Institutional investors are returning to the Spanish market after two years of virtual absence in the wake of the credit crisis. 'The year 2010 has been a much more traditional investment year in the sense that there were more institutional investors involved than in 2008 and 2009 when private investors and high-net worth individuals dominated the market,' said Wynn Williamson, head of International Investment at Aguirre Newman.
Institutional investors are returning to the Spanish market after two years of virtual absence in the wake of the credit crisis. 'The year 2010 has been a much more traditional investment year in the sense that there were more institutional investors involved than in 2008 and 2009 when private investors and high-net worth individuals dominated the market,' said Wynn Williamson, head of International Investment at Aguirre Newman.
According to Williamson, the trend is expected to continue over 2011 with institutions regaining their foothold especially in prime city-centre office deals and high-street retail transactions. 'These are strongly favoured markets because of the limited amount of product. These properties trade at a yield of 5-5.5% which seems acceptable given that rents have largely bottomed out,' he said, pointing to Paseo de Recoletos in Madrid, where four buildings have changed hands over the last 12 months, including one selling at 2%. 'Although there is significant demand from private investors, institutional investors have proven competitive - particularly for larger deal sizes.'
Another type of deal that is expected to gain more prominence is sale-and-leaseback, Williamson added. Foreign investors such as SEB, WP Carey, AEW Europe and Rockspring have all focused on offering capital to corporates willing to offload their real estate assets.
In December, Mercedes Benz sold its headquarters in Northern Madrid to the real estate arm of Spanish insurance group Mapfre while private investor Gorbea has reportedly acquired the FCC headquarters in Northern Madrid at a price above EUR 80 mln. The property, located in Las Tablas, was acquired through a forward funding structure and was expected to generate a yield of 7%. Aguirre Newman advised on both of these deals.
In spite of greater investment activity, Williamson noted that financing has become more difficult: 'The financing environment has worsened significantly since the beginning of 2010, owing to the Spanish government's credit problems. By now it is hard to finance even core, low leverage deals and we are starting to pre-finance assets before we put them on the market.'
