Swiss private equity real estate investor Corestate Capital is teaming up with Villar Mir, one of Spain's largest property groups, to launch a new property platform aimed at building up a sizeable portfolio in the country.

Swiss private equity real estate investor Corestate Capital is teaming up with Villar Mir, one of Spain's largest property groups, to launch a new property platform aimed at building up a sizeable portfolio in the country.

Zug-based Corestate said on Monday that it is making its first foray into the recovering Spanish market through the creation of a joint venture with Villar Mir's Inmobiliaria Espacio and OHL Desarrollos property development arms.

According to a company spokesperson, the partnership will be 50%-owned by Corestate and will seek to identify investment opportunities including both cash-generating properties and value-add properties with 'significant' upside potential. Inmobiliaria Espacio and OHL Desarrollos will each hold a 25% interest.

'We have studied the Spanish real estate market closely and decided that now is the right time for us to enter that market,' commented Ralph Winter, founder of Corestate Capital, a management-owned investor and asset manager with €1 bn of assets. 'We are keen to seize the chances that present themselves in Spain.'

The joint company, dubbed Iberian Corestate Capital Advisors, is targeting investments in Spain running into 'several hundred millions' of euros, Corestate told PropertyEU. The Swiss player will be responsible for investor relations and capital raising as well as structuring investment products and overseeing the implementation of each business plan. The partnership will benefit from Villar Mir's presence on the ground and its network of nine offices across the country.

Spain's economy is rebounding strongly from a deep trough. Its GDP grew by 0.5% in Q3 2014, out-performing the rest of the eurozone, and by 1.6% year-on-year in Q3.

HEAVYWEIGHT PLAYER
Grupo Villar Mir is a major Spanish business group with over 31,000 employees and over $10 bn in revenues in 2013. The company, which is directed by founder and former Spanish finance minister Juan-Miguel Villar Mir, directly owns Inmobiliaria Espacio and indirectly holds a majority stake in OHL Desarrollos, part of the listed OHL Group, a major construction company with a portfolio of €60 bn.

'Gaining access to Corestate's extensive investor base will give us an opportunity to serve even more institutional investors, family offices and high net worth individuals,' added Jose Antonio Fernandez Gallar, director general of Inmobiliaria Espacio.

According to Andrés Pan de Soraluce, president of OHL Desarrollos, the aim of the partnership is 'to create a strong and international real estate platform that will focus on various commercial and residential projects'. 'This joint venture will enable us to create an optimum balance between cash-flow oriented deals of defensive character and value-add projects that are more opportunistic,' he noted.

The partnership will focus on office, residential, retail and shopping centre developments along with other projects such as hotels, student housing and logistics. The first investment is expected to be made soon, the company said.

SPANISH FOCUS
Corestate Capital is planning on almost doubling its investment in the eurozone this year as a result of the recent delinking of the Swiss franc that has seen the value of the euro tumble by more than 20%.

‘In light of the new investment conditions, we expect to increase investment this year to at least €1 bn, up from around €600 mln last year,’ Corestate founder Ralph Winter recently told PropertyEU.

‘Around 40% of our investor base is in Switzerland and I expect them to want to invest more in the eurozone this year in light of the favourable exchange rate, coupled with negative interest rates,’ he added.

In December, the Swiss National Bank, the SNB, imposed an interest rate of –0.25% on sight deposit account balances at the SNB, with the aim of taking the three-month Libor into negative territory.

Corestate is focusing on Spain because that’s where it sees the best investment opportunities. Spain is still undervalued, according to Winter, who acknowledged that ‘you have to hunt for the diamond there’.

‘Private equity groups have very deep pockets but they have been struggling to find large, income driven portfolios there. We’re targeting smaller assets, valued at between €50 mln and €200 mln – those aren’t really on their radar. We’re interested in refurbishing offices in key markets such as Madrid and Barcelona. We’re also looking at residential development in Spain because there has been practically no development in the past six years because it was impossible to get financing. It’s a lot of work but we see good opportunities. In general, Spain offers 20% higher initial yields compared to Germany,’ Winter said.