GRI Club Iberia eSummit
I had the pleasure to moderate a GRIClub e-meeting on the post COVID-19 impact on Spain and Portugal’s real estate market: Iberia – Mapping COVID-19 Recovery, Growth and Inbound Investment Appetite. The e-meeting had over 80 participants including C-suite real estate executives and asset managers. My co-chairs included Brian Betel, Activium, Mark Tsocanos, Baupost Group, Lorcain Egan, Starwood Capital, Thomas Kottman, Mespil, Michael Abel, TPG Real Estate, and Marta Cladera de Codina, Nuveen Real Estate
The Economic Back Drop
Over the past 3 months, COVID-19 has triggered the worst economic crisis since the Great Depression. In the developed world, GDP declines in Q1 have not been seen since the Global Financial Crisis of 2008-09. Q2 will likely see declines in GDP in the mid-teens to well over 20%+ in some countries (including the US). Unemployment rates have skyrocketed throughout the developed world with no near-term end in sight. This has significant implications for the global real estate sectors and, more importantly, the hospitality industry which is key to Spain’s economy (representing 15% of GDP). Spain witnessed a decline in GDP of 5.2% in Q1 and expectations are for a decline of almost 15% in Q2. For the full year, Spain will likely see a decline in GDP of 8%. Portugal witnessed a decline in GDP of 3.9% in Q1 and expectations are for a decline of just under 12% in Q2. For the full year, Portugal will likely see a decline in GDP of just under 7%.
Spain and Portugal Real Estate Market Q&A
Some of the questions posed to the participants focused on the following questions:
- Views on COVID-19 impact, recovery and relative performance of asset classes and geographies
- What are the key drivers to keep investor confidence in current markets
- What are the expectations of the lending landscape in a post COVID-19 environment
- How has risk appetite changed pre & post COVID-19.
- Is public-private collaboration possible
- Is Barcelona, Madrid, and Lisbon now considered part of Core or Core+
- What are the repercussions from the printing of nearly $10 trillion.
- With tourism representing 15% of Spain’s GDP, what is the impact on real estate and hospitality.
In general, the participants provided a cautiously optimistic outlook for both Spain and Portugal’s economies, despite the significant uncertainties surrounding the Covid-19 pandemic. The residential PRS sector, industrial sector, and high-end office were singled out as well-positioned to recover quickest. As expected, the hospitality industry and retail industry had the most negative outlooks. But surprisingly, participants believe that personal vacations will recovery quicker as people want to travel. In contrast, business travel will likely remain depressed as people have become accustomed and prefer virtual meetings via Zoom and Microsoft Teams rather than travel.
The Wimmer Family Office continues to expand our partnerships with real estate developers with good track records and an ability to execute throughout business cycles. Our debt and equity financing facilities have a min size of 150mm to well over 1 bn and we are looking to increase our exposure to Spain and Portugal. In the past three weeks, we have signed engagements and/or term sheets with real estate developers across the globe for over 3.5bn. Separately, I have a joint venture partnership with the Fortress Credit Group to help companies with liquidity needs, including providing non-recourse capital secured by the company’s litigation claims.