M&G Invests €80M to Strengthen its RE Portfolio

29 May 2018 – Expansión

The real estate division of the London-based firm M&G Investment has decided to bet significantly on the Iberian market, where its exposure now exceeds €500 million. “We are partners of institutional investors looking for core properties in the best locations across Europe. We opened our office in Spain in 2016, but we completed our first operations there a year earlier”, explains Federico Bros, Director of Asset Management for Spain and Portugal.

Its first operation involved the purchase of the former headquarters of Telefónica located on Calle Ríos Rosas (Madrid) and leased to the advertising giant WPP. “It is an example of what we look for, well-located assets with long-term contracts, 17 years in this case. Between the renovation and purchase we will invest €175 million in that property”, says Bros.

After that acquisition came others, such as an office building in Barcelona’s 22@ district and, recently, five operations with a very diverse profile. On the one hand, M&G purchased three commercial assets: two in Madrid and one in Granada. “The premise in Granada, measuring 2,500 m2, is located on Reyes Católicos, the best shopping street in the city”, explains Bros. In the case of Madrid, M&G acquired two retail premises on Gran Vía 68. “We closed this operation in May but we have been negotiating it for months, given that the building was being renovated. A few months ago, a large Tony Roma’s restaurant opened there and Sabadell is going to open its flagship branch in the other premise in a matter of days”, he said.

Similarly, the firm acquired two industrial assets in Madrid, specifically a logistics platform, leased to Teka, in the Corredor del Henares, and another complex in Getafe. Those two sites span more than 55,000 m2. In total, the firm has invested €80 million on its latest operations, channelled through two funds: MEP and EuroSPIF.

More opportunities

Following these investments, the manager is still looking for opportunities in the Spanish market.

“We are involved in several processes, both official and off-market, in Madrid, Barcelona and prime locations in other cities. Spain is a priority country for us”, says Bros.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Madrid’s Offices Record Highest Occupancy Rates For 10 Years

29 November 2017 – Eje Prime

Offices are getting increasingly busier. In Madrid, the real estate sector is recording pre-crisis figures, with an occupancy (take-up) rate during the first nine months of the year of 359,000 m2, the highest volume for a decade.

This indicator is also encouraging the leasing of workspaces. According to a report from the consultancy firm Knight Frank, the Madrilenian office market is aspiring to close 2017 with half a million square metres of space leased, in large part, thanks to the 3.1% growth rate of Spain’s Gross Domestic Product (GDP). This data consolidates the Spanish capital as a point of reference for the sector across the country and makes it one of the fastest growing markets in Europe.

The volume of investment in this segment of the tertiary sector as at September 2017 was €928 million, with British and US investors increasing their activity by the most this year. That fact has caused the domestic quota to decrease from 80% to 65% in just twelve months.

The availability of office space in Madrid has decreased by 11.6% during the same period; the expectation is that over the next two years, the pipeline of stock will increase by 325,000 m2. Of that future space, 26% is already leased, most notably, the 36,000 m2 of space that the British company WPP acquired on Calle Ríos Rosas, where the former headquarters of Telefónica was located, and the 48,000 m2 of space that the Ministry of Foreign Affairs is going to make use of at number 8 Plaza del Marqués de Salamanca.

In terms of the economics, the high demand in this market in the Spanish capital is resulting in an increase in prime rents in the city, with an upward trend that saw rental prices reach €29.50/m2 during the third quarter.

Original story: Eje Prime

Translation: Carmel Drake

M&G Real Estate Buys 16 Santander Branches For €56.2M

25 May 2017 – El Economista

The fund manager M&G Real Estate has signed another deal in Spain, this time to become Banco Santander’s new landlord. Specifically, the firm has just signed an agreement with the Socimi Uro Property to acquire 16 of the financial institution’s branches for which it has paid €56.2 million.

The operation, which was closed at a premium with respect to the most recent valuation of the transferred portfolio, also includes the granting of a call option over another branch, which may be executed in the short term.

According to the Socimi, which owns approximately one-third of Banco Santander’s branches, the portfolio that M&G has purchased generates annual rental income of €3.04 million and comprises seven branches from the so-called Blue portfolio and nine from the Green portfolio.

The classification of the branches into these portfolios reflects the maturity dates of the corresponding rental contracts. Thus, in the first case (Blue portfolio), the lease contracts are due to terminate in 2045, 2046 and 2047, and may be extended for another seven years. In the case of the assets included in the Green portfolio, the lease contracts are due to mature between 2036 and 2038.

These terms of 30 and 20 years, respectively, match the British manager’s investment strategy, given that it seeks safe, long-term operations. In this way, the firm’s first operation in Spain was closed in 2015, when it acquired Telefónica’s former headquarters in Madrid, located in the heart of the city on Calle Ríos Rosas. It paid €175 million for that property, which is now the headquarters of WPP.

Following the sale, Uro will continue to own a portfolio of bank branches whose approximate value amounts to €1,893 million. When the Socimi debuted on the stock market, in March 2015, it managed 1,136 Santander branches, nevertheless, in April 2015, it sold a portfolio of 381 branches to Axa Real Estate for €308 million, leaving 755 branches, which cover a surface area of more than 340,000 m2.

Original story: El Economista (by Alba Brualla and Javier Mesones)

Translation: Carmel Drake

JLL & IESE: Investors Are Willing To Take On More RE Risk

30 March 2016 – Expansión

The increase in liquidity, accompanied by the lack of profitability of alternative assets – such as the bond market – and the volatility of world stock markets all mean that the real estate sector is regarded as a very attractive option for investors. This trend, which was first glimpsed last year, will be maintained in 2016, but there will also be a step up in terms of the risk curve this year. That is one of the main conclusions emerging from a report prepared by the consultancy firm JLL and the business school IESE, on the basis of interviews with 101 investors in the sector, both domestic and international.

More yields / Most investors are looking for value added opportunities in light of the scarcity of prime assets.

The study indicates that the lack opportunities to add value in prime areas and the increase in funding means that investors are willing to take on more risk in their operations in the real estate market, although they continue to analyse the feasibility of these assets and check that they are financeable, given that capital continues to be selective.

In this way, investors have expanded their radars to other less exclusive areas and to buildings that need renovating. One example of how investors are willing to take on more risk with their operations is the purchase, in July 2015, of Telefónica’s former headquarters on Calle Ríos Rosas (Madrid) for €90 million by the institutional investors M&G. The building will be completely renovated and its tenant will be WPP, the multi-national media agency and marketing group.

Similarly, the report detects interest for alternative investments, such as student halls and health centres, as well as an increase in rental prices.

Asset values are on the rise

Following a record year in the commercial real estate market, with investment of €9,200 million, 89% of investors expressed a “high” or “very high” interest in the Spanish market, compared with 10% who expressed a “low” level of interest. In addition, 60% of the investors surveyed consider that the value (of assets) will continue to grow for another 18 months, at least.

The responses to the survey reveal that the typical investment in the commercial real estate market falls in the range of €30 million to €100 million, with a gearing level of between 50% and 60%. The average investment time horizon is less than five years, with an initial yield of between 5% and 7% and an IRR of between 8% and 14%. Offices in Madrid and Barcelona, logistics warehouses and shopping centres are the business segments in most demand. They are followed by retail premises on main streets and hotels, whilst the assets generating the least interest are residential properties and land.

Looking ahead to the future, investors remain alert to Spain’s political situation. The investors surveyed consider that the political uncertainty at home may slow down the upwards cycle seen over the last few years and they express concern regarding the possibility that some local governments, such as the one in Barcelona, are not granting them the permits they need.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Knight Frank: Demand For Offices Soared By 30% In 2015

11 January 2016 – Cinco Días

The city of Madrid exceeded the real estate sector’s expectations with respect to the leasing of office space in 2015, as the volume of office space rented by companies grew by almost 30%, representing the best figure since 2008. In Barcelona, on the basis of data as at Q3, the increase was even greater, at 91%.

The real estate market is recovering at the same time as companies are starting to forecast their own growth. Unlike in recent years, during which time many companies have been delaying the decision to move offices or lease more space – because many of them have been involved in processes to reduce their workforces – last year there was a recovery, showing confidence in the future.

In Madrid, office rental agreements were signed for a total surface area of 480,000 m2 in 2015, the highest figure since the start of the crisis in 2007. The data was published last week by the real estate consultancy Knight Frank, which compiles industry information. The most optimistic forecasts predicted that the year would close with a figure of around 420,000 m2. The actual volume represents an increase of 27% with respect to the previous year. In 2014, 358,000 m2 of office space was leased out.

The minimum in the historic series was recorded in 2012, when 261,000 m2 of office space was leased out, at the height of the storm over sovereign debt in the countries in Southern Europe and when doubts over the economy were at their peak. By contrast, the best year was recorded in 2007, when 828,000 m2 of office space was leased.

This shows the positive behaviour of the market in recent months, which, in turn, has resulted from the strong macroeconomic outlook. At the end of the year, BNP Paribas Real Estate forecast that the volume of office rental operations would increase by 100,000 m2 in 2015 and by a further 84,000 m2 in the case of Barcelona.

In the Catalan capital, where full year data for 2015 is still pending, the volume of office space leased almost doubled during the first three quarters. During the 9 months to September, operations relating to 297,000 m2 of office space were closed, an increase of 91% according to the data provided by the consultancy firm CBRE.

The second half of the year has performed even more strongly in terms of new demand in Madrid. During the six months to June, office space measuring 198,000 m2 was leased; and from June to December, that figure amounted to 282,000 m2, i.e. 42% higher.

The most sought-after areas in Madrid are located inside the M-30, where there is a shortage of high quality buildings. In the case of Barcelona, demand is highest on Avenida Diagonal, el Paseo Gracia, the 22@ district and Plaza Europa. (…).

Moreover, the lack of high quality space, combined with the greater volume of demand, drove rental prices up by 6% in the best buildings in Madrid in 2015, to reach €27/m2/month. Even so, that rental figure is still one of the lowest in the historic series, well below the figure of €45/m2/month that tenants paid in 2008.

The main operations

One of the most important office rental operations in the capital involved the agency WPP, which took over a 36,000 m2 building on Calle Ríos Rosas. Another highlight was KPMG’s expected move to the 20,000 m2 Torre de Cristal, owned by Mutua Madrileña. Meanwhile, the bank BNP Paribas leased offices measuring 19,100 m2 in a building owned by Torre Rioja. Also, the consultancy EY signed an agreement to move into Torre Titania, owned by El Corte Inglés.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

WPP Buys, Sells & Leases Back New HQ In Madrid

28 July 2015 – Expansión

The British group WPP has closed a simultaneous operation for the purchase, and subsequent sale & leaseback, of Telefónica’s former headquarters on Calle Ríos Rosas in Madrid.

The investment, including the purchase and subsequent renovation of the property, will amount to €150 million. Following the refurbishment, the communication and publicity company will occupy the building under a lease contract and locate its Spanish headquarters there.

According to the real estate consultancy firm, Knight Frank, this purchase is one of the largest office building transactions carried out for own use in the Spanish capital. The consultancy firm has advised the seller of the building, the asset division of Nozar, which is currently immersed in bankruptcy proceedings.

Simultaneously, the communication and publicity group has sold the building to a British fund manager through a sale & leaseback transaction, in such a way that the British firm will occupy the property as the tenant and the fund manager will be the landlord.

The building is located at number 26, Calle Ríos Rosas in Madrid and has a surface area of 36,000 m2. WPP’s objective is to unify its offices in Madrid. In total, 2,500 employees work in the city at various companies, including Ogilvy Group, Burson Marteller and Hill & Knowlton.

Original story: Expansión

Translation: Carmel Drake