VIDEO: CBRE's Patricio Palomar on WP Carey's €300m deal in Spain

Patricio Palomar, director of offices advisory & alternative investments at CBRE, Spain highlights the most striking aspects of WP Carey's recent €300 mln sale-and-leaseback deal with the regional government of Andalusia. Watch the PropertyEU video on our YouTube channel

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Date: 5 December 2014 | Category: Deal Watch
US REIT WP Carey has pulled off the largest asset deal in Spain this year and the country's largest-ever sale-and-lease transaction of public buildings with the acquisition of 70 properties in Andalusia for €300 mln.

WP Carey's Spanish subsidiary Inversiones Holmes is acquiring the portfolio from the Andalusian regional government.

The sale price was slightly higher than the forecast proceeds from property sales of €292 mln cited in the regional government's 2014 budget. CBRE advised the Andalusian Government on the sale.

Inversiones Holmes has paid a €15 mln deposit and the completion of the deal is subject to various closing conditions.

'This sale represents the largest office transaction of the year, and the 5th largest in Spanish history. It is a good example of the big change in risk-return sentiment about Spain and also a testimony of the growing interest in new investment markets such as long dated income in secondary markets with good credit covenants,' said Adolfo Ramirez-Escudero. president CBRE Spain.

Jeffrey Lefleur, managing director of WP Carey, commented: 'The transaction with the State of Andalucía represents the opportunity to secure a long-term-leased portfolio of diverse assets at an attractive yield. Our experience in the European market, as well as our ability to close and fund the acquisition on a timely basis, were critical factors in our selection as the purchaser by the government of the State of Andalucía. We look forward to closing the transaction and adding these assets to the WP Carey portfolio.'

The property portfolio is the largest ever to be brought to market by an autonomous community in Spain. The properties in question, which also feature 949 parking spaces, are located across the eight provinces of Andalusia and are being leased back to the regional government for 20 years.

Some 92% are situated in the capital cities and the majority are in central areas. Around 36% of the properties are located in Seville, which accounts for 44% of the total floor space, as the lion’s share of the Andalusia government’s central services are located there. 25 properties are located in Seville, another nine in Huelva, eight in Cadiz and Cordoba respectively, seven in Jaen, five in Almeria and Malaga and three in Granada.

Patricio Palomar, head of research at CBRE Spain, said the deal was the largest sale-and-leaseback of public assets owned by a regional government ever in Spain. 'In addition, this is biggest sale of yielding offices buildings signed in Spain, both by number of assets, 70 properties, and by surface area, 259,070 m2 of built floor area.'

'The rate at which the economic recovery is taking off is phenomenal. Barely two years ago, investors who had experience in Spain and in managing assets were faced with the fact that even the most prime product on the Castellana avenue in Madrid was hard to find. Now, funds are arriving from as far afield as Asia-Pacific and Latin America; funds that would have never before have ventured into the Spanish market to look for product.

'The fact that an institution such as the Junta de Andalucía has managed to close this deal marks a significant milestone in the sector’s recovery; and, it takes the recovery to the next level given that none of the properties in this portfolio are in prime locations. Since 2008, only 3% of the total capital invested in Spain went outside of Madrid and Barcelona, but this deal could take the total amount invested in secondary markets at the national level to 9%,' Palomar said.