Thursday, October 29, 2020

The Portuguese Real Estate Market in August

Corporate transactional activity picked up somewhat during the month of August as three significant transactions were reported in the retail and shopping mall sector.  At the same time, however, commercial real estate investment is forecast to reach €2.5 billion by the end of this year, a drop of 20% year-on-year, according to Cushman & Wakefield. There were €1.67 billion in sales of commercial real estate in Portugal during the first semester of the year, equivalent to year-on-year growth of 50%. The figure was buoyed by the sale of 50% stake in the joint venture Sierra Prime by Sonae Sierra and APG to Allianz Real Estate and Elo, for about €800 million, partially compensating for the 88% decrease in the second quarter.

The market also reacted favourably to news that the UK would open a travel corridor, freeing travellers to Portugal from the need to quarantine themselves upon return home. Holiday bookings in the Algarve rose by approximately 13% in September. According to the Portuguese Hotel Association (AHP), “We went from 50% to 63% (occupancy) in three days, … an increase of about 13%. Although the increase doesn’t just come from the British market, it has a substantial weight.” The bad news, however, is that the United Kingdom is now considering re-imposing travel restrictions in the coming days, as cases of Covid-19 are ticking up again in Portugal and Scotland.

Retail

The Dutch pension fund manager APG agreed to acquire the totality of Via Outlets, a shopping mall operator. Included in that deal are two shopping centres in Portugal, the Freeport retail park, in Alcochete, and the Porto Fashion Outlet, in Vila do Conde. The Dutch pension fund manager will pay a total of 301 million euros for the 50% of the firm that it does not already own. Via Outlets currently has a portfolio of 11 retail parks in Europe, including the two in Portugal. The operation was announced by the British real estate manager Hammerson, which will sell the 50% share. The largest shareholder in the British company is APG itself.

Finangeste and a British investor acquired the Trindade Domus real estate development, located behind the Porto City Hall, for over forty million euros. The shopping mall’s developer had invested 65 million euros 12 years ago and subsequently went bankrupt, with debts of €85 million, principally to BES. Novo Banko, which is now the new BES, has kept its properties.

Portugal’s first Real Estate Investment and Management Company, a SIGI, whose legislative framework is similar to that of REITs and Socimis, made its first acquisition. Olimpo Real Estate (Ores), which was founded by Sonae Sierra and Bankinter, acquired five shopping centres, in a total investment of 37 million euros. Launched in December last year, the SIGI bought a portfolio with a total area of 21,227 square metres, comprising supermarkets and hypermarkets in Asprela, Mozelos, Covilhã, Faro and Reboleira. The five retail assets all long term rental contracts, four with Continente and one with Pingo Doce. An article in Economia Online noted that Ores bought at least four of the properties, Continente Covilhã in Serra Shopping, Continente Modelo Mozelos, Continente Modelo de Faro and Continente Bom Dia da Asprela, from Sonae MC, a subsidiary of Sonae, in a sale and leaseback operation.

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