The placement of hotel assets for sale, the boom in the logistics warehouse market, the outlook for the build to rent segment and the investment expectations resulting from the restoration of European funds, all set the tone for November.
In the retail space, the month ended with some promising transactions, albeit very focused on the food and distribution segments, which are the only ones that are currently generating any business.
News about the worsening performance of the hotel sector and the possible sale of assets and portfolios dominated the headlines during the month. Hotel investment is at an all-time low: it is set to fall by 60% this year, which means that it won’t even reach the levels of 2014, according to estimates by the consulting firm Colliers International.
And that, despite the fact that Covid is causing a barrage of hotels to be put up for sale in the Canary and Balearic Islands. Savills estimates are based on the assumption that the vacation segment will be the first to reactivate, once vaccines and tax breaks are approved, according to the consultancy.
Meanwhile, hotels are reinventing themselves to weather the crisis. In addition to the aforementioned assets going up for sale, initiatives such as the conversion of hotels into coworking spaces, the rental of rooms for long stays and the concept of the ‘gastrosiesta’ are being pursued; all to alleviate the serious crisis in which the sector is immersed. For example, Badi is negotiating with 4 hotel companies to add 400 rooms to its rental offer.
The latest transaction is the imminent sale of the future Four Seasons hotel in Mallorca. In addition, during November, the B&B Hotels chain bought a hotel in Mataró with an investment fund, and Stoneweg acquired 2 hotels and tourist complexes in Menorca.
Companies are continuing to focus on the search for financing, both for projects and to ride out the liquidity situation generated by the pandemic crisis, which started out as an activity crisis, but which is now beginning to generate other problems for companies. The president of Asprima has already warned of the tightening of bank financing conditions and advocated the search for new formulas.
Meanwhile, the brake has been put on the production of new supply; between January and September, a total of 67,789 new-build homes were approved for construction in Spain, down by 14% compared to 2019, marking the end of an upward trend that began in 2014, according to CSCAE.
Despite that, in November, we learned that Gestilar has been given the green light to build 1,433 homes for sale and rent in the Ribera Calderón project, also known as the Mahou-Calderón operation, for Azora, Ibosa, Pryconsa and Vivenio, which will be sold for record prices in the area. And the build to rent segment, where homes are developed specifically for rent, is continuing to grow.
Meanwhile, the creators of Neinor are preparing to debut a new real estate company with 200 million euros; Invesco launched its new European residential fund with 140 million euro; and the Gil family joined forces with the fund RoundShield to build 5,000 homes. Also, Kronos set up two projects in Málaga and announced that its total investment in Andalucía now amounts to 406 million euros, where it has nine projects and a portfolio of 1,060 homes underway.
Santander invested in the home sale proptech Clickalia and also appointed a new president for its large portfolio broker. Meanwhile, ASG Homes launched its build to rent business in Spain with an initial investment of 200 million euros to construct 2,500 homes for rent.
Cerberus launched the company MACC Residencial, which owns thousands of assets valued at 600 million euros that were previously owned by Banco Sabadell, BBVA and Santander. In addition, the former heads of Telefónica and Morabanc launched a vehicle to invest in hotels and build to rent homes.
In terms of results, Aedas reduced its half-year losses to 8.3 million euros; the Socimi Colonial earned 5 million euros to September, compared to 393 million euros during the same period a year earlier, due to an accounting adjustment in the value of its properties. And Merlin Properties generated revenues of 385 million euros to September, down by 3% compared to 2019, with a drop in income from offices and shopping centres.
Recovering international buyers is another issue that needs to be resolved. In this way, property developers such as TM have opened offices in Belgium, Germany, Norway and Russia to attract buyers, whilst Aedas and Kronos have developed sophisticated online sales programs. The purchase of homes by foreigners fell by 37.4% to June, according to the notaries.
And the auctions continue. Haya, the servicer controlled by Cerberus has put more than 3,400 “practically brand new” homes up for sale at second-hand prices, and is also carrying out other campaigns with Bankia. The liquidators of Reyal Urbis, one of the largest real estate companies during the previous boom, auctioned off the Rafaelhoteles chain’s 6 hotels, along with 12 plots of land in Pozuelo and its stake in Castellana 200, amongst other assets.
In the residential market, the focus during November was on the plan for redistributing European funds destined for urban renovation and regeneration projects, coming from the EU recovery fund created to overcome the pandemic crisis.
Moreover, we should not lose sight of the interventions by the administrations to put affordable rental housing on the market; the Community of Madrid is finalising a tender to build 7,000 homes with 650 million euros of private capital; whilst Barcelona is going to expand its residential public stock by 1,000 flats.
In this way, Madrid City Council is transferring 20.8 million euros to the EMVS to buy 120 homes from Sareb and acquire land. In central government, Mitma announced the
construction of 1,000 affordable rental homes in Andalucía; and the value of land is gaining weight as a bargaining chip: The PNV achieved the transfer of Loyola’s land in exchange for its support for the budgets.
There is also room for private investment. Quercus is going to invest up to 35 million euros in the purchase of apartments and residential buildings in cities such as Madrid, Barcelona, Valencia and Bilbao. The German fund manager Deutsche FI has invested in three residential projects on the Costa del Sol comprising more than 350 homes after buying the stake held by one of the owners.
In terms of sector indicators, rental prices have fallen by more than 12% in Madrid and Barcelona, according to Brainsre. The experts from the AEV’s XIII Valuation Observatory believe that house prices will need 3 full quarters to restore their equilibrium, although house sales recovered compared to August and grew by 20% in September, according to the INE.
In addition, between January and September, a total of 67,789 new-build homes were approved for construction in Spain, down by 14% compared to 2019, marking the end of an upward trend that began in 2014, according to CSCAE.
Large international funds and property developers are taking advantage of the e-commerce boom to close safe-haven operations in the Spanish property market. One example is Mercadona, which illustrates the story well: it is planning to invest 1,000 million euros in the logistics segment over the next five years. The fund Thor bought a logistics portfolio in Barcelona and Sevilla from a domestic family office and Renfe is considering placing 200,000 m2 of land and potential logistics assets on the market. The German fund Patrizia closed the sale of two logistics assets in the Madrid metropolitan area for 150 million euros to the German real estate investment manager Real I.S.
The American manager, Clarion, acquired a logistics portfolio from Prologis, which spans 132,350 square metres in total and which is distributed throughout the provinces of Barcelona, Tarragona and Sevilla.
The industrial property developer Panattoni bought a plot spanning 46,920 square metres to develop a logistics project in the municipality of Castellbisbal (Barcelona), its first investment in the region, in addition to its investments in Valencia. Acciona also signed up to the sector: it is going to invest 58 million euros in the construction of three logistics warehouses in Illescas, the epicentre of the business.
Montepino is going to build a logistics development spanning 5,500 square metres on a plot measuring 10,070 m2, located in the Catalan municipality of Barberà del Vallès, for the last
mile segment. This news follows the announcement by the investment firm CBRE GI and Montepino that they plan to carry out investments in the logistics sector in Spain worth 600 million euros.
The office market is dominated by uncertainty about the definitive and real impact of the new strategy to combine working from home with face-to-face activity. To date, surveys have revealed that 81% of the directors of large companies around the world expect to reduce their office space, an unprecedented figure. As a result, the Spanish market is on standby, especially compared to more active cities such as Paris and London (e.g. Mapfre has closed its first major real estate investment in London with Macquarie).
During November, Abengoa’s creditor banks announced that they are putting the firm’s headquarters in Sevilla up for sale; WiZink reported that it is vacating its headquarters in Madrid to reduce costs; and Correos said that it will invest two million euros to renovate its new headquarters in the Salamanca district. The 22 @ district in Barcelona continues to provide good news: AEW bought a new office building in the Catalan capital’s technology area.
In the retail space, the month ended with some promising transactions, albeit very focused on the food and distribution segments, which are the only ones that are currently generating any business. In this way, Invesco Real Estate closed the sale of six Eroski hypermarkets and the Puente de la Ribera shopping gallery, located in Tudela (Navarra), to Pradera for 130 million euros. Also, Eroski sold a portfolio of 27 properties to the fund WP Carey for 85 million euros.
Verianos acquired a portfolio of six commercial assets spanning a surface area of 25,000 square metres, which are leased in their entirety. Áreas, the Spanish operator, acquired 60
restaurants and shops from the Italian firm Autogrill in Spain, which has 1,000 employees. And the Swedish company Sagax acquired 37 assets from GM Food, under the sale & leaseback formula, for 152 million euros; the assets are mainly concentrated in Madrid and Barcelona.
In parallel, the blow to the shopping sector as a result of the pandemic crisis continued to impact company results: Castellana Properties lost 18 million euros due to the impairment in the value of its portfolio, as did Vitruvio, whilst Lar España put two shopping centres and 22 supermarkets up for sale for 100 million euros, after going from earning 79 million in the first nine months of 2019 to recording losses of 17.4 million euros during the same period in 2020. Vastned, the Dutch firm, put a portfolio of nine assets up for sale located on the most prime shopping streets of Madrid, Málaga and León, for which it is asking for 100 million euros.
In the portfolio market, the increase in non-performing loans and in financing difficulties are leading to assets being placed on the market. In this way, Santander and Blackstone, through Quasar, launched a loan portfolio from Banco Popular consisting of seven hotels and one shopping centre.
BBVA launched Project Dakar to offload the last of the unpaid loans that it inherited from the former group of Catalan savings banks (Manlleu, Sabadell and Terrassa), which it bought in 2012.
And the year is heading into its final stretch with an old proposal that originated during the real estate crash of 2008; the ECB has resurrected the creation of a European ‘bad bank’. The supervisory body is concerned about the growing balance of non-performing loans; according to its estimates, bad loans held by banks in the eurozone could end up amounting to 1.4 trillion euros.
Top 10 most read news – November 2020
2. WiZink Vacates its Headquarters in Madrid to Cut Costs