Merlin Properties Said to Plan IPO for Largest Spanish REIT

Merlin Properties SA plans to become Spain’s largest real estate investment trust by selling shares to the public by the summer to take advantage of a new law aimed at spurring property deals, a person with knowledge of the matter said.

Merlin, a Madrid-based company managed by former directors of RREEF, will be more than double the size of Hispania Activos Inmobiliarios SA, an externally managed Spanish REIT that listed its shares earlier this month, said the person, who asked not to be named because the information is private. Hispania has a market value of about 530 million euros ($728 million).

David Brush, former head of Europe for Brookfield Property Group, will be Merlin’s chief investment officer, the person said. The management team will also include Ismael Clemente and Miguel Ollero, former directors of RREEF Spain and founders of Magic Real Estate, an asset manager and investment company with 2.8 billion euros of assets under management.

Changes in Spanish law last year reduced tax burdens for REIT investors. Pacific Investment Management Co.’s Bill Gross, Quantum’s George Soros and billionaire John Paulson recently took stakes in REITs in the country. Hispania Activos is one of two Spanish property companies that listed shares on the Madrid exchange this month. The other, Lar Espania Real Estate Socimi SA, has a market value of 417 million euros.

No one at Merlin Properties or Magic Real Estate was available to comment on the planned initial public offering.

Sale Coordinator

Credit Suisse Group AG will coordinate the sale and will be joint book-runner along with UBS AG and Deutsche Bank AG, the person said. RREEF is the former name of a Deutsche Bank real estate investment unit.

Merlin will invest in prime commercial real estate assets primarily in Spain and may invest to a lesser extent in property in Portugal, the person said. The company will take the form of a Socimi, the Spanish equivalent of a REIT.

Investment in Spain by funds, private-equity firms and other financial-services companies totaled 13.9 billion euros in 2013, according to Irea, a Madrid-based debt-restructuring firm that has advised on 22 billion euros of refinancing and 3.2 billion euros of real estate transactions. That’s more than double the amount invested in 2012. About 37 percent went to real estate assets and the proportion is expected to increase this year, Irea said.

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