Starwood Spanish loan portfolio: The fiesta continues

Spain still offers real estate investors opportunity, despite increased competition and doubts over the market’s fundamentals.

The recent purchase by Starwood Capital of an €800m commercial real estate loan portfolio – known as Project Amazonia – from Bankia suggests the country still offers inroads, despite warnings this year that heightened competition was putting investors off.

The limited opportunity to invest in Spain has also been discussed. 

Speaking at the European AFIRE conference in London in June, Olivier Piani, chief executive at Allianz Real Estate, questioned the rush into Spain, citing a “huge disconnect” between rents and capital values.

Nevertheless, this year is tipped to see a peak in the sale of distressed loans, with European sales predicted by Cushman & Wakefield to reach €60bn by year-end.

In July, Blackstone bought a Spanish loan portfolio from CatalunyaCaixa for €6.39bn. 

The sale of the residential mortgages triggered major interest from international investors, with 12 funds in the first round of bidding.

Starwood’s portfolio – bought in a joint venture with Bain Capital’s Sankaty Advisors – comprised a mix of non-performing and sub-performing loans.

Sankaty has bought €2.2bn in loan portfolios from European banks over the last three years.

Alon Avner, managing director and head of Sankaty’s European business, said the loan portfolio was one of the most attractive on Bankia’s book.

Michael Madigan, director of CBRE Capital Advisors, said Spain continued to offer “great potential for investors looking to create value” – but was ahead of a “major upswing in real estate fundamentals”.

“The country risk has improved tremendously,” Madigan said.

“Investors are still able to take positions in one of Europe’s most populous and dynamic countries, at great discounts.”

Starwood’s deal was also the first to see hotel and corporate loans rolled in to one portfolio.

The portfolio includes bilateral and syndicated loans, backed in part by hotels, commercial real estate and land.

Part of the portfolio is secured against hotel collateral in Spain, with a concentration in resort locations.

The other is a pool of syndicated and bilateral loans secured against Spanish small-and-medium enterprises, with a mix of collateral including real estate.

Source: IPE Real Estate