The Hatchwell’s Socimi Excem Plans a €300M Capital Increase

18 March 2019 – El Confidencial 

The Socimi Excem, which is linked to the Hatchwell family, considers that its particular business model is immune to the new Rental Act. The company specialises in the rental of shared flats to university students and young professionals. As such, its clients are not subject to some of the aspects of the new legislation that are causing the most concern, such as the new contract terms (five or six years) or the limits on avals and guarantees.

Each young person pays the Socimi an average of €600 per month by way of rent and typically stays in the property for less than a year. That allows the vehicle to generate a gross return of 7.46%.

Moreover, in Spain, around 400,000 students have to find accommodation every year and 85% of them want a shared flat, rather than a hall of residence. As such, Excem is convinced that it needs to expand its business model across Spain and, to this end, is planning to undertake a €300 million capital increase this summer to finance that expansion.

Currently, Excem has 42 flats comprising 288 rooms, spanning a residential surface area of 8,000 m2. The company wants to expand to Barcelona and Valencia first, although it also has cities such as Málaga, Sevilla, Bilbao and Vigo on its radar. The aim is to grow the portfolio to include 4,000 beds across the whole Peninsula.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

CBRE: Spain’s Student Halls Begin To Pique Investor Interest

24 September 2015 – El Confidencial

The real estate product that has received the most interest from investors over the last year has not been offices, or shopping centres or houses, but rather halls of residence. And although they have passed virtually unnoticed as an asset in their own right, they starred in some of the most important investment transactions during the first half of 2015. To give you an idea, three of the ten largest operations closed in Europe during this period involved portfolios containing student halls. (…).

Moreover, in 2015, around €1,500 million was spent on a single student hall portfolio in the UK – that amount is equivalent to the market capitalisation of Spain’s largest Socimi, Merlin Properties, when it first listed last year. And it is just €300 million less than the amount that same Socimi will pay to acquire the real estate company Testa from Sacyr.

In Spain, where there are almost 1.4 million university students, the launch of this sector looks set to be just around the corner. At least that is the conclusion of analysis prepared by CBRE, which notes that this investor appetite will end up arriving in our country sooner rather than later because, although Spain is not yet such a mature market as the UK or Germany, real estate transactions involving halls of residence are becoming increasingly attractive. According to CBRE’s calculations, Spain has a stock of around 94,000 keys, of which approximately 52,000 are located in the 5 main university cities: Madrid, Barcelona, Salamanca, Valencia and Sevilla. (…)

What is the product like in Spain? Only 20% of the halls of residence in Spain are owned privately, and operated by their owners, whilst the remaining 80% are properties that are publicly owned or belong to the universities, or religious institutions, which are managed under concession agreements. Although the transactions that have closed in Spain have not been talked about as much as those in the rest of Europe, several operations have been signed. The largest one to take place during the first 6 months of the year was The Student Hotel’s (TSH) acquisition of a portfolio containing two halls of residences in the Melon District of Barcelona (Poble-Sec and Marina). The TSH platform was acquired by the US fund manager Perella at the end of 2014.

These two halls of residence, which previously belonged to BBVA, comprise 597 keys and 152 parking spaces, as well as around 3,465 m2 of restaurant and retail space across the two buildings.

In addition, in Madrid, two important concessions agreements, both in the Ciudad Universitaria neighbourhood, have changed hands. Also in the capital, construction has begun of the future Residencia El Faro, a 370-key project that will be operated by The Student Hotel and is located at number 2, Calle Isaac Peral, opposite the Hospital Universitario Fundación Jiménez Díaz. The same operator will also manager an even larger project, comprising 570 keys, currently under development in Barcelona. Both developments will require a total investment of €52 million.

CBRE predicts that several transactions could be closed over the next few months, given the high level of interest from international investors and managers looking to expand their businesses in Spain, a country that is home to 4 of the 10 cities that are most sought after by European students wishing to participate in the Erasmus program.

The UK market is the most active in Europe

Purchasers of these products have undoubtedly been most active beyond our borders. In England for example, transactions worth €2,950 million were recorded in 2014, and that figure almost doubled during the first half of 2015, with transactions amounting to €5,650 million. (…).

The German and Dutch markets, which have stocks of 234,000 keys and 400,000 keys, respectively, are also developing fast. (…).

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake

Student Halls In Spain: A Wise Alternative Investment?

17 February 2015 – Idealista

When we talk about real estate investment in Spain, we tend to mean the purchase of offices, hotels and shopping centres. Nevertheless, there is another type of property that may also generate high returns: student halls of residences. However, unlike in other European countries, this accommodation does not totally convince investors looking for assets in Spain. The lack of companies that know how to optimise them, and the shortage of the ideal product are some of the reasons why no transactions are being closed in this segment, despite considerable interest.

Spain had around 1.41 million students enrolled in universities during the academic year 2013-2014, according to the Ministry for Education, Culture and Sport. That is, a little over 3% of the Spanish population were university students. This percentage places Spain ahead of other countries such as Germany and France. The majority of these students (77%) studied courses in their home province, but 20% moved to another province to study and around 3% were from overseas.

Delving more deeply into their lifestyle: approximately 64% of university students live at home with their parents or other family members. At the other extreme, those who live away from home only have two options: rent (either in a shared house or on their own) or live in halls of residence. Specifically, only 2.8% choose to stay there.

In the opinion of the experts consulted, these figures are justified by the “very low” availability of public university halls. “Although there are significant cultural differences, certain aspects indicate that the market for university halls of residence in Spain will have to converge with that of the rest of Europe”, says a report published by JLL.

The consultancy firm is convinced by its analysis that the implementation of the Bologna education reforms will promote cross-border studying between European universities, “which tend to have much high percentages of students living in halls”. In Spain, it is normal for students to opt for this type of accommodation during the first and second years only.

“The flow of students travelling to study in other countries will increase over the coming years and not only in relation to Erasmus placements”, says Patricio Palomar, Director of Office Advisory and Alternative Investment at CBRE. In his opinion, issues such as the language (Spanish), the lifestyle and the affordable prices in comparison with neighbouring countries, are just a few of the attractions that draw many foreign students to choose Spain as their destination.

The main drawbacks

Unnim, the entity created from the merger of Cajas de Manlleu, Sabadell and Terrassa, is active in this market. The bank, which was acquired by BBVA in 2011, inherited this line of business from Caixa Terrassa. The former caja constructed its first hall of residence on the Avenida Parallel, 101, in the Poble Sec neighbourhood of Barcelona back in 2007.

According to the latest data available for Unnim, this business line generated a return of 7%. Sources in the sector explain that the net return on these types of assets can reach 10%, well above the rates offered by offices, hotels and shopping centres. In countries such as the UK and USA, this business generates returns of between 11% and 15%.

Juan Manuel Ortega, Director of Investment Offices at JLL, recognises that British firms are over-valuing these types of assets in Spain. These investors are looking for halls of residences that are larger than 5,000 m2 and that have between 60 and 150 rooms. Palomar also acknowledges this trend “the same funds that operate in the UK for example are looking (for opportunities) in Spain. The problem is that the same product is not available in other countries”.

Palomar maintains that student halls in Spain are obsolete and that many of them are stuck in the 1960s. That does not happen in cities such as Amsterdam where student accommodation is modern, hotel-like and less than 10 years old.

Another one of the pitfalls that affects this business is the ownership of these spaces. Most belong to the public universities, many of which have serious financial problems and cannot afford to finance the investment needed to optimise the assets. At the same time, they cannot sell the land and allow private companies to enter the sector.

This has a very direct effect on competition; it is low, which does not lead to an improvement in the facilities either. Similarly, experts recognise that the administration of these complexes is not simple, they require professional management.

Nevertheless, Palomar states that new student halls of residence are appearing in the outskirts of cities and near private business schools. “I think Spain should focus on other kinds of tourism, beyond the holiday market; educational and health tourism (have significant potential)”.

A trickle of transactions

The lethargy in this market is such that transactions are very scarce. The last known deal involved the purchase of the Galdós halls of residence in Madrid in 2012. The British firm, Knightsbridge Student Housing paid €20 million for the property, it was the first acquisition made by the company outside of the UK. Knightsbridge Student Housing was created in 2010 with the backing of Oaktree Capital Management.

Another of the most talked about transactions involved Lazora (Concha Osácar) when it acquired the Resa Group in 2011. Resa was created in 1994 and currently manages more than 8,000 beds in 32 halls of residence. The construction company Acciona also has give halls of residence (in Albacete, Cádiz, Castellón, Lleida and Murcia), which it has tried to sell in the past.

Further proof that this branch of real estate activity in Spain is still light years away from what is happening in other countries, is that Socimis dedicated to student accommodation already exist overseas. In 2013, GCP Student Living constituted the first REIT (Real Estate Investment Trust) in the UK.

Original story: Idealista (by Estefania Fonseca)