Real estate Spain

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• 22 Nov 2009

  Germany, UK and Spain drive growth in European retail investment

  Investment in European retail property reached over €5 billion in Q3 2009, a quarterly increase of 18% and the highest total since Q3 2008, according to new CB Richard Ellis research. In contrast to the 34% jump in activity across all sectors, the upturn in retail investment has been less pronounced; although the downturn in retail investment was equally shallow.
  
  Reflecting the trend in the overall European commercial real estate market, retail investment was heavily driven by a small number of western European markets in the last quarter. Germany, Spain and the UK clearly dominated the market, accounting for over 80% of Q3 European retail investment. Historically these three markets have accounted for just 63% of turnover. All three markets saw over €1 billion of transactions this quarter, but that is where the similarities between them end as the drivers behind their strong performance vary significantly.
  
  Germany saw the sharpest increase in activity with €1.2 billion of retail investment activity in Q3 - the highest quarterly total since Q1 2008. In contrast to recent years, retail investment activity outpaced that of offices, a rare occurrence in the typically office-dominant German market. This was heavily influenced by a number of large shopping centre transactions including Mercado in Hamburg, Die Mitte in Berlin, and a share of the Neues Thier-Areal development in Dortmund. In keeping with the broader German market, local investors continued to dominate, with institutional investors and German Open-ended Funds being most active.
  
  The high level of retail investment activity in Spain was heavily influenced by the €1.15 billion sale and leaseback of BBVA’s high street bank branches – the only retail deal over €1 billion in Europe this year so far. However, this level of activity is unlikely to be sustained in a market that saw an average €810 million quarterly retail investment even at the top of the market in 2006-2007.
  
  The UK market also remained active in Q3, although it is still broadly driven by local buyers mainly acquiring retail units in the €10-20 million lot size. The only major shopping centre deals were (Australian Pension Fund) Future Fund’s purchase of a 30% interest in the Bullring shopping centre in Birmingham for €238 million and RREEF Spezial Invest’s purchase of the €83 million Prince Bishops shopping center in Durham.
  
  Jan Dirk Poppinga, Head of Retail Investment for Germany, commented: “Germany is clearly starting to see more activity across the board and in the retail sector in particular. The first nine months of the year have been heavily dominated by the core local investors, but we are now witnessing early signs that some more opportunistic cross-border buyers are starting to take an active interest. Another reassuring trend is the growing number of assets being put on the market – for example, Prime Commercial Properties’ announcement of their intention to sell their German shopping centre portfolio. German investment activity is therefore likely to pick-up further later this year and into 2010.”
  
  John Welham, Head of European Retail Investment, said: “Current trends in pricing are particularly interesting, with values of some very good quality stock stabilising in many markets and even rising in a few. Strong investor demand remains heavily concentrated on good quality retail and the weight of equity allocated for retail property investment should continue putting downward pressure on yields. However, a lack of quality product is starting to see investor interest shift further out and into good secondary locations in order to realise the investment requirement. This trend is already evident in the UK and is now spreading to France, which should translate into an increased level of retail investment after the very quiet third quarter.”
  
  Source: CBRE
  
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• 15 Nov 2009

  EPRA: Spanish property regime a missed opportunity

  The new Spanish regime for property investment (SOCIMI) fails to capture the benefits of a true REIT structure and is a missed opportunity for the Spanish Government, according to the European Public Real Estate Association. EPRA views the ‘REIT’ label as unjustified since the SOCIMI regime has departed from the standard REIT model of tax exemption at the entity level. Instead, a reduced 18% flat rate is provided for qualifying net income, payable by the SOCIMI itself.
  
  “The half-way option chosen by the Spanish Government appears to be motivated by the fear of a loss of tax revenue,” said EPRA’s Finance Director Gareth Lewis. The industry’s view is that corporate tax and other onerous restrictions will limit the ability of the SOCIMI regime to attract new capital back into the Spanish market. This will deny Spain the benefits that REITs are capable of bringing, which have been witnessed in the more classical REIT markets.
  
  “The reason REITs have been so successful in the more mature real estate markets, such as the US, Japan, the UK, France, the Netherlands, Belgium, Italy and Germany, is down to their ability to access a global pool of investment that comes from being part of a widely understood, transparent and well managed investment vehicle,” Lewis continues.
  
  There is a common misperception that REITs are introduced to save tax for property companies and therefore result in a loss of tax for local governments. EPRA argues that there is ample evidence to show that REIT regimes actually increase government tax receipts through increased taxation on the dividend flow to investors, resulting in an increase in transfer tax generation. The impact of accrued investments by the REITs also generates VAT, local property taxes, transaction costs and social charges etc.
  
  As an example, it is estimated that the conversion to a SIIC (the French REIT equivalent) of Europe’s largest REIT, Unibail-Rodamco, has resulted in a recurring contribution to the French government being multiplied by four through indirect taxation.
  
  The classic REIT model that is proving so popular with governments and the market alike is the publicly listed, corporate structure that provides ‘flow through’ treatment of rental income – whereby tax is effectively collected once at the shareholder level. The industry’s view is that the double taxation arising from the fact that tax is imposed on the SOCIMI as well as on shareholders could significantly limit the ability of the Spanish regime to attract new capital back into Spain.
  
  “Despite the good intentions surrounding the introduction of the Spanish SOCIMI, EPRA continues to think that Spain would highly benefit from adopting a real REIT regime based on the consistent common rule of taxation of profits at shareholder level,” sums up EPRA CEO Philip Charls.
  
  “The more successful REIT markets are those where governments have struck a healthy balance between tax revenue protection and creating a market that investors are comfortable with. The Spanish property sector deserves a more ambitious structure than the SOCIMI.”
  
  Source: EPRA
  
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• 08 Nov 2009

  Carlyle completes headquarters for Spanish National Registrars Association in Madrid

  Global private equity firm The Carlyle Group announced the completion of the new headquarters for the National Registrars Association of Spain in Madrid. The 30,000 m² building has been developed on a site that Carlyle acquired in joint venture with Therus Invest in June 2006.
  
  Shortly after purchasing the land, Carlyle and Therus Invest signed a pre-sale agreement for €135 million with the Spanish National Registrars Association (Colegio de Registradores) for the development of its new headquarters on a turn-key basis. During the process, all parties worked together to adapt the new offices to the needs of the future owners.
  
  Rachel Lupiani, Director of Carlyle Europe Real Estate in Spain and Portugal, explains: “We are very proud of the building we have developed for Colegio de Registradores. In addition to having created a unique space adapted to the needs of our client, we are marking a milestone for our real estate activity in Spain by selling the first asset from our local portfolio.”
  
  Javier de Pablo, Associate Director for Carlyle Europe Real Estate and responsible for asset management in Spain and Portugal, has been in charge of the supervision of the project while Therus Invest took care of the development management.
  
  The new headquarters of the National Registrars Association has approximately 30,000 m² of office space and over 500 parking spaces. Work spaces are located in two parallel buildings joined by a central one. Each building has five floors articulated with vertical communication cores. The complex overlooks a plaza with gardens and high quality open spaces.
  
  The new building was designed by Mark Fenwick, Director at RFA Architecture, a leading Spanish architectural firm.
  
  Source: FD
  
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