The capital of Spain is one of the most cyclical markets in Europe and rents are still far from the previous peaks. According to Morgan Stanley, there is more upward potential in values with exposure to offices in Madrid. Besides, Spain is expected to grow above the European average.
Merlin Properties, one of the main property companies listed in the Spanish stock market, is studying creating alliances to buy part of the property portfolio of El Corte Inglés, Spain’s biggest retail group, which amounts 94 assets. The value of the portfolio is around €17.2 Bn, of which €15 billion euros are points of sale.
The shareholders of the Testa Residencial, Santander (37%), BBVA (26%), Acciona (20%) and Merlin Properties (17%), have finally chosen to list the Socimi on the MAB instead of making a public offer of part of its share capital. The reason behind the decision is the tensions in the financial markets over the last few days.
Home prices in Spain rose 4.4% year-on-year in Q2’17, according to the Price Index for Repeated Home Sales published by the Property Registers College. Prices have now been increasing for 10 consecutive quarters,
Almost 10 years after the big property bubble burst, Spain is once again showing how emotional it can get it with bricks and mortar in all its forms. And emotional is the word, because the ‘revival’ of the real estate sector – something which nobody was betting on three or four years ago – is so spectacular that not a day passes when there is not some sort of euphoric news emerging about it. Of course figures are figures and these are more than amazing. If we focus on the Socimis, the protagonists of the property market in this current phase, the truth is the numbers are really impressive.
Fernando Rodríguez | Hispania, Axiare, Lar and, above all, Merlin are looking good. Spain’s 4 big Socimis are reflecting the favourable economic cycle, the recovery in the property market and the beneficial tax conditions they enjoy. Risks include the upward tension in interest rates and the profileration of competitors, with the stock market swarming with 30 or so Socimis of all kinds.
Socimis, or Reits as they are called in Europe and the US, have helped revive the damaged real estate sector in Spain since 2009. Merlin Properties has been one of the most successful ones and was listed by Chairman and founder Ismael Clemente in 2014. In his opinion, that was a good year to start because “the cycle bottomed out at the end of 2013.”
Before the crisis, Metrovacesa was one of the five big Spanish property companies, born out of Madrid’s expansion with the construction of the underground in the first few decades of the XXth century.
Abengoa’s expulsion from Spain’s Ibex 35, after finding itself on the brink of bankruptcy, has provoked a tough fight amongst companies and sectors which consider they have the right to belong to this exclusive index. One of the most active sectors is real estate, now recovering from its 2008 collapse.
UBS | We remain constructive on the European real estate sector. As a bond proxy with growth , real estate benefits from current central bank stimulus, while it can also gain through rental growth in an inflationary environment, should the stimulus prove successful. For Spain, we upgrade Hispania to Buy and downgrade Merlin to Neutral.