Spain forging ahead

Spain will continue to show increased levels of property transactions next year, according to data firm, Real Capital Analytics.

Investment in Spanish retail property doubled to €1.44 billion in 2013 as international investors poured capital into grade A assets offering income returns amid signs the economy may be bottoming out. In terms of number of transactions, retail deals tallied 24 compared to 10 in the year before.

It is just the latest sign that transactional activity is heating up in Spain – something that Joseph Kelly, head of EMEA research at data firm Real Capital Analytics said the market would continue to see in 2014 as investors had shown “renewed interest” in Spain not just in the retail sector, but across other asset classes in both the debt as well equity.

“There are still clearly a lot of risks in Spain given the current economic environment, but if you are looking at prime assets in CBD areas, yields and rents have definitely stabilized. That is where we have seen a lot of institutional capital. Meanwhile, if you are looking at the more opportunistic end of the spectrum, firms are moving much further up the risk curve. They are looking at debt opportunities and at some of the residential assets being offloaded.”

Kelly said there was a “wide spread” of investors now back in the market, which this time last year were not present. “I think that will continue into next year as well,” he said. 

“If you are looking forward to 2014, one of the most interesting things to watch out for will be what comes out from the distressed space. For instance, Sareb, (Spain’s bad bank’) has obviously begun to sell, though it does not have a huge amount of commercial real estate. It comes at a time when the economic figures are not great, but they are improving a little. There is a renewed push not just from opportunistic investors but from core institutional buyers such as UBS, Deka, and Canada Pension Plan Investment Board (CPPIB).”

Real Capital Analytics’ data suggests large Spanish regional shopping centers accounted for almost half of retail activity in the country this year. The largest individual transaction was the €162 million purchase of Parque Principado in Oviedo by a joint venture between Intu Properties, a UK Reit, and CPPIB. London-based Moor Park Capital’s €299 million sale of 253 Banco de Sabadell-leased bank branches to a group of Mexican investors was the largest portfolio transaction, said the data firm.

Meanwhile, PERE has also been tracking multiple deals in the country with the latest coming in November when Apollo Global Management agreed to buy Altamira, the real estate investment management business of Spanish bank, Santander. The New York private equity firm is investing on behalf of its Apollo European Principal Finance Fund II (EPF II), said Santander, which added that it had struck an “agreement in principle” and that full details of the Altamira transaction would be disclosed in coming weeks.

Santander’s sale of Altamira is just one of a number of corporate moves by Spanish banks. Banco Popular is said to be selling its property management business Aliseda. Reports suggest that Cerberus Capital Management, Lone Star Funds, Centerbridge and Kennedy Wilson, which is working with hedge fund Varde Partners, are among those interested.

On 3 September, Bankia announced it had transferred the exclusive management of its real estate assets and developer loans to Cerberus for the next 10 years for a payment of between €40 million and €90 million depending on the progress of a business plan.

Cerberus, which does not own the assets but only the management contract as a result of the deal, will also manage the assets that BFA-Bankia markets on behalf of third parties. Some 457 employees transferred to Cerberus as part of the transaction. Cerberus also recently acquired a non-performing loan portfolio with a face value of €300 million from Santander and another €574 million from savings bank Liberbank.

In a further example of Spanish bank activity with private equity firms, Caixabank sold 51 percent of its property management unit to TPG Special Situations Partners, and Catalunya Banc sold its platform to Kennedy Wilson and Varde Partners. Sabadell has said it is examining the potential to sell its Solvia property management arm.