Real estate and infrastructure help build up Spanish activity

In March alone, CVC recouped a reported €1.1bn from the sell-down of a 7.5% stake in Abertis Infraestructuras, while GED Capital also agreed to buy five infrastructure funds worth €370m from Ahorro Corporación. Meanwhile, over the past couple of years, real estate values have predictably risen as investor demand increases.

Additionally, the European Central Bank's quantitative easing (QE) process has led to a devaluation of the euro. In March the currency hit a 12-year low against the dollar and a seven-year low against the sterling, resulting in a highly favourable deal-making environment for investors from countries outside the eurozone.

"The market for trophy assets, such as high-profile hotels in international cities such as Barcelona, is growing," says Jose Caireta, co-founder and managing partner at Squircle Capital. "We bought a triple-A real estate asset back in 2012 from a distressed situation. Two years later, based on recent market transactions – made by sophisticated overseas investors – these types of assets are being acquired for more than twice the value."

Third wave
This return of investment into real estate and infrastructure is already having an effect on other sectors, as Francisco Gómez, Spain partner at Clearwater International Corporate Finance, explains: "Real estate saw the first wave of new foreign investment following the crisis; because it is a relatively straightforward market. The second wave was in infrastructure. That has been followed by a third wave of private equity investments in the industrial and services sectors including chemicals, materials and food ingredients – mostly sectors that are very international."

There are many reasons for the return of investor appetite in Spain. Industry insiders cite the introduction of labour reforms in 2012, which were designed to give employers more flexibility, boost productivity and reduce severance payments for unfair dismissals. With asset valuations bottoming out, banks more open to lending and businesses decreasing their reliance on domestic sales, the prospects for private equity already look rosy. Furthermore, neighbouring economies including France and Italy have struggled to pass labour reforms as efficiently as Spain, making the country all the more attractive.

Factoring in the recent devaluation of the euro, Spain could be primed for an influx of foreign investment. "Until recently," says Clearwater's Gómez, "we have seen investors from the EU looking to buy market share off the back of the economic crisis. Next, we expect to see investors from countries with stronger currencies – mainly the US, Canada and the UK – because Europe will become cheaper than their domestic markets."

Squircle's Caireta agrees: "We have not seen the repercussions of QE yet," he says. "The movement in the exchange rate is too recent, but we presume it will have a big effect. It also depends on investors' long-term views on the euro. But if you are positive about the euro, now is definitely the time to invest."

However, despite the positive deal-making environment, the year ahead will not be without challenges for Spanish businesses. "We still have a lot of debt, in both the public and private sector," Clearwater's Gómez points out. "We need to address the amount of leverage throughout the economy. Additionally, we have elections at both a local and national level, and these typically cause nervousness among investors."

With anti-austerity party Podemos and right-leaning anti-corruption counterpart Ciudadanos both performing strongly in the polls, international investors will monitor the situation closely as the presidential election approaches. "In infrastructure and real estate, that will have a big effect," says Gómez. "But for those companies with 80% of their operations overseas, what is happening with regards to the Spanish elections should not affect them too much."

In this respect, the recent evolution of the country's business landscape should stand it in good stead. For Spanish businesses looking to take advantage of current macroeconomic factors to attract international GPs, the magic word is ‘exports'.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Southern Europe
• Real estate
• Infrastructure
• Spain
• Top story
• Unq2015Apr