BAG | Two real estate companies Ibex-35 begin to increase capital in the face of an imminent fall in rates

Real estate is raising its head in the stock market. The two largest companies by assets in Ibex-35, Socimis Colonial And Merlin Real Estateimmersed in processes raising capital for new investments, a prelude to the European Central Bank (ECB) starting to cut interest rates. Last Thursday, Colonial announced an agreement with Criteria, the investment arm of Fundación La Caixa, to invest 622 million euros in the company; while Merlin Properties is already working on a 1,000 million expansion before the end of the year.

The first to undertake an operation with these characteristics was Colonial, with the help of Criteria, which would receive 17% of the shares of the real estate company headed by Juan José Bruguera and headed by Pere Viñolas, in exchange for 350 million euros in cash and 272 million in deposits in the form of assets: three office buildings in Madrid and Barcelona and 600 houses for rent in different locations. With this capital, he will implement a program to reform and improve his assets, in which he plans to invest up to $400 million.

For its part, SOCIMI, under the leadership of Ismael Clemente, is immersed in the process raise capital of 1,000 million and 1000 million debt for investments in data centers (data centers in real estate slang). It is expected that the investor will receive a stake of 10% to 20%, and this process will be controlled by investment banks Morgan Stanley and JP Morgan. It is expected that by August the Board of Directors will approve one of the proposed options for carrying out this operation, the completion of which could take place before the end of the year.

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The reason that allows both SOCIMIs to raise capital is the stability of interest rates. From March 2022, the month in which the European Central Bank began increasing the value of money, The real estate market has collapsedduring a period that experts described as wait and see (wait and see in English). Given the uncertainty regarding what type of debt will be the main driver of property profitability and therefore price, investors paralyzed their activities. In 2023, investment fell by about 40% compared to 2022.

On the other hand, stability in interest rates has begun to emerge since the end of last year, and the ECB has already announced that it will begin to reduce them in the short and medium term. In practice, this will mean a decrease in the return on real estate assets and, therefore, a greater increase in asset prices. Definitely, This is attracting the interest of investors who want to anticipate such a cyclical change in the sector..

Colonial is the first to achieve a business movement of such characteristics, which entails great difficulties. Firstly, to convince the investor, and secondly, pay an estimated asset price that is much higher than the listing price these companies. Socimi, of Catalan origin but based in Madrid, has achieved this. only diluting the shareholder’s stake by 4%: that is, the participant now has a property worth 9.6 euros per title, in the case of SOCIMI, when previously he had 9.95. However, the average price paid of €7.1 per share is much higher than the listing price, as it was below €5.5 at the beginning of May.

The question now is whether Clemente and Merlin’s management team can do the same. At the moment, the market is showing confidence, since since the first information about a possible expansion appeared The company’s shares soared more than 23%. The key to this operation will be if Socimi can convince an investor to raise capital from the parent company, which also owns office buildings, logistics warehouses and shopping centers, rather than from a subsidiary created “specifically” for construction and operation. data centers. If it is finally closed successfully, it is expected that it will be some kind of large sovereign wealth fund, pension fund or family fund (family office) with a large amount of assets. At this point, at the shareholders’ meeting, the CEO admitted that he had received interest from the market.