Tag: tax advantages

Blackstone to List New Socimi with 4,000 Rental Homes Purchased from Sabadell

29 May 2018 – El Confidencial

One of the first funds to bet on the boom in rental housing in Spain, Blackstone, is on the verge of listing its fourth Socimi to specialise in this market, an area that is really blossoming.

The Socimi in question is Torbel Investments, a vehicle that primarily comprises the so-called Project Empire, a portfolio containing almost 4,000 homes, parking spaces, premises and storerooms that Banco Sabadell sold to the US fund two years ago.

At the time, the operation was worth around €600 million, although in net book value terms, Blackstone has recorded the assets at €113 million, according to Torbel’s most recent official accounts, corresponding to the year ending 2016.

Currently, the fund is on the home stretch of the procedures necessary with the CNMV – Spain’s National Securities and Markets Commission – to list the vehicle, whose natural destination is the MAB – Alternative Investment Market – given that Blackstone’s objective is, simply, to fulfil the demands of the Socimi regime to list the company so that it can benefit from the tax advantages.

That point means that this placement is completely different from the one being finalised by Testa, another giant in the rental housing sector in Spain, which is expected to make its debut on the main stock market in June, with €1.834 billion in assets.

Plethora of Socimis

Since it acquired these homes from Sabadell, Blackstone has managed all of the flats through its own servicer company, Anticipa, the firm that is behind the day to day operations of all of the large residential acquisitions carried out by the fund.

By geographical distribution, both in terms of property value and rental income, the main markets in which the Socimi has a presence are Madrid, Alicante, Murcia and Valencia, in other words, regions where the former entity CAM – Caja de Ahorros del Mediterráneo – had its greatest presence before it was acquired by Sabadell and whose foreclosed assets comprise this portfolio.

Blackstone is competing head to head with Testa to be the largest landlord in Spain, but it is adopting a very different strategy given that whilst the firm in which Santander, BBVA, Acciona and Merlin all hold stakes is opting to concentrate the greatest number of homes possible in a single company, the US fund is playing its hand by backing several smaller vehicles.

For the time being, Blackstone has already listed Fidere, which owns more than 5,700 homes, many of which have some kind of public protection;  it also has Albirana Properties, owner of another 5,000 rental assets; and Corona Patrimonial. But, in addition, the fund has been creating other Socimis such as Tourmalet and Pegarena.

All of these companies are expected to continue expanding their portfolios with assets from Project Quasar, the portfolio that Blackstone acquired from Santander, and which contains a sizeable portfolio of homes from the former Banco Popular.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Blackstone Builds Rental Home Giant In Spain

18 May 2017 – Cinco Días

The fund Blackstone is the largest property owner in the world and has been backing real estate Spain for a while now. And, it is going to continue to do so in the short to medium term. For the time being, the fund’s plans involve becoming a giant in the rental housing segment and it is already starting to show its investment strategy through several companies, including three new Socimis.

Blackstone’s first major step was to create the servicer Anticipa Real Estate, under the structure of the former entity Cataluña Caixa Inmobiliaria. This asset management platform purchased 40,000 mortgages from the extinct Catalan entity for €4,123 million in 2015. Since then, it has continued acquiring these kinds of mortgage portfolios, to accumulate a total investment to date of almost €7,000 million.

The latest acquisitions made by Blackstone – which is headquartered in New York – have included a €400 million portfolio of loans backed by property developer collateral and another portfolio from BBVA comprising 3,500 properties, for around €300 million.

This entire portfolio of mortgage debt and properties is managed by Anticipa, a company that is led by its CEO, Eduard Mendiluce, a veteran director in the sector. (…).

The work that the servicer performs for Blackstone involves managing the loans granted by banks to individuals and property developers. In many cases, that task ends with the “dación en pago” or foreclosure of the property or development, due to non-payment. The company says that it treats each client on a case by case basis, and the process often means it has to accept a discount on the debt.

Of the portfolios acquired from banks, “daciones en pago” and foreclosures, Anticipa already owns 12,000 properties, which are leased out (in around 75% of cases) and put up for sale. “The idea is for it to become one of the large owners of rental housing in Spain”, explains a spokesperson.

The opportunistic fund – which purchases problem assets at a discount – is planning to remain in the Spanish market beyond the short term, and has absolutely no interest in selling its businesses within the next 5-7 years, but rather intends to benefit from the upwards trend in property.

To create the residential giant, the US firm has started to create vehicles to which it will transfer properties for rent. The first of these companies is Albirana Properties, a Socimi that started to trade on the Alternative Investment Market in March. That listed investment company, which benefits from certain tax advantages, already manages 5,000 homes.

But it is only the first to be listed. Other Socimis, namely Pegarena and Tourmalet, which have already been constituted and are already owned by several Blackstone funds, will follow. These firms, in turn, operate using Anticipa as their manager. (…).

Packaging up these homes into different companies will facilitate the sale of those companies in the future to various interested parties.

Blackstone decided to back the rental sector rather than the sales market at a time of change in the type of demand, according to experts in the sector. In particular, the generation of millennials, for cultural reasons – are more inclined to live without the tie of a mortgage – and, above all, the difficulties being faced by young people to obtain loans given the job insecurity.

Unlike other Socimis that specialise in rental housing, the management of assets by Albirana is more complex, given that its properties are relatively scattered geographically, as they proceed from individual mortgages. Typically these companies opt to manage entire buildings, but Blackstone’s company has specialised in what is known as granular management.

Currently, the majority of these properties are located in Cataluña. They are followed – at some distance – by homes in Madrid, Comunidad Valenciana and Andalucía.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Madrid Seeks To Attract Companies Leaving UK Post-Brexit

3 May 2017 – Mis Oficinas

Madrid hopes to fill 80,000 m2 of office space following the United Kingdom’s exit from the European Union.

According to eleconomista.es, the capital of Spain is positioning itself as one of the possible destinations for companies deciding to abandon the United Kingdom due to Brexit. To this end, the Spanish real estate sector is optimistic, given that Madrid has available office space amounting to more than 60,000 m2 (thanks to buildings such as BBVA’s former headquarters) and in turn, is planning to increase the volume of office space on Paseo de la Castellana.

Spain offers a significant advantage in terms of the competitiveness of its rents, given that the costs of its offices, as well as its shared expenses, are some of the lowest in Europe, alongside Luxembourg and The Netherlands, which, due to their size, do not have sufficient office space available.

Despite this, many companies argue that Spain needs to improve its administrative arrangements if it wants to attract large businesses. According to them, the Government should accelerate the granting of licences to expedite the construction of offices and increase tax credits to facilitate the launch of companies in the country.

Spain is sixth in the ranking of the most attractive countries in the world to invest large fortunes. The ranking is led by the United Kingdom, the USA and Germany. This is the first time that Spain has featured in the Top Ten, which could influence the decision of these companies.

Original story: Mis Oficinas

Translation: Carmel Drake

Domo Gestora’s Socimi Acquires Its First Plot Of Land

24 March 2017 – Inmodiario

Domo Activos Socimi, the Socimi promoted by the real estate manager Domo, has acquired its first asset. The asset in question is a plot of land, located in Ensanche de Vallecas, in Madrid, where the company plans to develop a residential building comprising 80 homes for rent with the option to buy. This Socimi’s business model focuses on buying land on which to construct buildings for their subsequent rental. Once the mandatory three years during which they must lease the properties out has passed, the Socimi will then proceed to sell them, whereby benefitting from the tax benefits enjoyed by these types of companies. In this way, all of the profits generated from the date the land is acquired until the date the properties are sold is taxed at 0% for Corporation Tax purposes.

According to the company’s estimates, the returns on this project, once the divestment has been made, could reach 10% per annum. Before the sale and whilst the properties are being leased, investors will receive profits resulting from the rental income, in the form of dividend payments.

Domo Activos Socimi will debut on the Alternative Investment Market (MAB) in the recently created sub-segment, called “Socimi under development”. Socimis that allocate less than 70% of their assets for rent trade there. In this case, Domo Activos Socimi will ask to be incorporated into this sub-segment, given that initially, it will own just one plot of land.

Domo Activos Socimi’s business model allows its shareholders to participate in the advantages and returns offered by traditional Socimis, as well as in the returns offered by the development and construction of properties.

Domo Activos Socimi plans to file its request to join the MAB during the first half of 2017. This milestone will allow Domo to fulfil one of the main objectives that it set itself when it launched this Socimi, namely, to enable small and medium-sized investors to access investments with these characteristics.

Domo Activos Socimi has successfully completed its first capital increase, which has allowed it to acquire this plot of land and for the time being and until it debuts on the MAB, with the traditional “Ringing of the bell”, it may increase its share capital again, which would likely require a minimum necessary investment per shareholder of €100,000.

Original story: Inmodiario 

Translation: Carmel Drake

Armabex: 35+ Socimis Will Debut On The Stock Market In 2017

14 October 2016 – Invertia

Over the last year, there has been a steady flow of Socimis debuting on the stock market, but in 2017, we could see a genuine explosion. According to the registered advisor Armabex, at least 35 Socimis will make their stock market debuts next year, including one company worth €2,000 million.

Overnight, the Socimis have become one of the new kings of the Spanish property sector. Although the corporate structure has existed for decades, the sector underwent a real revolution in 2012, when the Tax Authorities started to allow these companies to not pay corporation tax on their real estate revenues and asset sales and purchases, in exchange for publicly listing and distributing high dividends (the minimum pay-out threshold is 80%).

That led to a wave of IPOs, as companies constituted new Socimis to benefit from the tax advantages and overseas fortunes used the vehicles to enter the maligned Spanish real estate market. In less than five years, 29 Socimis have debuted on the Spanish stock market and Alternative Investment Market (the MAB). But, we could see an avalanche of debuts next year, according to Armabex, a MAB registered advisor and firm that specialises in this niche.

The Chairman of the consultancy firm, Antonio Fernández (pictured above), estimates that in 2017, we could see “no less than 35 IPOs” if market conditions allow. His firm is working on the placement of around fifteen Socimis next year, include one worth around €2,000 million. These types of companies tend to debut at a discount with respect to their book values, which means that the final listed share capital (for that company) may be lower, but even so, the company will be sufficiently large to be able to aspire to join the Ibex 35 and become the second largest company in this segment, surpassed only by Merlin Properties (€3,200 million). The total value of the other 14 companies will amount to around €3,500 million.

Although most of the Socimis that will be created next year will debut on the MAB, Fernández expects that at least three will list on the main stock exchange. The first may involve Acciona, which has been evaluating the placement of its real estate assets for some time now. Meanwhile, the expert confirmed that one listed company and one Spanish bank have already taken the decision to list their Socimis directly on the main Madrid stock exchange. (…).

Original story: Invertia (by Aitor Atozqui)

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

The Socimis Consolidate Their Positions As RE Kings

1 April 2016 – Cinco Días

When the Socimis began to emerge timidly in 2014, few thought that they would become the key and crucial factor behind the change in the real estate cycle in Spain. The four largest companies alone, excluding the dozen other companies listed on the Alternative Investment Market, have managed to double the value of the properties that they own in the last year, to take the total to €9,235 million.

The key behind this change has been two-fold. Firstly, the acquisition that the Socimi Merlin Properties closed last year, of Testa from Sacyr, which doubled its size. Secondly, the large number of international funds that have relied on these Spanish managers to enter the domestic real estate market, where opportunities are now arising after the tough years of the property crisis.

Socimis are a type of company that is exempt from paying corporation tax in exchange for having the obligation to distribute dividends each year. Their structure is similar to the more established Anglo-Saxon REITs, which control properties that are leased out (offices, shopping centres, hotels..). The most obvious risk is that they drive up the prices of these kinds of assets, because they set short-term timeframes for investing the money they raise from investors.

Merlin Properties

The largest of these companies in Spain is Merlin Properties, chaired by Ismael Clemente, an experienced former director of Deutsche Bank. This Socimi has managed to sneak into the crème de la crème of the business world by listing on the Ibex 35 since the beginning of the year. Almost all of the funds that control its capital are international, with very diluted individual shareholdings. The largest block belongs to BlackRock, which owns a 5% stake.

(…). Merlin’s portfolio amounts to €6,052 million, and comprises offices (36%), retail premises (31%), shopping centres (11%), hotels (6.6%) and residential assets for lease (4.8%). (…). In December, the entity announced that it expects to issue bonds with a BBB rating. The company currently has a market capitalisation of approximately €3,370 million.

Hispania

Thanks to its partnership with Barceló, Hispania has become another one of the major players in the sector. (…). In total, Hispania now owns properties amounting to more than €1,425 million, comprising hotels (59%), offices (29%) and residential properties (12%). (…).

The multi-millionaire George Soros owns 16% of the company, meanwhile John Paulson owns a 9.9% stake. (…).

Lar España

One of Lar España’s most recent operations has been the announcement that it will invest €145 million in the construction of Sevilla’s largest shopping centre. The Socimi, managed by Grupo Lar, has gradually specialised in these types of assets, which now account for almost 70% of its business volume.

The company is currently listed with a market capitalisation of €340 million. Its other assets include a small residential portfolio (7%), as well as logistics assets (8%) and office buildings (17%).

Axiare Patrimonio

The company is led by Luis López de Herrera-Oria, a veteran in the real estate sector (…). Its shareholders include several funds – also international – such as Citigroup, Deutsche Bank, Gruss, JP Morgan Chase, Perry Partners and Pelham Capital.

It has doubled its portfolio of assets in the last year to €859 million, thanks to the appreciation in the value of its assets and new acquisitions. 72% of its portfolio relates to offices and 15% comprises logistics assets.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

House Prices Will Rise Again In 2016

10 December 2015 – El Economista

Second-hand house prices are going to close 2015 with a YoY decrease of between 1% and 2%, according to pisos.com, which forecasts that they will grow again in 2016.

And next year will be a strong year not only for second-hand homes, but also for new builds, despite the tax advantages of the former compared with the latter.

“The evolution of prices highlights the improved pace of activity in the real estate sector, which has now left behind the large drops and promises to make a definitive comeback in 2016”, says the Director of Research at the real estate portfolio to which the CEO, Miguel Angel Alemany, adds that 2016 will be a “fantastic” year for developments to overturn the market.

“There is a significant amount of demand eyeing up the upcoming residential developments, something that supports sales off-plan, a phenomena that practically disappeared during the crisis”, adds Alemany, who predicts that “next year, the gap between these two types of operations will become narrower, thanks to the deliveries that will be formalised.

All of this is due to the fact that, in the background, there is a greater understanding between some very competitive financial institutions and a well-informed demand.

This understanding is expressed in the purchase and sale of homes that, according to the real estate portfolio, will continue along the same lines as in recent months, to finish the year with around 41,000 more operations than in 2014, which represents an increase of 11%, according to the registers held by the National Institute for Statistics (INE).

In the same way, mortgage lending will end the year with growth of 22%, i.e. around 46,000 more loans, according to the forecasts set out by pisos.com.

Change of buyer, change of market

Thus, the buyers and the financial institutions have changed and they are showing different attitudes as we emerge from the crisis. The former are leaving behind opportunistic purchases, based on pure investment criteria, with the value in use of homes gaining weight.

“Buyers are no longer looking for bargains that allow them to live off the rental income, but rather they are looking for homes according to their own needs”, says Alemany, who immediately adds that owners “have come to their senses” and now “wise clients are those who wait to build up their savings and avoid the requirement for guarantors”. Meanwhile, the banks now appreciate customers who come to their branches with their accounts already prepared.

Cautiously looking ahead to the future

Thus, at the real estate portal, they consider that “sustainable growth in the residential sector doesn’t seem so difficult to achieve any more”. Nevertheless, they urge buyers to be “cautious” given that long-term volatility in variable interest rates may lead to nasty surprises in the future for those individuals who are now taking our mortgages now whilst Euribor is at historical lows.

Moreover, pisos.com points out that “any political decisions that are taken after the general election affecting the housing market must be coherent, considered and responsible”.

Original story: El Economista

Translation: Carmel Drake

Investment In Commercial RE Exceeds Pre-Crisis Levels

1 December 2015 – El País

The real estate companies are dealing with the recovery in the sector by restructuring their portfolios in favour of commercial properties. During the first nine months of the year, according to the consultancy CBRE, investment in offices, hotels, shopping centres and industrial warehouses amounted to €10,791 million. That figure exceeds the total amount invested during the whole of 2014 and ranks above pre-crisis levels. Operations undertaken by listed real estate companies and Socimis amounted to €6,300 million, i.e. almost 60% of the total, when in 2014, they accounted for 36%.

The €10,791 million spent on commercial properties during the first three quarters of the year by the Socimis, real estate companies, investment funds and individuals overtakes the total investment recorded during 2007, the best year of the real estate bubble era. The Director of Capital Markets at CBRE, Mikel Marco-Gardoqui, says that by this point in the year, total investment will have exceeded €11,500 million. “This is going to be a record year, and we expect investors’ appetite to continue in 2016”, he says. But the sector also warns that the “aggressiveness” associated with certain purchases raises concern against “semi-bubbles” in certain assets.

Socimis accounted for 46% of total investment during this period, which has allowed them to continue increasing their portfolios. Merlin Properties, which acquired the real estate company Testa for €1,793 million, leads this group of companies dedicated to rental properties, with assets worth €5,800 million, followed by Hispania (€775 million), Axiare (€773.4 million) and Lar Real Estate (€594.9 million). The ten Socimis listed on the Alternative Investment Market (‘Mercado Alternativo Bursátil’ or MAB) own around €3,058 million assets between them.

Strategic plans

It is not just these companies, with their tax advantages, that are participating in the bids for assets. Real estate companies – both listed and unlisted – have participated in another 13% of operations. The seven largest real estate companies on the stock market hold a portfolio of commercial properties worth almost €16,000 million.

Colonial, with a portfolio worth €6,290 million, expects to invest €1,500 million between now and 2019 through the purchase of new buildings, whilst Renta Corporación will spend another €500 million on acquisitions over the next two years. (…).

The restructurings carried out and the plans announced have been applauded by the markets, which have rewarded the majority of these companies with an improvement in their share prices. During the year to date, the value of Renta Corporación has increased by 55%; Realia by 39%; Hispania by 25%; Colonial and Axia, by 18.7%; and Merlin by 17.6%.

Moreover, Socimis and real estate companies are mediating a large part of the overseas investment arriving into the sector. For example, the main shareholders of Colonial include the sovereign fund Qatar Investment Authority and the English millionaire Joseph Lewis; meanwhile, various overseas funds holds stakes in Merlin Properties, and George Soros and John Paulson are shareholders of Hispania.

According to Marco-Gardoqui at CBRE, a significant difference between the investment that arrived in 2007 and this year is that the majority of the volume associated with the bubble was achieved through debt; today the funds come from private capital, although the banks have started to open the financing tap for the sector. (…).

Original story: El Páis (by Lluís Pellicer)

Translation: Carmel Drake

First-Generation Socimis Rush To List Before 30 Sept 2015

7 July 2015 – Cinco Días

Socimis are the investor vehicle of the moment. Their tax advantages and the international funds that they are attracting, have turned Socimis into key players in the timid recovery of the real estate sector. And they are going to become even more important. Many of the first generation Socimis (those constituted in 2013, following the reform of the law governing these listed real estate investment companies) are obliged to list on the stock exchange before 30 September 2015; failure to do so will mean that they lose their right to not pay corporation tax.

“The law made provisions for a transition period for the fulfilment of all requirements. The deadline for one of those, to list on the stock market, ends on 30 September”, explains Antonio Sánchez Recio, Partner at PwC. According to market sources, there may be a dozen companies in this situation, although some of them are small and will only list to comply with the law, rather than to raise capital, at least initially. (…).

They will join those that currently trade on the main stock exchange, namely: Merlin Properties, Hispania, Lar España and Axiare. As well as the smaller companies, which are listed on the Alternative Investment Market (MAB), namely: Entrecampos, Fidere (owned by Blackstone), Mercal, Promorent and Uro.

Around 25 entities are now constituted as Socimis, but some of them have been created in the last few months, and so they will not be affected by the upcoming deadline.

Furthermore, other companies are not obliged to list in Spain at all, since their shares are already traded on other European markets. That is the case of Pryconsa’s companies, called Cibra 2009 and InveRetiro, which in turn are owned by Saint Croix Holding Inmobiilier, a Socimi listed in Luxembourg. And that is also the case of Orion Columba, the owner of the Plenilunio shopping centre, which is now itself owned by the French listed company Klepierre.

In addition to the companies constituted in 2013, the market expects that a large number of these vehicles will undertake IPOs in the coming months. Such is the case of Trajano, the Socimi recently created by Deutsche Bank. One of the most eagerly awaited is the future Socimi Pontegadea, the family office owned by Amancio Ortega, which has assets of almost €5,000 million. (…).

Another large company on analysts’ radars is IBA Capital’s company Zambal, which owns the ABC Serrano shopping centre, amongst other buildings. Other companies also include GMP Property, created by the Montoro family and the sovereign fund GIC, which owns large assets such as Torre BBVA in Madrid. Acciona is in the same boat, it is assessing different options for its commitment to the residential rental sector, including the creation of a Socimi, according to sources close to the company.

Other companies and funds that are setting up their own Socimis include: Green Oak, Drago Capital, Corpfin, Autonomy Capital, Jaba, Meridia, Rodez (through Anglón Alza), Quabit (with the Socimi Bulwin), Brookfields, as well as Santander Real Estate (Banif Inmobiliario), Norfin, Banco Sabadell (Solvia), Triangle, Turanta, Unibail Rodamco and Urbas.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake