Spanish Merlin inks €740m BBVA deal

Merlin Properties, a newly created REIT managed by Magic Real Estate, the asset management firm headed by former RREEF executive Ismael Clemente, has inked the acquisition of Tree Inversiones Inmobiliarias for €740 mln a week after having gone public in the largest listing ever of a European REIT.

Tree Inversiones Inmobiliarias, sold by Ares Management, Europa Capital, Deutsche Bank and Banca March, is the owner of a portfolio of real estate assets (880 bank branches and 5 buildings) located throughout Spain and leased in their entirety to BBVA through 2029 (the buildings) and 2039 (the bank branch).

This acquisition - the largest in Spain so far this year - was conditional upon the completion of Merlin’s €1.25 bn IPO.

'We have successfully executed the largest stock market listing in Spain since July 2011,' commented Ismael Clemente, Executive Chairman and CEO of Merlin Properties. 'The success of our IPO is firmly tied to various strategic core themes, one of which was undoubtedly having high-quality assets in the portfolio from the outset.'

'The sale of Tree Inversiones Inmobiliarias to Merlin Properties Socimi is the ultimate great success of an investment project launched by Deutsche Bank and its investors in Spain,' added Antonio Losada, head of Wealth Management Spain & Portugal at Deutsche Bank, which owned a 35% share in the assets.

Jason Oram, Partner at Europa Capital said: 'We consider this next phase of Tree’s ownership to be testament to the quality of the portfolio and the strengthening appetite of institutional investors for prime real estate in Spain.'

Merlin said the deal is the first of a series of acquisitions planned in Spain’s main cities and, to a lesser extent, in Portugal. The company will focus on core and core plus commercial real estate.

Merlin made its debut on the stock exchange this week with the issue of 125 million shares at a price of €10 a share, giving it a market capitalisation of €1.25 bn.

Merlin's Clemente is already well familiar with the BBVA assets, having led the acquisition of these assets back in 2009 and in 2010 on behalf of RREEF where he previously held the post of head of Spain.

In 2009, a consortium led by Deutsche Bank's property fund RREEF completed the sale-and-leaseback of the majority of the Spanish assets of BBVA bank for €1.15 bn. The sale covered three office buildings and 944 bank branches located throughout Spain.

In 2010 the partners bought a second portfolio for €364 mln.

Spate of Spanish IPOs
Merlin’s planned IPO follows the listing in March of Hispania Activos Inmobiliarios, which currently has a market value of about €530 mln. The REIT, managed by investment manager Azora, received commitments from a number of cornerstone investors and other players including Quantum Strategic Partners, Paulson and Co, Moore Capital Management, APG, Cohen & Steers and the Canepa group.

Similarly, Spanish family-owned property company Grupo Lar’s newly-launched Socimi raised around €400 mln from the issue of 40 million new ordinary shares at a price of €10 per share. Lar Espania Real Estate Socimi currently has a market value of €417 mln.

‘Recent regulatory changes to the REIT structure in Spain have made these vehicles very attractive and today these structures strongly contribute to the investor-friendly climate that Spain is trying to foster,’ commented Wynn Williamson, a former director of Aguirre Newman and founder of Aura Asset Management. Williamson believes the REIT market’s potential for growth is enormous. ‘Several other Socimis are expected to launch in the next few months,' he added.

In general, market experts are welcoming the recent market activity which is expected to result in higher liquidity as well as a greater level of transparency and solvency. Commenting on the outlook for the Spanish listed sector, Kempen & Co's head of property franchise Bernd Stahli said he is optimistic about the recovery potential of the property market, but added that he expects it to be a rather ‘uneven recovery’.

‘We believe those Socimis that have a well-incentivised, established hands-on management team can exploit the current opportunity to carve out a profitable niche and so deliver good returns for shareholders,’ he noted. 'Key for shareholders in judging any newly created/established Socimis is to identify the right management teams and the alignment of interest.'