to €500 million, is expected to be financed by banks.

One of the funds is Kennedy Wilson Europe Real Estate, with whom the real estate company signed a partnership agreement last December. And its alliance with the second investment fund is in the “advanced” stage, explains the Chairman of Renta Corporación, Luis Hernández de Cabanyes.

The €500 million will be used to acquire a range of buildings including offices, residential properties, hotels, shopping centres and land. Renta, which has historically focused on the purchase, renovation and sale of residential buildings, will hereby enter other segments of the real estate market.

At the end of December, Kennedy Wilson Europe Real Estate and Renta Corporación closed their first purchase under the new alliance, in Madrid. The target, an office building in Calle Santísima Trinidad, will be converted into luxury homes, with a planned investment of more than €5 million.

The Chairman of Renta Corporación considers that “financing will experience an upturn over the next twelve months”. The banks “are in much better shape, from a solvency perspective, than in 2008”, he said.

Hernández de Cabanyes points out that Renta Corporación’s vocation has always been the purchase of “buildings with potential for value generation”. Now, with the help of these funds, “we have the peace of mind that comes from having more financial muscle”. It may take anything from six months to four years for the alliance between Renta and these funds to make purchases, create value and realise sales.

According to Hernández de Cabanyes, the prices of buildings in Madrid and Barcelona are currently 55% of the peak values they reached in 2007. In the case of land, its current value amounts to just 25% of the prices seen before the burst of the housing bubble.

In November, Sareb, Popular, ING and Banco Caixa Geral all invested in the share capital of Renta Corporación, in exchange for the cancelation of their debt in the company.

Original story: Expansión (by Marisa Anglés)

Translation: Carmel Drake