Merlin’s Profits Increased By 77% In H1 To €211M

26 September 2016 – Expansión

The Socimi Merlin Properties recorded revenues of €154.6 million during the first half of 2016, up by 136% compared to the same period a year earlier.

The real estate company has seen a significant increase in its revenues thanks to the acquisition of new assets – it completed the purchase of several assets worth around €149 million during the first six months of the year – and the management of them.

Merlin, whose shareholders approved its merger with Metrovacesa in an extraordinary meeting last week, increased its profits by 76.6% during the period, to €211.1 million. In June 2015, the Socimi also agreed to purchase Testa.

The Socimi’s recurrent EBITDA amounted to €135.5 million in H1 2016, up by 130% compared to 2015. “These results reflect the outstanding performance of the asset portfolio. In a record quarter in terms of space leased (in sqm), the company has managed to increase its occupancy rate and rents in comparable terms”, said Merlin.

The real estate company, which debuted on the stock exchange in June 2014 without any assets on its balance sheet, now has a portfolio worth €6,527 million, which represents an appreciation of 7.8% with respect to December 2015.

Financing

The Socimi controlled by Ismael Clemente (pictured above) closed the first half of 2016 with net debt of €3,124 million, which represents 47.9% of the value of its assets.

In April, Merlin completed a bond issue amounting to €850 million. It is planning to complete another similar operation before the end of the year, amounting to around €500 million, to cover a bridge loan currently held by Metrovacesa, which is due to mature in 2018.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Allianz Real Estate Opens Branch In Spain

22 September 2016 – El Economista

The real estate arm of Allianz has arrived in Spain, attracted by the investment opportunities on offer here. Allianz Real Estate has just opened a branch in Madrid to track its operations in the Iberian Peninsula and take responsibility for the management of the properties owned by the group.

To lead the project, the firm has hired Miguel Torres, ex-Arthur Andersen, who has been linked with GE Capital Real Estate since 1995, according to the Commercial Registry. “After the recovery of the real estate markets, Spain and Portgual are once again in the focus of international real estate investors”, explained the CEO of Allianz Real Estate, François Traush, who highlighted that the incorporation of Torres into the team aimed “to identify attractive investment opportunities to allow us to continue constructing a diversified portfolio”, for our shareholders.

With more than 20 years of experience in the real estate and structured financing sectors, Torres joins the company from GE Capital in Mexico, where he served as Director General, leading a team of 50 specialists and an unit with almost €3,500 million in real estate financing. Prior to that, he held various management positions at GE entities in Madrid, New York and Stamford.

Allianz Real Estate’s portfolio contains €41,700 million in assets under management: €29,300 million in direct and indirect investments, plus loans amounting to €12,400 million, based on figures at 2015 year end, when it closed operations amounting to €7,400 million. Its goal is to reach the €60,000 million threshold “within the next few years”.

The company, which has subsidiaries in Germany, France, Italy – into which the operations in Spain will report -, Switzerland and the USA, includes the office in Madrid as part of its regional expansion.

Its investment aspirations cover almost the entire sector: from taking stakes in debt, to investing in listed companies, direct and indirect positions in financing and building a significant property portfolio.

It debuted as a lender in Spain a year and a half ago, with a loan for €133 million that allowed the Socimi Merlin to acquire the Marineda Shopping Centre, which, at the time, was the largest investment in this type of complex since 2008.

The strategic logic is two-fold. The low interest rate environment is causing insurance companies to dust off old commitments to property in light of the meagre returns being offered by public debt and the high capital consumption involved with other investments. Companies such as Mapfre, Mutua Madrileña, Santalucía, Reale and Línea Directa have acquired properties recently and are looking for opportunities, although their involvement as financiers is residual or non-existent, unlike the role performed by multi-national firms such as Axa and Allianz.

The sector hopes that Brussels will smooth the path, easing the burden of callable capital, given that the Juncker Plan itself wants to involve infrastructure projects that Europe needs.

In addition, the real estate sector is presenting itself as an alternative that offers higher returns, especially given the security of their operations. The high expectations of growth in terms of office rents and a notable increase in the number of small operations, is converting this segment of the market into one of the most attractive options. In the case of the most cutting-edge buildings and those located in prime areas, rents may increase by up to 22% over the next three years. For the other more modest assets, the annual yield amounts to around 7%. Similarly, yields of commercial premises amount to around 7.5%,and rents are expected to increase by an average of 2.4% p.a. in Madrid over the next two years.

Original story: El Economista (by Eva Contrerar and Alba Brualla)

Translation: Carmel Drake

JLL: Inv’t In Retail Sector Falls By 27% In H1 To €1,278M

20 September 2016 – La Vanguardia

Real estate investment in the retail sector – which includes shopping centres, retail parks and other premises – decreased by 27% during the first half of the year to €1,279 million, as a result of the shortage of products in the market, according to data published yesterday by the real estate consultancy JLL.

Despite the decrease in investment during the first half of the year, the firm expects the full year to close roughly in line with 2015, when investment exceeded €3,000 million. Moreover, it does not detect any negative impact as a result of the political instability in Spain at the moment.

Spain accounted for 7% of all retail investment in Europe during the first half of 2016, to stand in fourth place in the overall ranking.

High street stores and shopping centres accounted for 25% and 23% of total investment in H1 2016, respectively, well below the 48% that each one of those segments represented a year ago.

Despite the decrease in investment, JLL is convinced that the fall is not indicative of a deceleration in the market. The number of operations completed during the first half of the year amounted to 38, exceeding the 23 signed a year earlier.

Nevertheless, the average size of those transactions decreased by half to €40 million. Most, 18, corresponded to high street stores, amounting to €310 million in total, compared with 14 operations amounting to €860 million in 2015.

Socimis accounted for 16% of the total investment with €106 million.

In terms of rents, Paseo de Gracia recorded an increase of 11.6% to €240/sqm/month, although Portal del Ángel in Barcelona was crowned the most expensive street in Spain after rents there increased by 8.3% to €260/sqm/month.

In Madrid, Preciados is the most expensive street, with rents of €255/sqm/month, following an increase of 6.25%. It is followed by Serrano (€240/sqm/month and an increase of 6.7%) and Gran Vía (€230/sqm/month, up by 4.5%).

The forecasts indicate that rents in Madrid will increase by 2.4% p.a. during the period 2016-2018 and by 1.7% p.a. in Barcelona.

In the case of shopping centres, rental prices reached €88/sqm/month and forecasts show that they will increase at an average annual rate of 2.2% between 2016 and 2018.

During this period, new shopping centre openings are expected to double after hitting a minimum of 343,000 sqm between 2013 and 2015.

Project highlights this year include: Parque Nevada (Granada), Sambil Outlet Madrid and Fan Mallorca Shopping. Between now and 2018, the following centres are also expected to open: Plaza Río; Open Sky Center; Viladecans The Style Outlets; Torre Village; Palmas Altas and Torrecárdenas.

According to the Director of the Retail Department at JLL, Sergio Fernandes, there are increasingly more players interested in developing new centres from scratch, as well as significant interest in both the sale and purchase of new centres.

JLL also highlighted the growing trend in terms of the opening of flagship stores, as well as the shortage of quality space, which is forcing retailers to convert other spaces from residential, office and leisure use into commercial properties.

One of the most noteworthy operations of this kind is the opening of a 5,000 sqm Zara store on Castellana 79 (in the building that previously housed Fnac), which is due to open at the end of 2016 or the beginning of 2017.

JLL expects returns to continue to be compressed over the next few months and that the average value of the shopping centre market will grow by 5.6% p.a.

Original story: La Vanguardia

Translation: Carmel Drake

Alquiler Seguro: Rents Will Keep Rising In 2016

12 September 2016 – El Economista

Alquiler Seguro forecasts that rental income in Spain will continue to be positive for the remainder of 2016 and will perform “well” next year.

That is according to the CEO of Alquiler Seguro, Antonio Carroza, who has confirmed that the sector “has been recovering” since the beginning of the year, as shown by data from the ARCA Index, which has now recorded four consecutive months of increases following a 1.2% rise in rental prices in August.

Carroza explained that, according to the most optimistic forecast, the recovery will “settle down” during the autumn and will be reflected in prices, where the renewal of new leases is on the rise.

Nevertheless, Carroza clarified that the recovery in the rental sector is subject to fluctuations and to the health of the economy, but that, above all, rental income will continue to be influenced by household income. In this sense, Alquiler Seguro forecasts that updates to rental income “will continue to exhibit positive values during 2016”.

The lack of Government is hampering confidence and affecting prices

Looking ahead to next year, Carroza states that the evolution (of the rental market) will depend on several factors, in a context in which the lack of Government “is hampering confidence in the market and where prices are also being affected”.

In this way, Carroza indicated that the consolidation of the rise in prices will also depend on the situation of political and economic uncertainty. “From an optimistic perspective, we consider that 2017 will be a good year for the rental market”, he added.

Regarding the possibility that the recovery in prices will end up scaring off demand, the CEO of Alquiler Seguro stated that prices are rising gradually, and so he does not think that this situation will lead to a decrease in demand over the medium term.

Shortage of supply and the impact of certain public policies

“The main problem is the shortage of supply in the rental sector”, explained Carroza, who gave the example of cities like Barcelona “where it is clear that the public policies are not helping to boost or increase the supply of homes available for rent”.

For the time being, he considers that “there is a long way to go” before the rental market in Spain reaches the European average, with 35% of all homes being rental properties.

In any case, he notes that young people, belonging to the so-called “No Credit Generation” have already confirmed that they see themselves renting for the next ten years.

Original story: El Economista

Translation: Carmel Drake

Inv’t In Retail Assets Exceeds €1,800M In YTD16

8 September 2016 – Expansión

So far this year, transactions amounting to more than €1,800 million have been completed (in the retail sector). Moreover, the development market is expected to be reactivated.

After years of low and moderate activity in the retail sector, the exit from the crisis represented a turning point and the last two years have been particularly intense in terms of investment in shopping centres and retail parks. In addition, experts forecast that sales growth will continue during 2016, along with the development of new projects.

In this way, whilst investment in the office segment has moderated during 2016, following the significant activity that was registered there last year, activity continues a pace in the shopping centre sector and, records are being broken, such as, for example, with the sale of Diagonal Mar (Barcelona) for €493 million in August.

Growth in income

Thus, during the first eight months of the year, investments amounting to more than €1,800 million have been made. The big four have strengthened their position as advisors to these types of operations. For example, Deloitte was the buy-side advisor in the Diagonal Mar deal, whilst CBRE advised on the sell-side.

Growth in the economy, as well as an improvement in consumption have represented a wake-up call for shopping centres and, in 2016, sales are expected to grow and the promotion of new projects is expected to be reactivated. Moreover, given that sales are growing at a faster rate than the volume of visitors to shopping centres, the ratio of spend per visitor is also improving. Thus, as a result of the good results and the demand for premises, rents in prime shopping centres increased in 2015 for the first time since the outbreak of the crisis, by between 5% and 10% on average, according to a report from CBRE.

Last year, investment in shopping centres and retail parks exceeded all expectations, with a total volume of €2,650 million. In terms of the profile of investors, the Socimis were the major players, with Merlin and Lar leading the charge, along with fund managers.

According to CBRE, although the economic and political uncertainty is concerning buyers, it has not affected investment activity in retail assets. The consultancy firm estimates that 2016 could end with a total investment volume of €2,000 million in the shopping centre sector.

“Opportunistic funds that invested between 2012 and 2014 are busy divesting in 2016, having reached their target returns much sooner than expected. Institutional investors, which have a much lower cost of capital, are now taking over the reins, now that the yield offered by shopping centres in the rest of Europe is lower than in Spain, despite the fact that the evolution of the consumer environment is less favourable than in our country. We have never before enjoyed such a favourable environment for completing transactions in Spain”, explained Javier García-Mateo, Partner in Financial Advisory at Deloitte.

For José Manuel Llovet, the Director of Retail in Spain at Lar, shopping centres have great potential. “Sales are increasing along with consumption, which means that shopping centres are managing to achieve much higher rent increases than offices, which have not ended up experiencing the improvements that were expected at the beginning of the recovery”, explained Llovet.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

C&W: Retail Rents Rise By 2% In MAD & BCN

17 August 2016 – Expansión

The recovery of the Spanish economy is causing demand for retail premises on the main streets of Madrid and Barcelona to increase, according to the latest quarterly Spain Country Snapshots report published yesterday by the advisor Cushman & Wakefield.

The real estate services company indicates that, taking into account the lack of available space in the prime areas of both cities, it is noteworthy that tenants are willing to pay higher rents in order to retain good locations.

The report also states that whilst rental prices have stabilised in the retail sector in general, they have increased by 1.9% in the prime areas of Madrid over the last year.

In addition, the report forecasts the opening of approximately 340,000 sqm of space dedicated to retail during the second half of the year across Spain. The new space will mainly be concentrated in three new shopping centres.

Good figures

Meanwhile, in the logistics market, Barcelona has reported some “outstanding” figures in terms of the leasing of space thanks, primarily, to the long-term project involving the implementation of Amazon’s logistics plant in Prat de Llobregat.

With this space, which measures 60,000 sqm, the city saw 161,000 sqm of space leased during the second quarter of 2016. The figure is similar to that reported in the same period in 2015 but contrasts with the 34,000 sqm of space leased in Madrid, according to data from the agency.

Cushman & Wakefield said that the forecast growth of the economy will have a positive impact on occupancy rates over the coming months.

In addition, it expects several operations to be signed before year end, after they were delayed from Q2.

Original story: Expansión

Translation: Carmel Drake

ECI Puts Logistics Assets Worth c.€300M Up For Sale

10 August 2016 – Expansión

The distribution giant El Corte Inglés has engaged Morgan Stanley to find investors who may be interested in acquiring assets worth between €200 million and €300 million, according to real estate sources.

Specifically, the company chaired by Dimas Gimeno intends to divest 33 assets, which have a surface area spanning more than 500,000 sqm, as well as five plots of land.

The assets on the market include rental contracts guaranteed for five, ten, fifteen and twenty years; and the deadline for submitting non-binding offers will close at the end of September.

Sources consulted indicate that some of the warehouses included in the sale are not sufficiently tall enough to meet with current demands from investors for this type of asset, which has forced them to adjust the duration of their contracts, as well as the rental prices.

The batch for sale, which comprises 38 assets in total, including the plots of land, contains: El Corte Inglés’ logistics centres in Bisbal del Penedès (Tarragona) and on La Peluquera industrial estate in Madrid. It also includes other assets on Las Atalayas industrial estate (in Alicante) and the Goro en Telde estate (in Gran Canaria).

By contrast, El Corte Inglés has not included any assets currently considered to be strategic in the batch. Thus, for example, the jewel in its logistics assets crown will not be included: its mega centre in the south of Madrid.

Reduce debt

The company, which seeks to reduce its debt balance with these divestment operations, may consider selling other types of non-strategic real estate assets in the future, as Expansión revealed in March.

These real estate asset divestments follow others completed by El Corte Inglés in recent years. In this way, in the summer of 2013, the distribution group completed the sale of a building next to Plaza de Cataluña in Barcelona to the fund manager IBA Capital.

Months later, it sold another property to the same investor on Calle Preciados in Madrid.

Other divestments

Last December, the chain sold another building in the iconic Puerta del Sol in Madrid for €65 million to the US fund Thor Equities. At the time, the group agreed to continue to occupy the building, which houses its book store and is located in one of the most important shopping areas of the capital, for another year.

Similarly, in February, the group sold the building that it had acquired ten years ago on Calle Fontanella in Barcelona for €17 million to a Russian investor, which plans to convert the property into a hotel.

By contrast, El Corte Inglés has also completed several important asset purchases in recent years. In this way, the company acquired a plot of land from the railway infrastructure manager Adif, right on Paseo de la Castellana for €136 million in 2014. This plot of land is located next to one of the company’s main shopping centres in the capital, in Nuevos Ministerios.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

Veracruz Properties Acquires Parla Natura Shopping Centre

4 August 2016 – Mis Locales

Veracruz Properties has acquired the Parla Natura shopping centre (in Madrid) in an operation advised by Cushman & Wakefield and Savills, marking a new milestone in the sale and purchase of shopping centres in Spain.

Opened in 2009, Parla Natura has a gross leasable area of 18,000 sqm spread across twelve stores, which are leased to brands such as Decathlon, Aki and Kiabi, as well as 1,200 parking spaces. Moreover, its location is unbeatable, given that it is easily accessible from the A-42 motorway that links Madrid and Toledo.

Salvador González, Director of Retail Investment at Savills, commented that “Investor appetite for retail parks in Spain is still very strong, primarily due to the product’s future potential both in terms of revenues and profitability. At Savills Spain, we have always been committed to the retail park sector, and proof of that is the strong track record of transactions that we have advised in this segment. We have successfully closed this operation, together with Cushman & Wakefield.

Rupert Lea, Head of Retail Capital Markets at Cushman & Wakefield Spain explained that: “The sale of Parla Natura is another example of the strong interest that international investors, in this case, from Latin America, have in the retail sector in Spain. Together with our co-agents, Cushman & Wakefield, we have successfully closed another transaction for our client”.

Original story: Mis Locales

Translation: Carmel Drake

Aguirre Newman: Office Inv’t Down As Socimis Less Active

14 July 2016 – Expansión

A smaller supply of assets and less investor pressure, as well the political uncertainty in the absence of a stable Government and the fears of a possible slowdown in economic growth around the world have caused investment in offices in Madrid and Barcelona to dip during the first half of the year.

Specifically, the volume of investment in offices in Madrid amounted to €700 million during H1 2016, which represented a 35% decrease compared to the same period last year (€1,076 million). Meanwhile, in Barcelona, investment decreased by 15% to €270 million, according to a report prepared by Aguirre Newman.

The study highlights that the Socimis, which accounted for between 40% and 45% of total investment volumes in 2014 and 2015, cut back their investment activity significantly during the first half of the year, to account for just 3% of the total. By contrast, one of the most active players during H1 was Colonial.

The Director General of the Investment division at Aguirre Newman, Alejandro Campoy, explains that the Socimis – which have been very active over the last two years – have focused more on managing their acquired assets during the last few months. Nevertheless, he expects them to resume their investment activity during the second half of the year and to account for 15% of total investment.

According to the consultancy firm, the political uncertainty, which should be resolved within the next few weeks, combined with the positive performance of the Spanish economy will benefit investment activity, especially from overseas institutional investors. In this way, it forecasts that investment in offices will amount to between €3,000 million and €3,500 million by the end of the year, albeit below the record reached in 2015, which was boosted by Merlin’s purchase of Testa.

The report reflects that low yields on fixed income, which are actually negative in certain cases, and the high degree of volatility surrounding equities, accentuated by Brexit, means that the appeal of the real estate sector will continue to increase as an alternative for channelling savings.

In terms of the behaviour of rental prices in Madrid and Barcelona, they are continuing the good trend started last year across all of the areas analysed and are expected to continue to rise over the coming months.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

Blackstone Owns c.5% Of Spain’s Logistics Assets

28 June 2016 – Expansión

Blackstone created Logicor in 2012 and since then, has grown the company by acquiring portfolios of logistics assets, to reach its current surface area coverage of 13 million sqm.

In Spain, Logicor has been purchasing assets for three years and now owns properties covering a total surface area of 1.1 million sqm, primarily in Madrid and Barcelona, making it the largest owner of logistics land in the country, with a market share of between 5% and 7%. It is followed in the ranking by Merlin Properties and Prologis, in an otherwise very fragmented sector.

Logicor’s Director General for Southern Europe, Manel Vericat, said that the company is still looking for logistics warehouses in Madrid and Barcelona, as well as in other cities, such as Valencia and Pamplona: “We are searching for products that have may potential thanks to the management of our team; and we are able to participate in operations that have higher risk because we have experience in this segment and are capable of managing these situations.

The Spanish subsidiary is led by Alejando Rumayor, who previously worked for Aguirre Newman, Iberdrola Inmobiliaria, ING Reim and CBRE, where he worked last before joining Logicor. The team in Barcelona is led by Xavier Novell, who joined the firm from Aguirre Newman, where he led the logistics and industrial department for the last decade.

In recent years, Logicor has made some major investments in Spain, such as the purchase of a portfolio of logistics assets from CBRE Global Investments, which covered a surface area of 78,000 sqm.

It also acquired a batch of logistics warehouses covering 106,000 sqm, from the French insurance company Axa.

Similarly, it purchased a batch of logistics assets from Gran Europa with a combined surface area of 319,000 sqm. And another one from SEP investments, measuring 138,000 sqm. Finally, one of its most important acquisitions at the global level involved a batch of warehouses from General Electric, of which around 348,000 sqm were located in Spain.

Rents

Vericat confirmed that, since last year, rents in the logistics sector have recovered in Barcelona. In Madrid, “we have not detected any increases yet, but certain rent incentives have disappeared, such as grace periods.

Original story: Expansión (by Marisa Anglés)

Translation: Carmel Drake