A Spanish real estate investment trust (REIT), Merlin Properties, announced on Monday it’s plans for a €1.5 billion flotation, which if completed, will become the largest ever property initial public offering (IPO) in Europe.
The time at which the announcement came about indicates that Merlin is attempting to capitalise upon the heavily discounted property market to try and attract interest from investors looking to profit from the increasingly likely “post-crash recovery” of the Spanish property market.
Acquisition Plans
Merlin has already managed to obtain €600 million of committed funds and has recently confirmed plans to acquire 880 branches of the Spanish bank BBVA, with a plethora of other investment opportunities expected in the short, medium and long term. The timing is seemingly perfect for the REIT to appeal to the host of investors carefully perusing relatively cheap entry points into the long-term Spanish real estate sector.
REITs have long been very popular pension-fund investments, as their relatively high yields combined with promising capital gains in the longer term can be very promising for investors looking for an investment that requires little work.Spanish property remains exceedingly cheap when compared to the UK and much of Western-Europe, where in general, property prices have soared dramatically over the last 24 months.
Growth Projections
Despite the apparent interest in Merlin’s IPO, a 1 per cent growth is all that is forecast for the Spanish economy in 2014. An unfeasibly high unemployment rate of over 25 per cent and public debt levels ever increasing, many think that some potential investors have been put off the country by it’s poor fundamentals.
Although the economic scenario has a grip on many Spanish nationals due to recently introduced tightened lending criteria and falling income levels, for foreign investors seeking a potentially lucrative long term commitment for their capital funds, the timing is spot on.
More caution is being shown by short and medium term investors, although long term investors are buying up assets, secure in the knowledge that their foresight will pay handsome dividends.
With an enviable balance of €1.5 billion, Merlin will be exceedingly well placed to take advantage of the increasingly promising long term potential across many varied areas of the Spanish property market.
Experts Opinion
Ron Wilkinson of Alta Vista Property thinks that the IPO will be good news for the Spanish economy. “I can see this being one of the biggest positives to hit the Spanish property market and economy in a number of years,” he said.
“Hopefully the sale of all these underpriced homes will inspire buyer confidence and we will see an influx of purchasers, both foreign and domestic, which in turn will pay dividends for the countries economical situation. If all goes well, I expect the IPO to have such a positive affect that the housing recovery may well be fully under way by this time next year. All we can do is wait and see what happens, and wait for the revival to begin, one thing is for certain, and that is that a recovery is definitely coming”.
Bradley shore is an avid blogger for the UK, he likes to travel and share his experiences and thoughts, his main interest is overseas property market as you can see in his recent work for Alta Vista Property. Follow his twitter for more articles from Brad.
