M&G Real Estate, part of UK insurer Prudential, has ambitious plans to grow its presence in Europe. An important step in the property investor's strategy was the recent opening of its ninth global office in central Madrid. Federico Bros Tejedor, formerly of CBRE Global Investors in Spain, has been appointed to head the office as director of asset management for Spain and Portugal.
‘A key priority in my new role is to ensure asset performance through active management across the business,’ he told PropertyEU. ‘This will incorporate driving active asset management, managing leasing strategies and overseeing property managers in a range of locations. An additional priority will be to secure more new investment opportunities in both Spain and Portugal on behalf of our client funds.’
The timing is good: Spain has had a positive 2016, with strengthening economic fundamentals, investor interest and new political stability, and this year looks promising too. ‘The GDP outlook for Spain in 2017 is above the eurozone average, and the level of unemployment continues to fall, especially in the major cities,’ Bros Tejedor said. ‘With this improving economic climate, we are also seeing fundamentals improving in core real estate markets, especially in the prime Central Business Districts of Madrid and Barcelona, where we expect to see further growth in office rents in the near term, as the market cycle evolves. These markets have also seen relatively low new supply in recent years, and therefore have low levels of vacancy for best quality buildings.’
M&G wants to be active in Portugal as well, he said: ‘We will continue to selectively target opportunities in this market, although our portfolio here is always likely to be smaller, given the market size for core assets is relatively small. Last year we completed a sale-and-leaseback on a portfolio of 12 well located Sonae supermarkets in Portugal, which we see as a very low-risk, defensive way to enter this market.’
M&G’s focus is on core real estate in key regional cities. In retail, he said, this means property on prime high streets which benefit from busy footfall as well as tourist trade. In Spain, this strategy is reinforced by the fact that the number of tourists visiting the country was up by 10% in 2016, pushing up retailer demand for new prime spaces.
As far as offices are concerned, M&G is looking for multi-let assets with long-term leases in place and is particularly focused on assets in Madrid and Barcelona. ‘We are also actively seeking prime logistics and warehouse investments within logistics hubs around Madrid, Barcelona and Zaragoza,’ Bros Tejedor said. ‘More generally, we are looking to continue to increase our footprint across all sectors and average transaction size. For example, last year we completed a €175 mln acquisition in Madrid for an office property that we are fully refurbishing. It will house media company WPP on a 17-year long-lease contract, and demonstrates the kind of deal that we are targeting – creating a long-term partnership with strong tenants.’
One of M&G’s priorities is the European Secured Property Income Fund, which focuses on commercial real estate assets let on long leases to strong credit tenants. This includes retail, office and industrial properties, but also hotels, leisure and healthcare.
The interview appears in the February 2017 edition of PropertyEU Magazine
