Spanish PRS portfolio

Throughout the second half of the 2010s, PIMCO Prime Real Estate had been mandated by its largest client to look for opportunities to grow their real estate portfolio with diversification as the main focus – in terms of sectors, geographies and investment styles. The residential sector, with its enduring appeal of long-term income resilience, had been a particular area of focus and, by the end of 2020, we had built up an €8.5-billion exposure globally, with €4.1 billion in the U.S., €3.2 billion in Europe and €1.3 billion in Asia.

Within Europe, however, the Spanish residential sector remained untouched by our client. The fundamentals of the sector that were prevalent elsewhere – urbanization driving demand in key cities, a cultural shift from home ownership to renting amongst younger generations – also held true for Spain, amplified even more by the comparative lack of institutional ownership.

Understanding these trends and having a highly networked team in Madrid able to source deals and understand local regulations enabled us to present the off-market opportunity to acquire a 21-asset, 421-unit portfolio in strong micro locations across Madrid and Barcelona. The client agreed and, in June 2021, we completed the transaction. Nine months later, in March 2022, we delivered a second transaction for a further nine assets comprising 245 units in Madrid with further CAPEX identified for energy efficiency measures within the assets between tenancies.

The quality of the assets, their location and our ongoing program to upgrade the energy efficiency of the residential units has ensured a continued occupancy above 90%.

The buildout of this portfolio demonstrates how PIMCO Prime is able to understand long-term trends and market dynamics and combine this with the capability to execute locally for our clients.