The stock market, key to the REITs sector in the economic recovery

• Last year these vehicles posted increases in terms of revenue from rents, net profit and operating margin
• In 2019 they increased their shareholder remuneration, with 1.3 billion euros in dividends, 60% more
• Between December and June their market cap was down 17% due to the Covid-19 crisis

The report REITs: Strength and Value for Recovery, produced by BME and the real estate consultancy JLL, has been presented today. This is the second edition of the report on the trends of the Spanish REITs market. This year it has had the special collaboration of law firm Uría Menéndez regarding the fiscal analysis of these investment vehicles. Jesús González Nieto-Márquez, General Manager of BME Growth and Alberto Segurado, Head of Financial Advisory at JLL Spain, presented the conclusions of the report in virtual format. The study has been carried out based on an analysis of a significant number of REITs in the Spanish market and includes stock and market data for the year 2019 and the first half of 2020.

Currently 83 REITs are listed in Spain, four in the main board (Colonial, Merlín Properties, Lar España and Árima Real Estate), two of them (Colonial and Merlín Properties) included in the IBEX 35 index and the remaining 79 in BME’s stock market for SMEs, BME Growth.

As of December 2019, the combined market capitalisation of the REITs totalled 25.7 billion euros. As a consequence of the COVID-19, at the end of last June the market value stood at 21.3 billion euros, more than 17% lower year-on-year.

In business terms, at the end of 2019 the combined revenues from rents posted by the REITs reached 2.1 billion, up 8% from the previous year and EBITDA was 1.7 billion, up 22% from 2019.  Their combined net profit reached 2.5 billion euros, up 11% and net cash generation exceeded 500 million.

Regarding shareholder remuneration, the REITs analysed in the report distributed 1.3 billion euros in dividends during 2019, a year-on-year increase of more than 60%.

The financial health of REITs, measured by their annual cash generation capacity, has made it possible to reduce their leverage, to 38% of the assets’ market value.

Jesús González Nieto-Márquez pointed out how the stock market has served as a catalyst for the real estate sector, providing it with an ideal instrument to access new investors and channel capital to a growing sector. “REITs play a pivotal role both in the real estate market, to which they provide an extra capacity to attract financing and more transparency, and in the financial market, which thanks to these vehicles offers investment products linked to the real estate rental market and greater risk diversification in investors' portfolios”.

Alberto Segurado highlighted how the REITs market has been growing year by year in terms of their number and value, thus becoming one of the most important players in the real estate investment sector. Segurado added: “We are very satisfied with the result of a period of intense work and the result of the collaboration of two companies like JLL and BME. Thanks to this, we can offer for the second time a very accurate snapshot of the REITs market, and one that allows us to assess the perspectives of some actors who, without a doubt, will continue expanding the Spanish real estate market while also improving it  and making it more professional”.

Luis Molina, Tax Lawyer at Uría Menéndez stated: “REITs have become major players in the Spanish real estate market, especially since in 2013 the tax regime was adapted to that of traditional REITs. In the coming years, the success of the model will depend on our institutions providing legal certainty and some flexibility in complying with tax and regulatory requirements, in line with other neighbouring countries’ practices.”

Access to the report (available only in Spanish):

https://www.bolsasymercados.es/ing/Studies-Research/Recommended-Contents