Portuguese Real Estate Investment Survey 3rd …...For more information, contact Deloitte Consultores, S.A. Portuguese Real Estate Investment Survey –3rd Edition 2018 25 Evolution

Portuguese Real Estate Investment Survey – 3rd Edition 2018Let’s get ready to retail

Portuguese Real Estate Investment Survey – 3rd Edition 2018© 2018. For more information, contact Deloitte Consultores, S.A. 2

The Portuguese Real Estate Investment Survey has been generating a positive impact in the perception and evolution of the real estate sector.

It is with great pleasure that we launch the third edition of this survey, with the confidence that the opinion and knowledge of the players that act daily in this business, make all the difference.

We would like to thank the Selected Panel for their continued support and involvement over the past editions. The success of this initiative depends only on their dedication.

We are at your entire disposal to discuss any relevant question.

Carefully,

Jorge Marrão

Jorge Sousa Marrão

Partner

Real Estate Leader

Preface

2Portuguese Real Estate Investment Survey – 3rd Edition 2018


Hot topicRetail

In the third quarter of 2018, there is a trend towards investment in the retail sector.

After a period of recession, leading to a decline in total private consumption, the retail sector in Portugal seems to be experiencing a recovery stage, driven by the raising of this indicator that reached 126 billion euros in 2017(1).

From shopping centres to high street shops, the choices seem to be growing and to be more diversified, with an increasing appetite from domestic and foreign investors.

After a strong bet on the office and hotel sectors, is it the time to shift to retail? Or is this growth related to the good performance of the other sectors?

(1)Source: PORDATA


Real Estate Strategy

Globally, the investment

strategy (69%) continues

to be the primary choice of

players in real estate

sector, similar to the 2nd

quarter.

Main conclusions

Investment Strategy

Core investments (46%)

are perceived as the

preferred investment

strategy. Major players

(46%) foresee to increase

their portfolio by more

than 10%.

Business Feeders

Banks (77%) continue to be

the main business feeders

of real estate acquisitions.

Capital sources arise mainly

from Europe (77%).

Divestment Strategy

Value added assets

(46%) will be the main

target of further

divestment. 54% of

respondents aim to

reduce their portfolio by

more than 10%.

Investors

Funds of Funds (62%) are

identified as the main real

estate purchasers.

Capital sources arise

mainly from Europe

(85%).

Real Estate Market

Noteworthy is the increase

in volume and transaction

prices in the four sectors

under analysis as well as a

greater stability in

profitability rates.

In the last 12 months,

38% of the respondents

made acquisitions up to

€25M, mainly in the

Portuguese market.

Also 38% made disposals

of less than 25M€.


5© 2018. For more information, contact Deloitte Consultores, S.A.

Introduction

Portuguese Real Estate Investment Survey – 3rd Edition 2018


IntroductionReal Estate strategy for 2018

Type of organization that participants represent

Divestment

Portfolio management

Investment

6

None of the above

31% 31%

15%

8% 8% 7%

Real Estate AssetManagement

Company

CorporateCompany

Venture Capital/Private Equity

Bank InsuranceCompany

Other

23%

69%

8%



Frequency of real estate portfolio strategy review

For most players of the sector, real estate portfolio should be continuously reviewed.54%

Continuous

review process

Introduction

7

23%Annually

15%When

opportunities/changes in

market dynamics

8%Twice a year



Investment strategy over the last 12 months per market

Value of purchases made in the last 12 months

More than 50M€

From 25M€ to 50M€

Up to 25M€

No acquisitions were made in the last 12 months

Portuguese market

European market

Introduction

8

8%

Not applicable

Regional market

23%

31%

46%

46%

8%

38%



Divestment strategy over the last 12 months per market

Value of disposals made in the last 12 months

More than 50M€

From 25M€ to 50M€

Up to 25M€

No disposals were made in the last 12 months

Portuguese market

European market

Introduction

9

Not applicable

Regional market

38%

8%

38%

16%

38%

38%

16%

8%



Investment strategy



(1)Multiple choice question

Investment forecast for the next 12 months

Investment strategy

Increase portfolio by more than 10%

Increase portfolio by more than 5%

Not applicable

Investment strategy for the next 12 months

11

Not applicable 8%

23%

23%

46%

Value added

Core

Opportunistic

deals

46%

31%

23%



Preferred investment sectors for the next 12 months

(1) Multiple choice question

Investment strategy

12

CMVM – Investment by type of use

Comparative analysis

Not applicableOthers

Note: Investment for Real Estate Investment Funds, Real Estate Special

Investment Funds and Real Estate Management Funds – 30.06.2018

(Values at end of month) vs 31.03.2018 (Values at end of month)

Source: CMVM – Long time series

54%

46%

38%

31%

15% 15%

8%

ResidentialIndustrial/ Logistics

OfficesHotelsRetail

40%

22%

14%

4%

3%

3%

14%

39%

23%

13%

3%

3%

3%

16%

Services

Retail

Residential

Industrial

Hotels

Logistics

Others



Source of funding for next year

Main funders for next year 77%EUROPE

31%NORTH AMERICA

8%MIDDLE EAST

38%ASIA

0%SOUTH AMERICA

Legend: Each icon represents 10%

Investment strategy


13

Banks (%)

Pension Funds (%)

Insurance Companies

(%)

Funds of funds (%)

Sovereign Funds (%)

77%

31%

31%

23%

23%

Others (%) 38%



Length of the real estate asset’s acquisition process

Easiness of fund raising for the next 12 months

Very

Difficult

Neutral

Easy

77%From 3 to 6

months

23%From 6 to 12

months

Investment strategy

14

61%

31%

8%



Divestment strategy



Divestment forecast for the next 12 months

Divestment strategy

Reduce portfolio by more than 10%

Reduce portfolio by more than 5%

Not applicable

Divestment strategy for the next 12 months


16

Not applicable 23%

17%

31%

46%Value added

Opportunistic

deals

Core

54%

8%

38%



Residential is the preferred divestment sector for players that operate in the real estate market in Portugal

Preferred divestment sectors for the next 12 months

Divestment strategy


17

Not applicableOthersOffices HotelsIndustrial/ Logistics

Residential Retail

31%

23% 23% 23% 23%

15%

23%



Source of financing for next year

Main real estate investors for next year 85%EUROPE

46%NORTH AMERICA

8%SOUTH AMERICA

46%ASIA

0%MIDDLE EAST

Divestment strategy


18

Legend: Each icon represents 10%

Funds of Funds (%)

Pension Funds (%)

Insurance Companies

(%)

Sovereign Funds (%)

Banks (%)

62%

46%

23%

15%

0%

Others (%) 54%



Length of the real estate asset’s disposal process

Easiness of investors gathering for the next 12 months 15%

Up to 3 months

54%From 3 to 6

months

31%From 6 to 12

months

Difficult

Neutral

Easy

Divestment strategy

19

62%

15%

23%



Real estate market in Portugal




For the next 3 months, it is expected an increase in the volume and sales price for the sectors under analysis, with special emphasis in the residential sector (75%).

Volume and sales price for the next 3 months

21

Decrease Slightly decrease Similar Slightly increase Increase

HotelRetail / ServicesResidential Industrial

17%

58%

17%

8%

42%

42%

17%

33%

8%

50%

34%42%

8%8% 8%8%



Profitability rates for the next 3 months For the next 3 months, it is expected a slightly increase for profitability rates in the residential sector (50%) and a greater stability in the retail/ services (58%) and industrial (50%) sectors.


22

Decrease Slightly decrease Similar Slightly increase Increase

HotelRetail / ServicesResidential Industrial

17%

33%

50%

8%

58%

17%

50%

34%

25%

42%

25%33%

8%



For the next 3 months, foreign investment, new players entrance and demand stand out as the variables that will have the greatest positive impact in the real estate sector.

Bureaucracy and fiscal policy will negatively impact the sector.

Impact of several variables in the real estate sector

New players

entranceBureaucracy Fiscal Policy Political

situation

Demand Supply Foreign

investment

PositiveNegative Neutral


23

50%

75%

8%

92%42%

25% 8%

58%

34%17%

75%

33%

67%

100%

8% 8%



The Deloitte CFO Survey: Spring 2018



Evolution of CFOs expectations about Portuguese economic outlook over the next 12 months

Economic outlook and financing

2325

Portuguese CFOs views on their businesses strategies priority

Attractive

Neither attractive nor unattractive

Unattractive

Corporate debt

Equity Internal

NegativePositive Neither positive nor negative

80% 22%

3%

52% 95% 90%

2%

60% 71% 15%

1% 1%

78%

-37%

-68%

37%

93% 89%

Q3_15 Q1_16 Q3_16 Q1_17 Q3_17 Q1_18

Net balance

Bank borrowing

61%

27%

12%

43%

38%

18%

23%

56%

22%

61%

29%

10%



Likelihood of risk impact on businesses over the next 12 months

(% of likelihood)

Uncertainty and risk

23

67%

58%

57%

56%

47%

41%40%

35%

34%

33%

32%

31%

Domestic public policies

Rising labour costs

Rising input costs

Political or economic

instability in foreign markets

Cyber risk

Currency fluctuations

Rising cost of capital

Weaker foreign demand

Deterioration of cash flow

Weaker domestic demand

Rising barriers to

trade/protectionism

Stress in the financial system

26

CFOs expectation on external financial and economic uncertainty impact

59%High uncertainty

33%Normal

8%Low uncertainty



The Portuguese Real Estate Investment Survey’s main goal is to assess:

• The perception of the real estate market evolution by the involved parties; and

• Understand which is the current and future strategy of the organizations.

The survey was sent to a Selected Panel of Participants on 18th September, the answers were obtain on 4th October, and were subject to analysis.

In case of doubt, some additional information or any clarification, please contact:

Jorge Sousa MarrãoPartnerTlm.: +(351) 963 902 674Tel.: +(351) 210 422 [email protected]

Inês Cintra CostaSenior ManagerTlm.: +(351) 962 103 923Tel.: +(351) 210 427 [email protected]

Technical Note

© 2018. For more information, contact Deloitte Consultores, S.A. 27Portuguese Real Estate Investment Survey – 3rd Edition 2018

28Portuguese Real Estate Investment Survey – 3rd Edition 2018© 2018. For more information, contact Deloitte Consultores, S.A.

Contacts

Jorge Sousa Marrão

Partner

Real Estate LeaderTlm. +(351) 963 902 674

[email protected]

Inês de Cintra Costa

Senior Manager

Real Estate – Financial AdvisoryTlm. +(351) 962 103 923

[email protected]

Miguel Paiva Couceiro

Manager

Real Estate – Financial AdvisoryTlm. +(351) 917 240 884

[email protected]

Ricardo Reis

Partner

Real Estate - TaxTlm. +(351) 964 736 261

[email protected]

Diogo Pires

Senior Manager

Real Estate – TaxTlm. +(351) 964 837 258

[email protected]

mailto:[email protected]





© 2018. For more information, contact Deloitte Consultores, S.A.

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Documents

Portuguese Real Estate Investment Survey 3rd …...For more information, contact Deloitte Consultores, S.A. Portuguese Real Estate Investment Survey –3rd Edition 2018 25 Evolution