Tag: uncertainty

PwC: Madrid Is One Of Europe’s Top 5 Most Attractive Cities For RE Investment

13 November 2017 – Eje Prime

Madrid is really winning over European investors. The Spanish capital is one of the top five cities to invest in over the course of the next year, as recommended by the consultancy firm PwC, according to its annual study Emerging Trends in Real Estate: Europe 2018. Whilst Madrid rose from 9th to 5th position, Barcelona managed to avoid the tense political situation in Cataluña to rise from 16th to 11th.

One of the reasons that led the consultancy firm to highlight Madrid as a safe house for real estate investment over the next year is its office market, which “after a cycle of compression”, has seen an increase in rental prices in the segment. “The increase in office rental prices suggests that Madrid is one of the most attractive opportunities for investors in Europe”, say sources at PwC.

With the (national) political uncertainty now “dissipated”, the recovery across Spain and, specifically, in Madrid is progressing “at full speed”. Real estate investment volumes in 2017 are on track to exceed records, especially in segments such as retail, where investment in this kind of asset is expected to soar by the end of the year, to exceed €4,000 million. Moreover, Madrid is also starring in alternative investment operations, such as those involving Resa and Nexo in the student hall segment, and the opening of the first Spanish WeWork office in Madrid, in the co-working sector.

During the 9 months to September, Spain closed transactions worth €10,300 million, according to a study compiled by the main real estate consultancy firms in Spain. In the third quarter alone, investment in real estate assets amounted to €3,000 million (…).

Offices remained the second most popular asset by investment volume (accounting for 24% of the total investment volume in Spain). Investors tend to focus on Madrid and Barcelona in this segment, with the two cities accounting for 90% of total office investment (…).

Logistics assets are also sparking a great deal of interest, especially warehouses located in Madrid and Barcelona. The volume of investment in these types of assets has not stopped growing since 2012 and so far this year, investment has reached €811 million, up by €100 million compared to 2016 as a whole (…).

Barcelona rises but misses out on Top 10 place

Outside the top ten by one position, Barcelona is nevertheless above average for the European cities recommended by PwC for investment. After rising several places from 16th to 11th in the ranking, the Catalan capital has caused alarm bells to ring due to the political situation, which has led some funds to put their real estate investments in the autonomous region on standby.

PwC says that, although there is a certain degree of concern, after interviewing a large number of investors for the preparation of its report, it concludes that no one is going to stop taking Barcelona into account for their real estate investments. “Investors are applying almost zero political risk, given that they do not believe that Cataluña is going to become independent”, said one of the main directors of a Spanish real estate business to the consultancy firm (…).

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

Stoneweg Still Has €200M To Invest In Spain

10 November 2017 – El Economista

The Swedish real estate investment platform Stoneweg, founded at the beginning of 2015 by the Spaniards Joaquín Castellví (pictured below, left) and Jaume Sabater (pictured below, right) in Geneva, has an investment plan for Spain amounting to €750 million. “So far, we have spent €550 million and our intention is to continue looking for opportunities in Madrid, Barcelona and along the coast, to spend the remaining balance that we have left of the €200 million”, explains Castellví.

Both partners left the bank Edmond de Rothschild to embark on this new venture, which, in just two years has established a presence in Italy, the USA and Switzerland, as well as in Spain. In the latter, its strategy is based on property development, including both new build and renovation projects, primarily residential, which currently account for 89.5% of its portfolio. In this way, the firm is currently working on the construction of 1,600 homes and “between October and November, we will be delivering the first units”, said the Director. He added that in the case of Madrid, the firm is looking for opportunities in the centre, in neighbourhoods such as Moncloa and Arguelles, “where there is a latent demand for a type of product that has not been built for many years”.

Stoneweg’s latest project in the centre of the Spanish capital is in the former Provincial Court building in Madrid, located on Calle Ferraz, where it is going to build 25 homes. “We have already started to market the homes and in the first week alone we have sold five units”, said the Director, who points out that the prices in other neighbourhoods, such as Salamanca and Chamberí, do not fit with their strategy, since they are looking for average returns of between 15% and 20%.

In its residential business, Stoneweg is also working by means of one-off partnerships with other property developers. Such is the case of its largest operation in Móstoles, where it has purchased a plot land for 300 homes together with ACR.

Also positioned in offices

The firm also holds positions in the office sector. In Barcelona, in fact, it is working on the largest business development in the city, the Luxa complex, comprising two buildings, which have already been pre-leased to Amazon and WeWork. “We sold those two properties to Catalana Occidente and we are now searching for a tenant for the WIP building, also located in 22@, measuring 4,500 m2. Once it has been leased, we will put it up for sale”.

The Director is optimistic because he acknowledges that “clearly, all the noise and uncertainty that we are currently seeing in Cataluña is not having any effect; we continue to have faith in the fundamentals of the city (…)”.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

Starwood Capital Suspends Its Investment Activity In Cataluña

24 October 2017 – Expansión

The vehicle that the US firm Starwood Capital uses to finance real estate operations in Europe expressed its concern to the market on Friday about the situation in Cataluña. Starwood now has a presence in the autonomous region through a €46 million loan that it has granted to a new hotel in Barcelona.

Moreover, the firm has granted €61 million to two real estate projects in other areas of Spain. Starwood European Real Estate Finance, a fund that is listed on the London Stock Exchange, has said that from now on, it is going to “prioritise” its investments in other areas of the continent, keeping its distance from the Catalan crisis. “The political risk, and its potential impact on the real estate market, continues to be one of our areas of scrutiny, alongside, for example, the Brexit process, the elections in Germany and the latest events in Cataluña. The group is monitoring Spain and the situation in Cataluña closely. The tensions regarding Catalan independence are not new, but there has been a significant increase in the uncertainty there following the referendum on 1 October”, says Starwood in a note to update the composition of its investment portfolio.

The fund says that the reaction from the financial markets to these tensions has been relatively moderate and that economists predict a soft impact on economic activity in Cataluña and Spain as a whole. But the managers of this firm are more pessimistic. “Although the market has not reacted to the recent events, the group is more cautious and is only going to give priority to opportunities that are relatively isolated from the current uncertainty”. Starwood does not rule out taking another look at this market if prices adjust to the new reality. “During this time, the group will follow the political developments and also monitor the Spanish market to see whether any other attractive opportunities arise, on the basis of risk”.

Starwood’s message echoes the views of the real estate consultancy firm Colliers, whose managers said last week, in an interview with Expansión, that real estate investments amounting to €175 million have been suspended in Cataluña. Property developers such as Hispania and Merlin have also warned about the effect of uncertainty in the sector. Moreover, several private equity funds expressed their concern last Tuesday at a conference in the City of London.

Starwood European Real Estate, with almost €500 million in assets, is one of the vehicles that Starwood Capital Group uses to channel its investments. With $53,000 million under management in total, the entity holds other real estate positions in Spain through various funds. The California-based fund, founded in 1991 by Barry Sternlicht (pictured above) participated in the foundation of the hotel chain Starwood, which has now merged with Marriott.

Original story: Expansión (by Roberto Casado)

Translation: Carmel Drake

Apollo Warns Of Slowdown In Investment Activity In Cataluña

19 October 2017 – Expansión

Andrés Rubio, Head of Europe for Apollo Global Management, one of the largest funds in the world and one of the most active in Spain, has said in London that the Catalan crisis “is not good” for Spain or for Cataluña and that investors are already taking into account the risk caused by the political instability.

At a conference organised by EY and the Spanish Association of Capital, Growth and Investment (Ascri) in the British capital, Rubio explained that “Spain is a model country in Europe for how it has dealt with the (financial) crisis and for the reforms that it has undertaken, above all in the employment, taxation and banking fields”. Nevertheless, “what we are seeing now is not good at all, either for Spain or for Cataluña”, he said. “Any investor looking at Cataluña now is analysing the risk”, explained Rubio, who acknowledges that he has seen a sharp slowdown in the market. “There is less activity in Cataluña now than there was a month ago, that’s for sure”.

Apollo Global Management has been one of the funds that has invested the most in Spain in recent years. Since it decided to back the Spanish market at the height of the (financial) crisis, it has invested around €1,000 million. Its main assets include an 85% stake in Altamira Real Estate, a real estate manager purchased from Banco Santander in November 2013 for €664 million, and Evo Banc, which it acquired from Nova Caixa Galicia for €60 million. It also owns a portfolio of hotels purchased from La Caixa and it wants to grow further in that segment.

Funds

Rubio’s comments echo the opinion of the other major funds meeting in London to analyse investment opportunities in Spain. Many expressed their concern for the situation in Cataluña and said that it may affect their investment decisions over the medium term. “Uncertainty is never good”, said Fernando Chueca, Director at Carlyle. “Nobody likes instability”, explained Nader Sabaqqian, from 360 Capital Partners, a technological fund that currently holds investments in two companies headquartered in Barcelona – Xceed and 21 Buttons – and which wants to make more purchases in Spain.

Above all, investors fear the political instability that may be created within the central Government, as well as the social discontent that is growing in Cataluña as the political tension rises. The heads of most of the large funds with interests in Spain say that, for the time being, they are not going to take any drastic decisions, but if the uncertainty continues, they will have to start to take action. “International investments have been suspended in Cataluña for a year now”, said another director.

Rubio, who is a Spanish citizen, but who was raised in New York, praised the clean up of the Spanish banking system during his speech at the conference. He explained that the sector has seen a reduction in the number of banks from 49 to 12 since the start of the crisis. He added that “Spain has a tailwind” and that Apollo is satisfied with the investments it has made. “We believe in Spain and we will continue investing”, he said.

Original story: Expansión (by Amparo Polo)

Translation: Carmel Drake

RE Experts Warn That The Cataluña Situation Is Seriously Affecting Investment

17 October 2017 – Expansión

The Spanish Association of Real Estate Consulting Companies (ACI) says that the “serious” situation currently being experienced in Cataluña is affecting the normal evolution of the real estate market since investors are fearful.

The Spanish association of real estate consultancy firms, comprising domestic and international companies alike, such as CBRE, Aguirre Newman/Savills, Cushman & Wakefield, JLL, Knight Frank and BNP Paribas, warned yesterday of the consequences that the secessionist challenge is having in the real estate market.

Specifically, the association chaired by Ricardo Martí Fluxá said that “the serious situation” in Cataluña at the moment, is affecting the strong performance of the Spanish real estate market as a whole. Until the third quarter, the volume of investment in real estate assets was registering record figures, at €10,300 million, up by 58% compared to the same period a year earlier. “The latest developments are seriously affecting the normal operation of investment activity and the evolution of our real estate market”, they warned.

For this reason, the real estate consultancy firms have called for respect for the laws, appealing to the Generalitat to abide by the order established in the Constitution. “Our association joins the large number of companies, institutions and entities that are calling on the Generalitat to comply with the provisions of our laws and abide by the order established in the Constitution”, they said in a statement.

The warning from the large real estate consultancy firms follows a statement made just a few days ago by the CEO of Lar España, one of the five large Socimis whose shares trade on the (main) Spanish stock exchange.

The CEO of the listed company, Miguel Pereda, said that if his firm had to make an investment in Cataluña today, it would “probably” not go ahead with it, in light of the political situation regarding independence.

Meanwhile, on 5 October, the ratings agency Moody’s issued a report warning that the “growing political tension” may negatively affect the credits interests of the Socimis Merlin and Colonial, given that the entities hold 13 % and 19% of their respective portfolios in Cataluña.

Indeed, Colonial is one of the listed companies that has moved its corporate headquarters from Barcelona to Madrid because of the secessionist challenge posted by the Catalan Generalitat.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

CaixaBank: Consequences Of Brexit For Spain’s RE Sector

11 September 2017 – CaixaBank Research

The real estate sector has started a new bullish cycle, as evidenced by the evolution of house purchases, which have been growing at double-digit figures for two years now. Whilst internal demand has been boosted by the recovery in employment and favourable financing conditions, overseas demand has been by no means negligible: in Q1 2017, it grew by 14% YoY.

Nevertheless, this positive movement in terms of demand from overseas buyers is masking various different trends. On the one hand, most of the purchases are happening on the Mediterranean Coast and in the islands, with foreigners accounting for more than 30% of total purchases in some provinces.

On the other hand, the evolution of these house purchases varies significantly by nationality. In this sense, the uncertainty surrounding Brexit and the depreciation of the pound are leaving their mark on the acquisition of homes by citizens from the United Kingdom, the main cohort of foreign homebuyers in Spain. In Q1 2017, purchases undertaken by British citizens decreased by 13% YoY. Nevertheless, that decrease was more than offset by the uptick in purchases made by French, German, Belgian and Swedish citizens who increased their purchases at rates equal to or more than 20% YoY in Q1 2017.

The different trends observed between international buyers have generated changes in the relative weight of each country in terms of house purchases, at the same time as reducing the degree of concentration amongst certain nationalities. Although the United Kingdom continues to head up the list of overseas buyers, purchases by that cohort have gone from accounting for 21% of the total in 2015 to 15% in Q1 2017.

Looking ahead, house purchases by British citizens may regain some of their buoyancy if the Brexit negotiations evolve favourably and the pound manages to recover some of its strength. Nevertheless, periods of significant uncertainty surrounding Brexit, or a hard Brexit, could tarnish the recovery, given that house purchases by British citizens have historically been very sensitive to economic conditions in their own country. On a more positive note, the good economic outlook for the other main home-buying countries in Spain, together with the continuation of accommodative monetary conditions and the decrease in the political uncertainty in the Eurozone countries, represent an opportunity for the Spanish real estate sector.

On a more positive note, the good economic outlook for the other main overseas buyers of homes in Spain, together with the continuation of loose monetary conditions and the decrease in the political uncertainty in the Eurozone countries, represent an opportunity for the Spanish real estate sector.

Original story: CaixaBank Research

Translation: Carmel Drake

Santander Owns 40% Of Spain’s Toxic Assets After Popular Purchase

12 June 2017 – El Confidencial

Banco Santander’s purchase of Banco Popular has created a new real estate headache for the entity chaired by Ana Patricia Botín (pictured above). As a result of the operation, which was closed for the symbolic price of €1, the Cantabrian entity has taken on a significant “inheritance” in the form of toxic assets linked to property. Specifically, we are talking about assets worth almost €17,000 million – €10,300 million net – according to data submitted by Banco Popular to Spain’s National Securities and Exchange Commission (CNMV) at the end of 2016.

If we add that figure to the €10,700 million that Santander already held on its balance sheet, according to figures at the end of last year, then the entity’s total real estate exposure following this corporate operation amounts to €27,700 million. That volume represents almost 40% of the entire toxic asset exposure that the large listed banks recognise on their balance sheets, which, at the end of 2016, amounted to €70,000 million in total (…).

Despite the clean up of foreclosed assets undertaken in recent years – carried out through the direct sale of properties and portfolios and the signing of operations such as the transfer of homes to Testa – the financial institutions still have a significant volume of property on their balance sheets. And Popular had the largest exposure of any of the listed entities. In net terms, it held €10,305 million; a figure well above those recorded by CaixaBank (€6,876 million); Sabadell (€6,244.7 million); BBVA (€6,012 million); Santander (€4,787.2 million); Bankia (€2,251.2 million) and Bankinter (€260.2 million).

Moreover, in land alone, the gross value of its assets amounts to almost €8,000 million, half of its total exposure to real estate and, once again, the highest figure of any of the listed banks.

Nevertheless, the precise gross value of those real estate assets has been one of the aspects that has generated most uncertainty in the market and one of the main obstacles it faced when it came to closing a corporate operation, which Santander agreed to in the end. An increase in the provisions against Popular’s real estate portfolio after the reappraisal process would increase the coverage ratio of these assets, which currently stands at 38.5%, however, it would also reduce their net book value, which amounted to €10,900 million as at 31 March.

Property continues to be a major problem for the financial institutions despite the clean-up undertaken in recent years. In fact, despite all of the real estate clean-up efforts, the G-7 banks reduced their global volume of foreclosed assets by just 2.3% in 2016; and by 0.73% in the case of land. (…).

The purchase of Banco Popular leaves the (recently announced) sale of a real estate portfolio amounting to €2,000 million up in the air – at least for the time bing – Emilio Saracho was preparing the portfolio together with KPMG, with the aim of reducing the high volume of non-performing assets (…) on its balance sheet in an accelerated way. (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Euroval: RE Activity Is Still “A Long Way” Below The Boom Levels

7 June 2017 – Expansión

The real estate appraisal company Euroval has said that real estate activity in Spain is still “a long way” below the levels reached a decade ago.

Specifically, based on data from a simulation that it has performed, Euroval highlights that real estate activity in Spain currently represents a quarter of the level achieved during the real estate boom.

According to the appraisal company, the recent economic crisis “is still taking its toll” on activity in the Spanish real estate sector. In fact, it has highlighted that the number of mortgages granted, the volume of construction revenues and expenses and the number of transactions carried out are still way behind the figures recorded 10 years ago.

By region, whilst in Andalucía, Murcia, the Community of Valencia and Cantabria, for example, real estate activity was operating at 100% in 2004, it is now performing at 13%. Moreover, the autonomous regions that are improving their activity in this sector compared to 2004 are the Balearic Islands (45%), País Vasco (28%) and Navarra and Extremadura (22% in both).

According to Euroval, “there are no known cases of economic sectors in any country representing a similar percentage of GDP as the real estate sector did in Spain at the time of its greatest rise, after which it suffered losses of more than 80% in less than a decade.

The appraisal company considers that the volume of residential appraisals and the supply of housing are the “key” indicators that reflect this decrease. Specifically, in 2006, around 1.3 million appraisals were performed, compared with 625,000 last year.

In 2016, the autonomous region with the highest volume of appraisals was Andalucía, with 129,200. It was followed by Cataluña, with 120,400; Madrid, with 85,300; and the Community of Valencia, with 76,700.

In terms of the housing supply, Euroval’s conclusions highlight the “anomalous behaviour” in terms of housing demand in Spain, given that “despite the significant decrease in prices”, there is still “weak demand in light of the uncertainty surrounding the economy and employment”.

The data from the appraisal company also indicates that this “weak” growth has been concentrated in primary homes above all, which have increased from 15 million units in 2004 to 18 million last year.

The evolution of finished homes used to amount to around 536,600 properties, almost double the number started that year, whilst in 2016, the figures were 50,351 and 34,351 units, respectively. Euroval predicts that the market will tend towards growth over the next two years.

Original story: Expansión 

Translation: Carmel Drake

Isolux Agrees To Sell Its Parking Lots To Oak Hill

5 June 2017 – Expansión

On Friday, Isolux took some important steps in its plan to reduce to the maximum the damage caused by its delicate corporate situation. On the one hand, the company’s Board of Directors, chaired by Nemesio Fernández-Cuesta, formulated the accounts for 2016, which saw it record losses of €1,332 million, after the entity recognised provisions and adjustments amounting to €2,853 million.

On the other hand, the company reached a preliminary agreement with the investment fund Oak Hill to transfer it the entire car park business. Sources at the company indicated that the investor held an option to execute a loan of up to €100 million granted in 2015. In theory, Oak Hill’s option was limited to, approximately, half of the business of Isolux Aparcamientos. However, the company and fund have reached an agreement for that option to be extended to include 100% of the subsidiary, in an operation that could see Isolux record revenues of €10 million and deconsolidate debt of €200 million.

The Spanish group first closed an agreement with the fund Oak Hill Capital Partners to jointly develop the business back in 2015. The investment fund undertook to inject €100 million into the company, in the form of a loan allocated entirely to expand the portfolio of assets. In exchange, Isolux granted Oak Hill an option to acquire a stake in the car park subsidiary from 2019 onwards.

Oak Hill’s arrival in 2015 ended a period of uncertainty for this branch of Isolux’s activity, which had been declared available for sale after other attempts to form strategic alliances had failed. At the beginning of 2013, the Spanish group signed a preliminary agreement with the French fund Edifice Capital to invest €150 million between 2013 and 2014. The resources were going to be used to purchase new car parks, with the aim of reaching 50,000 rotating spaces. However, in a surprise move, the French firm did not keep its word and withdrew from the project.

In the meantime, Isolux is pushing ahead with the rest of its divestments, the most high-profile of which is its exit from the transmission lines in Brazil.

On Friday Isolux approved the accounts for 2016, after postponing their formulation on four other occasions, and it did so to coincide with the new process that has been launched to restructure the group and avoid bankruptcy. “The Board of Directors considers that, with the right financial support, Isolux constitutes a viable business project,” said the Board of Directors of the company, which needs new funding and credit lines to ensure its survival.

Feasibility plan

Sources at the company indicate that the auditor, PwC, has not included any qualifications in its report, but that it has included paragraphs to emphasise the link between the operation of the company and the success of Álcarez & Marsal’s feasibility plan. This plan involves segregating the engineering business from the other LoBs and looking for a partner to inject money into the new company, with a portfolio of healthy contracts worth around €1,000 million. The solution requires the support of the plan’s current creditors/shareholders. The group is waiting for a response from Bankia and CaixaBank.

Original story: Expansión (by C. Morán)

Translation: Carmel Drake

Rental Prices Will Rise On La Castellana After The Summer

6 July 2016 – Expansión

Madrid’s financial district is refreshing its image and prices are set to rise in the area after the summer. The Spanish capital’s La Castellana thoroughfare is aiming to attract tenants who are willing to prioritise the quality of space over rental costs.

Whilst investors remain attentive to the course of events unfolding in the City (London), following Brexit’s victory in the EU referendum held on 23 June, and the formation of a new Government in Spain after the election on 26 June, business is continuing as usual and the capital’s financial district is getting ready to open its doors to some new tenants. Some of the countries in the Eurozone may, over time, attract some of the activity that has been performed in the United Kingdom until now, and if this becomes a reality, Madrid’s financial district could represent a good option for companies currently headquartered in London.

Torre Europa is preparing itself to this end. Grupo Infinorsa has launched a process to renovate the property following KPMG’s departure and will allocate €20 million to the modernisation of its facilities. In the same way, GMP is in the middle of renovating the Castellana 77 skyscraper, known as Torre Ederra – the former headquarters of Saint Gobain – as well as Castellana 81 – Torre BBVA – to adapt them both to the new demands of the market. Another building that is looking for new tenants is Torre Picasso following EY’s move to Torre Titania. (…).

Sources at Cushman & Wakefield explain that demand is not growing in Madrid at the moment. “GDP levels are similar to during the years before the crisis, and so around 200,000 sqm of space is being leased out per year. The main explanation is uncertainty”. Moreover, it seems like the slowdown is more acute in the financial district, due to the quality of available stock and the cost. (…).

José Miguel Setién, Director of the Office Business at JLL, explains that renting in Madrid has been cheap until now and the price ratio is still very attractive when compared with other major European cities; this means that there is still a lot of potential in the Spanish capital. “Provided there are no political or structural macroeconomic problems, the figure trend is that the market will continue to rise”, he added.

The CEO of Aguirre Newman, Jaime Pascual-Sanchiz de la Serna, explained that offices in prime areas, as well as in the market in general, have been very static in terms of renovations and new projects. Pascual-Sanchiz says that several projects launched within the last 12 months will come onto the market within the next year. In his opinion, they will be a good indicator for measuring the evolution of offices. “The owners of those properties, including Pontegadea, Mutua Madrileña and the Consorcio de Compensación de Seguros do not have financial problems, and are not desperate to lease their properties at any price”. For the expert, although we are seeing small and medium-sized operations in the area, the large moves, which are more dependent on the domestic and international political situation, will have to be unblocked after the summer.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake