Southern Europe Investment Briefing Opportunity & Distressed CBRE London, 9 th September 2014 Patricio Palomar Murillo Head of Research & Investment Strategy Spain patricio.palomar@cbre.com
1 THE MACROECONOMIC CONTEXT Visuel p. 2
Macroeconomic Data Spain GDP 4% 2% 1.3% 2.0% 2.2% 2.4% 2.4% 2.6% 0% 0.4% -2% -1.3% -1.6% -4% % annual change 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 p. 3
Macroeconomic Data Spain Labor Market 30% Unemplo yment rate 25% 20% 15% 10% 5% 2006 2007 2008 2009 2 0 10 2 0 11 2 0 12 2 0 13 2 0 14 2 0 15 2 0 16 2 0 17 2 0 18 2 0 19 2020 2021 2022 2023 p. 4
Bloomberg Businessweek Spain Growth beats Bank of Spain Estimate Even as Prices Fall p. 5
REUTERS Spain Unemployment Rate Drops as Job Creation Gathers Pace p. 6
Financial Times Europe s property IPOs at eightyear high - Tuesday 15 th July 2014 p. 7
2 INVESTMENT MARKET Visuel p. 8
CRE Investment Volumes in Southern Europe p. 9
Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 CRE Investment Volumes in CEE vs. Southern European Economies In nominal figures Million 12.000 CEE PIIGs 10.000 8.000 6.000 4.000 2.000 0 p. 10
Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 CRE Investment Volumes in Southern Europe Spain 7.000 Million Italy Spain Portugal 4Q average 6.000 5.000 4.000 3.000 2.000 1.000 0 p. 11
Change in Direct CRE investment Twelve months to Q2 2014 compared to previous twelve Change in Value (%) 160,0 140,0 120,0 100,0 80,0 60,0 40,0 20,0 0,0 Iberia Italy UK Benelux Europe France Germany Nordics CEE p. 12
Commercial Real Estate Finance Market Conditions in Europe Key Lending Terms*: Top Quality Real Estate and Tenant, Q4 2013 Market Max Loan** Max LTV Margin*** Germany 200 m 75% 150 bps Ireland 80m 70% 300 bps Netherlands 120m 70% 200 bps Russia 150m 70% 450 bps**** 600 bps***** Spain 50m 60% 4600 bps UK 150m 70% 170 bps Market Trend / * New 5-year loan based on the maximum underwriting ability of a single lender. ** Max ticket size for a single lender. *** Margin over EURIBOR/LIBOR swap. **** Lending in RUB. ***** Lending in US Dollar /. p. 13
1H of 2012, 2013 & 2014 Total Investment volume; Spain Doubling year on year 4.000 Millions 3,226 MM 3.000 2.000 1,455 MM 3.226 1.000 697 MM 1.455 0 697 1H 2012 1H 2013 1H 2014 p. 14
1H 2013 vs 1H 2014 Total Investment volume; Spain The share per sectors (% of total) Millions Offices Retail Industrial Others 4.000 3,226 MM 3.000 840 2.000 1,455 MM 128 1.110 1.000 0 697 MM 123 45 333 196 615 169 203 1.148 468 1H 2012 1H 2013 1H 2014 p. 15
The new tax efficient vehicles established in Spain Current and futures SOCIMIs and FABs SOCIMI Capitalization 90 55.4 50 500 500 1,250 400 p. 16
Spain H1 2014: Cross-Regional CRE Investment 2,201 out of 3,226 million came from over seas in H1 2013 Europe 927 million North America 583 million Middle East 138 million Asia-Pacific 359 million North LatAm 130 million South LatAm 63 million p. 17
Spain H1 2014: Cross-European CRE Investment Only 28% came from other European countries UK Netherlands 233 million 130 Germany million 55 million France 509 million p. 18
Spain: Historical CRE Turnover Investor demand is now reflected in investment volumes million Offices Retail Industrial & Logistics Other Forecast H2 10.000 609 9.000 8.000 3.591 7.000 430 6.000 5.000 4.000 3.000 2.000 1.000 0 605 2.889 1.261 196 288 214 1.766 117 381 5.879 120 1.868 2.288 97 4.289 72 3.818 1670 332 2.537 1.527 1.757 1688 259 840 370 128 222 508 1912 82 1110 924 930 1.199 1116 960 803 1074 1148 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014 p. 19
Q2 1997 Q4 1997 Q2 1998 Q4 1998 Q2 1999 Q4 1999 Q2 2000 Q4 2000 Q2 2001 Q4 2001 Q2 2002 Q4 2002 Q2 2003 Q4 2003 Q2 2004 Q4 2004 Q2 2005 Q4 2005 Q2 2006 Q4 2006 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Madrid: Prime yields evolution 11 Industrial Offices High Street Shopping Centres 10 9 8 7 6 5 4 3 p. 20
2014 Investment activity in the Madrid Office Market M-50 Castellana, 200 (Q1 2014) Price: 150 million /sqm: 5,500 Purchaser: PSP & Drago Capital A-6 M-40 A-1 R-2 Avenida de América, 115 (Q1 2014) Price: 117 million /sqm: 2,312 Purchaser: London & Regional A-2 M-50 M-40 M-30 2.028 MADRID R-3 A-5 A-4 A-3 A-42 M-50 R-5 R-4 Edificio IBM (Q2 2014) Price: 130 million /sqm: 1,800 Purchaser: Finaccess Edificio España (Q1 2014) Price: 265 million /sqm: 4,308 Purchaser: Dalian Wanda Group Castellana 77 (Q3 2014) Price: NA MM /sqm: NA Purchaser: NA p. 21
H1 2014 Investment activity in the Barcelona Office Market Paseo de Gracia, 111 (Q3 2014) Price: 90 million /sqm: 6,308 Purchaser: Emin Capital Avenida Diagonal, 211 (Q3 2014) Price: 150 million /sqm: 3,543 Purchaser: Emin Capital Diagonal, 00 (Q2 2014) Price: 107 million /sqm: 3,543 Purchaser: NA p. 22
II Public disposal of the Catalonia Government ( 13 assets for a value of 201 mios) Casp, 24-26 Gran Vía, 639 Pamplona,103-113 Avinguda Meridiana, 38 1 2 3 4 5 7 Pere IV, 134-146 Vía Laietana,2 6 8 12 Ausias Marc,36-40 10 7 2 1 9 6 11 13 4 3 5 Paseo Taulat 266 8 13 9 10 11 12 Diputació, 353 Girona, 20-22 La Rambla, 6-8 P. de Sant Joan 39-41/ Diputació, 355 P. De Sant Joan,45 p. 23
H1 2014 Shopping Center investment activity in Spain CC El Boulevard (Q2 2014) Price: 155 million Purchaser: ING Nationale Nederlanden C.C. Modóo (Q1 2014) Price: NA million Purchaser: Alpha Capital C.C. Gran Vía de Vigo (Q2 2014) Price: 115 million Purchaser: Oaktree C.C. Txingudi (Q1 2014) Price: 24 million Purchaser: Grupo Lar Socimi C.C. Mercado de Fuencarral (Q2 2014) Price: 22 million Purchaser: Thalus C.C. Las Huertas (Q1 2014) Price: 15.5 million Purchaser: Grupo Lar Socimi C.C. Vialia Málaga (Q2 2014) Price: 63 million Purchaser: Brazilian Investment Club Varios activos (Q4 2013) Price: 160 million Purchaser: Baupost, GreenOak, Lar C.C. Parque Ceuta (Q1 2014) Price: 18 Price: 18 million Purchaser: HGI C.C. Las Rosas (Madrid) C.C. Madrid Sur (Madrid) C.C. Getafe 3 (Madrid) C.C. Rosaleda (Málaga) p. 24 C.C. El Mirador (Burgos) C.C. Atalayas (Murcia) Parque PVistahermosa Vistahermosa C.C. Montigalá (Badalona) (Alicante)
H2 2014 Shopping Center investment activity in Spain (a) C.C. Planetocio ( Q3 2014) Price: 14 million Purchaser: AXIA RE C. C. Marineda City (Q3 2014) Price: 250 million Purchaser: Merlin Properties C.C. L Anec Blacu (Q3 2014) Price: 80 million Purchaser: Lar España C.C. As Cancelas ( Q3 2014) Price: NA million Purchaser: Carmila C.C. Alcalá Magna (Q3 2014) Price: 67 million Purchaser: Incus Capital P.C. MediaMarkt Villaverde( Q3 2014) Price: 9.2 million Purchaser: Lar España SOCIMI C.C. Los Alfares (Q3 2014) Price: NA million Purchaser: Carmila C.C. Imaginalia (Q3 2014) Price: 11.5 million Purchaser: Benson Elliot C.C. Holea ( Q3 2014) Price: NA million Purchaser: Carmila C.C. Albacenter (Q3 2014) Price: 28.4 million Purchaser: Lar España Socimi p. 25
3 THE DISTRESSED ASSETS Visuel p. 26
The Servicing Platforms of the banks Mandatory for those who want to invest in big resi portfolios Bank Platforms Investors and there are only very few ones in hands of the banks! p. 27
The bank repossessions in Spain In Million as of June 2014 * 1.381 1.000 958 940 789 596 404 401 2.820 ** 4.562 6.159 5.998 6.396 Net value. It includes assets from loans to companies that promote mortgages for buying houses of equity instruments. ** Bfa-Bankia data. 6.822 p. 28
SAREB: A bunch of investment projects either NPLs, land banks, CRE, Resi, etc a new world of opportuties for non risk averse investors! p. 29
Conclusions Visuel p. 30
Why invest now? Spanish cycle is very volatile Main structural reforms are being implemented Banks are starting lending again but gingerly Rentals levels adjusted heavily and have started growing Good quality stock is not in oversupply p. 31
Where is the opportunity? Bigger ticket assets (Castellana 77 for instance) Good asset/location with capex requirement (Castellana 89 for instance) Public sector sale and lease (Junta de Andalucia for instance) NPL s (Amazona Project for instance) Good companies over leveraged that go for sale and lease Supply segmentation is key to separate the good from the bad Offices (Good locations not so good asset or vacancy) Retail (regions with license granting moratorium) Logistic portfolio lease (>7,5 % net yield) Resi (Costa del Sol, resort type with track record) Student housing and health sector p. 32
For more information regarding this presentation please contact: PATRICIO PALOMAR MURILLO Head of Research & Investment Strategy T +34 91 5143934 F +34 619 137151 Email. patricio.palomar@cbre.com