10 April 2017 – Expansión
Large international funds such as Invesco, Harbert, Activum SG and Stoneweg are developing residential projects in Spain in search of high returns.
Following their arrival in Spain at the end of 2013, the international investment funds have become the players to watch in the Spanish real estate market. Attracted by the decrease in prices following the burst of the bubble, the funds entered the market looking for opportunities in the tertiary sector (primarily, in the office and commercial segments). Nevertheless, the price rises of these properties and the improvement in the macroeconomic situation in the country have led them to place their focus on a new type of investment: residential assets.
“The main advantage of investing in residential assets is the return. Currently, the returns on residential investments is greater – by between 13% and 20% – than those generated by other assets (be they commercial, logistics, etc.), which have been cut recently, as the upwards trends have been reduced by increasingly higher competition, due to the shortage of products in good locations and the rise in land prices”, said Gonzalo Gallego, Partner in Financial Advisory at Deloitte.
“We have seen many international funds and players investing in the residential sector: Kennedy Wilson, Lone Star, Greenoak, Grosvenor, Autonomy Capital, Invesco, as well as family offices and representatives of large equity firms such as Shaftesbury, the Capriles family, Stoneweg and Dazia, amongst others. In general, they promote to sell, but we are also awaiting the imminent arrival of international giants such as Greystar and Round Hill and Allianz, in the residential rental business, where they see an important niche for the professionalisation and institutionalisation of this sector”, explains Humphrey White, CEO at Knight Frank in Spain.
One of the most active funds is the German fund Activum SG Capital Management. Currently, that investor, through its Spanish subsidiary ASG Iberia, is working on the construction of 2,000 homes in six developments, such as in San Juan (Alicante), Alcalá de Henares (Madrid) and Málaga.
Another international fund that has decided to back the residential sector in Spain is Invesco. “We are trying to avoid or assume urban planning risk in our residential investments, with the aim of not exceeding our investment schedule. For this reason, we only invest in buildable land and in properties that do not need special urban planning procedures to change their use or buildability”, explain sources from the fund’s residential department in Spain. Its projects include the development of 30 homes on Paseo de la Habana in Madrid, another one on c/Serrano, also in the capital, and the transformation of an office building into 58 homes close to Calle Colón in Valencia.
Meanwhile, Harbert Management Corporation (HMC) has decided to invest in the Spanish residential sector through a local partner, the management company Momentum. “In 2008, partners that have experience working with funds founded Momentum. In 2012, we started to see opportunities for those investors in the residential sector and, in 2014, we purchased our first plot of land in Aravaca from La Caixa”, explained Gabriel Fernández de Gamboa, Founding Partner at Momentum. Alongside this management company, HMC has invested in six plots of land in Madrid and another one in Málaga for the development of more than 600 homes and is searching for new opportunities in the market.
Original story: Expansión (by Rocío Ruiz)
Translation: Carmel Drake