When compared with 2017, prospects of more real estate transactions indicate that 2018 will be another successful year with continuous growth of the real estate industry in many sectors. The Spanish economic outlook is driving investor confidence in the retail market. Several shopping centres and high street portfolios are expected to come onto the market in 2018.
The key factor is to maintain continued economic stability in Spain. This will favour rental growth in prime centres, as well as secondary centres to a lesser extent. If so, yields are expected to remain stable in both prime and secondary centres, and it is fair to say the prospects for SOCIMIs in Spain are positive.
An analysis of the Spanish regulatory framework may be useful to determine a best practices approach for other countries. Despite the fact that in 2009 the REIT model in Spain was not successful at all, what is remarkable is the new Spanish REIT regime finally adopted with effect as of 2013. REITs are known in Spain as SOCIMIs. The legal framework includes requirements for share capital, and trading on regulated markets or through multilateral negotiation systems. Furthermore, a key element is the advantageous tax conditions in exchange for distributing the profits obtained from renting and selling assets.
In Spain, no one doubts the dynamism and stability that REITs bring to a strongly atomized market. In purchasing buildings, they value select products based on location, repercussion and profitability. By type, REITs tend to invest in residential constructions for tourism, hotels, retail, large shopping centres and office spaces
According to Spanish Law, SOCIMIs may be listed in the alternative market, called MAB. This is a valid option and it may be worth a detailed analysis. The MAB is an alternative stock exchange run by the BME for companies that require special treatment, including open-ended investment funds (SICAVs) and other segments like SOCIMIs. The SOCIMI segment is a market designed to facilitate access of small cap companies to the stock market so that they can benefit from financing, liquidity, with a special set of regulations, costs, and processes tailored to their particular characteristics. The number of SOCIMIs listed and traded on the MAB is 51 companies, an indication of the success of the alternative markets.
The MAB was designed to focus on securities in the European Union and Latin America for institutional and private investors. It provides financing, visibility, liquidity and valuation with a trading regime suited to the peculiarities of the different asset types.
In summary, it is clear that rental is a profitable segment in the property sector, where REITs focus their attention. Despite offering shareholders profit margins, they provide confidence to offer safe investment options.
Moreover, we can confirm the usefulness of the Alternative Market (MAB). SOCIMIs are real estate investment vehicles that are competitive in terms of profitability and risk since they are affected not only by the evolution of financial markets, but also by the underlying assets, which are subject to the real estate market cycle. In addition, SOCIMIs are helpful for funding real estate companies, as well as for investors and real estate company managers. They should enable better investment and financing decision-making in the property market with the contribution of analysis models, which help flag market inefficiencies.