Azora is the largest independent investment manager of real estate in Spain and one of the largest in real assets. Founded in 2003, Azora has a team of +250 professionals, has raised more than €3.6bn of equity from institutional investors and has delivered 1.9x MOIC on its divested vehicles. Azora manages the complete investment cycle, from acquisition, restructuring, management, repositioning and eventually the sale of the assets. Azora is a pioneer in identifying new investment opportunities in untapped markets, where there is limited institutional capital deployed but which benefit from megatrend headwinds. In addition, Azora has a strong focus on asset classes with a high operational component and value-add potential.

Azora started as the first mover in the PRS segment in Spain and is the largest manager of purpose-built rented residential in Spain, with c.13.000 homes. In 2011 Azora also became the first mover in the student housing segment in Spain, with a build-up which totalled 9,200 beds and an inhouse operator, which was sold to a consortium of leading institutional investors in 2017, achieving outstanding returns. In 2014, Azora listed Hispania, a Spanish REIT, pioneering the institutional investment in sun & beach hotels. Hispania became the largest hotel owner of this asset class in Spain, with 46 hotels. Hispania was bought in 2018 through a take-over bid by Blackstone, delivering a net IRR of +19%.

Azora focuses on various investment verticals, including hospitality, PRS, senior living, light industrial, leisure, CRE, real estate debt and renewable energy.

Sector forecasts

Hotels

The travel and tourism industry, which accounts for 11% of global GDP with c. $2.8 trillion, has consistently outperformed world GDP over the past seven years, and has a very positive outlook for the coming years, reflected in an expected CAGR of 3.6% for the period 2019-2029. This future growth represents 1.3x the expected growth of world GDP. Furthermore, total international arrivals worldwide have continued to rise, recording a 4% CAGR during the period 2010-18, currently standing at 1.4bn arrivals, per annum.

This sustained growth in the travel and tourism industry is a key driver to the growing lodging demand, which today represents total annual revenues of $550Bn, with a total of 17.5 million rooms worldwide.

The tourism industry has benefited from a number of trends, including the growth in disposable income allocated to leisure activities, a cultural change, the increase in connectivity at lower prices, and the new generations which consistently seek new experiences, staying longer in their travels and spending more than previous generations.

There has been an increasing demand for Europe as a holiday destination, currently accounting for more than 50% of international arrivals. Within Europe, the Mediterranean region is the leader in worldwide “Sun & Beach” tourism, accounting for more than half of the top 25 global resort destinations.

Despite increasing demand, lodging supply has remained relatively flat, due to different reasons, including regulatory and geographical restrictions on construction, especially in first line beachfront assets. This limited supply is fuelling hoteliers’ pricing capacity and consequently RevPAR rates. Despite RevPAR growth in recent years, the Mediterranean is still an affordable destination, creating an excellent investment opportunity.

Residential

The residential market in Spain has traditionally been categorized as an owner’s market in comparison to other European markets, with the rental segment representing 24% of total housing; 10% lower than the average EU ratio. Nevertheless, in the past years there has been a behavioral change in the Spanish population, now more inclined to renting, which has resulted in an increase of 4% in the rental share in the past 10 years. In addition to the behavioral change, there have been other elements favoring this shift towards rental, such as the removal of all fiscal incentives for residential acquisition, the increasing mobility of people or the financial barriers to buying property.

The rental market in Spain provides an attractive investment opportunity given the imbalance between a scarce supply of quality housing and a strong demand, as well as the behavioural changes mentioned previously. Azora continues to believe that the PRS sector is an attractive segment in which to invest, both through the development of new buildings to be rented or through the acquisition of existing purpose-built assets.

Senior Homes

Azora’s investment thesis on senior nursing homes is backed by the megatrend of ageing population. The sector offers huge growth potential, particularly in Spain where the current offer does not cover the recommended bed ratio stablished by the World Health Organization. Spain offers around 375.000 beds in senior care facilities, which represents a 13% ratio over population aged over 80, 5% below the average European ratio. Furthermore, for population aged over 65, this ratio reduces to 4.3%, which is lower than the 5% required by the WHO. In order to reach the recommended WHO levels there is a need to increase the offer by 400.000 additional beds.

Additionally, the senior market in Spain is extremely fragmented, with the top ten operators only accounting for 25% of total beds offered.

These market dynamics offer a unique investment opportunity which Azora is targeting through its REIT, Adriano Care.

Renewable Energy

The EU energy and climate targets imply the need for an additional c.60 GW of renewable energy capacity in Spain by 2030, which translates into a total investment of c.€50bn, equivalent to €5bn per year. These requirements are backed by a political willingness to meet targets and to retire other technologies, providing a firm backdrop for substantial renewable generation capacity development.

Furthermore, the continued electrification of the economy, along with the reduction of other technologies, provides a supportive power demand in the medium-term for renewable energy.

Given the significant reduction in renewable generation costs, investments in this type of energy has become an appealing investment theme which does not require any subsidies in order to obtain attractive returns.

Investment principles & strategy

Our investment decisions are backed by an experienced team which allows us to cover the whole investment cycle, while focusing on mega-trends which last throughout more than one cycle.

Strategy Selection:
• Pioneers in identifying new investment opportunities in untapped markets but with potential to be institutionalised.

• Asset classes which will benefit from long term mega-trend headwinds, across cycles and where an active value-add can take place.

• Focus on operationally intense/complex asset classes.

Execution Capacities:
• Large and senior team, organised by investment verticals and with proven experience in complex investments and restructuring transactions.

• In-house technical team (leading all asset repositionings) and finance team, with leading relationships with the key local and international finance providers

Active Asset Management:
• Multidisciplinary professional team with relevant real estate experience

• Proven capacity to add value through active asset management and in heavily operational businesses

• Azora has a specific 170 person team focused on real estate property management and servicing, which currently manages more than 13.000 residential units in Spain.

Corporate Governance:
• Azora has the highest standards of corporate governance and responsible investments based on integrity, transparency and excellence.

• Strong alignment with our investors through Azora’s co-investment in every different vehicle, and the different remuneration schemes.