Oaktree Expresses Interest in Buying Sabadell’s Real Estate Arm

6 July 2018 – Cinco Días

The Spanish house building business is continuing to spark interest amongst international private equity firms. This was demonstrated yet again by the recent agreement signed between the fund Oaktree Capital and Solvia – the real estate arm of Banco Sabadell–, which created a joint venture to purchase land from Iberdrola, in a deal that may be extended in the future into an even greater alliance.

In fact, the US fund has just informed Sabadell of its interest in acquiring a majority stake in its property development business, in a company called Solvia Desarrollos Inmobiliarios, according to two sources in the financial sector. In this way, it would take another step forward in its strategy to position itself in the house building business.

For the time being, after closing the agreement in June to create the real estate joint venture, contact has now been made between the parties with a view to a possible purchase. Oaktree is expected to specify the details of its bid over the next few days and whereby the sales process would begin. Sources at the bank deny knowledge of any negotiations or offers at the moment. Meanwhile, Oaktree declined to make any comment.

Solvia is currently the parent company of Sabadell’s real estate business, which is divided into three arms. On the one hand, Solvia operates as a servicer to the bank; it also has a real estate agency division; and, finally, it has a property development arm, in the form of Solvia Desarrollos Inmobiliarios, which is the part that Oaktree is interested in, to develop land for own and third-party projects and to build homes.

Last month, Solvia and Oaktree announced that they have created a joint venture in which the fund owns 80% of the capital and Sabadell, through its subsidiary Bitarte, controls the rest. This company, which will be dedicated to identifying, acquiring, developing and marketing plots of residential land in Spain, received approval from the European Competition Authorities in June. The joint company’s first operation is the purchase of land belonging to Iberdrola, for almost €100 million, on which to build homes in several places across Spain.

But financial sources explain that Oaktree wants to deepen its commitment to house building and, for this reason, wants to purchase Solvia’s property development business from Sabadell. It is not known whether the bank is open to bids from the fund or not.

Oaktree’s intention through this corporate move is, primarily, to acquire a team with experience in the house building sector in Spain, according to the same sources. The US firm, meanwhile, has huge financial capacity and also owns several important real estate assets in Spain, acquired from financial institutions such as Bankia, the German bad bank and Sareb. In Spain, it has a subsidiary Sabal, led by Eduardo Bóveda, to manage those bank portfolios.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Patrizia Wants to Buy a Property Developer to Become Rental Giant in Spain

8 February 2018 – El Economista

Over the last six months, the German real estate fund manager Patrizia has closed three acquisitions that have turned it into the new property giant in Europe, with assets under management worth around €40 billion.

With a solid structure, the firm is pushing ahead with its plans to grow in Spain through the purchase of a property developer. “A few months ago, we were analysing two operations. We are still looking and would love to close something this year, because we have the funds and the desire”, explained Borja Goday (pictured above), Head of Patrizia Immobilien in Spain, who added that what he is looking for is “a company that is well-balanced in terms of the team and its bank of land”.

“Much of the development that we would be looking to carry out would be focused on homes for rent”, highlighted the director, who added that Patrizia’s objective is to become one of the major players in the rental market in the country.

In fact, the fund manager already has extensive experience in the residential market in some of Europe’s main countries, where it manages the rental of more than 50,000 homes.

In Spain, this business is still emerging, and there are just three large companies operating. “We want to introduce the institutional model that already works so well in other European markets, such as in Germany, and we are backing this segment because we think that the business in Spain will have an institutional base in 10 or 20 years”, explains Goday, who firmly believes that the 23% of the population that currently chooses to rent a home in Spain will grow significantly over the coming years.

Whilst it continues the search for a property developer, the fund manager will take its first steps into the residential rental market in Madrid, where it is finalising the acquisition of a property. “We are also negotiating the purchase of another building, which needs renovating, like we did with our project on Calle Claudio Coello 108, where there is just one home left for sale”, revealed Goday.

Investment strategy

The growth plans of the fund manager, which is finalising the process to integrate Rockspring, Triuva and the Danish firm SPI, are not based solely on the residential market.

“Our portfolio is very diversified, both geographically as well as by asset type, given that we have a presence in the hotel, office, high street retail and logistics segments”, said the director.

Following its recent acquisitions, Patrizia has established a portfolio worth around €1 billion in Spain and is positioning itself as an overseas real estate manager with one of the largest teams in the country, comprising 14 professionals.

“One of the major factors that differentiates Patrizia from other fund managers is that it does not invest in a country unless it has a local team with experience there”, stressed Goday.

“With these three operations, we have doubled our portfolio at the European level and we will now start to look more actively at the shopping centre segment, where we can add value”.

Moreover, the German firm, which works with investors from all over the world, wants to raise Spanish capital. “We are a wonderful partner for institutional investors and family offices who want to get involved in the real estate sector, since we give them the opportunity to also invest in Europe and to do so alongside a listed firm like Patrizia”.

Although the fund manager has doubled its volume of assets, it is committed to maintaining the same profile as always. “We are very comfortable closing operations of between €15 million and €100 million, because we think that that range is very well adapted to the reality of the current supply in the Spanish market”.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

Merlin Considers Creating New Hotel Socimi

15 November 2016 – Expansión

Merlin is going all out following its merger with Metrovacesa and is now busy exploring new market niches. The new real estate giant is analysing alternative options for the sale of its non-strategic assets, and now that it has set the future of its residential business on course, it is searching for a solution for its hotel portfolio – one option includes creating a new specialist Socimi to compete in the market.

“We will analyse the book value of our assets and we will determine whether a block sale from the portfolio is possible. If not, because the cost of capital of the potential buyers is very high, then we will probably opt for a solution that is similar to the one we have applied to the residential business. We will create a subsidiary, we will look for partners and we will constitute a company, in which we hold a majority, minority or equal stake, to serve as an owner of urban hotels”, explains Ismael Clemente, CEO of Merlin.

Following the integration with Metrovecesa, Merlin has gone from having 12 hotels worth €398 million, to owning 24 hotels with a gross value of €654 million. In this way, the new Merlin has multiplied the value of its hotel assets by 1.6x following the integration. By number of rooms, the union between Merlin and Metrovacesa has given rise to a giant hotel company with almost 4,500 rooms and a gross yield of 5.8%, according to the most recent data available.

In terms of its main rival in the sector, Hispania, Clemente says that “if there are any solutions that we can find together, we would be delighted to explore them”.

Merlin is now beginning a new phase in its journey, having created a business with assets worth €9,500 million in just two years. (…).

The listed real estate company, the only one to feature in the Ibex 35 following Colonial’s departure in 2008, faces a difficult year ahead with the major task of integrating Merlin and Metrovacesa’s teams. “By the end of the first quarter, the integrated team will work together in one location, which will not be where either of them are currently based”.

In addition, one of Merlin’s other challenges for 2017 is to dramatically improve the occupancy rate of the offices that it has inherited from Metrovacesa, as well as to perform a “significant” intervention in the shopping centres of both companies. (…).

Growth in housing

In terms of its plans for Testa – the subsidiary that owns the Socimi’s rental homes – Clemente says that, at the moment, the firm is holding conversations with other companies, as well as with its shareholder banks, with the aim of increasing its portfolio by incorporating new assets.

“We think that this vehicle has the potential to become a major player in the professional market for residential rental properties in Spain. The vehicle could own between 9,000 and 10,000 homes by the end of 2017”. (…).

Original story: Expansión (by R.Arroyo and R.Ruiz)

Translation: Carmel Drake