Will 2017 Be The Year Of Mergers Between The Socimis?

24 February 2017 – Expansión

The Socimi boom continues unabated. Ores – the listed real estate investment vehicle owned by Bankinter and Sonae Sierra – debuted on the Madrid stock market on Wednesday, and in doing so became the thirty-first company of its kind to have its shares traded on the MAB (Alternative Investment Market). Moreover, all indications are that this phenomenon is going to continue to grow.

An attractive tax regime and capital appetite for real estate assets has led to a flood of Socimis debuting on the stock market in recent years.

Heading up the list of Socimis, by size, are Merlin – the only real estate company whose shares are traded on the Ibex – Hispania, Lar España and Axiare. These four companies, which debuted on the Madrid stock exchange between March and June 2014 with €2,560 million to invest, now own a combined portfolio worth more than €10,500 million.

In addition to these Socimis, there are around thirty other companies that have joined the MAB in recent years. Following the tsunami that the real estate sector has experienced in just three years, the question now is: What will happen next?

Limitations

According to a report prepared by CBRE, “In 2016, the number of Socimis is expected to continue growing. Nevertheless, given that an increasing number of Socimis are competing in a somewhat limited market, it is likely that 2017 will be a year in which there is pressure for them to increase in terms of size and specialisation, with the aim of obtaining competitive advantages, driving merger and acquisition activity, and selling off non-strategic portfolios of assets between Socimis”.

In this sense, it is expected that existing investment vehicles owned by family offices and private banking will be converted into Socimis. The experts at CBRE point out that pooling assets into existing investment vehicles, in return for ownership stakes in them, generates value growth for investors. (…).

The analysts also point out that the Socimis are likely to move towards more specialisation in the future. In this sense, Hispania is planning to focus its activity on hotels, whilst it divests its residential business and rotates its offices. (…).

Merlin – the largest real estate company in Spain and one of the ten largest Socimis in Europe – decided to sell off its portfolio of hotel assets to Foncière des Regions for €535 million to focus on its significant office portfolio, which has just grown thanks to the Socimi’s acquisition of the iconic Torre Gloriés building, also known as Torre Agbar (pictured above), in Barcelona, for €142 million.

Meanwhile, Axiare is focusing above all on offices, whilst Lar España is centring its attention on shopping centres.

Investment

Operations such as Merlin’s purchase of Torre Agbar on 12 January and Axiare’s acquisition of the headquarters of Capgemini and PSA last month reflect the fact that, after the record investment figure recorded in 2016 – €14,000 million, a figure hitherto unseen in Spain – the real estate market is still very attractive.

“We expect 2017 to also be a very active year for the Spanish investment market (…)”, say sources at CBRE (….) thanks to the more attractive returns being offered by the real estate sector compared to other sectors, the outlook for economic growth across Europe and the continuous improvements in financing (…).

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

Translation: Carmel Drake

The 4 Largest Socimis Will Specialise By Asset Type

31 January 2017 – Cinco Días

Hotels, logistics assets, offices, shopping centres. The four largest Socimis – Merlin, Hispania, Lar España and Axiare – are entering their third year of life, and as they do so, they are embarking upon a new phase of specialisation by type of asset – the aim is to make their management more effective and ensure that they remain attractive to large international funds. (…). 

Between them, Merlin, Hispania, Axiare and Lar España now own assets worth almost €14,000 million – they have created small empires out of nothing.

Hispania looks set to become one of the major stars of 2017 with a series of operations planned to strengthen its already high degree of specialisation in hotels. The Socimi, in which the magnate George Soros owns a 16% stake, has a portfolio worth €1,793 million (including its most recent purchases at their acquisition prices). 61% of the portfolio value relates to hotels and most are located in the Canary Islands (70%) and the Balearic Islands (16%).

The experts forecast that this company, managed by Azora and led by Concha Osácar, will put the majority of its offices and residential assets on the market, and at the same time, will continue to buy up hotels. (…). 

Meanwhile, Merlin has taken steps to divest its residential and hotel assets, transferring them to Testa and Foncière des Murs, respectively, and is continuing to expand its core portfolio with its recent purchase of the Torre Agbar office block in Barcelona for €142 million. The Socimi’s portfolio currently comprises offices (48%), shopping centres (18%) – Merlin is now one of the major players in this segment – retail premises (22%) and logistics assets (5%). Experts consider that the latter have enormous potential to generate higher returns for this Socimi.

Axiare, led by Luis López Herrera-Oria, has already focused heavily on offices, which account for 73% of its €1,300 million portfolio. It has enhanced its presence significantly in recent weeks through its acquisitions of the headquarters of PSA, Cuatrecasas, McKinsey and Vocento for €242 million in total.

The Socimi’s high decree of specialisation in offices has led Colonial to take advantage of the fund Perry Capital’s departure from its share capital to acquire 15% of the Socimi. Some in the sector view this move as a precursor to a possible takeover bid, but the Catalan real estate company has denied the claim repeatedly. (…). 

Finally, Lar, led by José Luis del Valle and Miguel Pereda, has managed to specialise mainly in shopping centres, which now account for 75% of its €1,201 million portfolio. With shareholders that include Pimco and Franklin Templeton, the company owns 17 assets including shopping centres, retail parks and hypermarkets.

In just three years, Lar España has risen up the ranks to become the third largest owner of shopping centres in Spain, behind Unibail and Merlin. (…).

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

CBRE: RE Inv’t In 2017 Will Exceed €13,600M

16 January 2017 – Cinco Días

Merlin’s purchase of Torre Agbar in Barcelona and the agreement signed between the Baraka group and the chain Riu to open a hotel in Edificio España in Madrid, both announced last Thursday, are major real estate operations that are not only defining the start to 2017, they are also marking the sector’s entry into a new cycle. That is one of the conclusions of the Real Estate Trend Barometer compiled by CBRE and published on Friday, which calculates that non-residential real estate investment in 2017 will exceed the figure recorded in 2016 (€13,600 million).

The reasons given by the consultancy firm for this optimism include the economic recovery and the political stability following the formation of the Government. Nevertheless, it alerts that there are also risks for the sector from the volatility on the international stage and specifically due to Brexit. “There is no reason to think that 2017 will be worse than 2016”, said Adolfo Ramirez-Escudero, President at CBRE, who forecasts a “very active” investment market this year. That situation results from improvements in rental income for all assets: offices, retail, residential and logistics.

In this sense, the office market offers the greatest possibilities. Although in 2016, the amount of new space leased decreased (with only three operations exceeding 10,000 m2, compared with nine in 2015), CBRE considers that it was the political uncertainty that caused that downturn. Now that that uncertainty has been resolved, the operations that were not signed last year will be completed instead in 2017.

The logistics segment occupies second place in terms of the opportunities it offers investors, given the strength of ecommerce and the needs of companies in the sector such as Amazon. Next comes the hotel sector, where the specialist consultancy firm Irea forecasts investment of €2,000 million over the next year. In this context, the residential market also stands out and CBRE expects to see a recovery there for the first time since the crisis. In fact, it predicts that demand for new homes will increase by 180,000 units between 2010 and 2025. (…).

This improvement in residential housing will force real estate developers to play an important role. (…). That will be the case, for example, of the new real estate companies created from scratch by international funds, including Dospuntos (owned by Värde Partners) and Neinor Homes (owned by the fund Lone Star).

In terms of investor profile, family offices and private investors will gain weight compared to last year, Socimis will continue to play an important role for another year. Value added funds (which invest in renovations) and institutional entities (such as insurance companies) will also be key players. Nevertheless, opportunistic investors – those who look for bargains – who were very active in the depressed market of 2014 and 2015, will now exit the arena. According to Ramírez-Escudero, that shows that the market is now more mature. (…).

Original story: Cinco Días (by Álvaro Bayón)

Translation: Carmel Drake

Merlin Buys Torre Agbar In Barcelona For €142M

13 January 2017 – Cinco Días

The company General Aguas de Barcelona has sold Torre Agbar to Merlin Properties for €142 million. As such, the project announced by Emin Capital in 2013 to convert the property into a luxury hotel has been abandoned, given the difficulties involved. In theory, the plan was for a hotel to be opened there and managed by Hyatt, but the hotel moratorium imposed by the mayoress Ada Colau made that project impossible, according to sources at the fund.

In the end, Merlin pipped the Andorran investor group Emin at the post and purchased the iconic skyscraper, which will be used for office space. As such, the Socimi will not need to request any change in its designated use. Meanwhile, yesterday, Emin asked the Town Hall of Barcelona to cancel the request it had filed to change the designated use of the building to allow it to open a hotel.

Located at number 211 on Avenida Diagonal, the building designed by Jean Nouvel has become a symbol of the city and marks the entrance to Barcelona’s technological district, 22@. The pace of activity in the office market in the district has caused the number of operations to double in the last two years, establishing it as the city’s business hub.

At 142 m, Torre Agbar is the third tallest building in the city and has a gross leasable area of 37,614m2, spread over 34 floors and an auditorium with capacity for more than 350 people. In addition, it has 300 parking spaces on four underground floors and until July 2015, it housed the headquarters of Aguas de Barcelona.

Merlin – listed on the Ibex 35 – is the largest Socimi in Spain. It has a portfolio of assets worth €9,600 million, following its acquisition of Testa from Sacyr and the integration of Metrovacesa’s portfolio of commercial properties. Its main shareholders include Santander and BBVA, as well as international funds.

The company, led by Ismael Clemente, sold 19 hotels to Foncière des Regions for €535 million at the end of December, given that that type of property does not form part of its strategy. It has announced that it will allocate the resources raised to reducing its debt and to possible acquisitions. It also revealed that it wants to grow its presence in Barcelona, which accounts for just 13% of the value of its portfolio. On this occasion, it has been advised by Savills. (…).

Original story: Cinco Días (by Alfonso Simón Ruiz and Laura Salces)

Translation: Carmel Drake

Irea: Hotel Inv’t Amounted To €1,363M In YTD Sept 2016

17 October 2016 – Europa Press

Hotel investment in Spain has continued its strong momentum during the first nine months of 2016 to reach €1,363 million, according to a report about hotel investment in the real estate sector prepared by Irea. The report also shows that the figure could rise to €1,800 million by the end of the year. Despite the fact that the investment figure is 16% lower than the level recorded during the same period last year, it is the second best year ever.

Investor interest in hotel assets is still very high and if some of the main operations that are currently on the market are actually closed as a result of the year-end effect then the figure could end up exceeding €1,800 million by the end of 2016. The profile of investors has changed considerably with respect to 2015, when the Socimis (primarily Hispania and Merlin) were the stars and investment involving asset portfolios accounted for half of the total investment volume.

In 2016, operations involving individual assets are clearly dominating the market and are spreading in a general way across the whole country, versus the trend in recent years when there was a higher concentration of investment in traditional destinations.

The increase in the number of hotels sold to date in 2016 has been noteworthy (97 hotels compared to 83 last year), however, the average size per number of rooms has decreased significantly to 142 rooms from 214.

Madrid leads investment with €310 million.

In geographical distribution terms, Madrid leads the investment table for the second year in a row, with €310 million, followed by Barcelona with €302 million (the two regional capital cities account for 45% of total investment). The Balearic and Canary Islands are ranked in third and fourth places with €206 million and €198 million, respectively.

Whilst the figures in the Balearic Islands have remained stable compared to 2015, they have decreased in the Canary Islands after the high volume of investment seen in 2015, when it was the main investment destination in Spain.

Finally, there has been a notable increase in contributions to total investment from secondary destinations. In 2016, hotel investment has been distributed amongst 68 municipalities so far, compared with 44 in 2015 and 25 in 2014, which shows that the hotel investment market is establishing itself in Spain.

Investment is now reaching regional capitals such as Gijón, Oviedo, Orense, Lugo, Granada and Alicante, for example, i.e. places where barely any activity had been recorded in recent years.

The Socimis decrease their level of investment

The profile of investors has also changed markedly since 2015, when the Socimis were the undisputed stars, accounting for almost 50% of total investment volume in the hotel market in Spain.

This year, the Socimis have faded into the background, accounting for approximately €85 million of investment (only 6.2% of total hotel investment), whilst other types of investors have grown.

International investors have invested €585 million to date, almost twice as much as they spent in 2015, led by the Dogus Group, which purchased the Hotel Villa Magna in Madrid and Westmont Hospitality, which acquired a majority stake in Torre Agbar in Barcelona.

In terms of national chains, they invested €276 million in total on the purchase of 32 hotels. Highlights included Hotusa, which was the most active group, purchasing five properties during the first nine months of the year.

Meanwhile, domestic investors spent €304 million on hotels in total. The star of that category was HI Partners, which has acquired seven hotels so far this year, primarily in the vacation segment.

Original story: Europa Press

Translation: Carmel Drake

Núñez’s Complaint Against Colau’s Moratorium Deemed Admissible

7 October 2015 – Orbyt

The High Court of Justice in Cataluña has declared admissible a complaint filed by the construction company Núñez y Navarro against the Town Hall of Barcelona. Specifically, the company has denounced the moratorium that the municipal government team, led by the mayoress Ada Colau (pictured), approved at the beginning of the summer. The moratorium has resulted in the suspension of more than 40 hotel projects that were underway in the Catalan capital, for at least one year.

Núñez y Navarro, which has registered the complaint through one of its subsidiaries, is currently building a new hotel on Calle Rec Comtal, in the historical centre of the city. The Town Hall approved the project eight years ago, and given that it had already been granted the necessary permits and licences, the moratorium was not meant to affect it.

Nevertheless, at the beginning of the summer, the district counsellor of Ciutat Vella, Gala Pin, reported that an investigation had been opened to check whether there had been irregularities with the processing of the urban planning application. At that time, the municipal government did not rule out that the opening of this establishment could ultimately be suspended, in the event that it was able to prove that there had been malpractice in the rezoning of the site.

Overall balance

Yesterday, municipal sources refused to comment on the news that Núñez y Navarro’s complaint had been declared admissible. However, they did say was that the period (of two working months) during which companies affected by the moratorium are permitted to file complaints with the courts will come to an end shortly. Only then will the Town Hall provide an overall assessment of the impact of the measure.

The first consequences of Ada Colau’s moratorium have already been felt. At Deutsche Bank’s former headquarters, located on the corner of Avenida Diagonal and Paseo de Gracia, the existing building will no longer be demolished to construct a hotel, instead the property will be renovated and converted into luxury homes. By contrast, another iconic project will go ahead, namely the conversion of Torre Agbar into a luxury hotel to be operated by the US chain Hyatt.

Original story: Orbyt

Translation: Carmel Drake

Barcelona City Hall Suspends Tourist Licences For 1 Year

3 July 2015 – Cinco Días

The mayoress of Barcelona, Ada Colau, has fulfilled one of the promises she made during the election campaign for the municipal elections with the launch of a one-year moratorium for the granting of tourist licences in the city. “Tourism is one of the city’s main assets and we have to take care of it and make it sustainable”, she said.

Colau’s announcement had been expected by the market, since it had been one of her main promises during the election campaign, but it did not take shape until yesterday. Barcelona’s City Council, governed by Barcelona en Comú, has taken the decision to freeze licences for at least one year. The town council’s aim is to submit a Special Plan for the Regulation of Tourist Accommodation during the first quarter of next year, although it does not rule out extending that period by another year.

Some of the most iconic hotel projects being carried out in Barcelona include the conversions of Torre Agbar, the Deutsche Bank tower and the Henkel building. But, according to Janet Sanz, deputy mayoress of ecology, urban development and mobility, the actual list is longer and includes around thirty properties. “We are not saying that none of these projects will go ahead, simply that we are beginning a process of reflection on our tourism model”.

This moratorium, which comes in addition to the one that already exists in the neighbourhood of Ciutat Vella, is intended to allow time for an in-depth analysis of the stock of tourist accommodation in the city, so that the existing supply and the economic and social impact of tourism can be evaluated and diagnosed. The freeze will affect all establishments, from luxury hotels to hostels, so that a “calm debate” can be held about the situation in the city. Plans are afoot at the Deutsche Bank tower, which KKH purchased  last year, to build a five star Four Seasons hotel, costing €150 million, and the plan is to open a Grand Hyatt hotel in the Torre Agbar, which Emin Capital acquired in 2013. Others, such as the property being renovated by the construction company owned by Josep Lluís Núñez, the former President of FC Barcelona, will be excused from the moratorium.

In terms of Spanish hotel chains, the moratorium may affect Barceló, which is planning to open two new establishments in the city: one on Avenida Diagonal, 414 with views of the Casa de les Punxes, and the other, the conversion of the former headquarters of Nubiola Pigmentos, on the corner of Pau Claris and Gran Vía, which is still in its early phases. Nearby, one of Melia’s ME hotels, with 173 rooms, on the corner of Calle Casp and Paseo de Gracia may be affected. (…). Iberostar, Room Mate and Praktik Hotels could also be affected. (…).

The market regards the moratorium as a sign of insecurity for the entry of new investors. “The decision creates legal and administrative insecurity and leaves investors interested in entering the city on stand by”, says Inmaculada Ranero, CEO of Christie + Co for Spain and Portugal. (…).

Original story: Cinco Días

Translation: Carmel Drake

Office Rents In Barcelona To Grow By 30% In Three Years

18 February 2015 – Misoficinas.es

Barcelona is one of the cities with the greatest potential for real estate growth in Europe. At least, it is according to the 2015 Trend report, prepared by CBRE.

The international consultancy firm’s 2015 Trend Report says that the office segment is the main driver of Barcelona’s (real estate) market, and it estimates that rents will grow by between 25% and 30% between now and 2018.

Significant investment was made in offices in Barcelona in 2014, amounting to €844 million in total, i.e. 139% more than in 2013. In total, 19 transactions were closed (an increase of 31%) and more than 340,000 m2 of properties changed hands (112% more than in the previous year). This data clearly shows that investors’ appetite for this type of asset has returned to its pre-crisis levels.

In terms of occupancy rates, tenants leased 258,000 m2 of office space in 2014, the highest figure since the start of the crisis, and very close to the annual average for the past 10 years, with new business areas (Plaza Europa, 22@) accounting for 45% of the total, recovering their domination over the city centre.

An important factor to take into account is the progressive decrease in stock in the city centre, which resulted in 90,000 m2 less (available) office space in 2014. The main reason for this change was the conversion of offices into hotels, such as in the cases of Torre Agbar and the former headquarters of Cuatrecasas, as well as demand by tenants for higher quality, efficient spaces.

The report includes a Real Estate Barometer, which has been calculated for more than 10 years, based on a survey conducted with almost 200 industry executives. According to the majority of these executives, the most interesting development is that the role of vulture funds in Spain will decrease in 2015 with respect to last year. In fact, 64% confirm that this year will be dominated by ‘core’ funds and investors, i.e. those that invest on a long-term basis and are looking for greater security.

In terms of investment, the main players in the sector consider that the office and retail outlet segments will account for the majority of investment in Spain, whereby continuing the trend observed in previous years.

Original story: Misoficina.es

Translation: Carmel Drake

Meridia To Build A Hotel In Henkel’s Former Headquarters

26 January 2015 – Expansión

Barcelona / The fund will demolish Henkel’s old offices near the Sagrada Familia.

The real estate fund Meridia is joining the latest trend in the real estate sector in Barcelona: the demolition of old offices to build large hotels and attract international hotel brands. The fund led by Javier Faus, the Vice-President and Head of Finance and Strategy of FC Barcelona, will knock down the former headquarters of Henkel Ibérica to convert it into a complex containing a four star hotel, a block of flats and several townhouses.

The name of the chain that will run the hotel has not been revealed, but sources close to the transaction said that Meridia is finalising an agreement with a company that does not yet have a presence in Spain. The total investment, including purchase of the land, will amount to around €40 million.

The hotel project envisages the construction of 182 rooms and a 100-space car park. The complex, located near the Sagrada Familia, will also include a block of 33 flats and space for six terraced houses.

Other similar projects are already underway in Barcelona: the Deutsche Bank building, which currently serves as the headquarters of the law firm Cuatrecasas, will be demolished and replaced by a hotel that may be managed by Four Seasons. The Torre Agbar will be converted into a hotel to be run by Hyatt, although in this case, the external structure of the building will remain intact. Another building to be demolished is the old Hotel Barcelona, which will be replaced by a new hotel to be managed by Melia.

Original story: Expansión (by M. Anglés and J. Orihuel)

Translation: Carmel Drake