The year 2023 was characterised by an atypical quietness of real estate investment in Spain. The general elections last July froze investment decisions for many months. In addition to the political uncertainty, there were some tax changes that had a major impact on SOCIMI activity, such as the modification of wealth tax for non-residents. The rise in interest rates from mid-2022 and the downward resistance of asset valuations contributed to this investment sluggishness. Total foreign investment in Spain contracted by 23% compared to the previous year to €18,304 million, the lowest historical series, according to data from the Ministry of Industry, Trade and Tourism.
In this context, the real estate sector suffered a 44% drop compared to the previous year in foreign investment, with an annual figure that barely exceeds €1 billion. The incorporation of SOCIMIs in 2023 reflected these setbacks. The value of the assets incorporated in BME Growth stood at €60 million, with the incorporation of 2 SOCIMIs. Only the incorporation of Montepino Logística SOCIMI in Euronext Access brought the total number of assets incorporated to €1,532 million, in line with 2022.
Strong start to the year 2024
The start of the year has brought dynamism back to the market. In the first three months there were two incorporations in BME Scaleup and one in Euronext Access for €289 million in assets, all coordinated and managed by ARMANEXT.
Having laughed its 8th edition of the SOCIMI research report, Armanext defends that 2024 looks to be a promising year for the SOCIMI sector. ARMANEXT Group, through its subsidiary ARMABEX, is a Registered Advisor on BME Growth (since 2009) and the first Spanish Listing Sponsor on Euronext (since 2018); Portfolio Stock Exchange (since 2023) and BME Scaleup (since 2023).
They observe a growing interest on the part of family groups with real estate portfolios in considering SOCIMIs as an ideal vehicle for channelling their investments, thanks to their tax benefits and transparency in management. Likewise, the creation of SOCIMIs by international investors for the rental of residential assets in upmarket tourist areas is a growing trend.
In the field of asset typology, housing, especially through innovative forms of living, continues to be the focus of attention. The combination of the housing leasing companies (EDAVs) and SOCIMIs opens up new possibilities for Build-to-Rent projects.
In terms of shareholder typology, there are different trends:
- Family-controlled SOCIMIs, represented by consolidated real estate holdings, show a relative insensitivity to changes in interest rates for their establishment. Instead, they prioritise tax and political considerations as well as cost optimisation in the listing process. The availability of several Multilateral Trading Facilities for their choice is considered an incentive for this category of shareholders.
- Newly created SOCIMIs, financed by the infusion of new capital for real estate investments, face significant challenges related to interest rate variables and political and fiscal instability. Given the time needed to make decisions and raise funds, it is anticipated that these projects may experience delays until late 2024 or early 2025.
- As for non-resident investors, the trend observed over the last two years indicates a decrease in their preference for channelling their funds to SOCIMIs in Spain. Consequently, it is crucial to monitor the levels of risk they are willing to assume, as well as to evaluate the alternatives available in markets with greater stability. Political stability, fiscal security and price adjustments are again critical factors when making decisions on the location of investments in Spain.
First transactions on BME Scaleup
In these first three months, it is worth highlighting the transactions taking place on BME Scaleup, the new market launched by BME at the end of 2023.
Since 2020, there has been a change in trend in the SOCIMI market. Euronext, which had hardly been a relevant market in previous years, has led Spanish SOCIMI IPOs for the last four years. In these four years, Spanish SOCIMIs with an asset value of €4,649 million were listed on Euronext Access, compared to €1,893 million in the Spanish market. The most relevant IPO took place in June 2023 with the incorporation in Paris of Montepino Logística SOCIMI, with assets exceeding €1,200 million and significant investment plans.
The emergence of a new listing platform in Spain, Portfolio Stock Exchange, definitively changed the rules of the game in the Spanish market, which until then had been dominated by BME Growth. Lower administrative requirements in the admission process and lower costs threatened to displace BME for good. However, the first trades of 2024 have taken place on BME Scaleup.
Alfil Patrimonial was listed on 5 March and Solvento Group 2022 was added on 18 March, with assets of €67 million and €65 million respectively.
The migration of AM Locales Property from BME Growth to BME Scaleup, requested at the end of 2023, is expected to be completed in the near future. Throughout 2024, further migrations are expected to take advantage of the benefits of the New Securities Markets.
The simplification of incorporation and maintenance requirements and the reduction in costs seem to dispel the myth that listing on the stock exchange is a complex, expensive process reserved only for large companies.
Spanish companies, both industrial and SOCIMIs, should move more decisively towards the stock markets, at a time of a clear reduction in bank financing.