Investors - NOVEMBER 13, 2017

Spanish REIT to become $10b office manager

by Andrea Waitrovich

Inmobiliaria Colonial has launched a takeover bid for Axiare Patrimonio, valuing the rival company at €1.46 billion ($1.7 billion).

Colonial already owns nearly 29 percent of Axiare.

A takeover bid would increase Colonial’s asset value to €10 billion ($12 billion) and consolidate its standing as a landlord of prime office assets in Paris, Madrid and Barcelona.

Axiare’s portfolio consists of 74 percent offices, of which 77 percent are located in Madrid.

The resulting portfolio reaches more than 18 million of square feet under operation together with 330.000 square meters ($tk not sure what this number is) in assets under development.

With this transaction, Colonial, whose portfolio is made up solely of office buildings, 75 percent prime, and 97 percent occupied, will be able to accelerate its commitment to the Madrid market, where the combined entity will retain a portfolio of office buildings of €2.6 billion ($3 billion) in value.

Post-transaction, the exposure to Spain, which currently accounts for 31 percent of the value of Colonial’s assets, will increase to 42 percent of the total portfolio. The portfolio of the combined entity will have 58 percent of the value located in Paris, while the portfolio of offices in Madrid and the portfolio of assets in Barcelona will represent 27 percent and 10 percent, respectively.

The transaction is expected to close during the first half of 2018.

During the third quarter 2017 office transactions in Spain totaled approximately €2.5 billion ($2.9 billion), according to Cushman & Wakefield.

Investors have been active in their search for value-added opportunities in offices with good location, tenants and covenants. At the same time, the supply side remains constrained; total transaction volumes at the end of the year and even in 2018 may be hindered by this factor. Some extra caution is coming from the political arena. Prime yields for offices continued stable in the third quarter and most probably will remain so by year-end.

Good economic performance is expected to persist during the fourth quarter 2017, but political uncertainty may subtract some momentum to the economy

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