Spanish Value Opportunity Now in the South
- Durendal’s Bonetti - 09 February 2015
After the huge upswing in Madrid and Barcelona property investment last year, the best value opportunities in Spain are now along the southern coast, says Thomas Ezio Bonetti of the Durendal Ventures Group, a panelist at Thursday’s PIE Spain Property Breakfast.
With affiliates in Miami and New York, Mr. Bonetti of Durendal based in Marbella noted in a pre- event statement that the recovery in Spain mirrors the US market of a few years ago. “It’s no coincidence that one of the first major transaction closed with Spain’s ‘bad’ bank Sareb, was with a Private Equity firm based in Miami Beach,” he told PIE. “Looking out their beachfront skyscraper windows on Brickell Avenue, there was a perfect view of the financial tsunami which engulfed and collapsed US markets years before.” That collapse left behind upside-down properties, massive piles of debt, bank and company failures, foreclosures, and dozens of abandoned construction cranes “looming over the city like giant pink flamingos”, he said.
Spain is now set to mirror US markets, which today have recovered fully with valuations in all major asset classes at or above pre-crash levels. “The US markets that were hit the hardest, also delivered the highest rates of returns. In Miami for example, the recovery there has been so strong that many of our Clients are now exiting their positions to take profits. We anticipate a similar effect will occur over time here in Spain as well.”
Driven by private equity from America, Europe, and more recently Asia, the major markets of Madrid and Barcelona attracted unprecedented capital in the first phase of the Spanish recovery, Bonetti noted. “We saw firms who feasted on distressed Sareb portfolios, income producing assets, discounted debt, and cash flow challenged companies. However, in those markets today competition for assets is quickly overtaking supply, with prices and yields responding accordingly.”
According to Bonetti, there are two key macro strategies investors should consider enhancing today to unlock hidden value. First, you must have a very strong deal-sourcing team with on the ground local partners. And second, it’s time to look beyond the major Tier I markets. “Like Florida, we forecast the next wave of investment will occur in the south and all along the Costa del Sol with a focus on Marbella and its environs.” While Madrid and Barcelona markets are rapidly maturing, this second phase is only just beginning and will continue for at least the next 12-18 months.
Validating this approach, several strategic investors are already taking large positions, with recent transactions including the purchase of the Hotel Guadalmina, the Sotogrande Resort, and the Junta of Andalusia’s successful leaseback auction.
(Property Investor Europe - PIE)
"Durendal Ventures Group is one of our strongest partners in the Miravision network to connect top investment groups from America with our real estate and investment portfolio here in Spain."
(Tony Schröter, CEO Miravision)