Major Spanish investors incite pre-election jitters

Major investors holding out on investments until November’s general election are causing an outcry from certain Spanish investment agents.

The reaction follows reports of giants Goldman Sachs and Cerberus holding out on their previous intentions to bid on Banco Popular’s €500m Project Elcano portfolio, a mix of residential, land and hotel assets across Spain.

But it would be a mistake for investors to follow suit, particularly on the array of large real estate or loan portfolios that are coming to market despite the impending election, some investment agents argued.

BBVA, Spain’s second largest bank, for example, announced most recently that it is bringing two portfolios of nonperforming debt and real estate assets worth up to €2bn to market.

“Yes, there are a couple of funds that are holding their investment back until after the election,” but they “risk missing out,” said Alvaro Alonso, partner at Madrid-based consultancy irea.

“In the past month at least four to six new portfolios have come out worth up to €3bn. And they all have the idea of closing before the general elections in November.”

The election is scheduled for November 29 and is expected to be fiercely contested between the ruling People’s Party and the Spanish Socialist Workers’ Party.

The rise of anti-austerity parties such as Podemos is believed to have made investors nervous of the result. Podemos has promised to stop the eviction of people who have been unable to maintain mortgage payments during the country’s property bust.

“What you have to remember is Spain is a more federal country than the UK,” said Rupert Lea, partner and head of retail capital markets in Spain for Cushman & Wakefield.

“That means that whatever happens in the election it won’t make a huge impact on the direction of the Spanish economy. If the more radical politicians come in, which I doubt, there may be a jitter in the stock market but I can’t see that changing the state of the investment market.”

Spain attracted €7.5bn worth of property investment last year, about half of which was into large portfolio acquisitions, according to Savills. The number of large portfolio deals is expected to slow this year as banks work out their loan books. About €1bn of portfolio deals have closed this year.

An improving economy and competition among lenders have seen margins in Spain almost halve since late 2013, running between 200-275 bps, and loan-to-value ratios rising to 65%.

“You won’t be seeing the volumes of 2014 or this year in 2017 or 2018 in Spain,” said Lea. “But the fact is, there’s a huge capital flow into Europe and that won’t stop.”