The Spanish property company backed by powerhouses Caja Madrid and FCC has the confidence to float 48% of its shares just after last month’s Spanish stock meltdown
Despite Spain’s stock market crash last month, property company Realia has pushed ahead with its flotation, which could raise up to €2.7bn. The company insisted that its business is strong enough and its assets are good enough for it not to worry about the market consequences of “Black Tuesday” on 24 April as it goes in search of more capital in its quest to expand.
Realia has a reputation in the Spanish property world for having one of the best portfolios in the country. The portfolio includes landmark buildings in Madrid and Barcelona as well as assets in Paris, Lisbon and Warsaw. The company’s most iconic building, the Torre Este de Puerta de Europa, which leans over the Plaza de Castilla in Madrid, is incorporated in Realia’s logo.
The flotation, announced on 18 May and launching on 6 June, consists of 47.7% of Realia’s shares, valued at between €7.90 and €9.70 each, with an expected market capitalisation of between €2.2bn and €2.7bn. It will offer 52% to international investors, while 16% will go to domestic investors, 31% to minority shareholders and 1% to employees.
Realia is floating because it wants to widen its shareholder base and gain access to capital markets to help its growth. It also wants to offer its shareholders the greater liquidity that is available on the Spainish stock exchange.
Realia, which was advised by Caja Madrid and JP Morgan, has agreed not to float the remainder of its shares for another five years.
Realia, presided over by Ignacio Bayón, was founded in 2000 when its two major shareholders, Spanish bank Caja Madrid and construction company FCC, clubbed their real estate interests together to create the property company. Department store El Corte Inglés and motorway company Iberpistas are the other two shareholders. It has built up an impressive portfolio, specialising in offices, shopping centres and residential property.
Realia has 73 office buildings and three more in development, covering a total of 450,000m². It also has 12 shopping and leisure centres, eight of which are in use and four in development, covering 270,000m². In the residential market, Realia built 1,600 homes last year, including 46 complexes. In total it controls a land bank of 11m m² in Spain, Portugal and Poland.
“It has some of the most emblematic properties in Spain, so it will be fascinating to see such a prime portfolio on the market,” said Tim Nalder, general manager of Invesco in Madrid. “From a strategic point of view, it was a sweet moment for them to go to the market. This is one of the best portfolios and certainly they will prove to be the top company that they are.”
Not everyone agrees. With April’s stock market crash, listed property companies have taken a beating, with previous star Astroc especially affected. “The problem is that Realia is coming to market just when the market is punishing the real estate companies,” said Joaquín Piserra, managing director of the Redwood Group in Barcelona. “When the market attacks real estate, it doesn’t differentiate between commercial and residential.”
Realia is different from the rags-to-riches, king-of-bricks companies such as Astroc and Colonial, however. With powerhouses Caja Madrid and FCC behind it, Realia has built up a solid portfolio over the decade, making it less susceptible to the panic share-selling that caused April’s crash. Its first-quarter results this year were impressive. While Astroc saw its profits fall by 82% from €32m to less than €6m, Realia’s profits rose by 21% to €817.4m. Its solid pipeline should ensure that this performance continues.
Realia, like many other Spanish property companies, has looked abroad for investment. Last year the company bought the French property company SIIC de Paris for €586m, and has invested more than €1bn in France. The SIIC has a portfolio of forty buildings and Realia is acquiring four more. Realia is also active in Portugal, where it linked up with local developer Amorim in 2003, and Poland, where it has set up Realia Polska. Its shopping centre branch has expanded into smaller Spanish cities such as Guadalajara, Santiago de Compostela and Murcia.
“They are very serious people, the most serious in the market, and they have very good contacts,” said Luis López de Herrera Oria at Rodex. “They have very good assets and they will increase in value now they are going to market. I believe they will do very well because there are few offices on the market, and Realia is building quite a few.
“To list on the stock exchange is always good if you plan to stay there for a long time. If the real estate sector in Spain survives, and if there it isn’t a financial crisis, it’s not going to sink.”
