Tag: tax benefits

Spain’s Large Socimis are not Perturbed by Podemos’s Proposed Tax Legislation

14 October 2018 – La Información

The Socimis, one of the great tax regimes currently booming in our country, suffered a serious blow on Thursday after an agreement was published between PSOE and Podemos to push ahead with the State’s General Budgets. As a result, the Socimis are going to have to pay tax (at a rate of 15%) on any profits that they do not distribute as dividends, in other words, the funds that remain in the companies to increase their capitalisation. But, which companies are going to be most affected? Only the smallest ones.

In recent months, the large real estate companies on the Ibex and the Continuous Stock Market have been distributing significant dividends, in some cases even exceeding their accounting profits by two or three times. Therefore, the new measure will not affect them, given that only undistributed profits will be taxed. By contrast, the small entities that are listed on the Alternative Investment Market – where they have their own segment – barely exceeded the obligatory dividend distribution of 80% of the profits for that type of company in most cases.

If we take Merlin – a giant in the tertiary sector –by way of example. Last year, it obtained a profit of €114.5 million (after discounting the appreciation of its assets) and it dedicated 205% of its profits to dividends. Even high figures were recorded by Colonial, which distributed 267% of its profits to its shareholders, and Lar España, which is listed on the main stock market, and which distributed 236% of its results after taxes to the owners of its shares.

By contrast, the small companies on the MAB complied with the law in a comprehensive way but without distributing such significant figures. Such was the case of AP67, a Socimi whose assets are primarily residential, commercial and office-based, which distributed just over €240,000 of its total profits of €300,000.

Why do the small companies only distribute the legal minimum? Most of the companies listed on this market are owned by a small number of shareholders, normally those who have been with the entity since the beginning and, therefore, they have no commitment to the owners of those shares. In fact, the movement in shares is so small in the majority of cases that the volume is almost nil.

By distributing 80% of their profits as dividends, they pay tax of up to 25% on those earnings, whilst the remaining 20% is posted to reserves and, previously, there was no requirement to pay any tax on that. With this proposal, the money that is not distributed to the shareholders (in other words, that 20%) would be subject to a tax rate of 15%.

For tax experts, these measures may scare off foreign investors, especially funds, which regard Spain as a good opportunity for investing after the framework for Socimis was brought into line with those governing REITs in countries such as France and Germany. Moreover, “other countries have an advantage over Spain going back many years and they offer more beneficial tax frameworks”, something that the new tax will only serve to dent in the Spanish system.

In light of the possible approval of the draft presented on Thursday by Unidos Podemos and PSOE, the Socimis “will distribute all of their profits as dividends to avoid the double taxation of the same money”, said a high-profile tax advisor consulted by La Información.

Original story: La Información (by Lucía Gómez)

Translation: Carmel Drake

CV Grupo Debuts First Spanish Socimi on Euronext

17 September 2018 – Expansión

Salvador Vila Arcos and the Copoví Ridaura brothers have created Logis Confort, which owns seven industrial buildings in Valencia and Madrid, and they have opted to debut the entity on a secondary French market in light of the more onerous demands of the MAB.

One of the main developers of industrial warehouses in Valencia, CV Grupo, has converted its firm Logic Confort into the first Spanish Socimi to list on the Euronext Access market in Paris. The firm has opted for that secondary French market due to its less onerous requirements and its greater flexibility with respect to the Spanish Alternative Investment Market (MAB).

Logis Confort groups together seven industrial properties that the company leases, mainly in Valencia plus one in Madrid. The assets are worth €15 million. The firm started to trade in July with a benchmark price for its shares of €2.20, which represents a company valuation of €11 million. Although its corporate headquarters are located in Madrid, its three shareholders are from Valencia. The main shareholder is Salvador Vila Arcos, who owns 50% of the firm and is the owner of several firms that operate under the CV Grupo brand, with which it has developed and constructed some of the Ford suppliers’ park in Almussafes. His partners are two builders from that town, Edelmiro and José Manuel Copoví Ridaura, each of whom own 25%.

According to sources at the firm, the decision to opt for the Euronext exchange over the MAB fundamentally due to the conditions regarding the number of shareholders, the diffusion of the shareholding and of the free-floating shares – the percentage of total share capital trading freely on the stock market – demanded by the Spanish market and which did not fit with the company’s plans. Last year, the MAB tightened up its requirements in light of the Socimi boom to take advantage of tax benefits.

In fact, Logis Confort, which has relied on Armanext as an advisor, does not initially expect to open its share capital up to investors in general. Its strategy is to expand the Socimi’s capital by contributing more assets, some of which involve other partners who may join the shareholding of the company.

With this formula, the group also wants to take advantage of the creation of Logis Confort to reorganised its corporate structure and to be able to have an instrument for future operations and alliances.

As Expansión published, CV Grupo participates in companies with the investment firm Atitlán for the management of industrial warehouses.

Original story: Expansión (by A. C. A.)

Translation: Carmel Drake

Spain’s Banks Are Queueing Up to Finance Rental Housing

4 July 2018 – El Economista

One of the major challenges facing Spain in the residential market is the organisation of the rental home segment in light of the fragmentation that exists and the boom that is currently underway. There is currently a great deal of demand, but there is also a distinct lack of supply, and the new Housing Plan approved by the Government is not proving sufficient to incentivise the supply with the granting of aid to property developers that build rental housing. In light of this situation, we ask ourselves whether the opportunity that currently exists in Spain to organise the rental market is being taken advantage of?

“I think that the professionals and investors who have launched portfolios thanks to the creation of Socimis are taking good advantage of the opportunity, but I believe that some important players are simply not supporting the sector, such as the Public Administrations. Both nationally and locally, but above all locally, they are failing miserably and this is generating price tensions due to a lack of supply”, explains José Luis Ruiz Bartolomé, Director General of the consultancy firm Chamberí Asset Management.

Along the same lines, José María Cervera, Corporate CEO of Renta Corporación agrees and states that the public sector has been left on the sidelines. “Private capital has taken the initiative in this new segment of the market because it has seen a business opportunity and is looking for returns. And the public sector is going to have to enter, but now the arbitrage and those who are institutionalising it are in the private sector, and so they are going to place more rental properties on the market”.

For all of these reasons, during 2018, we are observing the creation of a new industry. Given that in Spain there are 18.5 million households, according to the latest figure from the Active Population Survey (EPA), and of those, 22% are rental homes, there are 4.7 million rental homes in total. Of that portfolio, only 5% are owned by institutional companies; the remaining 95% are owned by individuals.

“The Public Administration has done something important, which is to reorganise the real estate sector and separate property promotion and development activities, by creating Socimis that operate under a special framework. That has brought us closer to a situation that is more similar to those seen in other European countries. Now, we will have to see how the different players that are emerging in this market position themselves, and in two or three years, we will see the consolidation of this sector, which means that the Public Administrations will have to continue refining their regulations so that the sector can develop and be brought into line with those of other European countries”, says Nicolás Díaz-Saldaña, CEO at Témpore (Socimi of Sareb).

Nevertheless, not all of the experts in the sector concur. David Botín, Director of Real Estate Development at the ACR Group, says that this opportunity is not being leveraged. “It is possible that we are seeing the beginnings of a new rental market, but to date, just 22% of our households are renting and that supply is being provided almost exclusively by individuals. As such, it is very hard to fathom how we will reach the percentages seen in other countries such as Germany, where rental properties account for 48.3% of the market or the United Kingdom (36.6%). It is really hard to increase the stock in Spain because there are 19 million homes, and so a 1% increase means placing 190,000 more homes on the rental market, and that would take between three and four years (…). At that rate, nothing is going to happen quickly. No market works if there is no equilibrium between supply and demand. We need a large and varied supply for this market to work effectively”, he adds.

It is true that, historically, Spain has been a country of property owners, but the cultural and socio-economic changes that have been happening in recent years are drawing some new business lines, where the rental market is taking centre stage and is starting to become institutionalised. The new players in this market are: on the one hand, the Socimis, which are listed companies that serve as investment vehicles with tax benefits. The largest of them is Testa, which will debut on the stock market soon and which is owned by Santander, BBVA, Acciona and Merlin Properties. There are also others such as Azora, Vivenio (Renta Corporación), Témpore (Sareb) and Fidere, amongst the largest. Within this market, we can also include the servicers, which although they do not own properties, manage them, such as Solvia (Sabadell), Anticipa (Blackstone), Haya (Cerberus), Altamira (Apollo and Santander). And then, there are companies owned by the banks, such as Building Center (Caixabank) and other types of companies such as Alquiler Seguro, family offices, etc.

Therefore, now that the new players required to institutionalise this market are starting to be created, the next step is to develop a portfolio of assets. “We are going to need to reach agreements with property developers to build homes for rental (…), and at Sareb, we are going to use some of the land that we have for the co-development of rental homes (…)”, says Nicolás Saldaña.

That is a formula that is starting to spark interest. According to the experts, property developers have always been reluctant to enter the rental market, because they didn’t see it as their business, but in the end, the market trend has changed and whilst the sale and purchase segment will continue to exist, so too will the rental sector and property developers will have to participate (…).

The rental segment is a market that has always existed in the hands of individuals, but now, it is being professionalised, thanks to the arrival of overseas capital. “Investors have contributed many things, besides capital. They have contributed methodologies, rigour, professionalism (…). The banks were not open to this business before, they only financed promotion, but that has changed. For six months now, everyone has been wanting a piece of the pie and now there is a queue of financial institutions wanting to finance this type of business (…)”. Says José María Cervera (…).

Investing in residential properties is profitable. The gross return from investing in rental homes has increased to 7.3% from 6.3% a year ago, due to the strength of demand for rental properties, according to the real estate portfolio Idealista (…).

Original story: El Economista (by Luzmelia Torres)

Translation: Carmel Drake

Blackstone Includes its own RE Manager in the Popular Divestment Deal

3 May 2018 – La Información

Blackstone’s real estate platform, Anticipa, is going to collaborate with Aliseda – founded at the time by Popular – in the management of its voluminous property portfolio. The US fund acquired Anticipa in 2014 when it was awarded Catalunya Caixa’s portfolio, and it has just taken control of Aliseda, as part of the mega-operation signed with Santander. The Cantabrian group included the real estate platform, together with a dozen real estate companies, in the €30 billion gross portfolio of properties that it transferred to the new company, in which Blackstone owns 51% of the capital and Santander held onto the remaining 49%.

Blackstone decided not to merge the companies but they are going to collaborate together, according to information submitted to the market about the syndicated loan signed to close Popular’s transaction. The toxic exposure divested by Santander in the deal known as “Project Quasar” has been valued at €10 billion net, given that there was a provision cushion amounting to 63% of the original value in the case of the foreclosed assets and 75% in the case of the loans.

The transaction was structured with the contribution of 30% in capital and 70% in debt. The bank and the fund are going to contribute almost €3 billion in capital and the remaining almost €7.333 billion will proceed from a financial structure led by Bank of America Merrill Lynch, together with Deutsche Bank, JP Morgan, Morgan Stanley, Parlex 15 Lux, The Royal Bank of Scotland and Sof Investment. The operation has been advised by the law firm Allen & Overy, amongst others.

The “Neptune” portfolio constituted to obtain the financing includes Aliseda in the perimeter along with numerous real estate companies and stakes held in them by Popular, including Tifany Investments, Corporación Financiera ISSOS, Pandantan (Mindanao), Taler Real Estate, Vilarma Gestión, Marina Golf, Popsol, Elbrus Properties, Cercebelo Assets, Eagle Hispania, Las Canteras de Abanilla and Canvives. A large proportion of the assets transferred are plots of land, together with residential homes, industrial warehouses, commercial properties, offices, garages and almost €1 billion gross exposure in hotels.

This operation is going to allow Santander to dramatically reduce its exposure to foreclosed assets from €41.1 billion to €10.4 billion – a figure that is reduced to a net of €5.2 billion thanks to the provisions it has recognised amounting to 50% of the initial value – but enabling it to benefit from the divestments as a shareholder of the company receiving the portfolios with a 49% stake.

The plan includes the use of Socimis

The fund’s divestment plans include constructing or transferring some of the assets to Socimis, a vehicle that Blackstone has made use of for previous operations because it offers tax benefits such as avoiding the need to pay Corporation Tax if they distribute dividends. In gross terms, residential assets accounted for almost one-third of the perimeter of the original properties involved in the transaction.

After leaving the Popular portfolio in the hands of Blackstone, Santander still has €4 billion net in foreclosed assets and €1.2 billion in doubtful financing that it wants to get rid of soon. The bank plans to repackage the assets by batch and put them on the market, where half a dozen entities and Sareb are exploring how to get rid of almost €48 billion gross – the bad bank alone is looking for a buyer for the €30 billion whose sale is being managed by Haya Real Estate, and Sabadell has several batches up for sale amounting to almost €11 billion.

The Cantabrian group acquired Popular when it had closed the chapter to clean up its real estate and now it wants to return to that position quickly. It was its real estate division to leave behind the “red numbers” this year or by the early stages of 2019 at the latest.

Original story: La Información (by Eva Contreras)

Translation: Carmel Drake

Domo Activos Embarks On New Growth Phase

3 November 2017 – Eje Prime

Domo Activos is embarking on a new phase of growth. The largest property developer Socimi, aimed at medium-sized investors, is going to launch a €15 million capital increase over the next few weeks. It plans to use the funds raised to buy new land in Spain, with the purpose of building new homes, according to José Luís Alba, Director of Domo Gestora’s Socimi.

According to the director, the company has already identified opportunities in Spain and is now waiting to beef up its financial strength so as to be able to actually purchase the new plots. “We will focus these acquisitions in Madrid, Málaga and Valencia in the first instance, but we are also looking for plots in Sevilla, Córdoba, Granada and Zaragoza”, said the executive.

Domo Activos Socimi will increase its share capital through an issue and placement into circulation of up to a maximum of 7.5 million shares, with a nominal value of €2 each “with an incomplete subscription forecast”. To approve this increase, Domo Activos has convened an Extraordinary General Shareholders’ Meeting, which will be held in Madrid on 30 November.

The business model of Domo Activos involves the acquisition of land for the construction of buildings, which are let out for the first three years and then sold “whereby benefitting from the tax benefits afforded to these types of companies”. “In this way, all of the capital gains generated, from the date the land is acquired to the date the properties are sold, are not taxable for corporation tax purposes”, explain sources at the group.

According to the company’s own estimates, the return on this project, once the divestments have been made, could reach 10% per annum. Investors receive the profits resulting from rental income in the form of dividends throughout the period that the buildings are leased and until they are sold.

Currently, the first project being promoted by Domo Activos is the development that it is constructing in Madrid, in El Ensanche de Vallecas. This building will contain eighty homes for rent, according to sources at the group.

New leadership team

Moreover, the company has also been reshaping its management team in recent months. To carry out this new phase of growth, Domo Gestora has appointed José Luís Alba as Director of the Socimi, a role carried out until now by Roberto Boluda, who moved to Prygesa in July as the Managing Director of the property developer owned by the Pryconsa group.

Domo Gestora’s Socimi was created by a team that is closely related to the real estate business. When it was launched, the company appointed Enrique Guerra as its CEO. Guerra is an expert in real estate management and has specialised in housing cooperatives since 2002 (…).

Domo’s management team is completed by executives such as Juan Pedro Plaza, the Socimi’s Director of Investments (…); Feliciano Conde, who took over the presidency of Domo Activos in January 2016 (…); and Alberto Freire, Director of Developments at Domo, amongst others.

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

The MAB Gets Ready To Receive A New Wave Of Socimis

5 October 2017 – Expansión

Socimis have become the shining stars of the stock market and the undisputed protagonists of the real estate sector. Over the last four years, in addition to the large five listed Socimis – Merlin, Colonial, Hispania, Axiare and Lar España – , 40 vehicles of this kind have been incorporated into the Alternative Investment Market (MAB) and experts predict that, far from slowing down, the flood of stock market debuts is going to continue for the next few months at least.

Specifically, they estimate that around a dozen new vehicles are set to debut on the Madrilenian stock market. “We calculate that the total number of Socimis listed on the market could reach 50 by the end of 2017. At Armabex, we have 14 processes open for new Socimis, which will be making their debuts between 2017 and the first quarter of 2018”, explains Antonio Fernández, President of Armabex.

“You could say that we are facing the second wave of Socimis, but their growth prospects, until they reach the €40 million or €50 million mark, are still very broad”, explains Sandra Daza, Director General of Gesvalt. For Daza, the tightening of the access requirements to the MAB for Socimis, especially in terms of the diffusion of shareholders, will avoid the appearance of a distinguished group of small Socimis, focused solely on the fiscal benefits and not oriented towards the professionalism of their asset management.

Moreover, analysts expect to see greater specialisation in the field of the Socimis and consolidation of the sector over the medium term. “Gradually, over a period of three to five years, we will see the start of a new model of Socimi: those that arise as a result of mergers and acquisitions. This movement will result in the consolidation of the structure and the creation of some more heavyweight Socimis”, explains Fernández.

For Daza, the specialisation of Socimis in alternative assets within the real estate sector will be a process that will push ahead gradually: “For a Socimi to be a good investment vehicle, it requires a minimum size and a development plan that alternative assets do not always allow due to the small size of the market”.

Experts rule out that a bubble is being generated. “If we analyse in detail the history of the various Socimis listed on the MAB, the majority are the result of the restructuring of pre-existing real estate companies. In other words, there were not any previous transactions, they merely represented the adaptation of existing property portfolios to a new financial-fiscal environment, the Socimis, in which their respective real estate strategies fit better”, says Fernández. For Daza, in comparison with other countries, the size of the Spanish market and our GDP indicate that we are in for “a bright future in terms of the growth in the volume of Socimis over the next three to five years”.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

The Sun Shines On Spain’s RE Estate Sector Once Again

4 May 2017 – Expansión

The Spanish real estate sector is smiling again. After years of crisis and an on-going cleanup, the main listed companies in the property sector have reported more positive figures: the earnings of these firms tripled in 2016 with respect to the previous year and their operating profit rose by 64%, driven by an increase in the number of sales and an appreciation in asset values.

Two factors are converging to generate the improvement in the real estate sector: an acceleration in the number of sales – both in the residential sector, as well as in the office and retail segments – and an increase in transaction prices and in rental costs. In 2016, 404,421 operations were registered in the housing sector, up by 13.7% compared to the previous year, but nevertheless, just over half as many as in 2007. In the same way, average house prices rose by 11% from the minimums registered in 2014, but they are still 30% cheaper than in the year prior to the burst of the real estate bubble. (…).

The combined profit of all of the companies in the RE sector – Socimis and traditional real estate companies alike – reached €1,395 million last year, compared with €407 million in 2015. In other words, their earnings tripled in just twelve months and came close to the combined profit recorded in 2007 of €1,592 million, albeit generated by very different players.

Only 29.6% (€414 million) of the total amount was generated by traditional property companies, in other words, those that managed to emerge intact from the worst years of the crisis: Colonial, Realia, Inmobiliaria del Sur, Quabit, Renta Corporación, Grupo Urbas and Montebalito. If we take into account Reyal Urbis – which filed for creditor bankruptcy in 2013 – and Neinor Homes, the latest property developer to debut on the stock market, that percentage decreases to 18.98%, in other words, €264.8 million.

Therefore, most of the profits (70.4%) were generated by activity carried out by the Socimis, which multiplied their earnings almost five-fold in one year, from €244.6 million in 2015 to €1,131 million in 2016. (…).

The tax benefits that the Socimis enjoy, their obligation to distribute dividends annually and the attractive returns they generate compared to other investment options, have boosted their number and weight in the market.

In Spain, shares in four Socimis are traded on the main stock market and together they generated a gross operating profit of €388.5 million in 2016, up by 85.4% compared to twelve months earlier (…), with the largest, Merlin, accounting for the lion’s share of that figure (€260 million).

Large family fortunes are increasingly choosing this investment vehicle in recent times. In total, 17 Socimis debuted on the stock market in 2016 and there are currently 32 companies on the Socimi-specific segment of the MAB. (…).

The future strategy for all of these entities involves rotating their non-strategic assets and specialising in non-residential segments, specifically in: offices, retail and logistics. According to a recent report form the real estate management company Laborde Marcet, Spain closed Q1 2017 with investment in non-residential real estate assets amounting to €3,520 million.

The retail sector accounted for 42.5% of that figure and whereby recovered the high profile that it had previously ceded to the office segment; hotels accounted for 22.2% and logistics assets for 10.6%. Given these proportions, the plan that Merlin has just presented (to invest €200 million over five years on the renovation of its office and shopping centre portfolio) makes sense. Hispania is also planning to sell off its offices to concentrate on its hotel business.

Original story: Expansión (by María Hernández and Víctor Martínez)

Translation: Carmel Drake

CBRE: House Prices Will Rise By 25% Over Next 5 Years

22 November 2016 – Finanzas.com

CBRE Global Investors is the real estate management arm of the CBRE group. It is dedicated to developing and designing investment strategies to reflect the risk profiles that its clients (normally institutional players) define through different vehicles, using funds or listed companies. José Antonio Martín-Borregón (pictured above) is the firm’s Managing Director in Spain.

What would a “core” investor invest in at the moment?

In the main markets, in other words, in Germany, (“core” investors are investing) in more liquid assets, as well as in those assets that generate stable revenues, in other words, the office market. This means low returns. But insurance companies and pension funds invest in property to receive a higher return than they are currently earning on bonds and shares, which means that for them a 3% or 3.5% return is very attractive. Then if they want to complement their portfolios, they can approach other markets, such as Spain, Portugal and Greece, where international investors tend to look for what they cannot find in their own countries: higher returns and attractive prices.

Are offices being replaced by more profitable assets in Spain?

Is now a bad time for the office segment? No. In fact, one of the recommendations that all of the brokers are currently making regarding investment in Spain is to invest in offices in the major cities. The market is discounting significant growth in income over the next five years: at their peak rental prices stood at almost €45-€50/m2/month, and now they are less than €30/m2/month. But it is true that some investors who are not willing to wait for those rents to grow and so they are choosing to invest in logistics warehouses, for example, which may generate returns of 6.5%, or even 10% if the investment is leveraged a little. There are a lot more investors out there now – they are more sophisticated and they are developing complementary investment strategies.

Is housing an interesting market or should we rule it out?

Lots of things are going to happen in the housing market: prices are going to increase a lot, by 25% over the next five years; what’s more, housing is becoming a kind of institutional asset – there is a sense of opportunity because prices have fallen by so much and because it is still seen as quite a safe investment; and, finally, the rental housing market is going to develop significantly. Buying a home does not make economic sense (for many people anymore): from an economic point of view, it is much better to rent, it is more flexible and carries fewer risks. Moreover, rental prices are increasing at the moment, because demand exists but the supply of high-quality rental assets is very limited. As such, although the yield on housing is less than 3%, there is a very significant appreciation component to consider.

Are Socimis competing unfairly with other kinds of firms because of the preferential tax treatment they receive?

Taxation is not a primarily element of returns, there are other more important factors, such as debt, because interest rates are so low. The Socimis have a special tax regime, but they also have some special duties (they must be listed, there are restrictions over their investments, they have to pay dividends…). On the other hand, the Socimis are very similar to Sicavs and the large real estate companies are using these instruments to optimise their tax structures and so almost all of the Socimis are being listed on the MAB and they are not fulfilling the purpose for which they were designed.

Original story: Finanzas.com (by Cristina Vallejo)

Translation: Carmel Drake

Political Uncertainty Deters Real Estate Investment

31 May 2016 – Expansión

The political uncertainty in Spain is hanging over the real estate sector, which, despite continuing to be active, is not shining with the same splendour that it did in 2015. Specifically, real estate investment during the first quarter of the year exceeded €2,100 million, which represents a 25% decrease with respect to 2015, according to data from CBRE.

The segment most affected by this slowdown was offices, where investment declined by 70% during the first three months of the year, to €180 million. Meanwhile, investment in retail amounted to around €770 million, almost 45% less. By contrast, investment in the logistics sector amounted to €200 million, compared with €80 million in the same period a year earlier. In other sectors – residential and hotels – investment amounted to more than €1,000 million, compared with €885 million during Q1 2015.

Pedro Lacambra, manager at Ibercaja Gestión, explained that the Spanish real estate market is showing signs of a slowdown, which is accentuated in certain business segments, such as offices. The expert said that Socimis account for 40% of all investment in offices, and that they are having to raise new funds to grow and invest in assets. Moreover, he said that the office business requires greater demand for space from existing companies, as well as the appearance of new companies and multinationals arriving in Spain. For Lacambra, the current panorama of political uncertainty does not encourage any of these scenarios.

Meanwhile, Daniel Pingarrón, market strategist at IG, considers that the political uncertainty is weighing down more on the Socimis and real estate companies than on players in other sectors. “ The stock exchanges and financial markets are more globalised and depend a lot less on politics and local factors. By contrast, the real estate sector is more sensitive, as we have seen with Operación Chamartín and Operación Campamento”.

In this sense, the analyst thinks that some investors are waiting for the uncertainty surrounding the formation of the future Government to be resolved before entering Spain.

Taxation of the Socimis

The analyst at Selfbank, Victoria Torres, explains that the political uncertainty that currently exists in Spain is one of the factors that is significantly affecting the real estate sector, which is very sensitive to the legislation in force. “There is a fear that a change in Government could increase the tax charges for Socimis. For that reason, we are not seeing any massive sales, but rather defensive moves to reduce positions until after the General Election”, explains Torres.

Torres thinks that these companies are helping to boost a depressed sector thanks to the tax benefits that they enjoy, amongst other reasons. Socimis pay Corporation Tax at a special rate of 0%, receive a 95% rebate on Stamp Duty (AJD) and Property Transfer Tax (ITP) on capital gains, and do not retain the dividends distributed to their shareholders, which include both individuals and corporations.

For Torres, the new concerns over the sector come at a key moment for the firms, especially Hispania, which is preparing a €231 million capital increase. (…).

Gonzalo Sánchez, analyst at Gesconsult, shares the same view. For him a more or less similar Government would benefit these companies. “Behind the Socimis are overseas investors, who want to have their money where they can see it and to avoid the chance of any nasty surprises”, he added. (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Q1 2016: 4 Largest Socimis Almost Their Triple Profits

18 May 2016 – El País

The Socimis have become one of the most attractive investment vehicles in the financial market. With an annual return of around 5%, the four largest Socimis – Merlin Properties, Hispania, Lar and Axiare – earned €73.3 million in total during the first quarter of this year, which represents almost triple the €28.8 million that they achieved during the same period last year. These companies now own property-related assets amounting to more than €5,600 million.

The Socimis are key players in the Spanish real estate market. The four largest companies have starred in high-profile acquisition of buildings, shopping centres and hotel chains in recent months. During the first quarter alone, they have bought properties for €285 million and they are now preparing new acquisitions for the months ahead. These companies are revitalising a depressed sector thanks to, amongst other reasons, the tax advantages that they enjoy.

The returns that these firms are generating are overwhelming. The four largest Socimis – Merlin, Hispania, Lar, Axiare – generated income of €127 million during the first three months of the year and a profit of €73.3 million, according to information published by Spain’s National Securities Market Commission (CNMV). Most of their revenues come from the lease of shopping centres, hotels, offices and other properties that they acquire using funds raised from investors. (…).

Their rise has been meteoric. The largest Socimi, Merlin Properties, has a portfolio of 1,017 assets (buildings, offices, retail premises, leisure centres) worth more than €3,218 million. During the first quarter of the year, it earned €45.24 million, up by 131% compared to the same period in 2015 and it is rubbing shoulders with the country’s largest companies in the Ibex 35 after buying Testa from Sacyr last year for €1,794 million.

Hispania also stands out in the sector thanks to the prestige of its major investors. The magnate George Soros (16.7% of the capital) and the popular investment fund manager John Paulson (9.85%) feature amongst its shareholders. (…). The company is the owner of properties that it leases to hotel chains such as Barceló, Meliá, NH and Vincci, amongst others.

Another one of the largest Socimis is Lar España, which doubled its revenues during the first quarter of the year. This company is undergoing expansion, like all of the firms in the sector, which led it to purchase a retail complex in Barakaldo, the Palmas Altas Norte shopping centre (Sevilla) and to formalise the purchase of the remaining stake in the La Marina shopping centre in Ondara (Alicante) for €70.6 million.

Meanwhile, Axiare recorded a profit of €5.1 million, which represents a 1% increase with respect to the same period last year. Nevertheless, its revenues have grown by 38% due to the operation of new acquisitions signed last year. During the first three months of the year, Axiare spent €33 million acquiring two buildings: one property on Josefa Valcárcel (Madrid) and one shopping centre in Roquetas de Mar (Almería).

Original story: El País (by J. Sérvulo González)

Translation: Carmel Drake