Soros, Paulson lead property investment charge on a reviving Spain

12 March 2014

Only six years after Spain’s property market crashed, almost taking the European Union with it, the country has become an area of intense interest to property investors.

In the past few weeks, two real estate investment trusts (Reits) have been launched, the first since 2011.

They have a combined value of $1.25bn, and billionaire investors George Soros and John Paulson have each taken a $127m stake.

One of the funds, which is being managed by Grupo Lar, is concentrating on distressed property.

Soros and Paulson took their stake in the Hispania fund, which is being run by local property company Azora, and this is focusing on property with scope for value growth, and is aiming for a double-digit annual total return over a six-year period.

According to the Spain’s Institute of Statistics, house prices in the final quarter of last year stood at 64% of their 2007 value. But things are changing with surprising speed: the economy is undergoing an export-led revival, and last year it returned to growth after declining for 10 consecutive quarters.

Torremolinos: the property revival is concentrating on unsold developments and tourist locations on the Costa del Sol (Jeanne Menj Wikimedia Commons)

This has led some players to call the bottom of the market. Investment has more than doubled, year on year, and has now reached €2.7bn.

The "ice breaker" came in June 2013 when Axa Real Estate Investment Managers, the largest property fund in Europe, paid €172m for commercial office space auctioned by the Catalan government.

Then there was Bill Gates’ decision four months later to buy a €113.5m stake in the contractor FCC; this firm has debts of more than €5bn, so the Microsoft founder’s decision was a vote of confidence in both it and the wider Spanish economy.

In the longer run, construction activity is expected to grow in the Balearic Islands, and in the tourist resorts of the south, where a lot of infrastructure has already been built.

Europe’s real estate conference MIPIM is taking place in Cannes this week amid a renewed optimism. Attendance is at its highest since 2007 and the fastest-growing groups of delegates are from Spain and Italy, say organisers.

Story for GCR? Get in touch via email: [email protected]

Latest articles in News