2nd Iberian Lenders Survey in Commercial Real Estate 2015 Survey Conclusions
September 2015
CONTENTS 1. Leadership introduction ....................................................................................... 4 2. Executive summary ........................................................................................ 6
Theme 1: Market is borrower driven ...................................................... 8 Theme 2: Debt Types and Pricing. Further margin compression.....10 Theme 3: Spain vs. Portugal ....................................................................11 Theme 4: Some lessons learnt from the crisis ....................................14 3. What’s next in Iberia? ......................................................................................... 15 4. General Topics....................................................................................................... 16 5. Macro and Real Estate Market Situation ....................................................... 20 6. Contacts & Contributing Authors................................................................23
LEADERSHIP INTRODUCTION It is our great pleasure to introduce JLL’s second report on Iberian Lenders Survey in Commercial Real Estate.
Chris Holmes European Director and Head of UK Debt Advisory at JLL T: +44 (0)207 399 5728 chris.holmes@eu.jll.com
Jorge Valenzuela Head of Debt Advisory Capital Markets JLL Spain T: +34 91 789 11 00 jorge.valenzuela@eu.jll.com
Fernando Ferreira Head of Capital Markets Portugal at JLL T: 351 213 58 3239 fernando.ferreira@eu.jll.com
2nd Iberian Lenders Survey in Commercial Real Estate 2015
1.- Leadership introduction COLLECTING LENDERS SENTIMENT TOWARDS THE IBERIAN MARKET Over the last two years, we have captured the voice of the Lenders in the Property Finance community and provided powerful insights into the current status and future direction of the industry through our annual report on Iberian Property Finance trends.
• After the success of last years 1st edition of Spanish Lenders Survey, we are proud to present to you the 2nd Survey. This time covering the complete Iberian Peninsula: Spain & Portugal. • JLL Madrid & JLL Lisbon have joined their efforts to present a study with the main goal to provide the most innovative and complete report of the Iberian Property Finance (PF) market. • The Iberian Lenders Survey in CRE (Commercial Real Estate), on a highly confidential basis, covers each Lender´s testimonial, reflecting market sentiment and providing transparency to the RE PF market. • The Survey covers most of the active players in the market, who provided valuable graphics and information on their credit appetite, financing strategy and current market conditions. • The questionnaire was answered since May to September, in most cases during face to face interviews, with 33 leading entities on the Iberian RE PF market, represented by their heads of their Commercial RE, project Finance or Risk Management Departments, depending on the organizational structure. • We would like to take this opportunity to sincerely thank all who contributed to the research and shared their thoughts and perspectives. • This year we have included a short Macro-economic study and a CRE market report, to provide clearness on the Spanish and Portuguese’s economic and CRE market momentum.
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2nd Iberian Lenders Survey in Commercial Real Estate 2015
SURVEY PARTICIPANTS • We have been able to complete a total of 33 Surveys divided as follows: ✓✓ 25 in Spain, including 16 Banks (7 National and 9 International), 7 Private Equity Debt Funds and 2 Insurers with Debt platforms. ✓✓ 8 in Portugal including 7 Banks (2 National and 5 International), and 1 Private Equity Debt Fund. ✓✓ Some participants have authorized us to provide their names. They are: 7 for Spain (BBVA, CACIB, Blackstone, HIG, Muenchener HypothekenBank, Natixis and PBB) and 2 for Portugal (Hypothekenbank Frankfurt and Natixis).
Base: 25 respondents (12 respondents in 2014)
41%
28,0%
Lenders
Banks
32,0%
59%
Insurers with
8,0%
Debt Funds
32,0%
Base: 8 respondents
25%
25,0%
Lenders
Debt Funds
12,5%
Banks
75%
62,5%
Source: JLL Spain
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2nd Iberian Lenders Survey in Commercial Real Estate 2015
2. EXECUTIVE SUMMARY
Increased appetite and fierce competition
• When we published our 1st Lenders Survey report for Spain in Oct´14, we confirmed the interest of a number of Lenders in the Spanish Property Finance market. Since then, this interest has grown substantially in Spain and is back in Portugal. • One of the main reasons behind this is the increase in the number of International Investors entering the Iberian Real Estate market, attracted by the fall in Capital values during the crisis and by the economic recovery. • In this second edition, Iberian Lenders Survey in Commercial Real Estate identifies four fundamental themes that characterize the challenge for Lenders and their teams:
1
2
Debt Types and Pricing. Further margin compression
Market is borrower driven
3
4
Spanish Property Finance has recovered, Portugal is on its way
Some lessons learnt from the crisis
• As a result of all these changes, key financial variables have changed very rapidly since Oct´14: ✓ Margins for Senior Debt have tightened to between 150-275 bps in Spain and 250-400 bps in Portugal. ✓ In Spain that implies a reduction on the 400-600 bps seen for 2012-2013; and 225350 bps in Oct-14. ✓ Traditional Banks are dominant nowadays, some of them offering for Prime Assets 5 years bullet up to 55% LTV. ✓ LTV / LTC 50-70% in Spain and 50-60% in Portugal, except deals with Debt Funds and some exceptions with Banks at 70%-80% in Spain and 60%-80% in Portugal.
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2nd Iberian Lenders Survey in Commercial Real Estate 2015
✓ Ring-fenced structures with SPVs are the most usual in the market. ✓ Office lending activity primarily focused on Madrid, Barcelona and Lisbon. ✓ As the Commercial Real Estate Market becomes more competitive, Investors are moving up the risk curve with an increase of Land and Development Projects in the market and good perspective for the coming months. ✓ Some Spanish Lenders with Development Finance projects in the pipeline, most of them turnkey projects under Forward Purchase / Forward Funding agreements, with high level of pre-letting.
LENDING OPPORTUNITIES ARE CLEAR IN SPAIN & PORTUGAL. SUCCESS REQUIRE: Market knowledge Reliance on Debt Consultant experts JLL only goal is to elevate the DEBT ADVISORY service to EXCELLENCE
SPANISH REAL ESTATE LOAN MARKET: • 2014 with over €21bn transacted in portfolios, 2015 and onwards Spain will remain a key market for opportunistic investors. • The majority correspond to Residential NPLs, REO and Corporate RE Loans, with a significant increase in disposals being marketed, more than in any other country of the European Union. PORTUGUESE REAL ESTATE LOAN MARKET: • Portugal has transacted €0.8bn in REO’s disposals in H1´15, sold by Catalunya Banc to Lone Star (Vilamoura, €500M) and other REO Portfolio sold to EGD Vale do Lobo stake, for €500 M • There are further €2.9Bn of Non-core Real Estate exposure in the hands of BES bad Bank.
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2nd Iberian Lenders Survey in Commercial Real Estate 2015
THEME 1: Market is borrower driven
Increased Lenders appetite in Spain; recovered appetite in Portugal
Highlights from Lenders in Spain: • 86% of the surveyed participants show that there is a strong interest from Financial Intitutions in financing the CRE sector. Highlights from Lenders in Portugal: • 50% of respondents with high or very high appetite, most of them National Banks, with a few International Lenders showing interest.
Figure 1: What is the current lending appetite of your financial institution in the Spanish/Portuguese Market? All institutions appetite (Spain) Very High 34% Very High
Low 14%
30.0%
40.0%
High
13.3%
Low
50.0% 25.0% 25.0%
33.3%
30.0%
10 LENDERS
20.0%
33.3%
15 LENDERS
4 LENDERS
Insurers with debt pla orms 05 Interna nal Banks
Debt Funds 10 Na nal Banks
15
All institutions appetite (Portugal) Very High
100.0%
1 LENDER
Very High 17% High
100.0%
2 LENDERS
Very low 0% Low
Low Source: JLL 50% Spain
33.3%
66.7%
012345 Insurers with debt p Interna onal Banks
ms
8
3 LENDERS
Debt Funds Na nal TBanks
September 2015
2nd Iberian Lenders Survey in Commercial Real Estate 2015
• Prefered Average Loan ticket are in the range of €>100M in Spain and € 50-100€ in Portugal. Highlights from Spanish Lenders: • Loan amounts up to €100M is led by 36.8% by International Banks, between 50-100€M Debt Funds are majority in a 50%, while National Banks prefer 20-50€M and Insurers over €50M. • “The problem is to find viable projects to finance”. • Mainly Debt Funds followed by some Banks are willing to underwrite deals over 50€M; National Banks are dominant for operations below 50€M. Highlights from Portuguese Lenders: • Only International Banks are interested in deals above 100€M, followed by Debt Funds 50-100€M and finally National Banks 0-20€M. • International Banks are interested in deals over 50€M and National Banks for operations below 50€M.
Figure 2: What is your lending appetite in Spain in terms of annual loan amounts / objectives? All institutions appetite (Spain) >100€M
5.3%
31.6%
100€M >100€M 61%
12.5% 50.0%
50€M 33.3% 66.7%
12.5% 25.0%
19 LENDERS
26.3%
36.8%
100€M 26%
8 LENDERS
3 LENDERS
50€M 10%
20€M 100.0% 1 LENDER 20€M 3%
All institutions appetite (Portugal) >100€M >100M 25%
20M 12%
66.7%
100€M
50€M 50M 25% 100M 38%
20€M
2 LENDERS
100.0%
33.3%
50.0%
50.0%
100.0%
1 LENDER
01234
3 LENDERS
2 LENDERS
5
Source: JLL Spain
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THEME 2: Debt Types and Pricing Further margin compression In Spain it is a similar situation than last year. All Lenders are willing to provide Senior Debt. More Lenders are interested in Mezzanine Debt and Corporate RE than in 2014, mainly due to huge liquidity and more players entering the market. Highlights from Spanish Lenders: • “It is worrying the level of prices being paid again in good locations but for obsolete assets!” • One Lender says: “When spreads bottom out, LTVs will rise”. • Most of the deals have been closed by Banks, only a few deals by Debt Funds and Insurers. Highlights from Portuguese Lenders: • Senior Debt is the main category in the Portuguese market with National and International Banks as main players. • Only one Lender is willing to underwrite Mezzanine and Corporate RE.
Figure 3: Which debt types is your Company considering? All institutions appetite (Spain)
Senior
25,0%
16,7%
41,7%
16,7%
Senior
25,0%
16,7%
41,7%
16,7%
Mezzanine
12,5%
87,5%
Mezzanine
12,5%
87,5%
Corporate RE
14,3% 28,6%
57,1%
Corporate RE
14,3% 28,6%
57,1%
Others Others
100,0% 0 0
100,0%
12 LENDERS
8 LENDERS
7 LENDERS
2 LENDERS
2
4
6
2
4
6
8 Debt Funds 8 Debt Funds
10
12
14
10
12
14
All institutions appetite (Portugal) Senior
40,0%
60,0%
Senior
40,0%
60,0%
Mezzanine
100,0%
Mezzanine
100,0%
Corporate RE
100,0%
Corporate RE
100,0%
5 LENDERS
1 LENDER
1 LENDER
Others Others
Source: JLL Spain
0
1
2
3
0
1
2
3
10
Funds Funds
4
5
6
4
5
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2nd Iberian Lenders Survey in Commercial Real Estate 2015
THEME 3: Spain vs. Portugal
Increased Lenders appetite in Spain; recovered appetite in Portugal • • • • • • •
Offices is the preferred Lenders option, focused on Madrid, Barcelona and Lisbon. In Spain is significant that 100% of the Lenders are interested in the office sector (67% in Oct-14). In Portugal this percentage of interest in offices is also very high, 87.5% In Spain closely followed by Retail, Hotels and Logistics. Focus on Prime assets in both countries. Residential recovery in Spain, for both leased Residential and Residential for sale. Spanish Lenders have recovered the appetite for Value added deals; and some Lenders are looking for opportunistic. • This makes a clear difference with Portugal, where Focus is on Prime, with limited interest in Valueadded and not much in opportunistic.
Figure 4: Which asset class are the preferred to be financed by your company? All institutions appetite (Spain) 2015
100%
Retail
92%
Hotels
84% 80% 52% 40%
Others
20%
Prime
Value-Added
Opportunistic
Offices
88,0%
56,0%
16,0%
Retail
87,0%
52,2%
17,4%
Hotels
90,5%
47,6%
14,3%
Logistics
90,0%
45,0%
15,0%
Leased Residential
92,3%
46,2%
7,7%
Residential for sale
80,0%
60,0%
10,0%
Others
80,0%
60,0%
20,0%
Average
86,8%
52,4%
14,3%
Prime
Value-Added
Opportunistic
Offices
85,7%
28,6%
14,3%
Retail
83,3%
16,7%
0,0%
Hotels
100,0%
0,0%
0,0%
Logistics
100,0%
33,3%
0,0%
Others
100,0%
0,0%
0,0%
All institutions appetite (Portugal)
2015
87.5%
Retail
75.0%
Hotels
62.5%
37.5%
Others
12.5% 0.0%
Leased Residential
0,0%
0,0%
0,0%
0.0%
Residential for sale
0,0%
0,0%
0,0%
67,0%
11,2%
2,0%
0.00 %
Average
Source: JLL Spain
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THEME 3: Spain vs. Portugal
Spanish property finance has recovered, Portugal is on its way Figure 5: Where are the following variables today?
LTVs ✓ More Debt Funds Lenders for higher leverage of 70-80% LTV 15
6
11
10 5
0
✓ 50-60% LTV is market standard
4
2
1 <50%
<60%
<70%
4
4
7
0
<80%
1 <50%
1 <60%
<70%
<80%
Spreads ✓ 150-200 bps for the best deals ✓ National, International Banks and Insurers are the most competitive players 10
9
4
7
5
0
>200 pbs
3
3 2
>100 pbs
✓ Similar situation to Spanish spreads in Oct-14 ✓ The Portuguese Market’s spreads are around 100-150 bps above the Spanish Market
>300 pbs
2
2
3
1
1
0
>400 pbs
>100 pbs
>200 pbs
>300 pbs
>400 pbs
Loan Terms ✓ More lenders providing longer terms ✓ National Banks and Insurers are the most relevant player in the <10 years - <15 years terms 10
5
✓ Banks looking for plain vanilla and fully secured deals
4
9
6
5
2
3
1 0
< 5 years
< 7 years
< 10 years
3
3
0
< 15 years
1 < 5 years
< 7 years
1
1
< 10 years
< 15 years
Deal Size ✓ Increased number of lenders willing to underwrite large deals
20
✓ Small tickets, with same exceptions ✓ International Banks are the only relevant player in deals >50M 4
16
7
10
2
2
1
1
5 0
3
3
15
0 - 10M
10 - 20M
20 - 50M
0
>50M
0 - 10M
10 - 20M
20 - 50M
>50M
Source: JLL Spain
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Figure 5: Where are the following variables today?
Club Deals / Syndication ✓ Increased appetite for large deals and Club Deals ✓ Some lenders prefer to have a majority position in syndicated loans 10
✓ Most Banks are not willing to take U/W risks
3
8 5
5
2
4
2
20 - 50M
50 - 100M
1
1 0
2
0 - 10M
20 - 50M
50 - 100M
0
>100M
0 - 10M
>100M
Covenants (DSCR) ✓ Lenders more cautious with DSCR level
8
5
6
✓ Lenders looking for enough room to serve the Debt
6
6
5
4
4
4
4 1
2
2
0
<1,15X
<1,20X
<1,25X
0
<1,30X
<1,15X
1
<1,20X
<1,25X
<1,30X
Guarantees ✓ Ring-fenced structures with SPV’s are the most common loan structures 20
✓ Banks looking for plain vanilla and fully secured deals
6
15
15
5
4
10
1
2
5
2
2
0
Standard
Standard + Full Hedging
0
Standard + Full Hedging + soft and hard cov. Default
Standard
Standard + Full Hedging
Standard + Full Hedging + soft and hard cov. Default
Lending burocracy / time for approvals ✓ The most common is to get approval in 1 month
15
6
13
10
< 2 weeks
< 1 month
< 2 month
4
4
5
3
5 0
✓ Depending on the deal, 1 month since all info is available
1
2 0
< 3 month
< 2 weeks
< 1 month
< 2 month
< 3 month
Source: JLL Spain
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2nd Iberian Lenders Survey in Commercial Real Estate 2015
THEME 4: Some lessons learnt from the crisis Comments from Spanish Lenders: • The importance of prudent underwriting, although credit spreads, covenants and leverage are slipping already. • Take more guarantees, analyze in detail the companies who will pay you the rental income and the Sponsor’s track record. • Some lenders believe that we haven’t learnt anything, everything forgotten. The market is returning to something very similar to what we had in pre-crisis. • Lenders need to pay high attention to the real estate quality and business plan. They need to establish enforceable protections with LTV/DY covenants triggering payment defaults. • Good sponsor, good location, low spread, low LTV. The market has learnt about measuring the risks better and how to mitigate those risks in the financing structures. • Two major issues: analyze in more detail the projects risks of each transaction. Non-recourse financing is non-recourse. Be selective. Comments from Portuguese Lenders: • Important to analyze well the real estate asset value. It is crucial to perform a deep RE micro analysis, making a RE Asset swap Debt to own. • Return on bank equity should be reasonable and profitable.
Figure 6: Importance of borrower versus transaction All institutions Opinion (Spain)
22.2%
Spanish Lenders comments: • “Importance of the borrower is key. We need reliable and trustworthy Equity Partners”. • “Track record in Asset and Property management is key”
High
33.3%
13.3%
Low 50.0% 50.0%
44.4%
33.3%
9 LENDERS
20.0%
33.3%
15 LENDERS
2 LENDERS
100.0% 1 LENDER
05
10
All institutions Opinion (Portugal) 75.0%
Portuguese Lenders comments: • Borrower is more important in more complex “transactions”. • “In subperforming loans, borrowers financial and management is crucial”.
High
33.3%
33.3%
Low
100.0%
1 LENDER
0123
4 LENDERS
25.0%
33.3%
3 LENDERS
4
Source: JLL Spain
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2nd Iberian Lenders Survey in Commercial Real Estate 2015
3. WHAT’S NEXT IN IBERIA? Lender comments: • Increasing competition; economic recovery is still fragile; elections in autumn create a bit of uncertainty. Barring exogenous disruptions, there will be a few years of stability. • Progressive market improvement, possibly with new entrants (non-resident Banks and alternative Lenders) but they will not lend at more than 70% LTV and only on high quality assets. • Lenders should use their capital, without destroying it. Use their balance sheet more intelligently • Hold spreads, with an eye on Greece and on risk premium. If Greece does not give many scares, we will still see high appetite for financing. Valuations in some cases are too aggressive. • The financing goes hand on hand with the investment. The equity goes ahead, when it ends, financing will grow. There will not be a third wave of equity because there will be no product. • It is important to make a good analysis on the Real Estate value of every Asset at microanalysis level
• High level of Equity, the trend will continue. Still a lot of attractive opportunities available in the Spanish markets with many properties trading below replacement cost. Rents and fundamentals are starting to recover. Despite a more competitive environment, this is still an attractive environment to lend.
• Portuguese market will return to past behavior with a decreasing curve of constrains and price, along with economical recovery. • It will recover the financing for refurbishment and repositioning in good locations.
• The International Investors are betting on Spanish recovery with their purchases.
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General Topics
Some Lenders´ comments on current market status
#
Topic
Main conclusions
1
What has been your • Some Lenders have had a lot of experience in working out loans conexperience in workout with sensually and non-consensually (residential mortgages, developer loans, NPL's. foreclosed properties, share pledges, etc.). Real Estate Companies under • Discussion with Borrowers can be long and painful, usually manage to bankruptcy…? find a consensual deal to solve any issue.
2
What has your firm done • Aprox. 60% of Lenders have closed deals, remaining 40% are looking to recently in terms of Property close or new in the market. financing in Spain?
3
Are you considering to • More than 50% of Lenders are willing to provide Debt/refurbishment underwrite Refurbishment / finance. Development / Repositioning • Key factors are the business plan and Sponsor alignment with equity Finance in good locations? investment.
4
• Development finance is already reasonable in Madrid, according to some Lenders. In your opinion when will • Viable projects are financed when licenses are in with a place and good Development loans return to level of pre-letting, covering Debt Service. a reasonable level? • Other Lenders believes that Development will take still some 1-2 years. • There are already turnkey projects in the pipeline, especially in logistics.
5
• New financing trends surprised the traditional lenders with the entrance of insurers one year ago, a traditional bank cannot do 10 years bullet. What are in your opinion But now they think that it has been decaffeinated, for RE assets it has the principle changes from disappeared, there is no competence. new financing trends (Debt • This is not meant as a threat. With the price depression is getting colder. Funds, crowfunding, etc) and • Debt funds are fading due to the very low margins, they cannot comthe main challenges that the pete with banks. They are more active in large deals. Lending community is facing? • It will be challenging, they are alternative Lenders. More discipline on the market will be necessary.
6
How do you expect it will work the co-existence of traditional financial institutions with the Debt Funds (shadow banking) and Insurance players?
• Non traditional Lenders are active but they are not materializing as many deals as traditional Banks. • Debt Funds willing to do things differently. Main challenge for Banks are secondary assets. • Debts Funds have been most active in the NPL, distressed investment and Real Estate Equity areas.
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#
1
2
3
4
5
6
7
Topic
Main conclusions
What has been your experience in workout with NPL's. foreclosed • The Lenders surveyed have had litle experience. properties, Real Estate • Workout strategies are highly conditioned by Courts efficiency. Companies under ruptcy…?
What has your firm done recently • Not much deals done recently. in terms of Property financing in • Some loans extensions and restructuring improving DSCR through Portugal? close monitoring of Property Management.
Are you considering to underwrite Refurbishment / Development / Repositioning Finance in good locations?
• Only 2 Lenders are considering Development for prime assets.
In your opinion when will Development loans return to a reasonable level?
• It will take some years according to one Lender. • Other believes in 12 months.
What are in your opinion the principle changes from new financing trends (Debt Funds, crowdfunding, etc) and the main challenges that the Lending community is facing?
• New financing providers are still reluctant about the Portuguese market, focusing only on core transactions with low risk.
How do you expect it will work the co-existence of traditional financial institutions with the Debt Funds (shadow banking) and Insurance players?
• Shadow banking will remain if the margins are high.
How do you expect SIPIs will impact on the Portuguese Real Estate market?
• Might create an additional dynamic to the market. • Positive impact as alternative source for fund raising. • It will bring more professionalism to the market.
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4. Our understanding
Range of conditions offered by the Lending community
SENIOR DEBT
MEZZANINE DEBT
Spread (bps)
Term
Amor.
LTV / LTC
Ticket Spread (€ M) (bps)
Term
Amor.
LTV / LTC
Ticket (€ M)
Re-Financing / Acquisition Stable Asset
150 275
5 - 12 years
0%-3%
50% 70%
5M 200M
350 900
3-7 years
0%-2%
70% 80%
5M 200M
Re-Financing / Acquisition Repositioning
250 500
3-5 years
0%-3%
40% 60%
5M 60M
350 900
3-5 years
-
50% 80%
3M 50M
Refurbishment Financing
250 600
6 - 24 months
-
40% 50%
3M 30M
400 1,400
6 - 24 months
-
50% 70%
3M 50M
Conversion Financing
300 600
6 - 24 months
-
40% 50%
3M 30M
400 1,400
6 - 24 months
-
50% 70%
1M 50M
Development Financing
350 700
12 - 36 months
30% 50%
3M 200M
400 1,400
6 - 36 months
-
50% 70%
3M 200M
Source: JLL Spain
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SENIOR DEBT
MEZZANINE DEBT
Spread (bps)
Term
Amor.
LTV / LTC
Ticket Spread (€ M) (bps)
Term
Amor.
LTV / LTC
Ticket (€ M)
Re-Financing / Acquisition Stable Asset
250 400
5 - 10 years
3%-5%
50% 60%
5M 100M
450 1,000
3-7 years
0% 3%
60% 80%
5M 200M
Re-Financing / Acquisition Repositioning
350 600
3-5 years
0%-3%
40% 50%
5M 60M
450 1,000
3-5 years
-
50% 80%
3M 50M
Refurbishment Financing
350 700
6 - 24 months
-
40% 50%
3M 30M
500 1,500
6 - 24 months
-
50% 70%
3M 50M
Conversion Financing
400 700
6 - 24 months
-
40% 50%
3M 30M
500 1,500
6 - 24 months
-
50% 70%
1M 50M
Development Financing
400 800
12 - 36 months
30% 50%
3M 200M
500 1,500
6 - 36 months
-
50% 70%
3M 200M
Source: JLL Spain
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5. Market Situation MACROECONOMIC
VIRTUOUS CIRCLE
• The IMF forecast for 2015 places Spain as the 14th largest economy by GDP in the world (1.230 bn € ) and the 5th in the European Union. • Spanish growth remains at high levels, the GDP growth yoy stands up to 3,1 % and a +1% 2Q 2015 an equivalent 4% yoy leading the trend in Europe, as a result of government reforms and consumption increase and investment in construction. The figure is one tenth of a point higher than in the first quarter, and the highest in the last eight years, reflecting the kind of growth experienced prior to Spain’s economic crisis.
•
Investors are confident that growth will be in the cards in Madrid in 2015, at least for core and value-added offices.
•
Prime rents in Madrid & Barcelona are around 35% lower than pre-crisis level.
•
Madrid has shot up to nº 3 in Europe this year for investment products. Barcelona also feels the increased investor interest, especially in the touristic sector.
• Spanish exports are on the rise, thanks to the growth of global demand, a weak euro and the decrease of the oil price.
Spanish GDP
• The labor market situation continues with its upward trend, the unemployment rate fell for the ninth quarter in a row to 22.5%.
0,1
• Household financing has been increasing in a 20% for the past 12 months, latest data provided by the Bank of Spain, shows a slight continued improvement in loans to households and business sector.
2012
2013
SPANISH COMMERCIAL REAL ESTATE MARKET
700 600 500 400 300 200 100 0
(Figures in €M)
0
2014
2015
German Bond
Dic 2011
Feb 2015
3344
3500 3000 M€
2500
3000
2500 2116
2000
2000 1000
586
2014 Forecast 2015
1225
1500 800
500 0
Madrid & Barcelona are the main Office markets in Spain:
1.000
2013
Spanish Bond
4000
MAIN OFFICE MARKETS: MADRID & BARCELONA
3.457
Oficinas
Retail
Industrial
Hotel
Source: JLL Spain
4.064 1.265
2.579 572
1.463
2.007
1.938
1.583
2.068
2.799
3.034
2002
2003
2004
2005
2006
2007
2008
1.389
Barcelona Offices Madrid Offices
3.685 651
2.753 815
2.115
22,4
2012
CRE Investment Volume in 2014
• Construction is consolidated today as one of the main driver for the economic spanish growth, due to house building recovery and increase of public demand construction. Business investment in this sector has increased up to 5.1% rates. We are also assisting to a resurfacing of merchantings of dwellings, mortgage lending and visa application for building construction.
1.853 390
2017
23,7
Source:B anco de España
• The main buyers are continued to be SOCIMIs (Spanish REITs), investment funds and private investors. The vast majority of deals are completed by Spanish investors (mostly companies based in Spain with foreign capital).
2.000
2016
Spanish 10 year bond vs. German 10 year bond
• Yield compression continues to intensify, potential buyers are still focusing their interest on core and value added products in well-established areas that offer upside potential over the short, mid and long-term with respect to other areas.
3.000
2015
25,6
26
2011 Source:E PA
• In 2014, Spain accumulated in direct R.E. investment transactions (office, retail, logistics and hotels) 7.2 bn €. As at H1 2015, Spain exceeded an investment volume of 4.4 bn €, while forecasts predict a 8.3 bn € for 2015
4.000
2014
Spanish Unemployment 22,9
•
2,3
-1,2
-1,6
2011
2,7
2,5
1,4
532
1.175 544 631 2009
1.347 607 740 2010
2.116 503 192 311 2011
795 266 529 2012
672 306 366 2013
940 1.176 2014
Source: JLL Spain
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Portuguese GDP
MACROECONOMIC • Portugal is the 45th largest economy by GDP in the world (€173,044 bn in 2014) and the 14th in the European Union
0,9%
• Portugal productivity raised from the 46th place in 2013 to the 43rd in 2014
-1,3%
1,7%
1,9%
2,0%
2015
2016
2017
-1,4% -3,2%
• 2 out of 3 Portuguese banks passed the latest stress tests (scenario 2013-2016) . The BCP failed with a capital shortfall of 1.137M€. The shortfall will be presented to BCE in the capitalization plan of the bank.
2011
2012
2013
2014
Source: JLL Research
• The Quantitative Easing will result on an increase in lending and investing activities in the whole Euro Area. It will improve company financing, which was a problem specific to Portugal. • Nowadays, the Portuguese Banks are wide open to finance the household market. In June this market represented 46.5% of all the private credit and it was the best number since the crisis of 2011.
Portuguese Unemployment Rate
16,3%
15,6% 12,7%
13,9%
13,6%
2014
2015
12,8%
PORTUGUESE COMMERCIAL REAL ESTATE MARKET 2011
• Portugal had € 0,8 bn in RE direct transactions in 2014. In 2015 is expected that volume reach about € 2,0 bn(the highest ever in Portugal). Residential Development is also a very strong segment in Portugal due to the Golden Visa Programme and the special tax treatment for non-habitual residents who have brought the attention from international end buyers to Portugal.
2012
2013
2016
Source: JLL Research
10 Year Bond Spread - Portugal vs. Germany
• Besides the fact that the yields are decreasing, they continue above the majority of the European markets. However, demand continues to outweigh supply.
15,00 10,00
Portuguese Bond
LISBON OFFICE MARKETS
jun/15
dic/14
jun/14
dic/13
jun/13
jun/12
0,00
• CRE market has been the apple of many Pan-European investor´s eye over 2014, and with overseas Capital piling in.
dic/12
5,00
dic/11
Yield (%)
• Investors are looking beyond CRE: developers are in the game again and housing business in Lisbon is recovering, due to efforts of the Government and the boom of tourism.
German Bond
Source: JLL Research
• Lisbon Office Market, the main Office market in Portugal: GROWTH CIRCLE
Office Take up evolution Office Take-Up Evolution
• The office market it is recovering, though slowly. The investment in offices is mainly in core/prime buildings.
232.623
250.000 201.432
200.000
SQM
• Prime rents in Lisbon are around 13% lower than pre-crisis level, and it is expected their growth in the short tern, mainly in the zones with lowest vacancy rate.
150.000
148.662
161.675 115.628
105.057
100.000
126.529 87.649
101.974 77.802 50.776
50.000 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
S1 2015
Source: JLL Spain
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ABOUT JLL JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of US$4.7 billion and gross revenue of US$5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries, and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed US$118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has US$55.3 billion of real estate assets under management.
ABOUT JLL Debt Advisory Iberia JLL Debt Advisory will allow you an adequate and well structured financing process in Spain & Portugal. JLL Debt Advisory can either assist in one particular step of the financial process or manage during the whole process, ensuring transaction and pricing certainty. Tangible benefits: select the right Lenders for every investment, create competitive tension between Lenders and streamline the financing process. JLL Debt Advisory is providing clearness and transparency to the Spanish Property Market, with the Lenders Surveys issued in Oct´14 and Sep´15; and the Investor Survey (joint work JLL and IESE) issued in March´15.
Most relevant transactions: What our client said about our service…
Lender side
The transaction JLL Debt Advisory Spain advised in March 2015 to Allianz Real Estate, in the €133.6M financing to Merlin Properties, for the 2nd largest Shopping Mall in Spain, Marineda in A Coruña.
Mr. Helmut Muehlhofer, Head of Debt & Capital Markets in Allianz RE, has said: “This is the first financing we have provided in Spain. We are delighted with the advice of JLL Debt Advisory team, who has helped during the whole financing process”.
Borrower side
JLL Costumer
In June 2015 JLL Debt Advisory Spain advised Lar España RE Socimi in the €37M financing, provided by ING Bank for As Termas Shopping Centre in Lugo.
Mr. Sergio Criado Cirujeda, CFO in Lar España Real Estate Socimi S.A., has said: “Congratulations to JLL Debt Advisory team, Excellent Advise!”
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6. CONTACTS Chris Holmes
Jorge Valenzuela
European Director and Head of UK Debt Advisory T: +44 (0)207 399 5728 chris.holmes@eu.jll.com
Head of Debt Advisory Capital Markets Iberia T: +34 91 789 11 00 jorge.valenzuela@eu.jll.com
Gema Garrido
Fernando Ferreira
Loan Management Director Debt Advisory Capital Markets Iberia T: +34 91 298 94 13 gema.garridocalleja@eu.jll.com
Head of Capital Markets Portugal at JLL T: 351 213 58 3239 fernando.ferreira@eu.jll.com
CONTRIBUTING AUTHORS Irene Verdes-Montenegro MRICS
Francisco Torró
Financial Analyst Debt Advisory Capital Markets Iberia JLL Iberia T: +34 917 89 12 36 irene.verdes-montenegro@eu.jll.com
Senior Consultant JLL Spain T: +34 91 787 77 02 francisco.torro@eu.jll.com
Margarita Cuadra
María Empis
Financial Analyst Debt Advisory Capital Markets Iberia T: +34 917 89 11 00 margarita.cuadraespinar@eu.jll.com
Director of Research JLL Portugal T: +351 213 58 3234 maria.empis@eu.jll.com
Luis Antonio Fernández
Editor Responsible Marketing JLL Spain T: +34 917 89 11 00 luis-antonio.fernandez@eu.jll.com
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Investors Survey in Commercial Real Estate® is a trademark of JLL and is registered in the United States and other countries. All rights reserved. ©Jones Lang LaSalle IP, Inc. 2015
Jones Lang LaSalle España, S.A. © 2015 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this document. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.