With more than €6.1 billion invested in the year to June, Spain consolidated its position as one of the favourite destinations for investors, behind the United Kingdom, Germany, France and Holland.

The Spanish property market is still monopolising the flow of investment capital to Spain. With 6.161 billion euros invested in the first half of the year, Spain accounted for 5% of the total volume invested in the European market and has consolidated its position as the European country with the fifth highest volume transacted until June, behind the United Kingdom, Germany, France and Holland.

Overall, investment in the real estate market in Europe exceeded 120 billion euros, 10% less than in the same period of the previous, record-breaking, year, according to a report prepared by the consultancy CBRE.

By country. The United Kingdom is the leader in investments, with 34.4 billion euros, followed by Germany with 24.5 billion euros. In both cases, investments fell by 6%.

Behind these countries is France, with 11.9 billion euros; Holland with €10 billion; Spain with €6.1 billion; and Sweden with €5.1 billion.

By asset type. The office market was, once again, the segment that attracted the largest volume of investment in Europe, with 52 billion euros, 41% of the total; followed by alternative assets – student and senior citizen residences and healthcare facilities – with 21%; retail (20%), logistics (11%) and hotel management, 7%.

A takeover bid for Axiare

Spain. Colonial’s bid for Axiare encouraged investment in the sector during the first six months of the year, which, despite everything, came in at 15% below that registered in the same period of the previous year.

The acquisition of Axiare, which specialises in offices, by its rival Colonial, accounted for 30% of the total volume transacted in the first half of the year and leveraged the total investment in offices, to 2.036 billion euros.

The most active segment behind offices was retail. With 1.689 billion euros transacted in the first six months of the year, retail accounted for 27% of the total, thanks to the large volume invested in commercial centres with, among others, Redevco and Ares’ purchase of 70% of Parque Corredor for 140 million euros.

Operations focused on high street stores also encouraged investment in retail. Last January, the German fund manager Deka finalised its acquisition of 16 stores owned by Inditex, of which 14 are located in Spain, for some 400 million euros.

The next most significant segments by volume transacted were hotels, with 869 million euros, and logistics, with 716 million euros. 589 million were also invested in the residential sector, almost the same figure as in the first half of 2017, while purchases of alternative assets saw investments of 125 million euros.

Upward forecasts

As for forecasts for the end of the year, CBRE believes that the recovery in the real estate market in Catalonia that, after the independence referendum of last year, has experienced a certain measure of paralysis, along with the finalisation of some large operations currently under negotiation, will see the conclusion of 2018 reaching investment levels similar to those of previous years. Investments in 2017 reached 12.9 billion euros.

The director of Capital Markets at CBRE Spain, Mikel Marco-Gardoqui, explains that taking into account the various “large-scale” operations in advanced negotiations and the return of activity to the investment market in Catalonia, the prospects for the end of the year are “rosy.”

Among these operations is the purchase of four shopping centres owned by Unibail Rodamco for 490 million euros by Vukile. Specifically, the sale of Los Arcos (Seville). Bahia Sur (Cadiz), Faro (Badajoz) and Vallsur (Valladolid) by the South African fund was finalised at the end of July and will be counted, therefore, amongst the transactions closed in the third quarter.

Also, the finalisation of the sale of the three shopping centres sold by CBRE GI and Sonae – Gran Casa (Zaragoza), Max Center (Bilbao) and Valle Real (Santander) – for around 500 million euros is expected in the coming months. According to Expansión, the Slovak fund J&T, in alliance with Sonae, is a favourite to acquire this portfolio of commercial assets.

Corporate operations will also continue to boost the sector in the second half of the year. Among the operations that will boost the real estate market is the purchase of Hispania by Blackstone. The American investment fund finalised its takeover of Hispania last July, after taking control of almost 91% of the Socimi.

The offer from Blackstone, which already held 16.56% of the socimi’s capital, values Hispania at 1.992 billion euros and makes the US fund the largest hotel owner in Spain.

Marco-Gardoqui explains that Spain’s benign macroeconomic prospects, the potential for revenue growth in the office sector, the strong growth of electronic commerce and the need for adequate logistics spaces will continue to undergird the real estate sector.

Likewise, the consultancy underlined the opportunities in the alternative asset segment, which have an extensive need for development and professionalisation. Together with the availability of low-cost capital at low cost, the sector is expected to attract additional capital.

The largest of these real estate companies multiplied their assets fourfold since their first major acquisitions in 2015. Axiare left the continuous market and Hispania will soon follow as the sector undergoes a period of concentration.

The success of the socimi regulatory regime since its launch in 2013 is reflected in the gigantic portfolio of assets that these real estate companies have amassed in the last few years. The four largest listed companies have already accumulated portfolios of properties worth nearly 30 billion euros in three or four years of operation, according to the companies’ financial reports for the first quarter of 2018.

The development of a regulatory regime for these listed real estate investment companies was helmed by the then Minister of Finance Cristóbal Montoro, as these companies were exempted from paying corporate taxes in exchange for obligations such as having to distribute at least 80% of their dividends (which is taxed) and a listing on the stock exchange, guaranteeing transparency, among other requirements. The regulatory regime followed the example of REITs (Real Estate Investment Trust), which have a long history in the US and Europe.

These companies are focused on the property business, and they lease their properties, which are principally offices, shopping centres and commercial premises, hotels, rental homes and logistics warehouses.

The launch of the regulatory regime coincided with the recovery in international confidence in Spain (after the sovereign debt crisis and doubts about its financial system) as some foreign firms (mainly investment funds and later institutional capital such as insurers) that returned to the market, betting on a recovery in the reactivation of the Spanish real estate market. Moreover, socimis have been one of the principal channels for investing these international flows of capital in this type of asset.

At Least €15 Billion More on the MAB

Spain’s Alternative Stock Market. The MAB found a way to grow through the socimis. 59 of these real estate companies have already listed on the market, often as purely tax vehicles, with no major movements in their limited free float and which also do not carry out large purchases. Among them, three big ones stand out: GMP (owned by the Montoro Alemán family and Singapore’s sovereign wealth fund, GIC), Uro Property (with Santander’s banking offices) and General de Galerias Comerciales (owned by the executive Tomás Olivo). At the end of last year, there were 44 of these companies in the MAB, with a value of 12.221 billion euros (+60% y-o-y), according to data from Armabex, a registered advisor.

Testa Residencial. Among the 15 socimis that joined the MAB in the last months, Testa, which is owned by Santander, BBVA, Acciona and Merlin, stands out. Testa debuted at the end of July with €2.275 billion in rental housing. Along with other companies that launched on the market this year, there are now 59 firms with at least €15 billion in property. Initially, Testa had planned to debut on the continuous market, but market doubts in June led the company to opt for its plan B. The company still plans on a move to the continuous market in the future.

Records for investments in this type of property were broken in 2015, 2016 and 2017. In the past year, 13.99 billion euros were allocated to acquisitions, according to the real estate consultancy JLL, with international funds and socimis as the main players.

The growth of these companies over the last three years has been spectacular. In the first semester of this year, when the socimis published updated property valuations, the big four had €27.336 million in their portfolios (up 3% compared to the end of 2017). The four include Merlin Properties, Colonial, Hispania and Lar España. Taking the first quarter of 2015 as a baseline, when the largest of these companies were already active and began to make their large purchases, these same companies had a total of €6.691 billion. That is a fourfold increase in three years.

If one takes into account that Colonial had not yet become socimi that year (the developer changed status in 2017), the jump is even greater since, at the time, Axiare (absorbed a few months ago by the Catalan company) is one of the top four, with only €465 million in its portfolio. At that point, Merlin, Hispania, Axiare and Lar España had total assets of €4.2 billion, 6.5 times less than at the present date.

The success of these companies has led them to be targets of large corporate operations in the sector in recent months, in a period of concentration that experts believe will continue for the time being.

The largest then, as now, is Merlin (listed on the Ibex-35), which has Ismael Clemente as its CEO. The socimi already owns properties worth €11.755 billion, mainly offices and shopping centres and commercial premises, although with increasing investments in the thriving logistics warehouse sector. The company was launched after convincing investors, mainly Americans, to acquire the so-called Árbol (Tree) portfolio and its 800 BBVA banking branches.

The socimi debuted on the stock exchange in 2014 and grew rapidly with the acquisition of Testa from Sacyr in 2015 (€1.8 billion cost) and the integration of Metrovacesa’s tertiary assets (buildings valued at €1.67 billion) in 2016. At this point, Santander became its largest shareholder, with 22.6% of the capital. The rest is highly diluted, with large international funds as the most common investors. Its flagship buildings include the Torre Agbar, where Facebook will open an office (through the CCC outsourcing company) to monitor and control harmful content on the social network.

Merlin is closely followed by Colonial (Ibex 35), which has assets valued at €11.19 billion, compared to €2.185 billion in 2015. The historic real estate company began operations in Barcelona in 1946 and decided to become a socimi last year for the tax benefits. It has made major strides through its investments, including its recent takeover of Axiare, for which it paid €1.7 billion, giving Madrid a greater weight in its portfolio. The portfolio, mainly offices (91%), includes properties controlled by its French subsidiary SFL, with buildings in Paris (33% of the total value). The core of Colonial’s shareholders includes the Mexican investor Carlos Fernández González (18.3% of the capital), the Qatar Investment Authority (10.6%), the Colombian group Santo Domingo (7.3%) and the perfume family Puig (5.1%).

The other major socimi that has been the protagonist of a recent corporate deal is Hispania, listed since 2014, which was recently taken over by the giant American fund Blackstone. In fact, Blackstone has controlled 90.5% of the socimi since the end of July and is expected to abandon the socimi tax regime in the coming weeks. The company has €2.185 billion in real estate, 66% of which corresponds to hotels. The US fund plans to use Hispania’s assets to create a large hotel platform after having also acquired the HI Partners from Sabadell for €630 million.

After the acquisitions of Hispania and Axiare, the only large company that will remain on the continuous market is Lar España, which is managed externally by Grupo Lar, with the Pimco fund as its main shareholder (19.6%). It was the first socimi to make the jump to the stock market and has assets of €1.58 billion, of which 82% are shopping centres, following its strategy of focusing on the retail sector. With that in mind, the company announced the sale of its logistics park to Blackstone for €120 million at the end of July.

The Mahou-Calderón project is pushing ahead. Tomorrow (Thursday), the Town Hall of Madrid is going to approve the urban development plan for the land, one of the most sought-after plots in the Spanish capital. The roadmap for the site, which is still home to the Vicente Calderón stadium, the historical home of Atlético de Madrid, means that the construction work will begin after the summer and will be scheduled for completion within three years.

After the summer, Atlético de Madrid and Mahou, the owners of the batch of land, hope that the period of public consultation will be completed so that they can start to demolish the stadium, according to El Confidencial.

The building work will be divided into three phases, starting with the demolition of the Calderón. Next, and after modifying the traffic flow that passes under the pitch, the roads between Paseo de los Pontones, Paseo Imperial and Paseo de los Melancólicos are going to be urbanised.

The first phase of the project is also going to be the most expensive, with an investment of €22.7 million, half of the total budget established (€42.2 million) for this ambitious urban development plan. The Government of Madrid is going to contribute another €60 million to cover over the road.

The finalists: Solvia, Ibosa and Princeton 

Waiting to see what happens tomorrow in the Town Hall are Solvia, Ibosa and Princeton, the three finalist investors looking to buy the plots, which will expand Madrid’s residential stock by another 33,339 m2 of buildable land, located on a plot with a buildable surface area of 132,344 m2.

The objective of Atlético de Madrid with this project is to raise up to €200 million from the sale operation. The club is planning to use that extraordinary capital to repay Carlos Slim the €160 million loan that he granted the sporting entity to complete the building work on its current stadium, the Wanda Metropolitano.

El Corte Inglés is selling off assets to alleviate its debt. The department store group is negotiating the rating for its bond issue on the capital markets in an effort to reduce its dependency on the banks. In the context of this plan, the company is going to launch a string of asset divestments worth €2 billion.

The company is already working to sell assets worth up to €300 million before the autumn when it will launch the bond issue. With these resources, El Corte Inglés will have to pay off a bridge loan with Banco Santander, Goldman Sachs and Bank of America Merrill Lynch, according to El Confidencial.

The aim of El Corte Inglés is to close these operations before October, which is when the bond issue is scheduled. Through this plan, the company hopes to reduce the company’s current debt balance of €4 billion to €2 billion.

The group has already received purchase offers for some of its most profitable establishments, including those in Madrid, Barcelona and Marbella. One of them is Torre Titania, on the site of the former Windsor Building in Madrid. At the other end of the scale are the centres it opened during the start of the crisis: around 24 stores that generate heavy losses for the most part.

Last Friday, El Corte Inglés sold a percentage of share capital agreed three years ago, amounting to 10%, to the company Primefin, which is owned by Sheikh Hamad Bin Jassim Bin Jaber Al Thani. That operation was the result of the repayment of a €1 billion loan that Primefin made in July 2015. The company paid, through the delivery of shares equivalent to 0.75% of the share capital, the third and final instalment of the interest corresponding to the loan.

Primark is finally entering the centre of Barcelona. The low-cost fashion company is going to open a flagship store at number 23 Plaza Cataluña, in a building owned by the fund manager IBA Capital, according to confirmation from real estate sources speaking to Idealista News. Until now, the property has been occupied by the El Corte Inglés department store group, but now the Irish chain is going to take over the 7,393 m2 property.

IBA Capital acquired the building in 2013 for €100 million and, over the last six months, since it has been on the market, the asset has attracted attention from the main fashion groups in Europe, including H&M, Primark, Inditex and the Japanese firm Uniqlo.

The building has a gross leasable area of 7,393 m2 and is located at the junction of Plaza Cataluña and Las Ramblas, one of the new commercial thoroughfares in Barcelona following the opening of establishments by the Galician giant Inditex there, as well as by operators such as Mango, Apple and Urban Outfitters.

The building was leased in its entirety to El Corte Inglés until a few months ago, which operated it through a multi-brand concept with firms such as Gap, Tommy Hilfiger, Guess, Diesel, Maje, Sandro, Stefanel and Desigual.

The property was renovated in 1998 and used to house the former headquarters of Banco Central and one of the only stores that the British firm Marks&Spencer used to have in Spain. Following the purchase by IBA Capital, El Corte Inglés and the fund signed a sale and leaseback contract, which expired in 2018.

IBA Capital in the Spanish market

Founded in 2013, IBA is led by Thierry Julienne and Jesús Valderrama, the founders of the investment vehicle. The fund manager has the capacity to manage all classes of real estate assets and its portfolio is currently worth €1 billion.

The portfolio comprises more than a dozen assets situated in first-rate locations in Madrid and Barcelona. Its properties include number 18 Gran Vía, number 9 Preciados and the ABC Serrano shopping centre, which have been acquired for subsequent renovation.

The other assets are office buildings including the property at number 96 Calle Santiago de Compostela, in Madrid and the Tripark Business Park, in las Rozas. Moreover, the fund owns the Vodafone Building, located at number 115 Avenida de América, and the Manoteras Leisure Park, also in the Spanish capital.

A new commercial space is available for rent in the centre of Barcelona. Massimo Dutti, one of the chains in the Inditex group, closed the doors to its establishment at number 60 Rambla Catalunya, on the corner with c/Aragón on Tuesday. The Coma-Cros family, which owns the building that is home to the store, has put the property on the market.

According to sources at the chain, the closure of the Massimo Dutti store forms part of the Galician group’s current process to reorganise its network of shops; it is focusing on getting rid of small stores in favour of larger establishments. Massimo Dutti already has another store on the corner of Gran Vía and Rambla Catalunya and another one on Paseo de Gracia, the latter in the former premises of Vinçon.

The building at number 60 Rambla Catalunya is owned by the Coma-Cros family and proceeds from a saga relating to the textile sector, whose company, based in Salt (Girona) shut down in 1999 after 149 years of operation.

According to explanations from sources in the real estate sector speaking to Eje Prime, the premises occupied by Massimo Dutto until now has been put on the market. The asset has a surface area of around 1,065 m2 and its neighbours include Tezenis and Rituals.

The Coma-Cros family channels its investment activity in the real estate sector through the company Fisa 74, which it manages through Fisa Rentals. The company owns residential assets for rent in Barcelona, on Calles Aribau, Bailén, Les Corts, Rambla Catalunya and Gran Vía.

Rambla Catalunya has become one of the most sought-after streets in Barcelona for retail operators. According to data from the consultancy firm CBRE, in 2017, the street accounted for 30% of the prime high street rental operations in Barcelona. Avenida Diagonal, meanwhile, accounted for 25%, followed by Paseo de Gracia with 22%, Portaferrissa with 13%, Pelayo with 7%, and Portal de l’Àngel with 3%.

Since 2014, around fifty operations have been closed on Rambla Catalunya, which has led to the modernisation of the offer on the street. In 2017, operators such as Etam, CKS, Lily and Pangea arrived, amongst others.

According to sources in the sector, the speed at which a new tenant for the asset is found will depend on the price set by the owners, given that price is proving to be the main stumbling block in the negotiations currently underway in Barcelona. According to CBRE, rents for stores measuring between 800 m2 and 1,500 m2 on Rambla Catalunya amount to around €30/m2/month.

The building where Capgemini is going to move more than 800 of its employees has been constructed by the real estate group GMP and designed by the architect Rafael de la Hoz, according to explanations provided by the company in a statement.

The company, which provides consultancy, technology and digital transformation services, is going to be the first tenant to occupy the building which spans a surface area of 9,365 m2.

Through these new offices, the firm is seeking to encourage collaboration between its employees in an “open, multi-disciplinary and occupational well-being work environment”. This idea will be developed both through the furniture, as well as through the common area services, digital resources and the design itself.

At the same time, the new headquarters will have a co-innovation centre in such a way that clients and partners will be able to connect with universities, emerging companies and business schools to evaluate new business models and assist with digitalisation processes.

The CEO of Capgemini in Spain, Francisco Bermúdez, explained that the change of headquarters seeks to “respond to the company’s innovation strategy at the global level”, which is why “we are backing new organisational structures that prioritise models of collaboration and experimentation.

The CEO confirmed that the Oxxeo building “will provide us with the facilities and resources that we need, and will embody the company’s identity in terms of vanguard and innovation”. Most importantly, it will offer “a renovated and well-equipped workspace with more resources for the well-being of our professionals”.

Sustainable headquarters

The building chosen by the corporation stands out due to its sustainability, given that it is the first office building in Las Tablas to be awarded the Leed Platinum pre-certificate, the highest possible distinction granted by the US Green Building Council (USGBC).

It is also one of the most pioneering buildings in Europe, the first of its kind in Madrid and the second in Spain, to be included in the WELL Building Standard certification process, the leading global certification for buildings that focuses solely on human health and well-being.

Singapore, Singapore. Photo credit: sukhrahul/Pixabay

The Pestana Group began construction on the Pestana Douro Hotel in Gondomar, designed by David Sinclair, an architect who has been working with the Madeiran group for many years. The new hotel is based on the rehabilitation and requalification of the old Floral Factory building in Gondomar, next to the Pousada do Freixo, on the north bank of the Douro.

The Pestana Douro Hotel, which is expected to be completed by the end of 2019, represents a 20-million-euro investment and will have 165 rooms, creating one hundred jobs, according to the hospitality group.

The abandoned building of the former Floral factory was the focus of interest for a possible hotel rehabilitation, but it was their success with the Pestana Palácio do Freixo and the Pestana Vintage Porto hotels, both on the banks of the Douro, which convinced the largest hospitality group in Portugal to move ahead with the project.

In 2016, Pestana Hotel Group ranked 116th in the world hotel ranking, with 89 hotel units and 11,082 employees worldwide. It currently owns and manages 90 Hotels, totalling more than 11,800 rooms in 15 countries and four continents. With 1.1 billion euros in assets, it will probably have more than 100 hotels by the end of 2018.

The W Sydney, Australia. Photo credit: Marriott International