Mad speculation in the rental market following the funds' relief from the Housing Law.

On Wednesday, the Real Housing Forum (RHF) will take place in Madrid, bringing together companies in the real estate sector with a primary focus on rental housing. The forum's agenda includes discussions on "trends," "exclusive networking," and the "market situation," which promises to be very promising, as well as an analysis of the "investment climate" and "new opportunities." One of the frequently used acronyms will be BTR, "Build to Rent," which is a trendy segment. However, the forum will also address other promising aspects, such as technological innovations and "flexible living" - new ways of living, such as co-living, which are not limited to students and young people. There is also business in this area. Spain faces some challenges in the rental market, but not in business. Investors, having dispelled the main concerns related to the Housing Law, are aware of this.

The forum will feature developers, builders, landowners, architectural firms, portals, insurance companies, appraisers, consultants, and advisors. However, an analysis of the participants—both their personalities and their activities—clearly shows who the "alpha male" in this jungle is: the investors. That is, fund managers, what is commonly referred to as "investment funds." The fact that everything revolves around the investor at such a significant event dedicated to the rental business speaks volumes. It means at least two things: 1) There is interested capital, because 2) there are prospects for asset value appreciation. In short, there is confidence that investing money in rental real estate—becoming a landlord and waiting for rent payments from tenants—will be a good business. The RHF itself draws its conclusions and data: "The rental sector is on the rise, attracting more and more fund investments. In terms of investments, it accounted for 47% of the total investment volume in the real estate market up to the third quarter of 2022." The sector is anything but static. Even within the hegemony of funds, cycles change and guard posts shift. Giants like Blackstone and Lone Star, who loaded their portfolios up to 2018, are now selling them off. Note that they are selling to both individuals and other funds. For example, the French company AXA, known for its insurance activities but also having a real estate division, acquired rental properties from Blackstone last year for 285 million euros. Among the companies making purchases are other names like the Swedish giant Intrum or the Spanish management company Azora. New names, the same dynamics: housing as a speculative asset. Unfinished business with "construction for rent."

All the companies mentioned above play a role in the rental housing market, confirming the status of renting as a sought-after business. Unlike the era of cheap mortgages, today banks require a 20% down payment, plus taxes and notary fees. This closes the door for many, forcing them to turn to renting. As a result, the demand for rentals is growing, and prices are rising accordingly, shifting capital interest towards this sector. Moreover, this is an area with great potential. "In Spain, the so-called 'build-to-rent' concept still needs to be developed, which has received little attention since the 1950s. This has now changed," explains research specialist Manuel Gabarre, author of the book "Hitting Bottom" (Traficantes de Sueños, 2019), who notes that companies are eager to acquire "cheap government land" for building rental housing, considering that many municipalities are unable to sell their land. Investor optimism is also fueled by the fact that major concerns regarding the Housing Law seem to have dissipated, given the limited implementation of the law, which requires support from communities and municipalities, many of which belong to the People's Party and are clearly opposed to its measures. This is what a professional in the field, who preferred to remain anonymous and has worked as a liaison between a company in this sector and investment funds, tells us. "The law was passed, but it seems that nothing has changed," he summarizes.

Two American mega funds

Let's move on to the participants of RHF, who represent a broad panorama. The list consists of "partners," meaning RHF partners who pay for their participation in the event and hope to leave with new business partnerships. In this field, many of the largest giants operate not under their own brand but from behind the scenes, so you need to pay a little attention. At the same time, we see two names, Testa and Servihabitat, which in turn lead us to two American mega-funds, Blackstone and Lone Star.

Testa is one of the largest players in the housing market in Spain. It is a SOCIMI, which is a type of investment fund specializing in residential rentals and criticized for its tax benefits. They have over 11,000 residential units, and in 2022, they reported a profit of around 12 million euros. Behind Testa is Blackstone, as the American company itself explains, which sold more than 1,800 public apartments to the Madrid city hall during the rule of the People's Party. The company has invested 23 billion euros in real estate—not only in apartments but also in land, hotels, warehouses—and in venture capital in Spain over the past ten years. The president of Testa is Claudio Boada, who is the head of Blackstone in Spain, a giant that manages assets worth 1 trillion euros worldwide, not just in real estate. The group, led by Jonathan D. Gray, is present in RHF not only through Testa. They are also partners with Asval, a lobby chaired by Joan Clos, which owns the most apartments under Blackstone, and Uli Spain, an association of experts in this field, sponsored by Anticipa and Aliseda, Blackstone's real estate arm.

Servihabitat, another partner of the meeting, is a company that manages third-party assets. This means that the portfolio does not belong to them. They manage 165,000 properties and financial assets worth over 20 billion euros, according to the company's balance sheet. The company is part of the Coral Homes group, which owns more than 70,000 properties in Spain and sells them through Servihabitat. But the story doesn't end with Coral, which is in turn 20% owned by Caixabank - through Building Center - and 80% owned by Lone Star, according to a representative from infoLibre. Under the leadership of John Grayken, Lone Star is one of three companies that found themselves on the podium of toxic bank loan accumulators after the great crisis. Therefore, their critics refer to such managers as "vulture funds." In the case of Lone Star, a key player is Caixabank, which sold them assets worth about 7 billion euros in 2018. Right now, Lone Star and Caixabank are trying to sell Servihabitat, and this deal is keeping the entire sector on edge.

And one more fund (besides Tamara Falco).

Real estate companies seeking investors are another common category. "Why invest in housing in Madrid?" asks the company Kronos on its website, enticing potential clients. The entire corporate image line exudes luxury, which aligns with the choice of Tamara Falcó and Eugenia Silva as the company's brand ambassadors in Spain. Stay by Kronos, a rental construction project shared by Kronos Group and the American asset manager Nuveen, is a partner of RHF. The head of Kronos is Lebanese Said Hejazi, the son and grandson of developers, who worked at Morgan Stanley and the American fund Fortress before becoming one of the most fashionable faces in Spanish real estate. In 2022, Kronos announced a revenue of 462 million euros and has a portfolio of 16,000 residential properties in Spain and Portugal for rent and purchase. infoLibre revealed in December 2022 the key role that money from Luxembourg, a free economic zone for tax optimization, plays in their financing.

As for Nuveen, we are dealing with a megagiant where housing is just one of the sectors, and Spain is just one of the countries. The company manages over 1 trillion euros in assets. Here, at Nuveen, is another hyperactive fund manager with deep pockets in the rental market.

Swedish giant

Several features make Intrum a unique company.