Real Estate Market Snapshot - December 2015

There was a great deal of activity in the real estate sector in December as institutional investors and Socimis alike raced against the clock to complete transactions before year-end.

Major purchases were made in every segment and Madrid accounted for a significant volume of the operations, including: Colonial’s acquisition of an office building on c/Santa Engracia for €67M; Thor’s purchase of retail premises in Sol from El Corte Inglés for €65M; and Pryconsa’s acquisition of 14 plots of land in Valdebebas for €57M. Meanwhile, Mazabi acquired two hotels, in Ibiza and Estepona, for €60M; Encore bought the Bilbondo shopping centre in Bilbao from CBRE for €60M and GreenOak bought a building on c/Fuencarral in Madrid for €21M, which it plans to convert into apartments.

In the banking sector, three of the largest players successfully closed significant loan portfolio sales just before year-end – refer to the banking section below for more details.

All of these transactions represented the culmination of a record-breaking year in the real estate sector, with total investment exceeding €13,000 million, up from €10,200 million in 2014 (equalling the previous record, set in 2007), making Spain the sixth largest RE investment market in the world. This growth was led by significant deals in the office, commercial and hotel segments, most notably: Merlin’s acquisition of the real estate giant Testa for €1,793M in June; the sale of Torre Espacio by Villar Mir to Grupo Emperador for €558M in November; Pontegadea’s purchase of Gran Vía 32 from Drago for €400M in January; and Orion’s sale of the Plenilunio shopping centre in Madrid to Klépierre for €375M in March.


In December, Merlin completed an extraordinary year by replacing Abengoa in the Ibex 35, with a market capitalisation of €3,600 million, just 18 months after its launch on the stock exchange. As such, it became not only the first Socimi to enter the benchmark index, but also the first real estate company to join the ranking for more than 7 years, following Colonial’s exit in 2008. During 2015, the 4 largest listed Socimis (Merlin, Hispania, Lar España and Axiare) all completed capital increases amounting to €1,648M, €337M, €135M and €395M, respectively, whereby raising funds to finance their continued growth. Merlin and Hispania are also now making preparations to source additional financing through bond issues in 2016.

The Socimis also participated in some of the most high profile transactions of the year. Hispania was pipped at the post by Carlos Slim in its bid to acquire the real estate company Realia, but it nevertheless pushed ahead with the creation and expansion of its hotel Socimi, Bay, in partnership with the hotel chain Barceló. Meanwhile, several new Socimis debuted on the MAB (Alternative Investment Market), including Uro Property (backed by Santander), Trajano Iberia (backed by Deutsche Bank) and Zambal (owner of the ABC Serrano shopping centre) taking the total number of Socimis on the MAB to 11.

Banking sector

Following 8 years of frenzied M&A activity in the banking sector, the rate of corporate consolidation settled down in 2015 and Spain’s remaining (18) financial institutions were able to focus on repairing and reviving their businesses. They completed the sale of numerous loan and non-strategic asset portfolios, the largest of which included: Bankia’s sale of two debt portfolios (a €1,300M mixed debt portfolio to Oaktree and Chenavari in July; and a €645M commercial asset portfolio just before year-end); CaixaBank’s sale of three NPL portfolios, amounting to almost €800M, €700M and €800M, respectively to Blackstone, Cerberus, and TPG/Goldman Sachs, respectively; Ibercaja’s sale of a €900M property developer loan portfolio to the US fund Oaktree; and Santander’s sale of a €400M NPL portfolio to Encore just before year-end. In addition, Blackstone won one of the largest real estate auctions of the year to acquire a portfolio of 4,500 rental homes, initially valued at around €450 million, from Banco Sabadell just before year-end. Meanwhile, the banks also ramped up their lending, with lenders such as Santander, Sabadell, ING, CatalunyaCaixa and Kutxabank offering increasingly competitive interest rates in an attempt to kick start the market and grow their credit portfolios once again.


Jaime Echegoyen took over as the Chairman of the bad bank from Belén Romana in January and oversaw the completion of the migration of 162,000 assets (homes, land, premises) from nine originating entities to the chosen servicers or real estate managers (Altamira, Haya, Servihabitat and Solvia), which was completed in Q4. Sareb also managed to sell 5,345 homes to individuals between January and June 2015 (the latest period for which figures are available) and it appeased Ada Colau, the mayoress of Barcelona, by granting the Town Hall 200 flats for use in its social housing scheme, in the first agreement of its kind.

However, the Bank of Spain published an accounting circular in October, requiring that Sareb value all of its assets – namely 100,000 own properties, 400,000 collaterals and 70,000 loans - on an individual basis, before the end of 2016. Not only will this be an expensive exercise – experts estimate that it will cost €25M – it is also likely to result in the bad bank having to recognise new provisions, and whereby record financial losses once again. Indeed, the entity closed its third full year of operation with a great deal of uncertainty over whether it will be able to fulfil the four main objectives it set itself in 2012; it has proven that its business model works, with small scale portfolio and individual asset sales, but it will need to ramp up its level of activity significantly in the coming years if it is to achieve its target of reducing its balance sheet by 44% by the end of 2017 (14% as at 2015).


The recovery in the housing market finally took hold in 2015, with house prices rising by 1% on average - the first year of positive growth following seven years of decreases, during which time they have registered a cumulative average decrease of c. 40%. Barcelona and Madrid accounted for the majority of the upswing, with price rises of 8.7% and 3.8%, respectively, although they were offset by decreases elsewhere. BBVA estimates that 400,000 homes were sold in total in 2015, representing an increase of around 10% compared with 2014, driven by improvements in the underlying fundamentals (the recovery of the labour market, the stabilisation of prices and the revival of the banking sector, amongst other factors).


Despite Sareb’s woes, the experts in the sector are cautiously optimistic about the general outlook for 2016. They expect it to be characterised by stabilisation and a two-speed recovery, and although we are unlikely to see a repeat of the volume of transactions closed in 2015, the total level of investment may well exceed the €10,000 million threshold once again.

The experts also agree that we will see cranes returning to the landscape in 2016, with the Ministry of Development reporting a 5-year high in the number of construction permits granted between January and October 2015. Moreover, the Institute of Business Practice has made the following forecasts for 2016: house prices will rise strongly (by 6.6%), house sales will increase by 17.2%, construction of new homes will rise by 12.2%, mortgage lending for urban properties will increase by 16% and stock will decrease by 24.7%.

By all accounts, we can look forward to a busy year ahead.