8 June 2015 – El Confidencial
Since the end of April, Axa Real Estate has been one of Banco Santander’s landlords, after it acquired 381 of the entity’s branches from Uro Property for €308 million. This price was 10% higher than the valuation that Richard Ellis had performed a few months earlier (which served as the basis for the debut of the vendor Socimi on the stock exchange); the difference has caused it to look very closely at the numbers involved in the transaction.
Sources close to the operation say that, based on these figures, the deal was closed at a ratio of 6.27%, which means that the real estate arm of the insurance company is going to have to build a structure that guarantees it yields of more than 6.5%.
Having already transferred the Santander branches that it acquired, known as the ‘Cartera Amarilla’, to a group company, Axa Real Estate is now working on a long term plan, over a (minimum) 10-year timeframe, to allow it to achieve those figures, which effectively converts this batch of branches into a real bonus at a time when interest rates are zero and even negative.
Amongst the options being analysed by the entity, which has declined to make any comments, is the constitution of a Socimi – that company structure is dominating all transactions of this type, thanks to its tax advantages, which facilitate the achievement of yield objectives set. Merlin Properties, for example, has built up the bulk of its portfolio with 880 BBVA branches; and Uro itself, which still owns 755 of Santander’s branches, has also adopted this legal structure.
In the case of the insurance company, the Socimi option is currently being analysed and will probably depend on the ambitious investment plan that it currently has underway. In the sector, Axa Real Estate is seen as one of the major players of the moment, especially in Cataluña, where it has closed significant transactions, such as the purchase of 13 buildings from the Generalitat for €172 million.
Moreover, it has submitted a bid to construct nine offices, with an investment that would amount to €50 million and whose final target as a tenant would be the Catalan Public Administration, which would turn the insurance company into the main landlord of Artur Mas’ government.
In line with the typical practice for this kind of transaction, Axa is guaranteeing the vendors two-decade lease terms in all of the contracts, which facilitates the design of the financial structure of this type of vehicle to try to achieve those ambitious yields.
If it ends up constituting a Socimi with all of these branches, whose core will be Santander’s branches, the French insurance company will join the growing number of overseas institutional investors that have found that this is the perfect formula for channelling their investments in Spain.
Axa Real Estate is one of the leaders in the sector, with €57,000 million assets under management; it has a particularly strong presence in Europe.
Original story: El Confidencial (by R. Ugalde)
Translation: Carmel Drake