Two Spanish property funds have launched a €900m [£745m] fundraising drive — the biggest the country has ever seen — as more and more distressed real estate comes to the market.
Six years into a property market slump, buyers are snapping up an increasing number of distressed assets as banks clean up their books and prices come closer to bottoming at around 40 per cent below the pre-crisis peak. This is encouraging funds to try out investment paths rare in Spain, including through real estate investment trusts or REITS.
Last week the family-owned real estate company Grupo Lar published a prospectus for a listed property vehicle of up to €400m [£331m], to be placed among investors by JP Morgan. Within days private investment firm Azora launched a similar REIT fundraising drive for a vehicle aimed at attracting €500 [£414m] from investors. It has hired Goldman Sachs and UBS to market the listed fund, to be known as Hispania. Both funds will carry tax advantages and attractive returns.
Many European property analysts are starting to look upon Spain as the next Ireland as a rich source of debt-ridden property. “We’ve looked at these kind of things in Ireland before,” said one London-based investor who admitted he had been invited to invest in both the Grupo Lar and Azora funds.
Several US funds which specialise in dressed real estate have already joined foreign investors to notch up acquisitions across the country during the second half of last year. These were elusive in the early years of the property slump as buyers struggled to agree on prices with banks selling their foreclosed assets and wary of making losses.
Foreign banks are also making a push to sell soured Spanish property. Germany’s Commerzbank is seeking to sell a portfolio worth €4.3bn [£35.5bn] in performing and non-performing real estate loans, one of the biggest of its kind on the market so far.
Last year’s overhaul of Spain’s rigid rental laws has also given added impetus to the property market and the formation of real estate investment trusts. Officially introduced five years ago, but only recently enacted, the government has for the first time allowed shorter rental contracts and made it easier for landlords to evict non-paying tenants which, in turn, has made the market more attractive for investors.
