‘Late’ Rental Payments Increased By 12% In 2014

6 March 2015 – Cinco Días

Late-paying tenants owed landlords €6,489, on average, in 2014.

Until the Government publishes the first official statistics about the rental market, as promised, the rental sector specialist, Alquiler Seguro, is the only firm in Spain that is able to give us a snapshot of overdue rental payments through its File on Tenants in Arrears (Fichero de Inquilinos Morosos or FIM).

Yesterday, Alquiler Seguro opened offices in Málaga and took the opportunity to announce the arrears data for 2014. Taking the number of inscriptions recorded in this list across the country as a benchmark, late payments amongst urban tenants increased by 11.91% last year.

By autonomous region, the highest increases were recorded in Madrid (with 16.87%), Aragón (16.39%), Cataluña (15.73%), País Vasco (15.33%) and Andalucía (14.95%). By contrast, the regions with the lowest increases were Ceuta and Cantabria (8.74%), Murcia (6.54%), La Rioja (6.50%) and Navarra (3.56%).

The average amount owed by tenants to landlords reached €6,489 in 2014. Nevertheless, the highest average amount was recorded in the Community of Madrid (€14,242); this figure was undoubtedly inflated by the high rental prices in that region compared with other regions around the country; in Murcia, the average overdue amount was €13,692 and in the Balearic Islands, it was €9,428.

At the opposite end of the ranking, the average amounts owed in the following regions were notably lower: Castilla y Leon with €2,500, La Rioja with €3,073, Extremadura with €3,215 and Aragón with €3,409.

The FIM is a file that is freely accessible to the public and may be consulted by both registered professionals with prior approval from the FIM Iberica S.L. and by individuals with a legitimate interest, who may log individual queries without any requirement to register.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

New Investment Formula: Buy-To-Let Cooperatives

5 March 2015 – Expansión

Investing in the Spanish real estate sector has been not only an option, but almost an obligation for large investors in recent years, both Spanish and international. But, what about small savers? Do they have any options left to fall back on?

Away from the real estate companies that are listed on the stock market, there is an investment proposal that involves buying homes to let them out. Nevertheless, this model has not been operated on a professional basis in the past. Now, the Spanish company Alquiler Seguro, which specialises in the management of rental contracts for both tenants and landlords, has decided to launch a cooperative project involving homes intended for rental, which are designed precisely for that purpose from the outset. “Last year, we realised that our most frequent transactions involved clients who were owners of some properties and at the same time, tenants of others”, explains Gustavo Rossi, Chairman of Alquiler Seguro. “A change is happening in the market, whereby young people, who are accessing housing through the rental market, are becoming good savers whilst also being tenants”, adds Antonio Carroza, CEO of the company.

The executives of Alquiler Seguro propose that these tenants use their savings to purchase homes, for an average price of €120,000, which offer investment returns after 18-24 months (the time taken to construct the properties). “These are homes that are designed to be rented out; they are expected to generate returns of between 3.5% and 6% and achieve an investment return within ten years”, says Carroza.

Currently, the company has two developments underway, both located in Madrid, in the neighbourhoods of Carabanchel and López de Hoyos. “We have chosen areas where there is demand from tenants and prices (of the properties) are affordable”.

Both developments offer financial support. “Our model is 50% equity and 50% bank financing. Entities are willing to subsidise some of the land purchase since the properties have (already) been sold to the cooperative members”.

“In the case of these two projects, each investor has acquired one home, but the goal is to move towards a model that does not involve horizontal divisions, but rather one in which many investors buy the whole development. We already have several plots of land in our portfolio that we intend to develop in this way”, says Rossi.

It is not the only buy-to-let investment project that the company is working on. “We are also evaluating the possibility of creating a Socimi, where investors contribute assets instead of capital but, at the moment, that is not a profitable model, due to the expenses associated with municipal gains”.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Tecnocasa: Average Rents Reached €8.54/sqm In 2014

19 February 2015 – El Mundo

Rental prices (in 2014) were slightly higher (+0.47%) than at the end of 2013.

The market is suffering its greatest declines in Madrid (-1.57%) and Barcelona (-0.59%).

The typical landlord profile: pensioners (28%), Spanish nationals (96%) and married (70%).

The typical tenant profile: single people, with permanent employment contracts, aged between 25 and 44 years old and Spanish.

The Tecnocasa Group has presented its first report about the residential rental market in Spain (a groundbreaking study). Highlights show that the average cost of rental homes amounted to €8.54/square metre (in 2014), which is slightly higher (+0.47%) than at the end of 2013.

With these figures on the table, Tecnocasa says that “rental prices have remained stable (upwards)”, although it acknowledges that there has been a slight decline in the two largest Spanish cities. Specifically, rents became 1.57% cheaper in Madrid and 0.59% cheaper in Barcelona, where prices amount to €10/sqm in absolute terms.

One must go back to 2007 to find the last report about rental prices nationwide. The then Housing Minister, María Antonio Trujillo, presented the OEVA (the State Observatory for Rental Housing or ‘Observatorio Estatal de la Vivienda en Alquiler’), which was the first official survey about the market. It was also the last. That study reported that the average price of rental housing was €7.20/square metre.

Tecnocasa’s study shows that the profile of landlords, i.e. of the people that lease out their properties, includes a high percentage of pensioners (28%), Spanish nationals (96%) and married people (70%). In terms of the profile of tenants, they are single, with permanent employment contracts, aged between 25 and 44 and, for the most part, are Spanish.

Lázaro Cubero, Director of the Department for Analysis and Reports (Departamento de Análisis e Informes or DAI) at the Tecnocasa Group, notes that rental prices have decreased by less than purchase prices in the last year, which means that “the yield a landlord can obtain by renting out a home that he/she owns is now greater”. Specifically, this yield has increased to 7.41% on average for the whole of Spain.

These figures represent the findings of the first report about the rental market conducted by the Tecnocasa Group and the Univerisdad Pompeu Fabra (UPF), based on a study that analyses data extracted from the property rental agreements brokered by Tecnocasa’s network (of agents) in Spain between 2012 and 2014.

Original story: El Mundo

Translation: Carmel Drake

Telefónica Seeks Buyer For Buildings In Madrid And Barcelona For €60m

28 January 2015 – El Confidencial

Telefónica has begun to shed some of its real estate weight. And it is doing so at a time when investors are no longer planning their moves in the market, they are actually closing transactions. According to sector sources, the company led by César Alierta has completed the sale of five buildings for €65 million in recent months and is now looking for a buyer for four other properties, for which it expects to receive another €60 million.

The listed company has designed a real estate efficiency plan for 2014 and 2015, which includes the sale of nine buildings that will become totally obsolete in less than a decade, in the face of impending technological change. The company itself recognises that with the proceeds, it will be able to finance the investments required to adapt its business to the changing times. Telefónica will continue to lease the buildings as the tenant – known in real estate parlance as sale & leaseback – for between seven and ten years, so that once the lease contract is up, the new owners will have full use of the properties.

Currently- and although the market expects the company to put new assets up for sale – Telefónica is looking for a buyer for three buildings in Madrid (in Calle Irún; close to Plaza de Santo Domingo; and in Moratalaz) and one in Barcelona, in the La Sagrera neighbourhood.

The building in Plaza de Santo Domingo, a few metres from Madrid’s Gran Vía, is a very attractive asset due to its location, as well as for its urban classification as residential. Although Telefónica will remain as the tenant for several years, the future buyer of the property may later convert the building into homes in an area where residential property is in short supply. Similarly, the building in Calle Irun, just a ten-minute walk from Plaza de España and Principe Pío train station, could also be converted into homes in the future. The final property for sale in Madrid, measuring 5,800 square metres, is located in Moratalez and is also for residential use, just like the one in La Sagrera, Barcelona.

Indeed, seven of the nine buildings put up for sale by Telefónica are classified as residential. Only two of them are not. The first, a building in Valencia that was acquired by the owner of Embutidos Martínez, is located in the Plaza del Ayuntamiento and has seven floors and a surface area of almost 4,000 square metres. The second, Telefónica’s historical headquarters in Bilbao, on Calle Buenos Aires, was sold a few weeks ago and measures 5,500 square metres and is classified for alternative commercial use.

Investors’ appetite outside of Madrid and Barcelona

“Investors have seized the opportunity to acquire landmark assets that have great potential for future development and meanwhile, obtain very competitive rents, guaranteed by an AAA tenant. This has facilitated a very agile sales process, which has lasted less than two months, clearly demonstrating the market’s appetite for well-located buildings that have good lease contracts to guarantee yields over the medium and long term”, says Pablo Méndez, Investment Director at Aguirre Newman.

Moreover, the assets are strategically located in the centre of some of Spain’s most important cities, which has helped to boost their appeal. “It is especially striking that investors are showing interest in buildings in cities such as Bilbao, San Sebastián and Valencia. This shows that the perception of risk is continuing to decline in the real estate market and that investors are now more willing to take positions in cities that are regarded as secondary to prime markets, such as Madrid and Barcelona”, said Patricio Palomar, Director of Office Advisory and Alternative Investment at CBRE.

He adds that “for this type of product, it is also very important that domestic investors, like family offices and private firms, are more agile in their ability to take decisions and get offers on the table as this gives them a competitive advantage with respect to foreign buyers with more institutional capital, such as insurance companies, fund managers and those with more sophisticated vehicles”.

These are not the first and they certainly will not be the last non-strategic assets to be sold by the company, given that over the coming years, it will have to gradually get rid of many of them following the demise of analogue technology and the digitalisation of all equipment. “Telefónica serves as an example of good wealth management. It knows that in a few years copper cable connections are going to become completely obsolete and that in a ten years, telephone cables will no longer be used; all connections will be fibre optic”, says Patricio Palomar.

“The sale of these assets demonstrates very professional management by a corporation such as Telefónica, which has a clear strategic vision for the business. Given that the type of activity that takes place in these buildings is destined to disappear, the company ensures through these sales that its services will continue for as long as necessary, until the move happens over to the new technology. In addition, it affords it a line of financing that is cheaper than many others and it could choose to use this liquidity to grow its core business, which is much more about providing telecommunications services than investing in real estate” he concludes.

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake