Colonial Set to Spend After Housekeeping Sparked ReboundSharon Smyth
It took a costly dose of reality for Inmobiliaria Colonial SA to transform itself from a money-losing Spanish real estate company to a profitable business with cash to invest.
Colonial, which reported writedowns of 5 billion euros ($5.9 billion) over five years as it revalued assets, could invest 400 million euros this year in Spain and France and may resume dividend payments in two years, Chief Executive Officer Pere Vinolas said in an interview at his office in Barcelona.
“If you want to attract investors, you have to do housekeeping and have your assets marked to market,” Vinolas said. “We performed a restructuring exercise that serves as a model and left the company totally stable.”
Colonial’s management reorganized the company’s finances and shareholder structure last year, raising 1.26 billion euros from new investors including Qatar Investment Authority and the Villar Mir Group and securing a 1.04 billion-euro syndicated loan in 2014. The company, which hasn’t paid a dividend since 2007, in is on track to report its first annual profit since 2011.
Colonial, Spain’s largest real estate company by market value with about 5.5 billion euros of prime office buildings in Spain and France, may use as much as half of the money earmarked for investments to refurbish properties, Vinolas said.
“There’s a lack of prime office buildings for sale in Spain,” Vinolas said. Occupancy rates are rising significantly as an improving economy sparks an increase in office demand.
Rental income from Colonial’s properties in Madrid gained 6.8 percent in the first nine months of 2014, while its buildings in Paris had a 3.4 percent increase, according to its website. About 70 percent of the company’s assets are in France.
Colonial spent about 370 million euros on acquiring and refurbishing office buildings in 2014. The company reported net income of 563 million euros for the first nine months. It had a loss of 369 million euros a year earlier after deconsolidating Assentia, a bad bank set up in 2010 to offload loss-making residential and land assets.