Being one step ahead of the curve pays dividends, delegates heard at the Iberian Investment Briefing, organised by Real Asset Media and Iberian Property and held in London recently.
‘We pioneered alternative asset classes in Spain,’ said Cristina García-Peri, Director of Business Development & Strategy, Azora. ‘We got involved in residential for rent, creating the first multi-family rental housing platform, we were the first mover on vacation hotels as an emerging asset class and we created the largest student housing platform outside the UK, which we sold in 2017 with a 30% IRR. It is important to identify megatrends’.
The next step for Azora, a private equity firm founded in 2013, is the launch of the first investment fund focused on senior housing. ‘Just like we saw years ago that rental demand was on the rise and there was a lack of supply, we now realise the impact on the market of demographic trends – Spain has the world’s highest life expectancy’, she said.
Alternative sectors are less crowded than other real estate asset classes and they also give the opportunity to add value. ‘Real estate is really changing,’ García-Peri said. ‘The focus is not on bricks & mortar but more on the operations, which have become key. We like to add value as managers, we focus on returns and generate alpha above market growth, so we are not afraid of complexity and we are happy to reposition assets’.
Traditional sectors like offices still offer opportunities too. ‘Current office stock is becoming obsolete and rental growth is still healthy,’ she said. ‘There are plenty of refurbishment and development opportunities focusing on high-quality offices’.
Another megatrend is retail returning to the city centre, partly due to the urbanisation trend and millennials’ lifestyle choices, partly to environmental restrictions and less car use. In this context, urban logistics will continue to be a growth sector.
Direct lending is becoming an opportunity for the first time in Spain, García-Peri said: ‘Spanish banks, which have so far monopolised the market, are now neglecting to finance attractive projects because they are over-cautious and afraid of reputational risk. Certain asset classes are out of favour regardless of the quality of the asset, and non-traditional structures cannot be adequately financed in time’.
Real estate specialists like Azora, who have a strong local presence and who can assess the value of the project and its prospects, can therefore step in and generate superior returns. ‘We have proven experience in the real estate debt sector through direct investments, debt-to-equity transactions and complex restructuring situations’, she said. ‘At this point in the cycle we see many interesting projects’.
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