AXA RE picked as preferred bidder for Telefonica's Barcelona HQ

AXA Real Estate has been picked as the preferred bidder to acquire telecom operator Telefónica's Barcelona headquarters in what will be one of the largest single asset deals in Spain since the credit crisis.

Acting on behalf of an unnamed client, AXA RE has presented a €107 mln bid for the tower which is fully let to telecom operator Telefónica until 2060. The offer represents a 9% premium to the asset's selling price of €98.5 mln.

If successful, the transaction would represent one of the largest single asset deals in Spain since the credit crisis. The purchase is believed to reflect a net initial yield of 6%.

The sales process is being overseen by Catalan public agency Consorci de la Zona Franca de Barcelona (CZFB).

DIAGONAL 00
Built in 2010, the 110-metre high tower has been dubbed Diagonal 00 due to its location at the start of the Barcelona's main avenue, Diagonal. The property provides a total of 32,811 m2 of gross area over 24 floors and 295 parking spaces.

While Spain has undergone something of a resurgence in the past 12 months, particularly among opportunistic investors, the Telefonica asset sale shows that investors’ appetite has got as strong for core assets as for riskier product.

'The Telefonica building represents a rare opportunity to acquire a prime office building in the Catalan capital city which is let to a strong tenant covenant on a very long lease and matches our client’s requirement for assets which can deliver highly visible and secure income,' commented Hermann Montenegro, head of asset management and transactions, Spain at AXA Real Estate.

He added: 'We will now focus on working hard to complete the transaction on behalf of our client as soon as possible and will make a further announcement at that time.'

The tower was put up for sale by CZFB last month with a guide price of €98.5 mln. It is understood to have attracted some 66 expressions of interest, 60 of which from international capital, including an offer from Qatari investor Ibrahim Hassan Al Asmakh, advised by DTZ, as well as bids from German funds and some of Europe's largest insurance companies.

AXA Real Estate is being advised by Jones Lang LaSalle.

'This asset really ticks all the right boxes; it is hard to find a product that is more core than this one,' commented Andres Escarpenter, managing director of JLL in Spain. 'As such, the investment's return compares very favourably to that of a 10-year bond,' he added.

The transaction is expected to be completed in the next two months.

This is the second asset sold by CZFB in 2014, following the sale of the Banc de Sang i de Teixits for just over €38 mln to Recober Inversiones. The public development agecy is the owner of the free trade zone at the port of Barcelona and has built a number of high-profile assets on the area including Las Gloriès shopping centre, currently being redeveloped by Unibail Rodamco.

AXA Real Estate made a comeback to the Spanish property market in June last year when it bought a portfolio of up to 13 government-let office buildings in Barcelona, as part of a sale-and-leaseback transaction with local authority Generalitat de Catalunya for €172 mln.