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2017 / iberian.propery // 27
ISSUE: TOP IBERIAN Investors //dossier
The usual answer would include the following components:
- Cultural differences from the Anglo-Saxon world (where
most equity comes from, directly or indirectly)
- Possible deficiencies in the legal system for some inves-
tors (stability, transparency and timing to defend rights…)
- Depth of the market (depending on “
where
” on the cycle,
lack of liquidity or lack of product)
- Difficulties to find a team or JV Partner
- Political risk
- The strong (negative) influence of burocracy in economy
As these elements are vastly known, I would like to tackle
other ones, more financially-driven, using the real factors
affecting cap rate (study performed by Chervachidze &
Wheaton and commented by Livia Giorgialongo):
- Debt availability: Iberia suffered in past years from debt
availability, which pushed cap rates up, thus heavily
reducing values. Now debt availability is perceived as a
more stable factor
- Country risk premium: 2012 proved that country risk pre-
mium is extremely key. Record levels at that time dried
the market. Today, political uncertainty & lack of stability
would negatively increase risk premium and therefore
hampering the real estate market recovery by strongly
influencing –negatively- values and liquidity
- Real T bond yield is the key challenge getting more
press (some predicting
“doom days
” when interest rates
rise). It would certainly have a negative effect (as it
would also affect the other components). Nevertheless,
its correlation in the past with the real estate market
was not that obvious, behaving less of as a challenge
than anticipated
- Real Rent ratio, where the correlation of economic growth
and rent -relative to the supply- has been historically the
norm (with a time lag effect). This seems now to be the
case (probably in a different speed than forecasted) and
could be stable if economic growth keeps its good pace
Wind is blowing in the right direction for real estate in Iberia,
hopefully not to be turned into a tornado by mortal gods.
Juan Barba
Meridia Capital
Partner | Managing
Director Real Estate
The key challenges put up to real estate investors within
the Iberian market, vary primarily from the ones that already
know the market, and the new comers that have now the
first approach to it.
These will have to understand laws, tax regime (property,
corporate and double taxation dividends), and the local real
estate market specification and trends.
This takes time, patience and money. They will have to opt
between creating their own structure, or subcontract a local
and existing expertise.
For the ones that already know the market, the challenge is
to lead with an increasing competition, with a lot of money
to invest, then with prices rising and yields compressing.
On the other hand, the more experience and knowledge
there is, the better access to off market deals and to better
opportunities, there will be.
The hardness of developing a pan-Iberian strategy is very
much linked to the above connection. Although from the
investment approach it is common sense to say that, from
a global investor perspective, Iberia is the same region, in
fact each country has some different laws, some different
taxes in all levels (property, corporate, and shareholding),
and some own real estate market particularities.
Therefore, different strategies and different teams have
to be considered if an investor wants to succeed. And one
should always bear in mind that in real estate a very bad
investment decision has a costly impact.
Pedro Coelho
Square AM
Member of the
Board