Free float: a barrier to access the continuous market?

Free float: a barrier to access the continuous market?
Laura Fernández García, Independent Advisor & Board Member at Testa Home

At the end of January, an intimate group of investors were gathered in Madrid in an Editorial Breakfast organised by Iberian Property, which counted with the support of Clifford Chance, to discuss the listing alternatives for Spanish REITS. 

When a SOCIMI is backed by a large investment fund the free float demanded by the continuous market can imply losing a 25% of its asset values with the entrance of minority investors, originating trades at a NAV discount...something funds definitely don't appreciate.

In this sense, Laura Fernández García, Independent Advisor & Board Member at Testa Home, defended that in the case of both Fidere and Testa (two SOCIMIs backed by Blackstone) the incorporation to the regime had the main goal of stabilizing their business, and in that line, the alternative markets worked just fine. If the objective was to grow organically the investors pool the continuous market would probably be a better fit, because “in the former MAB (now BME Growth) the shares are available to whoever comes, but the attraction it generates for an investor who has no relationship with the company is very diminished”.

Laura Fernández García, involved in two vehicles backed by Blackstone for several years, classified herself as a “true SOCIMI believer”. Still, she identifies a couple of inefficiencies that need solving.

“In the case of a Socimi that has 100% of its residential assets for rent, with a 98% occupancy, dedicating to absolutely nothing else, how is it possible that it might fail to meet the test? A simple financial accounting transaction could jeopardize the benefits of that year, which makes no sense”.

Laura stressed that we can no longer continue with a law from 10 years ago (that was very well thought out at the time) but that now should be amended to allow a more dynamic market.

See here this event SPECIAL STORY 

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