Time to sell for opportunistic investors in Spain, says Europa Capital

Opportunistic investors that have been snapping up Spanish assets at the bottom of the market, should look for an exit now that a wave of institutions is moving back into Spain to take advantage of forecast rental growth, according to Europa Capital’s partner and head of Southern Europe Jason Oram.

'There is a lot of commentary at present about the opportunity that Spain today represents, but our view is that the interesting time for opportunistic and value-add capital is behind us,’ Oram told PropertyEU in an interview.

Europa Capital was one of the owners of the BBVA portfolio which was recently sold to Merlin Properties, a newly created REIT managed by Magic Real Estate, for €740 mln.

The package, including 880 bank branches and five office buildings, was put together in two separate acquisitions in 2009 and 2010 by a consortium of investors led by Deutsche Bank and including Europa Capital. Although the investment was made with a view to holding the assets for up to 10 years, the investors decided to seize the opportunity for an immediate sale, Oram said.

‘The reality is that the market is far more crowded now that it was five or six years ago. Assets are trading at a significant premium to where fair value was considered to be during the crisis, while fundamentally nothing has changed. I think that for those of us who were here in the down cycle, it is now an appropriate time to sell,’ he said.

Oram believes the disposal of the BBVA package will trigger the start of a number of sales by those opportunistic investors that were active in the market during the recession. 'What is considered to be fair value today is about 25% higher than prices at market bottom,' he added.

According to PropertyEU’s research, only a handful of retail deals were closed in the country during the credit crisis. They included Doughty Hanson & Co Real Estate which spent €120 mln to buy Plaza Eboli, a neighbourhood mall located near Madrid, and El Rosal, a regional shopping centre located in north-west Spain; Deka Immobiliën acquiring the Ballonti shopping centre for over €116 mln; and US investment group WP Carey purchasing a portfolio of Eroski supermarkets for $51 mln (€36 mln).

Looking ahead, Oram said that Europa Capital will continue to be active in Spain on the acquisition side by focusing on assets that have been ‘underinvested’ during the downturn. ‘They are present in abundance,’ he noted. ‘It is important for us to avoid public sales processes where there is a lot of competition today.’

Spain has seen a resurgence of interest in the recent past with a number of foreign institutions looking to take advantage of favourable changes to regulations governing real estate investment trusts, known as SOCIMI.

Earlier in July Merlin Properties made its debut on the Spanish stock exchange with the largest listing ever of a European real estate investment trust, while in March Hispania Activos Inmobiliarios went public after receiving 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.