Special focus : Real Estate
Think outside the box
Despite a scarcity of assets in the Spanish real estate market , opportunist funds are still looking to complete more ‘ imaginative ’ deals , while in Portugal , development and tourism-related projects are generating considerable work for lawyers
Land in both Spain and Portugal has become an increasingly attractive asset to investors . The real estate sectors in both countries are continuing their recovery , with lawyers citing the great availability of credit , in addition to tourism and urban regeneration , as important factors .
“ The [ real estate ] sector remains active in all segments ,” according to Carlos Portocarrero , a partner at Clifford Chance in Madrid . “ Core investors have entered the market strongly and yields are compressing , and that , together with a scarcity of assets , has led opportunist funds to explore more complex deals ,” he adds .
However , rents are not growing as quickly as expected and price increases are due to the “ yield compression ”, Portocarrero says . “ Law firms with a strong transaction department and much experience in the sector are the best positioned to pick up work in this cycle , while other firms will have less medium-term success .”
Big projects stalling However , the ongoing political uncertainty in Spain – with the country heading for its third election in two years – has had less impact than expected , thanks to the strength of the Spanish economy , Portocarrero argues . “ Investment is only being stalled in big projects , but there is legal
“
There are fewer assets on the market compared to last year , and the political uncertainty doesn ’ t help .
”
Bernat Mullerat , Cuatrecasas Gonçalves Periera uncertainty because of the constantly changing norms and deals are difficult on portfolios with underlying mortgages , in addition to the poor functioning of Spanish tribunals .”
More imagination needed Portocarrero says competition from other European countries that are clearing their financial sectors of non-performing loans and real estate risk , means that investors could switch countries from one day to the next , while an interest rate rise could result in money being ploughed into other assets . “ A change of norms by the Bank of Spain , for example , could oblige banks to more swiftly offload their real estate portfolios , sinking the price of low-quality residential property ,” he explains . “ The challenges are finding more imaginative deals and moving into more
52 • IBERIAN LAWYER • September / October 2016 www . iberianlawyer . com