Real Estate

We are fully aware of the cyclical nature of the real estate market, its sensitivity to financing and liquidity conditions and the opportunities that may arise during periods of adjustment and correction.

From an asset management perspective and with a non-speculative approach, we allocate part of our resources to the acquisition, operation and selective rotation of real estate assets. Our focus is primarily on residential and commercial properties, as well as certain agricultural assets, selected based on their quality, location and return prospects.

We do not view real estate investment as merely an exposure to price movements. We seek assets with solid fundamentals, the ability to generate recurring cash flows and a value that justifies the acquisition price. On this basis, active management and appropriate capital allocation enable us to improve their efficiency, increase their income-generating capacity and optimise their performance.

Our analysis begins with a deep understanding of each property, its surroundings and the factors that determine its value. We assess its location, construction quality, state of preservation, underlying demand, cost structure, liquidity and repositioning potential, together with any specific factors that may affect its operation and evolution.

We pay particular attention to properties whose quality and location provide them with greater stability under different market conditions. We prioritise built assets of good quality, located primarily in Madrid, Barcelona and other major cities, as well as in selected tourist destinations with solid and structural demand.

These preferences do not exclude other locations when the quality, depth and stability of demand, acquisition conditions and prospects for future development justify the investment. Location is an essential factor, but its relevance must be analysed together with the other variables that affect an asset’s value and development potential.

We also seek situations in which active management can contribute to improving investment returns, whether through physical improvements to the property, operational optimisation, adaptation of its use, improved occupancy, increased income or a more efficient capital structure. Intervention in these areas forms part of the execution of the investment thesis and is always approached in accordance with the specific characteristics and objectives of each opportunity.

We continuously monitor the variables that may affect the performance of each asset and adapt our decisions to the evolution of each situation. Likewise, we consider divestment when the value achieved, market conditions or the emergence of alternatives offering a more attractive risk-return profile justify reallocating capital.

Within our real estate strategy, we distinguish three asset profiles according to their main sources of return and associated level of risk:

• High-quality, low-volatility assets, where income generation constitutes a primary source of return. We seek properties with proven demand, strong locations and the capacity to maintain stable occupancy and rental levels.
• Assets with transformation potential, where certain inefficiencies, an acquisition price offering an adequate margin, or specific transformation requirements provide an opportunity to improve their physical, operational or financial performance. In these cases, returns depend to a greater extent on the ability to execute the defined strategy effectively and to allocate the required capital with discipline.
• Assets with a greater appreciation component, where a significant portion of the expected return derives from the future evolution of the property’s value. These investments involve a higher degree of uncertainty and require particular rigor in asset valuation, appropriate determination of the acquisition price and a time horizon consistent with the nature of the investment.

This differentiation allows us to combine different sources of return within the portfolio, balancing the generation of recurring income with value creation and asset appreciation.

Within this same long-term, wealth-preservation investment approach, we consider certain agricultural assets as part of our strategy.

Agricultural investment, like real estate investment, presents characteristics that are consistent with our investment approach: its tangible nature, the importance of location, the scarcity of certain resources, the potential to generate recurring income and a long-term holding perspective. At the same time, it incorporates specific factors — agronomic, climatic, productive and regulatory — that require a differentiated analysis.

Valuing such assets requires an understanding of the variables that determine their productive capacity and long-term economic performance. We jointly analyse soil quality, water availability and legal security of water rights, irrigation systems, potential productivity, crop type, cost structure, accessibility, the size and configuration of the land, proximity to infrastructure and markets, as well as opportunities to improve and diversify its sources of income.

In certain areas, particularly in the Iberian Peninsula, the availability, security and efficiency of water use are determining factors when assessing both productivity and long-term value. Increasing pressure on water resources and greater variability in climatic conditions further reinforce the importance of these factors, both in the selection and in the management of agricultural holdings.

We place particular importance on irrigated farmland and on certain dryland properties which, due to their location, liquidity or relative scarcity, may offer an attractive relationship between value and price. We seek sound agronomic conditions, adequate access and proximity to population centres, infrastructure or areas with significant economic activity. We place particular value on situations where the combination of soil, location and management can generate an appropriate return while preserving value over time.

Where the characteristics of the property allow, we also assess the possibility of incorporating complementary uses capable of diversifying its sources of income. These may include certain initiatives linked to energy infrastructure, provided they are compatible with the nature of the operation, applicable regulations and the underlying agricultural activity. The objective is to improve economic efficiency and provide additional sources of cash generation, without altering the property’s characteristics or compromising its primary activity.

Both strategies are based on the same underlying principle: acquiring quality assets at reasonable prices, gaining an in-depth understanding of the factors that determine their economic performance, managing them actively and holding them for as long as an attractive relationship between return, risk and investment horizon remains in place.