Bargain Hunters Hungrily Eye Prime Madrid Commercial Property
The regional government of Madrid has announced plans to sell 100 office buildings in the centre of the Spanish capital over the next three years. The sales’ proceeds will be used to pay for public services and help to reduce the region’s budget shortfall, which reached 2.2 per cent of regional gross domestic product in 2011, according to Jose Luis Moreno Casas, director of policy for finance, treasury and assets, who is also overseeing the real estate sales.
“We’re not a real estate company,” said Moreno. “Our job is to ensure there is adequate health care, education and mobility for our people,” he added. According to his statement, there are hundreds of buildings that could be sold in order to boost the region’s coffers, but Madrid’s regional government will start the real estate liquidation operation with the more valuable assets. With a sluggish market, investors’ interest will need to be piqued.
!m(/uploads/story/182/thumbs/pic1_inline.png)The first 15 buildings which will go up for sale have been valued at about €62 million (£47 million) collectively. Amongst the more valuable properties that will hit the auction block is a 12,300 square-meter office building in Madrid’s Arguelles district with 192 below-ground parking spaces and worth around the €12 million (£9.4 million) mark and a 2,524 square-meter office building in Calle Jose Abascal in the upscale Chamberi district of the city, valued at about €10 million (£7.9 million). The regional government of Madrid is also considering selling universities, schools, retirement homes and hospital buildings in the later phases of the three-year plan.
The first 15 properties will be sold in November and thereafter batches of buildings will be marketed for auction every four months. The properties could be sold at a discount of 15 per cent to 30 per cent, Moreno said. To make the sales more attractive the regional government will sell its properties outright and individually, rather than in lots or under long-term leases, Moreno further remarked. The exact terms of the auction will be announced by the end of July and interested investors will have four months to submit bids.
And while the auction has not started yet, real estate companies have already shown interest in the properties slated for sale: “We’ve received interest from open-ended German funds and British, American and Swiss property funds,” Moreno said. “Domestic interest has come from pension funds, real estate investment companies and insurers,” he further stated. In September the regional government of Madrid will also hold a presentation for Chinese and Russian investors who have inquired about the sales. But as the bidding is confidential, Moreno declined to identify the interested parties.
Analysts commented on Madrid’s regional government plan, remarking that the Spanish capital may get a price advantage over other cities that follow their example of selling properties amid austerity, because they are the first to market — indeed, they may be the first of a flood of authorities offering up property for investors who can see a way to turn a profit.
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