Pimco Said to Compete With Perella for Spanish Real Estate

Pacific Investment Management Co. is one of three bidders chosen to make final offers for an office and shopping-mall complex in Madrid’s business district, two people with knowledge of the matter said.

Pimco, in partnership with Talus Real Estate, is competing against Perella Weinberg Partners LP and a third bidder, according to the people, who asked not to be identified because the talks are private. Bids may be about 140 million euros ($193 million) and are due by March 14, the people said.

The Castellana 200 property -- two office buildings totaling 20,300 square meters (219,000 square feet) and a 6,200 square meter retail mall -- was put up for sale by banks including Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA and the Bankia Group.

Pimco, one of the world’s largest asset managers, is joining Blackstone Group LP and Goldman Sachs Group Inc. in investing in Spanish real estate as the economy recovers. Government policy changes have made the property market more attractive to overseas investors.

Officials from Pimco and Perella Weinberg declined to comment.

Pimco, based in Newport Beach, California, will own as much as 12.5 percent of Lar Espana Real Estate Socimi SA after the company sells shares to the public for the first time next month. Lar Espana will become a Socimi, Spain’s version of a real estate investment trust.

Property Buys

Investment firms including Blackstone and Goldman Sachs have been buying real estate in Spain after home prices fell more than 45 percent from their 2007 peak. Grupo Lar, along with Fortress Investment Group LLC, bought more than 1,000 homes from Spanish bad bank Sareb in December for 146 million euros.

Investment in Spain by funds, private-equity firms and financial-services companies totaled 13.9 billion euros in 2013, according to Madrid-based debt-restructuring firm Irea. About 37 percent of the money was spent on real estate assets and that figure is expected to increase this year as special emphasis is put on the property market, according to Chief Executive Officer Mikel Echavarren.

Source: sfgate.com

Spanish Property Investor Lar Espana Rises on First Trading Day

Lar Espana Real Estate Socimi SA, a company that plans to buy distressed property in Spain (SPNPTHQ), rose on the first day of trading in Madrid on expectations it will benefit from a recovery in the country’s real estate market. 

Lar Espana, which raised 400 million euros ($549 million) in a share placement last week and counts Pacific Investment Management Co. among its investors, rose as much as 10 percent. The shares traded at 10.25 euros at 12:20 p.m. in Madrid, compared with the 10 euro price set for the share sale.
Overseas investors are entering Spain’s property market after home prices fell by more than 40 percent. Paulson & Co., the hedge-fund firm founded by billionaire John Paulson, plans to invest in Hispania Activos Inmobiliarios, another Spanish real estate company that’s due to sell shares to the public for the first time this month. Other investors include Quantum Strategic Partners LP.

Story: Greece May Finally Sell Some Olympic Venues

Lar Espana is a Socimi, which is similar to a real estate investment trust. It will focus on buying undervalued offices in Madrid and Barcelona as well as retail parks and warehouses throughout Spain, the company said in the Feb. 13 offering documents. Lar Espana is targeting a total shareholder return rate of more than 12 percent a year when all net proceeds have been fully invested, according to the documents.

Investment in Spain by funds, private-equity firms and financial-services companies totaled 13.9 billion euros in 2013, according to Madrid-based debt-restructuring firm Irea. About 37 percent of the money was spent on real estate assets and that figure is expected to increase this year as special emphasis is put on the property market, according to Irea Chief Executive Officer Mikel Echavarren.

Source: businessweek.com

Spanish Property Deals Grab Investor Interest

At least a dozen large international investors are lining up to look at a large Spanish property-loan portfolio sale that will take the temperature of one of Europe's most distressed real-estate markets.

Commerzbank AG CBK.XE -2.28% recently began shopping around the portfolio—code named Project Octopus—that includes loans with a face value of €4.4 billion ($6 billion) that are backed by shopping centers, hotels and offices. 

The loans were originally extended by Eurohypo AG, a unit of Commerzbank that is being wound down after suffering large losses in recent years. 

The deal is expected to be one of the biggest of its kind in Europe this year and will be a key test of investor faith in Spain's budding economic recovery. Any buyer of the loans likely would pay a discount to their face value. Still, they would be making a multiyear bet on the euro zone's fourth-largest economy, which late last year emerged from more than two years of recession. 

Investors looking at the deal include Blackstone Group BX +0.67% L.P., Cerberus Capital Management L.P., Värde Partners, Apollo Global Management APO -0.81% LLC, Lone Star Funds, Kennedy Wilson, KW +1.64% Pacific Investment Management Co., Starwood Capital Group LLC, CarVal Investors, Colony Capital LLC and Centerbridge Partners L.P., according to people familiar with the deal. Some of these funds have teamed up with large lenders such as Deutsche Bank AG DBK.XE +0.56% and Wells Fargo WFC -0.02% & Co.

Commerzbank, which is among a number of European banks that have been unloading loan portfolios to align with new banking regulations, hired investment bank Lazard Ltd. LAZ +2.96% to run the sale. Commerzbank declined to comment. 

European banks still are digging out from an avalanche of bad real-estate debt that crushed them when the financial crisis hit. In 2014, more than €40 billion in European real-estate loans could be put on the market, a 32% increase from 2013, according to a report last week from real-estate broker Cushman & Wakefield.

Big sellers include so-called bad banks that were set up in Spain and Ireland to manage soured real-estate assets. Those banks are increasing their disposal activity, while sales in Italy also are expected to pick up, said Andrew Sim, head of European investment at Knight Frank in London.

Spain's real-estate market has seen a revival of late. The government, through its bad-bank structure Sareb, is expected to put several large property portfolios up for sale in the first quarter, and local banks also are looking to reduce their exposure to real estate.

However, there are reasons to be cautious, say some analysts. A shock to the economy would be a "particularly big problem" for the property market, where asset values have fallen far less than in other troubled countries like Ireland, said Matthew Richardson, European real-estate research director at Fidelity Worldwide Investment in London.

"If you're an institutional investor running third-party money, it's a heck of a risk to take," Mr. Richardson said.

Last week, Commerzbank sold €710 million of nonperforming Spanish property loans to hedge funds. In December, it sold €280 million of shipping loans to a buyer affiliated with Oaktree Capital Management L.P.

The latest Commerzbank Spanish portfolio sale is expected to be completed this summer. Interested investors will participate in the first round of bidding within the next four to six weeks, a person close to the deal said.

The deal could be structured similarly to Commerzbank's £4 billion ($6.6 billion) U.K. real-estate portfolio deal last year, said people familiar with the ongoing process. About half the Spanish portfolio consists of performing loans, while the other half is split between nonperforming and subperforming loans, these people said.

The U.K. sale was broken into two parts, with Wells Fargo taking control of £2.7 billion in performing loans, while Lone Star took on £1.3 billion of nonperforming loans.

There also is a chance one investor could buy the whole portfolio, said Adolfo Ramírez-Escudero, managing director in Spain at CBRE Group Inc., which is representing one of the bidders. He noted only a handful of bidders have the resources to consider this option.

Large asset managers such as Lone Star and Kennedy Wilson have opened local offices in the Spanish capital, and funds including Apollo Global Management and TPG Capital LLP have purchased real-estate servicing units from local banks, giving them a platform to manage the assets they buy.

On Tuesday, a portfolio of seven shopping centers in Spain was sold to U.K.-based GreenOak Real Estate Advisors L.P. and Spanish investor Grupo Lar Real Estate Investments SA for €160 million by Dutch property fund Vastned Retail VASTN.AE -0.25% NV.

The rising number of investors looking at distressed Spanish assets also may drive prices higher, increasing risk. A person familiar with Project Octopus noted the deal was "extraordinarily" well bid.

"You look at the bigger picture and it sounds pretty good. But on second look, you're thinking the good news might be priced in," the person said.

Source: online.wsj.com

Brit Expats boost Spanish property market

The Spanish market is increasingly attractive to foreign investors due to the low prices and fast capital growth available.

New figures in the Bank of Spain and the Real Estate Registry’s yearly report found that foreigners are propping up the country’s troubled property market following a long-standing recession.

It exposed that foreign investment in Spanish property increased by 17 % 2012 compared to the year before - and British property investors are topping the polls.

UK residents accounted for more than 16 % of the share of the foreign investment market of 2012, which equates to around 1.35 % of the total property market.

France came second with investments in Spain totaling 10% of the foreign purchase market, and Russia made up the 3rd spot with 9.6 %.

However, there has been much talk of interest from China and Germany, with these two countries contributing 4.3 per cent and 7.9 per cent respectively.

According to Spanish Property Insight, foreign investors bought 26,871 residential estates in Spain last year, accounting for 8.12 % of all home purchases.

This is a extreme uptick from 2009 when foreign buyers made up only 4.2 % of total purchases.

However, split by region, some areas are seeing their property sales significantly propped up by foreign investment in Spain.

 

This is mainly the coastline which is famous for its holiday and pension homes among north Europeans. The information resource revealed that as a percentage of buyers, foreign nationals accounted of 33 % of total sales in Alicante on the Costa Blanca, 27 % in Tenerife and 25 % in the Balearic Islands.

It is expected that the boom of foreign investment in Spain will accelerate following the passing of the new residential visa regulations.

Coming into effect in July, the rules state that non-EU nationals who buy property in Spain worth more than €500,000 will get the automatic right to residency in the country in a bid to boost investment.