Spanish Properties Breathe Again A Good Time To Invest

Noted billionaires John Paulson and George Soros, are well-known for their ability to make bold calls. Despite showing different styles in their ventures in the past, the two have shown a common interest in the Spanish real estate market this year. The two recently invested $127 million each, in Hispania .

With Soros being one of the most celebrated hedge-fund managers in history, and Paulson being right in his predictions of the 2007-2008 US mortgage market bust, is it time for other investors to follow their lead, probably on a smaller scale? The proposition certainly looks inviting to investors, considering that current Spanish property prices are at their lowest.
An inrush of foreign investors

The prices of prime properties in the Spanish real estate market, are less than the peak values they reached, about five years back, by nearly 30 percent. The difference in property prices of those along the Costas is almost 70 percent, although, properties have been experiencing a renewal in the recent past.

Savills claims that the inflow into the retail property sphere in Spain, last year, increased almost three-fold. The inflow in 2012, was €320 million, when compared to last year's inflow of €850 million. The majority of the inflow can be accredited to foreign investment.
Predictions for 2014

Gema de la Puente, the research head at Savills, says that bullish multinationals have a built-up demand, and that they are trying to make their way into the improving mid-term economy in Spain. Many of these multinationals have been biding their time, waiting for suitable opportunities to spring up.

Recently, Vodafone bought Ono, one of Spain's biggest cable TV and broadband unit, for €7.2 billion. The economy has been looking promising too, as the credit rating was upgraded by Moody's last month. Among other stories of Spain's recovery, the yield from 10 year government bonds have hit their lowest values, since early 2006.

Whether or not the recent improvements will reflect on the property market, is the big question on everyone's lips. Fitch reports that mainland Spain will see slow progress for the most part, as it is yet to recover from the crisis, and its repercussions. The agency predicts that property prices in Spain, will continue dipping further this year, and will hit their lowest in 2015. While the Costa de Sol expects a gloomy phase, the classier markets to the north of Mallorca, near Deja, are looking promising.

According to reports from Knight Frank, property sales in the area went up 40 percent during 2013. The sales were largely propelled by investors from Northern Europe, who were looking for properties at bargain prices. The upmarket districts in Barcelona and Madrid, currently look promising for city dwellers.

The government has been working towards attracting in buyers too, hosting multiple property roadshows and highlighting bargain prices of Spanish properties. Aside from following in Soros' footsteps, the Spanish real-estate market now seems inviting to investors of all levels.

Source: property-abroad.com

Banks, funds line up for landmark Spanish property sale: sources

 
Banks such as Deutsche Bank and JPMorgan are teaming up with international funds to bid for a multi-billion-euro portfolio of Spanish property loans as the country's real estate market thaws, sources close to the process said.

The loan package of over 4 billion euros ($5.5 billion), from Germany's Commerzbank , is one of the biggest of its kind to be auctioned in Spain's six-year real estate slump as lenders burned in the crisis clean up their books.

It is made up of some soured debts and other performing loans backed by office blocks and shopping centers, rather than debts related to residential homes which have more commonly been offered to investors.

That is helping the portfolio attract buyers, the sources familiar with the process said, though funds have also been flocking to Spain recently as the country emerges from recession and property prices come closer to hitting bottom after falling around 40 percent since 2007.

Banks have been joining up with funds to bid together for the Commerzbank portfolio, and would most likely split the assets afterwards, with banks keeping the performing ones.

U.S. private equity firm Lone Star is bidding with JPMorgan for the loans, while Blackstone is working with Deutsche Bank, two sources familiar with those offers said. Apollo Global Managament has put in a joint offer with Spain's Santander , a third source said.

U.S. private equity firm Cerberus has also put in a bid, two other people said, as has Oaktree Capital Group, according to a sixth source, though it was unclear whether these investors had bank partners.

Commerzbank, and the banks and funds declined to comment, as did Lazard which is handling the auction. Over 10 parties have put in bids, which were due at the end of last week, the sources said. Another round of bids is scheduled for April.

"Bidders can put in offers for the whole package, or just the parts they're interested in, such as the non-performing loans for example," said a real estate adviser close to the auction, which is known as "Project Octopus."

The portfolio includes 3.3 billion euros in performing loans and roughly 1 billion in non-performing loans, people familiar with the transaction have previously said.

A lawyer familiar with the process added that the deal could come with a small real estate management platform and a team of people to handle the debts.

International funds have been chasing these kinds of assets in Spain so they can build up credit management units and buy more loan portfolios. Apollo recently bought 85 percent of Santander's property management division, while bailed-out lender Bankia transferred the management of its platform to Cerberus for the next 10 years.

Source: chicagotribune.com

Is it the right time to invest in Spain?

With an aggregate volume of around €2bn between Q1 - Q3 2013, the Spanish real estate investment volume is increasing, according to new research BNP Paribas Real Estate, as revealed at its Investing in Spain event held today in London.

The most active sector is retail, driven by large portfolio acquisitions, followed closely by the office sector and then the hotel market. Transactions have mainly focused on assets in Madrid and Barcelona, with the average value varying between €20m and €40m. The sales of housing portfolios have also finally come back to life.

Luis Martín Guirado, president of BNP Paribas Real Estate Spain, said: “The opportunities offered by Spain as a country go far beyond the success which it has justifiably achieved in fields such as tourism, sports and cuisine. So why do we believe that this year will be particularly favourable for real estate investment in Spain? We are seeing capital values for all types of real estate assets and the price of land at the lowest levels seen in recent years, representing a unique opportunity. The primary markets such as Madrid, Barcelona and Valencia are enjoying moderate, stable rents and further growth is expected. In addition, as a result of future yield compression, returns for investors committed to Spain are anticipated in all sub-sectors.”

BNP Paribas Real Estate’s international investment director, Andrew Cruickshank, commented: “The expectations for recovery during 2014 is fuelling a perception that available assets with prices below market levels may offer high internal rates of return. We are now seeing large international funds setting themselves up in Spain on the lookout for real estate opportunities originating from public institutions, banks repossessions and the Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria (SAREB).”

Unlike previous years, where real estate investment rested in the hands of private national investors, American, French, British and German funds are now prominent in the Spanish investment market. Latin American private equity and investment funds have also recently acquired Spanish assets.

This increased investment activity has not yet affected prime yields, in part due to the weakness in occupancy. Prime offices in Madrid offer initial yields of around 6.2%, compared to 6.4% in Barcelona. The prime yield in the retail segment amounts to 5.5% in both key cities. Although logistics investment transactions have so far remained frozen in 2013, the initial yield is around 8%. Despite the improved outlook for public sector debt and the economy in general, yield compression is not anticipated until the recovery of the occupational market becomes evident, forecast towards the second half of 2014.

“We expect the improving Spanish real estate investment climate to remain positive for the rest of this year and into 2014. Bank portfolios and the SAREB will continue to foster opportunistic strategies and the bottoming-out of capital values will open the door to value-added strategies. Nonetheless, access to credit for real estate investment will remain restricted for the foreseeable future and as a result, cash buyers will continue to represent the main players within the Spanish market,” added Cruickshank.

Source: property-magazine.eu

Spanish , Italian shares delight in euro zone increase halo

Investment in Spanish and Italian stocks has surged on the backside of improved financial information , trumping a Spanish party funding scandal and the threat that the government in Rome might fall .

Shareholders have given each nations a wide berth for years yet are being tempted back by rosier study data and the end of the economic downturn in the euro zone .

Signals of financial revival have assisted to reduced both countries' loaning for expenses and drawn money into Italy-focused funds at the quickest rate for a decade , EPFR reports revealed . Italian and Spanish exchange-traded funds began to take in more money in July as opposed to the whole 2nd quarter .

Their benchmark share indexes are up accordingly ; Italy's FTSE MIB is on track for their best quarter since late 2009 , and Spain's IBEX 35 for its best since late 2010 .

The two indexes are an immediate option to profit from a pick-up in the euro zone periphery , they have got an even greater proportion of companies focused on Europe than their euro zone peers at a time when multiple strategists suggest growing exposure to the continent , and are less expensive than euro zone alternatives , like the French stocks .

For some , such as M .M . Warburg market strategist Matthias Thiel , this is the time to purchase in as he is convinced the better economic prospects outnumber the threat of brand new political tensions .

"The opinion of numerous investors regarding those equity markets remains to be negative , even though the economy is becoming better . And then they are quite attractively valued . We see that risks continue to be , however we believe they are in the price already ."

In the last 10 days , renewed worries that past premier Silvio Berlusconi's People of Freedom ( PDL ) party might bring down the government in Rome shaved 5 .7 percent off the FTSE MIB and drove up the price of buying options to ensure against future shifts in the index by around fifteen % .

Italy's capability to maintain investors on side would be examined next month ; the PDL has stated it will withdraw from the sensitive coalition if parliament votes to keep away Berlusconi , lately convicted of tax fraud , from the Senate .

In Madrid Prime Minister Mariano Rajoy has survived calls to resign for mishandling a significant corruption scandal regarding his party's former treasurer .

"If we got a return to the polls in Italy , the decrease in borrowing expenses that we've seen in the past couple of months would be reversed , and the equity index might easily decrease ten percent , as well as the same applies to the IBEX ," stated by Claudia Panseri global equity strategist at Societe Generale Private Banking , which administers just below 90 billion euros ( $120 billion ) of assets .

"In the longer run , that is similar to 12-24 months , it is clear Italy and Spain are interesting if the reform course continues ."

ETF PICKUP

After lagging for many of the past five years , Italian and Spanish ETFs have outpaced inflows into funds tracking the broader European industry by above 7 times since the beginning of the year , ETFGI data exposed . ETFs can be purchased and sold more quickly than conventional funds and are commonly used by hedge funds .

Whilst monthly ETF movement data is not a trusted measure of future market direction on its own , low valuations and light investor placing leave ample room for more money from longer-term investors to return .

Although overall European equity funds' assets are up from their levels by the end of 2009 , before the euro zone crisis started , the overall assets of funds invested in Italian and Spanish stock shares remain down 11-12 percent , Lipper data reveals .

The FTSE MIB and IBEX 35 stay roughly fifty percent and forty percent off their 2008 peaks , respectively , while the broad STOXX Europe 600 is just down around ten percent .

Spain and Italy roughly trade at a 10-20 percent reduction to the local index , determined by the estimated income of their components over the following 12 months , Datastream information showed .

A part of that gap is due to banks , which account for around one third of each indexes and are the most fragile stocks to any signal of an increase in the countries' loaning for expenses through their large sovereign debt holdings .

Conversely , they have accomplished well this quarter when the spread of both countries' benchmark debt to safe-haven German Bunds contracted to their tightest levels for 2 years .

The movement of funds from emerging markets into Europe , and particularly into less expensive stocks more reliant on sales in the area , just like banks , has also helped both outperform more internationally focused peers such as Britain's FTSE .

"They are the riskier markets , but there are probably more possibilities there ," said Kerry Craig , global market strategist at JP Morgan Asset Management , which handles assets worth $1 .5 trillion . "As confidence and business picks up there , as you can see from the economic indicators , you should see these markets perform much better ."