Galil Capital RE Spain, S.A. (“GCRE“ or the “Company”) – is a Spanish real estate company that shall invest in residential properties in major cities in Spain, primarily in Barcelona and Madrid. GCRE started its operations on 1 December 2015.
The Spanish real estate market experienced a major price reduction since the global financial crisis in 2008. In the last few months, the Spanish economy has started to show signs of improvement , banks are starting to selectively offer mortgages to retail buyers, and real estate prices in major cities seem to have bottomed down. We expect that real estate prices in Spain will go up at least 20%-30% in the next few years.
GCRE was structured as a Spanish SOCIMI (REIT) to benefit from a very favorable tax regime in Spain (practically zero corporate taxes on purchase of properties, leasing operations and sale of properties) . The SOCIMI structure was recently introduced (in its current form) in Spain to attract new capital to invest in the real estate market in Spain.
On 4 May 2016, GCRE elected to become a SOCIMI and notified HACIENDA (Spain Tax Authority). As a result, GCRE must complete a public listing of it shares on the MAB no later than 3 May 2018.
GCRE Investment Objectives are as follows:
- Buy apartment buildings primarily in Barcelona and Madrid.
- Focus on small – medium size apartment buildings (10-50 units).
- Aim to obtain 50% bank financing on average in every purchase.
- Hold properties for 3+ years, remodel interior of units and improve buildings, as needed, to be able to increase rents and make units more attractive for resale in the future.
- Objective to achieve 5% annual yield from leasing operations and significant capital gains at selling.
GCRE Value Creation Strategy:
- Improve interior/ exterior of building – add new elevator, paint, renovate the common areas
- Improve property – divide large units into smaller units, renovate units
- Increase rents – taking advantage of the property improvements and renovations
- DIVISION HORIZONTAL – Buy Apartment Buildings (pay wholesale price) and sell apartments individually (retail price)
+ Benefit from expected continued economic recovery and price appreciation in Spain (not included in above estimates)