BBVA Continues to Obtain Juicy Profits from the RE Market

17 April 2018 – Merca2

Bilbao. Gran Vía, 1. One of the most iconic buildings in the Vizcayan capital has been located at that address since 1969. Comprising 21 storeys and measuring 86 m tall, it was the giant of the city until the arrival of Torre Iberdrola. Headquarters, at the time, of Banco de Vizcaya, the entity known nowadays as BBVA has just put the property up for sale. The price? Around €100 million.

This is a new milestone in the process to divest iconic buildings that the entity chaired by Francisco González has been carrying out for several years and which has been generating some juicy profits. This money for the coffers is a godsend for the balance sheet.

Another example, the most recent on the long list, saw the sale of Torre Puig in 2017 to the Catalan perfume group of the same name. That building, which ended up in BBVA’s hands after its acquisition of Catalunya Caixa, was sold for €60 million, at a gain of €30 million.

Also prior to this latest operation on Bilbao’s Gran Vía, which is expected to be closed before the summer, in 2015, BBVA sold the office block known as Torre Ederra in Madrid, located at number 77 Paseo de la Castellana, to Gmp (owned by the Montoro Alemán family and the sovereign fund of Singapore GIC). Spanning 21,000 m2 and spread over 18 floors, BBVA acquired that property in 2003 for €87.5 million from the French group Saint Gobain. The sales price paid by Gmp exceeded €90 million.

BBVA and its €300 million gain

There are several reasons behind BBVA’s decision to divest a series of buildings; some of them have significant value, not only financial but also in terms of their history and architectural beauty.

One of the reasons is to finance the cost of the creation of BBVA City (Ciudad BBVA). The new headquarters, popularly known as La Vela due to its most iconic tower, also comprises another seven horizontal buildings. It cost around €700 million to build and was constructed to reduce by one third the operating cost of having around 6,500 employees spread across a dozen properties, amongst other reasons.

Another building that was sold, for example, was the work of the architect Francisco Javier Saénz de Oiza. Constructed at number 81 Paseo de la Castellana, measuring 100 m tall, and spanning more than 49,000 m2 over 30 storeys, that property was sold in 2007, also to the real estate group Gmp.

That same year, BBVA reduced its portfolio further by placing other buildings in Madrid on the market, such as those located on Calle Goya 14, Calle Alcalá 16 and on Gran Vía de Hortaleza. In total, more than 108,000 m2 of space was sold, which saw these last four buildings generate gains of €300 million for the entity chaired by González (…).

Another operation that was different was BBVA’s sale, at the end of 2017, of its real estate division to the fund Cerberus Capital for around €4 billion. That deal was carried out at a discount of 61%: the gross book value of the 78,000 real estate assets that form part of the deal is €13 billion.

In this case, the operation involved divesting the bank’s exposure to property, in part “imposed” or “recommended” by the Single Supervisory Mechanism (SSM) of the European Central Bank (…).

Which assets are being spared? So far, the former headquarters of Argentaria, located on Paseo de Recoletos in Madrid, which currently houses the headquarters of Fundación BBVA. For the time being, no “for sale” sign has been put up there. But it could only be a matter of time.

Original story: Merca2 (by Valentín Bustos)

Translation: Carmel Drake

The Resurgence of Bilbao’s Real Estate Sector

15 December 2017 – Expansión

Bilbao has undergone a major facelift in recent years and has just received its due recognition in this regard with its award as the European City of 2018 by the British Academy of Urbanism. With a leisure offer led by the prestigious Guggenheim Museum, an exquisite gastronomy, the likely arrival of the AVE (train service) and an increasingly attractive urban destination for travellers, Bilbao is a city that enjoys a stable economy and that is continuing to attract real estate investors.

The arrival of Primark and the new flagship Zara store are revitalising retail, a sector that is also boosting the logistics market in the face of growing demand for urban space to handle online sales. Four new hotels are also going to open soon and the construction of new residential developments is now underway. Moreover, the city will soon require new offices.

With more than 900,000 inhabitants, the metropolitan area of Bilbao has traditionally been a small but safe and stable market for the real estate sector. Limited by the scarce supply of land, the developments undertaken to modernise the Biscayan capital have converted this industrial city into a major centre for leisure and enjoyment. Its transformation has been highly valued not only by its residents but also by local, domestic and increasingly, international, property developers, who see the Nervión River as a safe bet for their money.

Bilbao is a special market from the point of view of real estate, because thanks to the constant presence and commitment of local investors, and the high salaries of its residents, with an income per capita that is 30% higher than the average for the rest of Spain, the city is less affected by the cycles that impact the real estate sector elsewhere.

In the office segment, the city developed 80% of its supply in the 1960s and did not see any new output until 2011. In that segment, the construction of Torre Iberdrola represented the turning point. According to Juanjo López del Corral, Regional Director at CBRE Bilbao, “the tower resulted in the incorporation of 50,000 m2 of new office space, equivalent to the surface area of 25 buildings in the city”. Until today, the space in the tower has been sufficient to absorb the demand for office space in the city. Currently, 42,000 m2 of the building is leased and the remaining space is expected to be let during the first quarter of next year, at a rent of around €20/m2/month.

Torre Iberdrola charges the highest office rents in the city. On average, in the prime business district, the rent per square metre amounts to €13.50/m2/month, according to the CBRE consultancy. Across the city, average rents range between €8/m2/month and €14/m2/month (…).

Retail

It is not only the office sector that is working to adapt to the new needs of companies, the Retail and Residential segments are also adjusting to the new demands. In the specific case of Retail, the greatest challenge for operators is to find available space on the Biscayan capital’s main shopping streets, such as Gran Vía. They are home to first-rate players from Spain and overseas and “offer very similar yields to those generated on Gran Vía, Madrid”. “The most powerful brands in the mass market now occupy former bank buildings as their new flagship stores. Examples include the upcoming Zara store, measuring 4,000 m2, which will open its doors at number 23, in a building that was previously occupied by BBK; also, the future Primark shop, at Gran Vía 1, which will open on the lower floors of the historical Torre BBVA, and which will become Primark’s fourth largest store, spanning 10,000 m2”, said the director at CBRE (…).

The sources at CBRE also highlight the strong arrival of restaurant chains, which until now had remained shy given the city’s rich cuisine, but which now represent significant demand for the retail segment (…).

Residential

Meanwhile, the residential market is also in full expansion. There are new build developments offering services that used to be unthinkable in Bilbao, such as gyms and swimming pools, with a higher level of quality, taller buildings, technology… “But like in the other segments, the lack of space makes its hard to find large developments with added services, which is why the majority of the new projects are focusing on the renovation of old buildings, both residential and industrial”, say sources at the consultancy firm (…).

Currently, the average sales price in the centre of Bilbao amounts to €6,400/m2, excluding parking spaces and storerooms; although prices can reach as high as €8,000/m2. In secondary areas of Abando, prices stand at around €4,000/m2 (…).

Original story: Expansión (by Lucía Junco)

Translation: Carmel Drake