Elliott & Minor Enter the Bidding for HNA’s Stake in NH

30 May 2018 – Expansión

The bidding to acquire the stake owned by the Chinese holding company HNA in NH is entering the home stretch. The Asian giant has set this week as the deadline for the receipt of binding offers for its 29.5% stake in NH, which will be diluted to 25.5% following the execution of the hotel chain’s convertible bonds that are currently in circulation.

The investment funds that have made it to the final round are Lone Star, which has joined forces with the US hotel chain Hyatt to launch its offer, as well as Apollo and Elliott, who have also expressed their interest. Meanwhile, Starwood Capital and Blackstone, which both analysed the operation, have been excluded from the process.

The offers from the funds fall in the range of between €5.50 and €6.00 per share, according to market sources. Yesterday, NH’s share price closed at €6.39. Other sources explain that the funds have signed a standstill with the company so as to not exceed 20% in NH following the operation and whereby avoid having to launch a takeover bid for 100% of the entity at a low price.

These funds have also been joined by the Thai hotel chain Minor, which last week acquired €30 million of Oceanwood’s shares, representing 8.6% of NH, for around €190 million. The agreement includes a pact whereby the manager concedes Minor the right to exclusively negotiate the purchase of the rest of its stake in NH, which, after the bond conversion, will amount to 9.5%.

If it were to acquire all of HNA’s stake, Minor would clearly exceed the 30% threshold that would oblige it to launch a takeover bid for the entire company. In that scenario, the Thai group, whose shares are traded on the Hong Kong stock market, would have a number of alternatives: sell some of its stake on the market, buy fewer shares from HNA or request permission from the shareholders to launch a takeover bid (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Office Inv’t in Madrid & Barcelona Rose by 70% in YTD Sept

27 November 2017 – Eje Prime

Madrid and Barcelona are continuing to take advantage of the boom in the office market. The sector, which accounts for 28% of all (tertiary) real estate investments in Spain, has its national breeding ground in the country’s two largest cities. During the nine months until September, the leasing of office space increased by 70% with respect to the same period in 2016, pushing up rental prices and also, reducing the available stock to a minimum. The forecasts indicate that the sector will close 2017 with a total of 780,000 m2 of space leased in Madrid and Barcelona alone: 460,000 m2 in the Spanish capital and 320,000 m2 in the Mediterranean city.

The leasing of office space grew by 21% in the third quarter in Madrid, where the leasing of workspace exceeded the 100,000 m2 threshold during the quarter to reach 102,000 m2. This increase is stimulating the sector, which by year-end may equal the total space leased in 2016 (450,000 m2).

In the Spanish capital, the central business district (CBD) continues to be the location of choice for companies, with an occupancy rate that accounts for 50% of the whole city. Between June and September, 73 operations were signed in Madrid, in other words, fewer than the 90 contracts that were signed during the same quarter last year, according to a report compiled by the consultancy firm Cushman & Wakefield.

In Barcelona, by contrast, the leasing of office space decreased by 56% during the third quarter (…) to 56,700 m2. On the other hand, of the 291 operations closed between June and September in the city, only 6% exceeded 2,000 m2; instead, contracts for spaces measuring less than 500 m2 predominated (61%), resulting in an average leased surface area of 900 m2. Similarly, in the Catalan capital, where the cumulative absorption has increased by 12% in 2017 compared to 2016, technological companies are the most active, accounting for 39% of the office space rented in the Mediterranean city, ahead of the industrial sector (11%).

The 22@ district, an area of constant growth, is home to 46% of the offices of companies headquartered in Barcelona. The rest are located in the centre (36%) and on the outskirts, where 18% of companies are situated.

Two of the largest operations carried out in Spain in the last quarter in this tertiary sector featured WeWork, one of the main players in the coworking segment. The US company leased 6,500 m2 of surface area in the Luxa building in the 22@ district of Barcelona and another 5,500 m2 of space at number 43 on Madrid’s Paseo de la Castellana.

90% occupancy rates

One of the challenges for the office sector in 2018 is going to be increasing its stock. Currently, the availability of space in Madrid and Barcelona is at minimum levels. In the Spanish capital, the supply of workspace has decreased to 12% of the total land constructed for that purpose, whilst in Barcelona, the figure is even lower, at 8%.

To this end, the plan for next year is to incorporate 139,000 m2 of new stock in the Catalan city and 80,000 m2 of space in Madrid. This lack of space has driven up rents, which are currently priced at €32/m2/month in the prime areas of the Spanish capital and €22.75/m2/month in Barcelona.

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake

Employment In The Real Estate Sector Rose By 6.4% In October

3 November 2017 – Eje Prime

The real estate sector is continuing its role as a driver of the growth of employment in Spain. According to data from the Social Security office, in October, real estate activity registered a total of 130,850 affiliated workers, 63 more than in September. That figure represents a YoY increase of 6.4%, with 7,921 more professionals now active in the sector.

Including October, real estate activity has now recorded four consecutive months above the threshold of 130,000 jobs. This hopeful figure for growth contrasts with the just over 118,000 workers that were registered in the segment less than two years ago, in January 2016. Last year, during one month, March, the figure actually fell below that threshold, to an annual minimum of 117,986.

Nevertheless, the sector has been recovering its strength, month after month, and the real estate business made its debut in 2017 with 124,053 affiliated workers registered for Social Security purposes. Since January, the MoM growth rate has stood at around 1%, with around 1,000 new jobs being created each month, until the summer, when the rate of increase stagnated.

The strong performance in terms of employment in the real estate sector goes hand in hand with the recovery of the job market in general right across the country. In October, the Social Security office registered 17 million affiliated workers, which represents an improvement of 3.9% on the total employment figures recorded in the same month in 2016. The growth rate of employment in the real estate sector (6.4%) clearly shows that it is moving at a faster pace than the economy in general.

If we add employment in real estate activity with employment in the construction sector (the construction of buildings, specialist construction work and civil engineering), then the sector recorded an average of 1.27 million affiliated workers in October, up by 6.7% compared to the same month last year.

Unemployment rose by 56,884 people in October

The number of registered unemployed people at the Public Employment Services’ offices rose by 56,884 in October compared to the previous month. Nevertheless, the increase was well below the average rise in the unemployment figure in October over the last eight years, which amounts to 90,000 people.

In YoY terms, unemployment in Spain fell by 7.9% in the tenth month of the year, bringing the total number of unemployed people to 3.46 million. By economic sector, registered unemployment decreased above all in the construction sector, whilst it increased in the agriculture, industry and services sectors.

Original story: Eje Prime

Translation: Carmel Drake

Atlético De Madrid Wants To Sell Operación Calderón Land For €3,300/m2

10 November 2017 – Cinco Días

Atlético de Madrid is looking to shake up the real estate sector with a record-breaking operation. The club is heating up the housing market with an operation to sell the plots on the site of its former Vicente Calderón stadium, through which it wants to achieve much higher prices than are currently being paid for land in the surrounding area.

The club, chaired by Enrique Cerezo and controlled by Miguel Ángel Gil, has engaged the consultancy firm CBRE to sell the plots of land, and the first round of offers have already been received. Atlético has already been sounding out potential buyers regarding a land asking price of €3,300/m2, according to four companies in the real estate sector, which would represent a record in this part of the Spanish capital.

That high land value would mean that the houses built on the site would have to be sold for approximately €6,000/m2, according to the calculations performed by several sources. That figure is equivalent to other more expensive areas in the capital and represents almost twice the current sales price of new build homes in the district of Arganzuela, where the stadium is located. According to the appraisal company Tinsa, new homes in this neighbourhood are currently being sold for prices ranging between €3,000/m2 and €4,000/m2, based on data as at 2017.

Specifically, Atlético is selling three plots of land, which have a total surface area of 63,076 m2, of which 57,094 m2 corresponds to residential use and the remaining 5,892 m2 to commercial use. Around 500 homes are expected to be built on the site. If the club manages to find a buyer willing to pay €3,300/m2, it will receive proceeds of €210 million. If the price ends up being €3,000/m2, the purchaser will have to spend around €190 million.

This urban planning operation is linked to the club’s change of stadium after it moved this season from its former pitch next to the Manzanares River to the new Wanda Metropolitan (…). Moreover, the football team needs to sell these plots to repay Inbursa – owned by the magnate Carlos Slim – for a €160 million loan that it was granted to build its new stadium.

The so-called Operación Mahou-Calderón, which also includes the adjacent plots on the site of the former brewery headquarters- but which are not included in the sale now being undertaken by Atlético – was approved by the municipal plenary in September. The buildability of that environment has decreased from 175,000 m2 to 147,000 m2 with respect to Ana Botella’s plan dated 2014.

Sources in the sector explain that CBRE has already received at least five offers during the first phase of the process, which is expected to close at the beginning of 2018. For the time being, it is not known whether any of these bids exceeds the figure of €3,000/m2 that Atleti is looking for (…).

Sources at the real estate consultancy firm Knight Frank calculate that the price of land in this neighbourhood amounts to a maximum of between €2,400/m2 and €2,800/m2. They explain that recent similar purchases in the district of Arganzuela, in the Méndez Álvaro area, for example, were closed for a price of between €2,000/m2 and €2,220/m2.

However, some experts in the residential market do believe that the €3,000/m2 threshold may be broken due to the high purchase pressure currently in play, primarily due to interest from international funds. They also consider that these plots are very attractive, located as they are in the Madrid Río area, and so they expect the degree of interest in them to be high.

Meanwhile, on the other side of the river, in the Usera area, Neinor Homes is marketing quite an exclusive development called Riverside at prices that exceed €4,000/m2, according to the portal Fotocasa, and the penthouses are going for €6,000/m2.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Cepco: New Build Starts Could Reach 80,000 Units By Year-End

7 November 2017 – Cinco Días

With barely two months to go before the end of the year, forecasts abound about what is going to happen to house prices, house sales and construction activity in the residential sector. After three years (2014, 2015 and 2016) during which the sector has gradually emerged from the worst real estate crisis in recent history, 2017 is going to be remembered as the year in which the improvement in all the variables was consolidated, property developers returned to the stock market and overseas investment in the sector reached record levels.

The only but that continues to mark this recovery is its heterogeneity, given that prices are not rising by the same amount in every autonomous region and homes are nowhere near as easy to sell in Cáceres as they are in Madrid (for example); moreover, cranes are not expected to return to certain regions for a long while yet.

Nevertheless, 2018 can be summarised by the fact that we expect to see more of the same. Prices will continue to recover, even reaching double-digit growth rates, above all in Madrid, Barcelona and certain parts of the Mediterranean Coast; transaction volumes may exceed the 500,000 unit threshold; and the number of new homes started will amount to 80,000 units, if the current rate continues.

And that is because the statistics in aggregate terms reveal some very significant increases, both in terms of transaction volumes and new home starts. For example, between January and August 2017, 56,000 new homes were sold in Spain, up by 5.8% compared to the same period last year, according to the latest report from the Spanish Confederation of the Associations of Construction Product Manufacturers (Cepco).

That represents quite an accelerated rate, with which permits for new homes are trying to keep up. During the first seven months of this year, 49,200 new permits were granted, up by 9,700 compared to the same period last year, which represents an increase of no less than 24.4% in relative terms.

That is what is causing the experts to predict that if these trends continue, then work could begin on the construction of around 80,000 new homes by the end of this year. If that volume of construction ends up being confirmed, the level of activity recorded in 2016, when 64,038 homes were started, will have risen by 25%. Nevertheless, these figures are still well below the more than 865,000 new home permits that were granted in 2006. And a considerable distance from the 200,000 or 250,000 that the consensus of experts in the sector believes will represent the real estate market’s cruising speed over the medium term.

Meanwhile, the number of finished homes also grew significantly during 2017, by 40%, although in absolute terms the figures are still minimal (33,085), as Cepco’s research acknowledges (…).

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Carlos Slim On Verge Of FCC Takeover

13 January 2016 – Expansión

The conditions that Esther Koplowitz and Carlos Slim, the majority shareholders of FCC, agreed on 27 November 2014, to facilitate a €1,000 million capital increase and the refinancing of the business woman’s personal debt, may now become an obstacle that stands in the way of allowing the Mexican investor to guarantee the construction company’s latest capital increase, amounting to €709 million.

Slim has committed to subscribing for all of the new shares (totalling €118.2 million at €6 per share) that are not placed during the preferential subscription period. This guarantee exposes him to the possibility of exceeding the threshold of holding a 30% stake in FCC, which would force him to launch a takeover for 100% of the company.

However, the terms of the shareholder agreement signed with Koplowitz in 2014 prohibits the Mexican investor from exceeding the 30% threshold until the end of 2018. The agreement, which was submitted to the CNMV on 27 November 2014, clearly states that, “the parties agree to not increase their individual stakes in FCC above 29.99% of the share capital (that carry voting rights) for the duration of the lock-up period (four years)”.

Sources close to the company say that the most likely course of action is that both shareholders will agree to modify the shareholders’ agreement to lift or ease the limits to allow an increase in their (permitted) stakes, above all, given that, in less than a month, Slim has increased his shareholding from 25.6% to 27.2%. “He is marking the field of play and launching a clear message to the market ahead of the upcoming capital increase”, say the sources.

Slim is already exposed to an identical situation in Realia, in which he now holds a stake of more than 30% following a €89 million capital increase. He is currently waiting for the CNMV to release him of the obligation to launch a takeover.

Even if the waiver for Realia is accepted by the CNMV, it would not apply in the case of FCC, given that Slim is the majority shareholder and none of the other shareholders in the company have a stake of more than 30%. At market prices, the formulation of a takeover of 100% of FCC may cost Slim around €850 million, if he exceeds the threshold of 30% (excluding the 22.4% stake held by the Kolpowitz family).

Yesterday, trading on the stock exchange closed with a share price of €6.89 for FCC, i.e. 15% above the price set for the capital increase (€6/share). FCC’s €709 million capital increase is the latest measure adopted by Slim to complete the restructuring of his stake. The construction company wants to use the funds to repay some tranche B debt amounting to €450 million. It pays interest of 5% on the loan and it determines the group’s investment policy and shareholder remuneration.

In exchange for this repayment, the creditors must agree to commit to applying a discount of at least 15%. This is the same discount that was applied to the previous restructuring in which FCC refinanced debt worth €4,512 million.

Original story: Expansión (by C.Morán)

Translation: Carmel Drake