Big investment funds are now looking seriously at Spain for the first time since the crisis began, but many are still unconvinced by the discounts on offer.
The attitude of international investors towards Spain has clearly improved in recent months, helped along by investments like Goldman Sachs’s €201m purchase of a rental portfolio in Madrid, and the €113.5m Bill Gates paid for 6pc of FCC, a Spanish construction company. When the big beasts start investing, it’s usually a good sign.
There is plenty of interest, according to industry insiders. “If in the past the question was how to get money out of Spain, now the topic of debate is how to invest here,” said Nuno Espíritu Santo Silva, founder and head of Finsolutia, a property and credit servicing company, recently quoted in the Spanish press. He said they now get enquiries from three to four investment funds a day, predominantly from the US.
But not everyone is impressed by the discounts on offer in Spain, Silva pointed out. “It’s still difficult to invest here, price is still the problem. Discounts of distressed assets need to be high, around 70pc,” he said.
This is a point I’ve also heard in conversations with professional investors looking at Spain. Given the severity of the real estate bust and economic crisis, rental yields around 5pc are simply not impressive enough for some investors.
There is also a problem with the quality of assets. “There is not much quality product for sale. The banks are selling their bad assets, only the Sareb is selling the good ones,” said Silva.
That means that investor expectations have to be managed carefully. “There are opportunities here, but we need to manage the expectations of investors looking for bargains and expecting to double their investment,” says another Finsolutia man, Gonzalo Jiménez. “There are not yet many committed investors, between eight and fifteen, but we are talking about a market that is just getting going, and in the next few years we will see lots of deals.”
The sooner prices fall enough to attract big foreign investors in a big way, the better. That will help get the assets out of the hands of Spanish banks, and into the hands of people who know what they are doing. Sales will follow, and we can all move on. It can’t happen soon enough.