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Portuguese Real Estate Investment Survey – 3rd Q 2017A positive outlook for Portuguese real estateDeloitte Consultores, S.A.
Portuguese Real Estate Investment Survey – 3rd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A. 2
Portuguese Real Estate Investment Survey – 3rd Q 2017
Preface
It is with great pleasure that we launch the 3rd 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 dynamic trends, 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 conclusions
23Portuguese Real Estate Investment Survey – 3rd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A.
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Overall, respondents aim to focus in an investment strategy in opposition to the portfolio management and divestment
strategies.
Regarding divestment strategy, respondents are more keen in selling “Core” assets (50%). Respondents
perceives a greater ease in attracting investors for assets acquisition.
Value added investments (69%) are perceived as the preferred investment strategy by respondents, with a more
optimistic fundraising perception when it comes to finance acquisitions.
Banks and Sovereign funds (38% each) stand out as the main business feeders of real estate acquisitions, as capital sources will mainly arise from Europe
(75%).
Funds of Funds (50%) and Insurance Companies (43%) are identified as the
main real estate buyers in Portugal. Capital sources mainly arises from
Europe (86%).
Regarding to the Portuguese real estate market, there is a perception of an
increase in the volume and sales price for residential, retail/ services and hotel
sectors, and a greater stability of profitability rates.
Main conclusions
Portuguese Real Estate Investment Survey – 3rd Q 2017
Portuguese Real Estate Investment Survey – 3rd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A. 5
Real Estate strategy for 2017 Portuguese real estate market
2nd Quarter 3rd Quarter
36%
27%
41% Disposal of "Core" assets
Divestment in “Opportunistic
deals” represents only 27%
Funds of Funds are the main real
state purchasers, with Pension
Funds (27%) becoming more
relevant
2nd Quarter 3rd Quarter
Investment Policy Divestment Policy
Comparative analysis
Portuguese Real Estate Investment Survey – 3rd Q 2017
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 2nd quarter of 2017, portfolio management and divestment strategies lost their representativeness for the benefit of a investment strategy.
Respondents maintain the perception of an increase in the volume and sales
price for residential, retail/ services and hotel sectors, related to a greater
stability in the profitability rates.
77% Capital arising from Europe
69% “Value added” investments are
the most representative
44% 44% of the respondents invest in
“Core” assets
38% Banks e Sovereign funds are the
main business feeders
75% Capital arising from Europe
50%
29%
50% Disposal of “Core” assets
Divestment in “Opportunistic
deals” represents only 29%
Funds of Funds are the main real
state purchasers, with Insurance
companies (43%) becoming more
relevant
86% Capital arising from Europe
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Introduction
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Portuguese Real Estate Investment Survey – 3rd Q 2017
Real Estate Asset Management Companies and Corporate Companies represent together 63% of the respondents.
Type of organization that respondents represent
13%Banks
19%Corporate
Companies
44%Real Estate Asset
Management
Companies
6%Private Equity
6%Insurance
companies
12%Others
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Portuguese Real Estate Investment Survey – 3rd Q 2017
Real Estate strategy for 2017
For 2017, the preferred strategy option is the investment with 44%, followed by portfolio management and divestment strategy each representing 31% and 25%, respectively.
Strategy
Divestment
Portfolio management
Investment
44%
31%
25%
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Investment strategy
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38%
25%
69%
44%
31%
50%
Current Future
Portuguese Real Estate Investment Survey – 3rd Q 2017
Current and future investment strategy (1)
In both current and future strategies, respondents foresee that the most favourable strategy is the investment in Value Added assets representing 50% and 69%, respectively.
(1) Multiple choice question
Value added
Core
Opportunistic
deals
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Portuguese Real Estate Investment Survey – 3rd Q 2017
Main investors / Business Feeders and their allocation in the next year (1)
For the next year, Banks and Sovereign funds representing 38% each, will be the main investors. Funds’ allocation is predominantly European (75%).
(1) Multiple choice question
75%EUROPE
63%NORTH AMERICA
31%ASIA
25%MIDDLE EAST
Banks (%)
Sovereign
funds (%)
Fund of funds
(%)
Insurance
companies (%)
Pension funds
(%)
Others (%)
Legend:
Each icon represents 10%
Portuguese Real Estate Investment Survey – 3rd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A. 12
Portuguese Real Estate Investment Survey – 3rd Q 2017
Fundraising approach, in the last 12 months and next 12 months
Fundraising perception for the next 12 months is slightly more optimistic compared to the last 12 months.
Difficult
Neutral
Easy
Last 12 months Next 12 months
38%
44%
18%
31%
25%
44%
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12%
Low
69%
Significant
Portuguese Real Estate Investment Survey – 3rd Q 2017
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.19%
Very significant
Size of funds
Range of investors
13%
Very significant
31%
Low
56%
Significant
0%
Meaningless
31%
Low
56%
Significant
13%
Very significant
Length of process
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Portuguese Real Estate Investment Survey – 3rd Q 2017
Impact of regulatory changes in the Organizations
The majority of the respondents considered that AIFMD and FATCA will have a significant 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)
Very significant Significant Low Not applicable
25%
38%
25%
56%
18% 19%
13%
31%
31% 38%
6%
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Portuguese Real Estate Investment Survey – 3rd Q 2017
Length of the real estate assets’ acquisition process
In general, real estate assets’ acquisition process takes from 3 to 6 months.
56%From 3 to 6
months
31%From 6 to 12
months
13%Up to 3
months
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Divestment strategy
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50%
29%
50%
50%
36%
29%
Current Future
Portuguese Real Estate Investment Survey – 3rd Q 2017
Current and future divestment strategy (1)
Divestment strategy in Core assets will be the greatest focus of the organizations.
In the future the divestment strategy will be focused on both, Core and Value added assets.
Value added
Opportunistic
deals
Core
(1) Multiple choice question
Portuguese Real Estate Investment Survey – 3rd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A. 18
Europe with 86%, will be the main real estate investment player, followed by North America with 57%.
(1) Multiple choice question.
Fund of funds
(%)
Insurance
companies (%)
Pension funds
(%)
Banks (%)
Sovereign funds
(%)
Others (%)
Legend:
Each icon represents 10%
Portuguese Real Estate Investment Survey – 3rd Q 2017
Main real estate investors and their allocation in the next year (1)
For the next year, Fund of Funds represent 50% of the main real estate investors/ buyers for entities seeking to divest.
86%EUROPE
57%NORTH AMERICA
36%ASIA
21%MIDDLE EAST
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Last 12 months Next 12 months
Difficult
Neutral
Easy
Portuguese Real Estate Investment Survey – 3rd Q 2017
Fundraising approach, in the last 12 months and next 12 months
For the next 12 months, with regard to investors attraction for the acquisition of real estate assets, respondents perceive a greater easiness.
36%
36%
28%
50%
29%
21%
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14%
Low
72%
Significant
Portuguese Real Estate Investment Survey – 3rd Q 2017
Level of impact of different factors affecting fundraising
The size of funds and length of process are the most relevant factors affecting fundraising.
The range of investors has an increasingly smaller impact on this process.
22%
Low
64%
Significant
14%
Very significant
Length of process
14%
Very significant
Size of funds
Range of investors
0%
Very significant
43%
Low
57%
Significant
0%
Meaningless
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Portuguese Real Estate Investment Survey – 3rd Q 2017
Impact of regulatory changes in the Organizations
AIFMD and EMIR will, in general, have a low impact in the divestment of the organizations. FATCA will have a more significant impact in these operations.
Very significant Significant Low Not applicable
(1) AIFMD: Alternative Investments Fund Managers Directive; (2) FATCA: Foreign Account Tax Compliance Act; (3) EMIR: European Market Infrastructure Regulation.
36%
21%
36% 36%
14%
36%
21%
29%
43%AIFMD(1)
FATCA(2) EMIR(3)
14%
14%
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Portuguese Real Estate Investment Survey – 3rd Q 2017
Length of the real estate assets’ selling process
In general, the real estate assets’ selling process takes from 3 to 12 months.
7%More than
12 months
50%From 3 to 6
months43%From 6 to 12
months
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Real Estate valuations
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Portuguese Real Estate Investment Survey – 3rd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A. 24
14%Reposition Cost
29%Capitalization
57%Comparative
Real Estate valuation methods (1)
The most used valuation method for land and other uses is the DCF.
Portuguese Real Estate Investment Survey – 3rd Q 2017
(1) Multiple choice question
64%DCF
0%Reposition Cost
7%Capitalization
Land
71%DCF
Other uses
57%Comparative
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Portuguese Real Estate Investment Survey – 3rd Q 2017
External Real Estate valuations
According to the respondents, the assets valuations assigned by the external evaluators are in general, in line providing the fair value of the assets (43%) or slightly overestimated (29%).
43% of the respondents, also consider that the valuations assigned by the external evaluators are aligned with market changes. However, 36% consider that they do not allow to anticipate market trends.21%
Anticipating market
trends
43%In line with market
changes
36%Late in factoring market
changes
Underestimated
Slightly underestimated
In line, providing fair value
Slightly overestimated
Overestimated
7%
21%
43%
29%
0%
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Real Estate market in Portugal
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Portuguese Real Estate Investment Survey – 3rd Q 2017
Real estate sector dynamics
Volume and sales price for the next 3 months
For the next 3 months, is expected an increase of the volume and sales price for residential, retail/ services and hotel sectors.
Decrease Slightly decrease Similar Slightly increase Increase
HotelsRetail/ ServicesResidential Industrial
28%
36%
36%
14%
64%
22%
14%
50%
29%
7%
29%
64%
7%
Portuguese Real Estate Investment Survey – 3rd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A. 28
Portuguese Real Estate Investment Survey – 3rd Q 2017
Real Estate sector dynamics
Profitability of real estate assets for the next 3 months
It is also expected that profitability rates remain steady over the next 3 months in the residential, retail/ services and industrial sectors.
In the hotel sector is expected a slightly increase.
HotelRetail/ ServicesResidential Industrial
Decrease Slightly decrease Similar Slightly increase Increase
21%
50%
21%
21%
58%
21%
14%
79%
21%
36%
36%
8%
7%
7%
Portuguese Real Estate Investment Survey – 3rd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A. 29
New players
entranceBureaucracy Tax policy Political
situation
Demand Supply Foreign
investment
Positive
Negative
Neutral
Portuguese Real Estate Investment Survey – 3rd Q 2017
Impact of several variables in the Real Estate sector
For the next 3 months, the respondents consider that supply and foreign investment will have a positive impact in the real estate sector.
Political situation will gain representation in the positive impact that generates.
28%
36%
29%7%
36%
93% 71%
7%
57%
21%
71%
43%
57%
7%
57%36%
36%
Portuguese Real Estate Investment Survey – 3rd Q 2017© 2017. For more information, contact Deloitte Consultores, S.A. 30
Technical Note
Portuguese Real Estate Investment Survey – 3rd Q 2017
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 21st September, the answers were obtain on 3rd October, 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 – 3rd 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
Jorge Sousa Marrão
Partner
Real Estate Leader
Deloitte Portugal
Tlm. +(351) 963 902 674
Tel. +(351) 210 422 503
Ricardo Reis
Partner
Real Estate - Tax
Deloitte Portugal
Tlm. +(351) 964 736 261
Tel. +(351) 210 427 564
Inês Cintra Costa
Manager
Real Estate – Financial Advisory
Deloitte Portugal
Tlm. +(351) 962 103 923
Tel. +(351) 210 422 500
Diogo Pires
Senior Manager
Real Estate - Tax
Deloitte Portugal
Tlm. +(351) 964 837 258
Tel. +(351) 210 427 541
© 2017. For more information, contact Deloitte Consultores, S.A.
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