Special focus: Real estate
Briefing: The Portuguese real estate market
What are currently the biggest opportunities for law firms?
The Portuguese real estate market is booming, according to Tiago
Mendonça de Castro, partner at PLMJ. “This boom is a result of the
depreciation of real estate assets prices and the efforts of several public
policies aimed at promoting Portugal abroad, with the purpose of
highlighting Portugal as a safe and open place for foreign investment and
a prime living or tourist destination,” he says. “Several tax schemes have
recently been designed for attracting foreign investors to Portugal, which
has a real estate market that is highly sought after by foreign investors and
companies from all around the world.” Mendonça de Castro adds that the
biggest opportunities for law firms lie in their “ability to advise and assist
foreign clients in such a way that they feel safe investing within a legal
context which is foreign to them”.
Providing advice to international investors acquiring real estate assets in
Portugal is a significant source of work for Lisbon firms. “Structuring foreign
real estate investments is currently one of the biggest opportunities for law
firms,” says Sofia Galvão, name partner at real estate boutique Sofia Galvão
Advogados. The most significant opportunities exist in the commercial
sector – specifically retail, hotels, shopping centres and offices – according
to MLGTS partner Filipa Arantes Pedroso. She adds: “Urban redevelopment
is also an opportunity with tax benefits in place.”
What have been the latest developments in the real estate finance
market?
“Depending on the quality of the underlying assets, banks, equity investors
and other sponsors have increasingly become available to finance real
estate acquisitions and development based on more appropriate loan
to value ratio,” says Pedro Ferreirinha, partner at Vieira de Almeida.
However, there is still a feeling that banks are largely reluctant to fund
real estate projects. Tiago Mendonça de Castro, partner at PLMJ, says:
“The Portuguese real estate finance market is still licking its wounds and
proceeds extremely carefully – the financing for real estate investment
is very low when it comes to individual investors, banks are sometimes
more willing when the investor is a well renown foreign company but the
banks’ approach is still generally cautious with respect to real estate.”
However, Hugo Nunes, partner at Sofia Galvão Advogados, says there are
opportunities for law firms in this area: “New rules on available public
funds in Portugal mean there is demand for legal advice in light of the very
interesting opportunities for alternative sources of funding.”
What assets are developers targeting?
There are two main categories of asset that developers are seeking,
according to PLMJ partner Tiago Mendonça de Castro. “They are
commercial assets – such as shopping centres and new retail stores in
prime areas for street shopping – as well as houses or touristic assets,
or assets with a high tourism potential, such as services apartments
or boutique hotels all in prime areas,” he adds. ABBC partner Luis
Filipe Carvalho says developers are focusing on properties in “strategic
localisations in city downtowns” to reconstruct or refurbish in order to sell
as prime real estate to foreign investors either for residential or commercial
purposes. He continues: “Additionally, investors are also looking for bigger
properties to develop office spaces.”
54 • IBERIAN LAWYER • September / October 2015
Gómez argues that this
complexity extends to
investment and financing
structures, which is the
“driver that real estate lawyers
have to play with”. Other
lawyers in Spain say that the
financing market, especially the
alternative financing market,
is driving investments. “The
leading traditional credit
institutions are financing
real estate projects again and
new market participants have
entered the Spanish lending
market, for example, direct
lenders such as hedge funds,”
García-Manso comments.
“We have also seen certain
projects financed by insurance
companies – the pricing of
loans, in terms of margin, is
relatively low if compared to
other financings such as project
and ac quisition financings.”
Fernando Azofra, partner
at Uría Menéndez, agrees
that most Spanish and
international banks, and also
some investment funds, are
“back on track to finance
transactions”, adding that this
includes development finance.
Meanwhile, Ferreirinha cites
the availability of significant
funds in the Portuguese
market as an influence: “We
have witnessed some major
international players entering
the market with the acquisitions
of significant retail portfolios,
stand-alone retail and
hospitality projects and sale and
lease back transactions.”
High office vacancy rate
Despite the positive messages,
there is a degree of caution
about the future. Many
observers believe it will be
a challenge to maintain the
current momentum, especially
in Portugal, if the market does
not develop in a sustainable and
balanced way. “Low inflation
is a risk for the economy and
therefore for the real estate
market,” warns Filipa Arantes
www.iberianlawyer.com