UBS Asset Management has returned to Spain with the acquisition of the Urbil shopping centre in San Sebastian, Northern Spain.

Moody's Investors Service raised Spain's sovereign debt rating and outlook on Friday, citing progress in economic  rebalancing, structural reforms and improved market access after around five years of a deep economic downturn.

London-based private equity real estate firm, GreenOak Real Estate, said today it had teamed up with Spain’s Grupo Lar to buy shopping centers and a retail park in Spain for €160 million. 

The deal is expected to go through at a sale value 29 percent below the latest appraisal value in December by seller, the Dutch property company, Vastned Retail. It is the latest example of foreign, private equity capital looking for motivated sellers in the country.

Vastned sold the “secondary assets” because of “negative forecasts” for them, pressure on rental income and higher non-recoverable service charges.

GreenOak Real Estate and Grupo Lar, on behalf of a consortium of investors, have agreed to acquire a portfolio of Spanish shopping centres from Vastned Retail N.V. for €160 million.

The portfolio is made up of seven shopping centres and one retail park comprising approximately 135,000 sqm and 380 tenants. Assets are located in Madrid (3), Barcelona, Alicante, Malaga, Murcia and Burgos.

GreenOak and Grupo Lar will jointly manage the shopping centres and the investment.

Commerzbank has sold €710 million ($961 million) worth of bad Spanish property loans, as the bank continues to work on improving its risk profile. In a company announcement today, Germany's second-biggest lender said it sold the non-performing loans to international investors.  

Intensifying competition in Europe’s major real estate markets is leading to renewed interest in periphery markets such as Spain and Ireland, as investors search for returns.

While the US remains the top market among foreign investors in real estate, many of these institutions’ preferences otherwise have been shifting. Perennial favorites such as Washington, DC and the multifamily sector have been falling out of favor, while emerging opportunities in Spain and US secondary cities have been on the rise among investors seeking higher yields.

Spain, for example, now ranks second among countries that are viewed as providing the best opportunity for capital appreciation in the 22nd annual survey by the Association of Foreign Investors in Real Estate (AFIRE), although the country trailed first-place US by a 26 percent margin. In the previous year’s survey, the European nation ranked fifth, tying with Australia and Mexico.

U.S.-based Blackstone is bidding for the 620-home Dorion portfolio, as well as 1,200 garages and storage units built between 2007 and 2011 in Madrid and Barcelona, the news service reports.  

Blackstone Group LP offered to pay 43 million euros ($58 million) for a portfolio of homes in Spain being sold by the country’s bad bank as the U.S. private-equity firm builds its rental business in the country, according to two people with knowledge of the matter. 

Stress tests by the European Central Bank (ECB) in 2014 could lead to even greater deal flow in Europe, according to Lee Millstein, senior managing director of Cerberus Capital Management. 

He noted that the ECB was on record as saying it would use stricter rules when stress testing banks’ balance sheets during its asset quality review in 2014, as it seeks to ensure banks have a capital ratio of 8 percent.

“I think the big potential catalyst coming forward is the asset quality review and stress tests being conducted by the ECB,” said Millstein, who heads European and Asian distressed and real estate investments on behalf of Cerberus. "Banks are trying to get ahead of these tests, looking to sell assets that are deemed problem assets.”

Investment in Spanish retail property doubled to €1.44 billion in 2013 as international investors poured capital into grade A assets offering income returns amid signs the economy may be bottoming out. In terms of number of transactions, retail deals tallied 24 compared to 10 in the year before.

It is just the latest sign that transactional activity is heating up in Spain – something that Joseph Kelly, head of EMEA research at data firm Real Capital Analytics said the market would continue to see in 2014 as investors had shown “renewed interest” in Spain not just in the retail sector, but across other asset classes in both the debt as well equity.

There’s something happening in the Iberian peninsula. Spain, an unfortunate textbook example of what happens when real estate growth unrealistically outstrips demand, has spent the last few years putting its house in order. And international investors are starting to take note.
Typically, in a crisis period, a country’s real estate market is dominated by domestic players: those for whom real estate is an “occupational” necessity or who still inherently believe in their territory’s fundamentals. The return of international investors, then, is a reasonable sign of improving economic conditions. Sentiment is a curious thing and both bolsters and reacts to hard data; either way, the foreign funds are allocating money to Madrid and Barcelona and the interest of a few front runners seems to be inspiring rising volumes of equity.

Orion Capital Managers, the European private equity real estate firm, has closed its latest opportunity fund, Orion European Real Estate Fund IV, on the maximum of €1.3 billion just over 18 months after launching it.

The company led by Aref Lahham, Van Stults and Bruce Bossom, managed to attract new investors as well as existing investors for the follow up to fund III, said Orion, as it explained how it was seeing a “range of opportunities” and projects for the new fund.

Apollo Global Management has agreed to buy Altamira, the real estate investment management business of Spanish bank, Santander. 

The New York private equity firm is making the investment on behalf of its Apollo European Principal Finance Fund II (EPF II), said Santander, which added that it had struck an “agreement in principle” and that full details of the Altamira transaction would be disclosed in coming weeks.

Santander, which has about €9.9 billion of property loans and foreclosed Spanish homes is selling the unit in a deal worth €700 million, according to a report by Reuters. 

Internos, the London-based private equity real estate firm, has landed another asset management contract as it continues to build assets under management. 

The company started by Andrew Thornton and Jos Short in 2008, has been appointed by UK REIT British Land to manage the Pillar Retail Europark Fund. The fund owns ten retail parks in Spain, France, Portugal and Italy with a collective value of €230 million and most of British Land's staff in Spain and France have transferred to the replacement manager. 

The opportunity to take on the fund has arisen because British Land regards it as too small to be considered a core part of its business. British Land inherited the assets when it took over UK retail specialist Pillar Property in 2005. As well as British Land’s financial interests, the closed ended fund – which launched in 2004 - also contains several institutional investors.

Spain's Banco Popular plans to sell its property management business to two U.S. investment firms as a means to strengthen its capital.

The regional government of Madrid has sold a portfolio of residential flats to Goldman Sachs private equity and Azora, the investment group, for €201m.

Blackstone Group (BX), builder of the biggest single-family rental home business in the U.S., is using its experience to replicate the model in Spain, where property prices have dropped 40 percent since the 2007 peak. The world’s largest private equity firm agreed in July to purchase 18 apartment buildings from the city of Madrid for €125.5 million ($173 million). “Building a business from scratch without a single employee and buying something like $150 million in homes per week requires a learning process,” Anthony Myers, senior managing director of real estate at Blackstone, said at a conference in Barcelona in mid-October. “When we looked at the situation in Spain, we thought we could see something similar, where we could replicate a lot of the systems and technology that we created in the U.S.”

Oaktree Capital Management is nearing the end of fundraising for its global real estate opportunity fund as well as its property debt program. In an earnings call on Friday, the alternative asset manager revealed that it had surpassed or is close to surpassing its initial equity expectations for both real estate strategies.

During the third quarter, Oaktree nearly doubled its equity haul for its current global real estate fund, Oaktree Real Estate Opportunities Fund VI, collecting a total of more than $2.3 billion in commitments, up from more than $1.2 billion at the end of June. John Frank, managing principal at Oaktree, said during the call that the firm had concluded marketing for Fund VI and is expected to reach approximately $2.8 billion in equity by year’s end. The final close for the fund – which was launched in August 2012 with an initial target of $1.5 billion – is anticipated in December. 

Sitting in an office in Paseo de la Castellana in the shadow of Real Madrid’s famous Bernabéu Stadium, Juan Barba recently took a short break from his urgent daily duties to brief PERE on the progress of Spain’s ‘bad bank’.
 
The Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria (Sareb) is not really a bank, of course. It was set up last November to help cleanse the Spanish financial sector in the wake of the global downturn and excessive exposure to real estate. Some €50 billion of assets were transferred to Sareb in two tranches, with the biggest contributor being Bankia. The mission is to dispose of the assets at the highest possible value to ensure that Sareb makes the best possible returns for its shareholders.