BANK magazine released the launch of Real Capital Fund. Mariano Capellino was interviewed and he talked about a new instrument which enables financial advisors to provide clients with an opportunity to invest in Spain. Below, you can read the article:
Through the stock markets, with at least US$50,000, it is possible to participate in the acquisition of a portfolio of different real estate assets in a market which is today considered the star market in real estate. The Blackstone fund, one of the largest funds worldwide specialized in real estate, invested 30,000 million euros in the acquisition of thousands of homes in Spain from portfolios which were in the hands of Spanish banks.
According to information released in the Spanish media, the said acquisition accounts for approximately 20% of the total portfolio of the fund, when Spain accounts for only 1% of the real estate investments all over the world.
The reason for this? Waiting for their revaluation. Today, the prices of class B homes have 50% and 60% discount compared to their values 10 years ago and, by acquiring large portfolios from banks it is possible to get an additional 25% discount.
In addition to this, if we take into account an attractive rent of 6% net annually in Spain, it can be an option to be considered when starting a real estate business at global level.
Another important factor is that Spain has experienced the highest growth rate in real estate investments, higher than China, USA and its neighboring countries in the rest of Europe.
One hundred sq. m. apartments in the outskirts of Madrid or in the capital cities of important provinces can be acquired at about 80,000 euros, while in 2007 their prices reached 190,000.
This means, paying 800 euros per sq./m, quite below the amount paid for a unit in any place of Buenos Aires and its surrounding areas.
This situation reminds us of the situation in 2001 in Argentina: in the case of Spain, it took seven years to get stable after the decline. The positive sign was given by the international funds which entered the country as of 2015 and, for this reason, class A properties in Madrid have already recovered their historic value. But Class B properties in the outskirts of Madrid and provinces have not experienced the same situation yet, as only last year mortgage loans at extraordinary rates of 2% annually started to be granted again. Meanwhile, the Spanish economy continues to recover drastically. Its GDP is increasing twice the average rate in the European Community and with a strong decline in the unemployment rate.
With this situation, the launch of Real Capital Funds with real estate assets from Spain was announced. This instrument allows small and medium investors, rather than institutional investors, to participate in large portfolios and residential buildings at lowered prices. In addition, the investment structuring is listed in the international stock market, thus making a system transparent and permanently audited.
Real Capital Fund I is listed in Vienna Stock Market and it is managed by the Spanish company INMSA SL based in Madrid.
Mariano Capellino, CEO of INMSA, expressed: “Some time ago, this type of opportunities was available only to great fortunes or global investment funds. Today, with the active participation of the State and private banks through Sareb´s actions, the so called Bad Bank which gathered bank´s nonperforming real property, the opportunity has been expanded and, through the implementation of certain instruments, smaller investors are allowed to access”. This fund, and some other funds under development process, allow to absorb a number of properties recovered from unpaid mortgages.
Thus, the acquisition of property packages can have thousands of investors which contribute with a smaller capital, compared to the large amounts brought by institutional investors. The fund is projecting annual 11% returns in 4 years in US dollars. Advanced 4% coupon payments are made, thus consolidating this investment as one of the most convenient ones for those who wish to invest in property.
As said by Capellino: “This model also involves professional management which permits to detect which are the best assets to buy, manage and sell once they have been revalued. Today, these properties have prices quite under the replacement cost. In some cases, 50% lower”. There is also an opportunity which will be grasped by the fund, which involves the investment in homes with squatters or in the hands of banks, reaching values accounting for 35% of the replacement cost. That means that a new home with similar characteristics is 3 times more expensive than acquiring the same one already built. That difference offers an opportunity for the market which is quite infrequent in developed countries.
“There are many investors accessing the market to actively operate in Spain. Our experience in Spain enables us to distinguish between possibly good things and really great opportunities”, says Mariano Capellino.
The fund which will be offered worldwide through financial advisors represents an initial investment of 50 million dollars and which will be conducted in tranches, in the hope that the first ones will be instrumented in the next months. The most evident benefit of these new opportunities is the democratization of investments, which was previously available only to large investors due to magnitude of the investments involved.
With proper instrumentation, it has been possible for small and medium investors to access different markets. In this opportunity in Spain, a country that today represents the market with the highest growth rate and considered the real estate star worldwide.
If you wish to read the article in BANK’s web version, please access https://www.bankmagazine.com.ar/espana-a-la-conquista-del-real-state-global/