The Catalan Government sells 13 buildings to AXA Real Estate for €172 million to reduce public deficit
The Catalan Government will continue to occupy the facilities as a tenant, annually paying €16.2 million in rent over the next 20 years. The decision to sell Catalan Government properties had been taken to ease the difficult financial situation and obtain liquidity. The initiative is part of the austerity measures adopted to reduce the public deficit and increase revenue. Taking this last sale into account, the Catalan Government will have sold 17 properties for a total of €266 million since 2012. The Catalan Minister for the Presidency, Francesc Homs, emphasised that the revenue generated by these sales will allow the Government to undertake fewer budget cuts.
Barcelona (ACN).– On Tuesday the Catalan Government awarded AXA Real Estate the public tender to buy a lot of 13 buildings for a total of €172 million, €9.3 million more than the minimum price set by the Catalan Executive. The initiative is part of the austerity measures adopted to reduce the public deficit and obtain liquidity. The Catalan Government will continue to occupy the facilities like now but as a tenant, for a maximum period of 20 years and paying an annual amount of €16.2 million in rent, as was initially put in the tender. Since the timing for the completion of the technical work has been very tight, the sale of two buildings from the lot will be formalized within the next two weeks. During the press conference held after the weekly Cabinet Meeting, the Catalan Minister for the Presidency, Francesc Homs, justified the decision given the cash needs of the Executive and the “exceptional circumstances” of difficult access to credit and the need to reduce the public deficit in order to meet the deficit targets imposed by the Spanish Government. Homs explained that the decision to sell Catalan Government properties had been taken to ease the difficult financial situation, because otherwise they would not have taken this road. “It is not from desire or because we want to do it but for not having to adopt so many budget cuts,” he explained.
On Tuesday, the Catalan Government approved the sale and leaseback of 11 properties for a price of €148.6 million euros and an annual rent of €14.6 million. The other two properties will be sold within the next two weeks for technical reasons. The sales contract will enter into force at the end of June, after AXA Real Estate has submitted bank guarantees worth 25% of the transaction. The Catalan Government has said in a statement that their desire has always been to make transactions at market value, respecting public resources.
In March, the Catalan Executive brought together 13 buildings for sale in a single lot and improved the conditions of the tender to make it more attractive. Since the tender was published in the Catalan Government’s Official Journal, the Catalan Finance Ministry received several offers from different investors for the 13-building lot. Finally, the Executive decided to award the lot to AXA Real Estate Company for a bid of €172 million and an annual rent of €16.2 million. AXA Real Estate carried out the operation with Jones Lang Lasalle, acting as real estate consultant, and with Herbert Smith Freehills and Gleeds Iberica SA Spain LLP as legal advisors and technicians, respectively.
17 properties for €266 million
This operation of a direct sale and leaseback is part of the Catalan Government’s privatisation program designed to reduce the public deficit and debt. The first sale was on the 27th March, 2012, when the company Servicios Integrales Bancalé bought the headquarters of the Catalan Ministry for Territory and Sustainability, located at Number 2-6 Josep Tarradellas Avenue, Barcelona. This first transaction brought in revenue of €52 million. The second operation was authorized on the 22nd of May, 2012; Mutual Mèdica de Catalunya i Balears bought a building at 221, Muntaner Street, Barcelona, for a total of €2.5 million. The third transaction took place on the 19th of June, 2012, when the Catalan Government approved the sale of a building at 80-86 Dr. Roux Street, Barcelona, for €14.5 million to the insurance company Vidacaixa. Finally, the fourth operation was held on the 5th of February, 2013, when the Executive awarded Ziscal Inversiones 2012 the building at 6-8 Fontanella Street, Barcelona, next to Catalunya Square, for €25 million.
In total, these previous transactions brought in €94 million, atypical revenue very much welcomed to rebalance public finances on the short-term. Once the lot of 13 buildings are officially sold, the Catalan Government will have sold 17 properties for a total of €266 million since 2012.
The Burés House and Democratic Memorial building will go through a direct sale
In addition, the Catalan Government has started the direct process to sell Art-Nouveau Burés House and the Democratic Memorial Building in Barcelona, located at 12-18, Girona Street and 69, Via Laietana Street respectively. This process has started since the two public tenders did not manage to award the sale, neither in the first nor in the second auction. Now, the Catalan Government is directly negotiating with several investors interested in buying these properties, starting at a price 20% lower than the minimum price at the first auction.
The headquarters of the Catalan Education Ministry, the most expensive property
In the lot of 13 properties sold to AXA Real Estate, the most expensive was at 202-226, Via Augusta Street, which is currently occupied by the Catalan Ministry of Education. The building was sold for €42.7 million. The Catalan Executive will pay €4 million for the annual rent. The second highest-priced property is located at 612-614, Gran Via Avenue, where the Catalan Ministry of Agriculture, Livestock and Fisheries is located. The building was sold for €21.8 million, with an annual rent of €2 million. The third building is at 58-60, Via Laietana Street, next to Barcelona’s Urquinaona Square, where the Directorate General for Taxes and Gambling is located. The building has been sold for €17.2 million and an annual rent of €1.6 million. However, the cheapest property is the branch of the Catalan Public Employment Service, located at 8, Joaquim Dou Street, which sold for €1.8 million and an annual rent of €171,105.
The Catalan Government justifies the sales to ease the “emergency” situation
The Catalan Minister for the Presidency justified the sale of public buildings to ease the “emergency” the Catalan Government’s coffers are going through. Francesc Homs said that the measure is “exceptional”. “It's the eternal debate of the poor. There is a Catalan saying that describes it very well: Sell the [owner’s] house to rent [another one],” he said. Homs acknowledged that selling assets is not an “optimal” or “excellent” solution but he emphasised that it is the option that allows the Catalan Government to “get to the end of the month”. Instead, “the alternative is not to get there”, he underlined. “We have risks and dangers, but we cannot be without doing anything,” he stated.