In the same week that a new Spanish property company announced it was targeting a €1.5bn flotation, speakers at the European AFIRE conference questioned the volume of capital flowing into the country.
Speaking in London, Olivier Piani, CEO of Allianz Real Estate, said there was a “huge disconnect going on in Europe between the rents you can get from an asset and the capital value of that asset, because of this flow of money”. He added: “Today, they seem to be all rushing into Spain.”
Piani said Allianz, which has a presence in Spain as both insurer and real estate investor, “had been buying zero assets” in the country in recent years.
Kevin Faxon, head of real estate Americas and global real assets at JP Morgan Asset Management, asked whether the recent attention on Spain had been prompted by genuine market opportunities or “because all of a sudden a bunch of money [had been] raised”.
Dennis Lopez, global CIO at AXA Real Estate, referred to the French asset manager’s deal last year to acquire 13 government-let office buildings in Barcelona for €172m. But he said assets being sold through auctions today were largely “overpriced”.
“If you focus on Barcelona, Madrid – which are the big opportunities – there are other things that you can do outside the auctions,” he said.
Moderating the panel session, Eric Adler, CEO of Pramerica Real Estate Investors, questioned the size of Spain’s economy to support the volume capital in the market.
He said: “When you see the competition and money raised for Spain, how do we relate that to what possibly can be supported in an economy the size of Spain’s?”
But Kelvin Davis, senior partner and head of TPG Real Estate, said Spain had a “dynamic, export-driven economy” that favoured select opportunistic investments in specific regional markets and property types.
“Spain is interesting because after years of unparalleled declines in economic activity and in asset values, you have a country that has real economic attributes, primarily around export-driven industries that will recover, in our view,” he said. “And when they do, real estate values will go up.”
Davis said much of the inbound capital had been attracted to auctions led by government agencies or local brokers, but he said TPG had found success in “identifying distressed assets often controlled by banks where they are less anxious to air their wares in a public setting”.
They were speaking at the annual European conference of the Association of Foreign Investors in Real Estate, an organisation whose main aim is to represent Europe-based institutions investing in US real estate. While core real estate in the US continues to look attractive foreign investors, US-based opportunistic funds have been turning their attention to Europe.
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