Sonae Sierra & CBRE GI Put the ‘Max Center de Barakaldo’ Shopping Complex Up For Sale

10 February 2018 – El Correo

Bizkaia is preparing for a major commercial and real estate revolution. Sonae Sierra, the multinational owner of the Max Center shopping complex in Barakaldo has put the property up for sale, 15 years after acquiring it from ING Real Estate. The property was opened in 1994 and was extended in 2002 with the addition of the adjoining Max Ocio building. The latest transaction forms part of a national macro-operation, given that the portfolio up for sale also includes two other large complexes: the Gran Casa de Zaragoza and the Valle Real de Santander.

The company, together with its partner CBRE Global Investors, with whom it jointly shares the ownership of the three large shopping centres, calculates that it will receive proceeds of around €500 million from the sale, according to sources in the sector. Spokespeople for Sonae avoided providing further details about the operation to this newspaper on Thursday. They announced that they only discuss “closed” operations and that the installations in Kareaga, which have an approximate surface area of 60,000 m2 “are still operating in a normal way”.

Nevertheless, the negotiations have been underway for several months. Although they are satisfied with the progress of the business, which is enjoying growing sales and which seems to have left behind the worst years of the crisis, the current owners are looking to generate revenues from the sale of these assets to invest in other projects in different parts of Spain. Sonae Sierra, which is controlled by Hugh Grosvenor, the Duke of Westminster and the richest man in the United Kingdom, has a presence in seven countries with 46 buildings worth almost €7 billion. It is currently working alongside the British operator McArthurGlen on the imminent opening of a luxury outlet in the Plaza Mayor de Málaga complex, which will involve a disbursement of €140 million.

The company is looking to take advantage of the current times in the Spanish real estate market, which are being characterised by a great deal of interest from funds and overseas companies. Last year, investment in the retail sector rose in a spectacular fashion – by 31% – to reach €3.9 billion. If this latest sale goes ahead, the owners of the Max Center, which is home to 133 stores, as well as a sizeable restaurant and leisure area, would complete their second divestment process in Bizkaia in two years.

At the beginning of 2016, they sold the Zubiarte de Bilbao complex to Activum SG Iberia Fund for €150 million (…).

Modernisation of its roof

Now, all eyes are focused on the Max Center, which has just invested €3.5 million on the modernisation of its roof. Nevertheless, the improvements are not going to stop there, given that the complex is soon going to be subjected to a complete renovation. The changes undertaken in recent months to renew the roof of the building, which houses a parking lot, included the resurfacing of the surface area and its signage, as well as improvements to the lighting and security in the parking area.

In addition to the successive renovation projects, the Max Center has also improved its sustainable profile with several actions aimed at reducing water consumption, improving energy efficiency and increasing recycling rates. Together with these interventions, management has been working on an intense campaign to increase the commercial offering and renew the trust of its customers who are being offered increasingly more choice by nearby competitors, such as Megapark and Ballonti (Portugalete). Some of the new brands that have chosen the Max Center and are about to open stores there include Pablosky, Indie&Soul, San Carlos, Trendie, Loop&Coffe and Burger King. Meanwhile, other stores, which are already established, such as the footwear shop Foot Locker, have undergone major renovations.

Original story: El Correo (by Luis Gómez)

Translation: Carmel Drake

IPE: House Prices Will Rise By 5% In 2016

18 July 2016 – Expansión

The recovery of the real estate sector began in 2015, and we are now (in 2016) seeing the consolidation of the end of the crisis, with increases in: property prices, the number of transactions, the number of housing permits and rentals, spreading across the whole country.

After seven years of crisis in the sector, the improvement in 2015 might have seemed like a mirage to many, a temporary bounce or a small sign of stabilisation. Nevertheless, the figures for 2016 are showing that the outlook is strong and that the housing market still has great potential, which means that we no longer need to talk about “blossom in the greenhouse” or an incipient recovery, but rather future growth.

The scenario outlined by the Institute of Business Practice (IPE) in its next edition of the Real Estate Pulsometer, shows a very favourable outlook for the sector, in which average transaction prices will grow by 5% and the volume of sales will increase by 13.9% with respect to 2015. All of this will act as a driver for the rest of the sector, which is also being boosted by construction activity. Thus, the number of projects launched will increase by 9.3% and the number of permits for new homes will grow by 13.9%. It seems that the sun is already shining on all of the major indicators in the real estate market.

In addition to this data, we are seeing a gradual and increasingly rapid recovery of the rental market; a strong increase in the yield on homes; and a clear recovery in the non-residential sector, which set record breaking figures in 2015 and is following a positive trend so far in 2016, with fewer operations, but higher prices.

The indicator that best indicates the recovery of the real estate sector is the number of transactions, which grew by 11.1% in 2015 and which is forecast to rise by 13.9% this year. In addition, the increase in sales does not depend only on purchases by those with significant savings…, which was the main driver of the market in years gone by, but in very specific areas.

More mortgages

During 2016, the opening up of the bank loan tap will drive mortgages up by 10.5% (compared with a miniscule increase of 0.6% in 2015), which will allow buyers to return to the market in search of primary residences, even if they only have small amounts of savings. This means that the improvement in the market will extend to other provinces and neighbourhoods that have not featured on the radars of investors in the past.

In addition, this recovery will also affect plots of land, as well as garages, offices and storerooms, to reach 787,839 operations (up by 10.2%) compared with last year. In total, more than half of these transactions are expected to involve homes.

Based on the data to May, the highest increases in house sales are being seen in the Balearic Islands (where purchases grew by 38.6% between January and May, with respect to the same period last year), followed by Murcia (28.9%), País Vasco (24.3%) and Extremadura (21.7%), according to INE. Nevertheless, the Institute of Business Practice forecasts that, during the year, Madrid, Cataluña, Valencia and the Canary Islands will also see some of the most significant increases. (…).

Original story: Expansión (by Pablo Cerezal)

Translation: Carmel Drake

The RE Sector Attracts Overseas Investors Once More

12 April 2016 – Cinco Días

(…) Overseas capital is focusing on the property market once again. And Spain is one of the main European markets for offices, hotels and logistics. Madrid and Barcelona are leading the charge and the Socimis at the forefront of the revitalisation of the market. (…)

According to data from the Foreign Investment Register, published by the Ministry of Finance, the construction sector and real estate-related activities secured almost €7,700 million of direct foreign investment in 2015, i.e. 34.5% of the total. As such, one out of every three euros of international funds received by the Spanish economy last year was invested in the property sector.

Productive foreign investment (that which generates activity and employment) grew for the third consecutive year, to close 2015 with an increase of 11%, to €21,724 million. Of that amount, €4,706 million, i.e. 21.7%, was allocated to the construction of residential buildings and property development, compared with €1,762 million in 2014….Meanwhile, real estate-related activities (sales, purchases and rentals) accounted for 13.8% of the total, i.e. €2,992 million. (…).

In the context of this new activity, the Socimis have emerged as the main supporters of the market. The large Socimis experienced a real boom in 2015, when they flooded the MAB with their stock exchange debuts and came close to tripling their profits, which rose from €89.5 million in 2014 to €251.2 million last year, according to data from the CNMV.

Within the last year, the four largest Socimis (Merlin Properties – which has been listed on the Ibex 35 since December -, Hispania – thanks to its partnership with Barceló -, Lar España and Axiare Patrimonio) have doubled the value of the properties they own, to more than €9,200 million in total. (…).

The Socimis accounted for 41% of all funds invested in the purchase of real estate assets in 2015 – they spent €5,237 million on asset transactions. In this way, the increase in the volume of their investments amounted to 129%, in particular due to Merlin’s purchase of Testa for almost €1,800 million.

Wealthy individuals and several international funds have invested fully in these investment vehicles, attracted by the low prices in the sector and the tax advantages on offer (Socimis are exempt from paying corporation tax). The Qatar sovereign fund is trying to become the largest shareholder in Colonial; it now owns almost 30% of the Catalan real estate company.

George Soros has strengthened his commitment to Hispania, in which the millionaire John Paulson holds a stake of almost 10%. Carlos Slim controls Realia…Amancio Ortega, with his investment arm Pontegadea, now manages a very interesting and diverse asset portfolio.

The experts agree that the sector has left behind the turbulent times that it experienced following the burst of the real estate bubble. It is undergoing a period of normalisation and stabilisation – albeit a long way from its pre-crisis levels – and it is facing a new environment, with sustainable growth, in a market that is more mature and more professional.

Original story: Cinco Días (by Pablo Pico)

Translation: Carmel Drake

Anticipa: 230,000 New Homes Will Be Built Before 2018

22 October 2015 – Expansión

The supply of housing in Spain will grow by 20% p.a. and the market will receive around 230,000 new homes between now and 2018, according to a study by Anticipa and Josep Oliver, a professor at the Universidad Autónoma de Barcelona, which was presented at Barcelona Meeting Point yesterday.

Spain currently has 983,000 homes to sell. In 2018, there will be 978,000 empty units. The accumulation of unoccupied housing stock, which partly explained the crisis in the sector, will remain stable for the rest of this decade and will only decrease if fewer homes than forecast are built. It is expected that the economic improvement will help the formation of new households – and the demand for homes – despite the falling population.

Lluís Marsá, President of the Property Developers (Association) of Barcelona (APCE), warned that the pace of house construction in Cataluña is four times lower than it should be, but he did not dare to predict when it would return to its normal ratio of 3.5 new homes per thousand inhabitants.

The recovery is very heterogeneous. “We have a two-speed market in Spain and when some people hear talk of recovery in the country, it would not be unreasonable for them to respond with a comment such as: “What are you talking about?””, said the CEO of Neinor Homes Madrid, Juan Velayos, during a talk.

Whilst Madrid and Barcelona have shortages, there are still lots of unsold properties left in unpopulated areas, as the CEO of Vertix Barcelona, Elena Massot, highlighted. She warned that the price of land may rise due to the entry of funds into the market.

The experts point to a rise in rentals, which have increased from 10% to 17% in recent years. “This figure is going to continue to rise”, said the Director General of Servihabitat’s real estate business, Juan Carlos Álvarez.

One segment that is very much not in crisis is the hotel sector, which will grow by 72% in 2015 to €1,900 million, according to the consultancy CBRE. This volume reflects a return to pre-crisis levels.

Original story: Expansión (by A. Zanón)

Translation: Carmel Drake

The Economist: Homes In Spain Are Still Overvalued By 8%-18%

22 April 2015 – El Confidencial

Five years ago, housing in Spain was overvalued by more than 50% and every year since then, the Economist has considered that house prices still need to decrease further.

House prices in Spain have decreased by between 30% and 50% – the range varies depending on the source consulted and the type of assets being considered. According to the statistics and the experts, this decrease has now come to an end. But, what if prices are still inflated?

That is what the weekly British publication The Economist thinks; and it has been warning against the overvaluation of house prices in our country for the last five years. The publication says that house (prices) in Spain are still inflated by between 8% and 18%. By almost 10% on the basis of the net income of citizens and by almost 20% if we take into account the relationship between the price of house sales and rentals. This overvaluation comes despite the fact that the publication calculates that prices have decreased by 31.3% since the peaks recorded in the fourth quarter of 2007.

In 2010, The Economist created an index that was based, precisely, on the relationship between the sales price of properties and rental, and the net income of citizens in different countries to calculate reasonable house prices. Then, homes in Spain were overvalued by more than 50% and in every year since then, the publication has considered that house prices still need to decrease further.

Having said that, our country is not unique in this sense. Not surprisingly, homes are much more overvalued with respect to the average earnings of their citizens in countries such as Canada (by between 35% and 89%), France (25%-29%), Belgium (50%-55%) and Australia (39%-61%).

However, the data from The Economist reflects that if any further decrease takes place, then it will come in dribs and drabs – prices (in Spain) have decreased by just 0.2% in the last year, the smallest decline recorded in any of the countries analysed, and below those registered in Greece (6.1%), China (-5.6%), Singapore (-3.9%), Italy (-3.8%) and France (-2.1%).

By contrast, Ireland, a country that had a very similar real estate bubble to that experienced in Spain and where prices have decreased by almost 40% from their peak levels, heads up the ranking for highest price increases with a 16.2% year-on-year rise, followed by Turkey (16%) and Hong Kong (11.9%).

Original story: El Confidencial (by Elena Sanz). Refer to original story for table showing ‘The Economist House Price Indicators’ by country.

Translation: Carmel Drake