portuguese real estate investment survey 2nd q 2017 · pdf fileinvestment and disinvestment...

Portuguese Real Estate Investment Survey – 2nd Q 2017Core assets take over investment strategyDeloitte Consultores, S.A.

Portuguese Real Estate Investment Survey – 2nd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A. 2

Portuguese Real Estate Investment Survey – 2nd Q 2017

Preface

It is with great pleasure that we launch the 2nd edition of Deloitte’s Portuguese Real Estate Investment Survey. This survey analyses the insights of a selected panel of participants who act in the Portuguese real estate sector.

Our goal is to better understand the Portuguese real estate dynamics trend, analysing the investment and disinvestment strategies according to current and future circumstances. We address financial and strategic topics concerning real estate business which we considered to be useful for understanding the dynamics of the industry.

This initiative’s success depended, above all, on the involvement and participation of the Selected Panel, whom we thank in advance for its proactive contribution by sharing their experience with us, allowing to identify the main trends of the sector’s development.

We are at your entire disposal to discuss any relevant question.

Carefully,

Jorge Marrão

Jorge Sousa Marrão

Partner

Real Estate Leader

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Main conclusions3Portuguese Real Estate Investment Survey – 2nd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A.

4Portuguese Real Estate Investment Survey – 2nd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A.

Overall, respondents aim to focus in a portfolio management strategy in opposition to the investment and

divestment strategies.

Regarding divestment strategy, respondents are more keen in selling

“Core” assets (41%). Investor attraction perception remains stable regarding

assets acquisition.

Core investments (41%) are perceived as the preferred investment strategy by respondents, with a more optimistic

fundraising perception when it comes to finance acquisitions.

Banks (41%) stand out as the main business feeder of real estate

acquisitions, as capital will mainly arise from Europe (73%).

Funds of funds (36%) and pension funds (27%) are identified as the main real

estate buyers in Portugal. Capital mainly arises from Europe (77%).

Regarding to the Portuguese real estate market, there is a perception of an

increase in the volume, sales price and profitability rates for residential, retail/

services and hotels sectors.

Main conclusions



Real Estate strategy for 2017 Portuguese real estate market

1st Quarter 2nd Quarter

52%

71%

52% Disposal of “Value Added” assets

Funds of Funds were the main real

estate purchasers

Capital arising from Europe

36%

32%

41% Disposal of "Core" assets

Divestment in “Value Added”

assets represents only 32%

Funds of Funds are the main real

state purchasers, with Pension

Funds (27%) becoming more

relevant

1st Quarter 2nd Quarter

Investment Policy Divestment Policy

Comparative analysis


52%

81%

62% Investment in “Value Added”

assets

Banks and Funds were the main

business feeders

Capital arising from Europe

27% Only 27% of the respondents

invest in “Value Added” assets

41% “Core” investments are the

most representative

41% Banks are the main business

feeders

73% Capital arising from Europe

Compared to the 1st quarter of 2017, investment and divestment strategies lost their representativeness for the benefit of a portfolio management strategy.

Respondents maintain the perception of an increase in the volume and sales

price for residential, retail/ services and hotels, related to a greater stability in

the profitability rates.

77% Capital arising from Europe



Companies and Real Estate Asset Management Firms represent altogether 68% of the respondents.

Type of organization that respondents represent

9%Banks

27%Real Estate

Asset

Management

Firms

41%Companies

5%Real Estate Funds

5%Private Equity

Followed by Banks (9%), Real Estate Funds, Private Equity and Insurance companies (5% each), and other companies (8%).

5%Insurance

companies

8%Others



Real Estate strategy for 2017

For 2017, the preferred strategy option is the portfolio management with 41%, followed by divestment and investment strategies each representing 32% and 27%, respectively.

Strategy

27%

41%

32%

Disinvestment

Portfolio management

Investment



Current and future investment strategy (1)

In both current and future strategies, respondents foresee that the most favourable strategy is the investment in Core assets representing 41%.

Opportunistic deals will remain steady on respondents’ intention, currently and in the future. Value added investments will lose representation in the future.

(1) Multiple choice question

Value added

Core

Opportunistic

deals

41%

32%

27%

41%

32%

32%

Current Future



Main investors / Business Feeders and their allocation in the next year (1)

For the next year, Banks representing 41%, will be the main investor. Funds’ allocation is predominantly European.

Europe with 73%, will be the main allocation of funds, followed by Asia with 36%.

North America and Middle East add a 45% to the funds’ allocation of the main investors.


Banks (%)

Fund of funds

(%)

Pension funds

(%)

Insurance

companies (%)

Sovereign

funds (%)

Others (%)

Legend:

Each icon represents 10%

73%EUROPE

36%ASIA

27%NORTH AMERICA

18%MIDDLE EAST



Fundraising approach, in the last 12 months and next 12 months

Fundraising perception for the next 12 months is optimistic compared to the last 12 months.

However, compared to the last 12 months, respondents consider that fundraising will remain steady.

Difficult

Neutral

Easy

Last 12 months Next 12 months

35%

50%

15%

30%

45%

25%



Level of impact of the different factors affecting fundraising

Size of funds, range of investors and length of process are the most relevant factors affecting fundraising.

70%

Significant

5%

Low

15%

Very significant

10%

Meaningless

Size of funds

Range of investors

15%

Very significant

30%

Low

55%

Significant

0%

Meaningless 15%

Low

60%

Significant

10%

Very significant

15%

Meaningless

Length of process



Impact of regulatory changes in the Organizations

The majority of the respondents considered that AIFMD and FATCA will have a low impact on their Organizations.

(1) AIFMD: Alternative Investments Fund Managers Directive; (2) FATCA: Foreign Account Tax Compliance Act; (3) EMIR: European Market Infrastructure Regulation.

AIFMD(1)

FATCA(2) EMIR(3)

45% 35%

Very significant Significant Low Not applicable

20% 20%

50% 30%

30% 50%

5%

15%



Length of the real estate assets’ acquisition process

In general, real estate assets’ acquisition process takes from 3 to 6 months.

5%More than

12 months

55%From 3 to 6

months

30%From 6 to 12

months

10%Up to 3

months



Current and future divestment strategy (1)

Divestment strategy in Core assets will be the greatest focus of the organizations, followed by Value added assets.Value added

Opportunistic

deals

Core


36%

27%

32%

41%

32%

23%

Current Future


Europe with 77%, will be the main real estate investment player, followed by Asia with 45%.

(1) Multiple choice question.

Fund of funds

(%)

Pension funds

(%)

Insurance

companies (%)

Sovereign funds

(%)

Banks (%)

Others (%)

Legend:

Each icon represents 10%


Main real estate investors and their allocation in the next year (1)

For the next year, Fund of Funds represent 36% of the main real estate investors/ buyers for entities seeking to divest.

77%EUROPE

45%ASIA

23%NORTH AMERICA

23%MIDDLE EAST


26%

58%

16%

Last 12 months Next 12 months

Difficult

Neutral

Easy 21%

68%

11%


Fundraising approach, in the last 12 months and next 12 months

Fundraising perception for the last and the next 12 months remains steady, according to the respondents.



Level of impact of different factors affecting fundraising

The size of funds, range of investors and length of process are the most relevant factors affecting fundraising.

16%

Low

63%

Significant

16%

Very significant

5%

Meaningless

Length of process

0%

Meaningless

10%

Low

74%

Significant

16%

Very significant

Size of funds

Range of investors

5%

Very significant

21%

Low

69%

Significant

5%

Meaningless



Impact of regulatory changes in the Organizations

AIFMD, FATCA and EMIR will, in general, have a low impact in the divestment of the organizations.

37%

16%

53% 47%

5%

42%

21%26%

37%

Very significant Significant Low Not applicable

AIFMD(1)

FATCA(2) EMIR(3)

(1) AIFMD: Alternative Investments Fund Managers Directive; (2) FATCA: Foreign Account Tax Compliance Act; (3) EMIR: European Market Infrastructure Regulation.

16%



Length of the real estate assets’ acquisition process

In general, the real estate assets’ acquisition process takes from 3 to 12 months.

16%More than

12 months

31%From 3 to 6

months

37%From 6 to 12

months

16%Up to 3

months


55%DCF27%

Comparative

9%Reposition Cost

14%Capitalization

9%Reposition

Cost9%Capitalization

36%Comparative

Followed by Comparative method and other less relevant approaches as the Reposition Cost and Capitalization.

Real Estate valuation methods (1)

The most used valuation method for land and other uses is the DCF.


55%DCF

Land Other uses




External Real Estate valuations

According to the respondents, values assigned by the external valuator are, in general, slightly underestimated (39%) or in line, providing the fair value (33%).

The great majority of the respondents, representing 61%, also consider that the values assigned by the external evaluators are aligned with market changes.

0%Anticipating market

trends

61%In line with market

changes

39%Late in factoring market

changes

Underestimated

11%

Slightly underestimated

39%

In line, providing fair value

33%

Slightly overestimated

11%

Overestimated

6%



Real estate sector dynamics

Volume and sales price for the next 3 months

For the next 3 months, an increase is expected in the volume and sales price for hotel and retail/ services sectors.

Decrease Slightly decrease Similar Slightly increase Increase

HotelsRetail/ ServicesResidential Industrial

33%

33%

34%

6%

61%

33%

22%

56%

22%

6%

38%

50%

6%



Real Estate sector dynamics

Profitability of real estate assets for the next 3 months

An increase is also expected in profitability rates over the next 3 months in the hotel, retail/ services and residential sectors.

HotelRetail/ ServicesResidential Industrial

33%

44%

6%11%

44%

28%

28%

6%

33%

61%

22%

45%

22%

11%

6%

Decrease Slightly decrease Similar Slightly increase Increase


83%

11%

28%

72%

44%

56%17%

6%11%17%

33%

New players

entranceBureaucracy Tax policy Political

situation

Demand Supply Foreign

investment

50%

89% 94%

83%

Positive

Negative

Neutral

6%


Impact of several variables in the Real Estate sector

For the next 3 months, the respondents consider that foreign investment, supply and new players entrance will have a positive impact in the real estate sector.


Technical Note


The Portuguese Real Estate Investment Survey’s main goal is to assess:

• The perception of the real estate market evolution by the involved parties; and

• Understand which is the current and future strategy of the organizations.

The survey was sent to a Selected Panel of Participants on 20th June, the answers were obtain on 30th June, and were subject to analysis.

In case of doubt, some additional information or any clarification, please contact:

Jorge Sousa MarrãoPartnerTlm.: +(351) 963 902 674Tel.: +(351) 210 422 [email protected]

Inês Cintra CostaManagerTlm.: +(351) 962 103 923Tel.: +(351) 210 427 [email protected]

31Portuguese Real Estate Investment Survey – 2nd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A.

Contacts

Miguel Paiva Couceiro

Manager

Real Estate – Financial Advisory

Deloitte Portugal

Tlm. +(351) 917 240 884

Tel. +(351) 210 422 500

[email protected]

Jorge Sousa Marrão

Partner

Real Estate Leader

Deloitte Portugal

Tlm. +(351) 963 902 674

Tel. +(351) 210 422 503

[email protected]

Ricardo Reis

Partner

Real Estate - Tax

Deloitte Portugal

Tlm. +(351) 964 736 261

Tel. +(351) 210 427 564

[email protected]

Inês Cintra Costa

Manager

Real Estate – Financial Advisory

Deloitte Portugal

Tlm. +(351) 962 103 923

Tel. +(351) 210 422 500

[email protected]

Diogo Pires

Senior Manager

Real Estate - Tax

Deloitte Portugal

Tlm. +(351) 964 837 258

Tel. +(351) 210 427 541

[email protected]

mailto:[email protected]





© 2017. For more information, contact Deloitte Consultores, S.A.

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