The Business Year

Francisco Horta e Costa

PORTUGAL - Real Estate & Construction

Francisco Horta e Costa

Managing Director, CBRE

Bio

CBRE Portugal Managing Director since October 2012. Following a brief experience at Citibank, he worked for the Spanish construction company Agroman/Ferrovial as head of Treasury. In 1998 he joined CBRE where he spent 10 years, managing two real estate investment funds, as well as overlooking the investment area for 7 years, where he coordinated and led several relevant operations in the Portuguese market with local and international investors. In September 2008, Francisco joined Norfin – Sociedade Gestora de Fundos de Investimento Imobiliário which had around €1,000 million under management, as Commercial and International Director and also Manager of the company in Spain. In November 2009, he returned to CBRE as Senior Director with responsibilities across different areas related with institutional investors, including Capital Markets, as part of the “European Cross Border Capital Markets Group”. Between 2016 and 2018 Francisco was Chairman of the Urban Land Institute (ULI).

TBY talks to Francisco Horta e Costa, Managing Director of CBRE, about the impact of the pandemic, demand trends, and goals for the coming year.

How did COVID-19 re-shape the sector you are working in?

As many others, the real estate market was also affected by the pandemic. The decision making process of investors was on hold, and it was clear in 2021 and going into 2022 that the huge amount of capital raised by investors internationally and to invest in Portugal as well would place heavy pressure on the market to find suitable products. In 2021, talking about income-generating assets, there was a reduction in investment volumes of circa EUR2.2 billion; in 2019, this was around EUR3.8 billion. This data does not imply less of an appetite from investors. We have an important share on the investment market because when considering the 10 largest transactions in Portugal, CBRE was involved in eight. Going into 2022, everyone is focused on investing, and this trends is visible across all sectors. Investors want to go to senior living, co-living, micro-living, PRS, build-to-rent, offices, and logistics asPortugal remains extremely attractive. It is a market where we are witnessing an increase in the office take up, contrary to the trend in other European cities or maybe even in the US. Portugal is a great destination to live and work, and many international companies take that into account when deciding where to go. Rents are also attractive compared to larger European cities. After the pandemic, it seems obvious that Portugal provides a great lifestyle for all generations, so we can somehow call its main cities–Lisbon and Porto–hubs for talent 

Where is demand coming from?

Investors are coming from everywhere; we have investors across the entire risk curve, including those who want to do development and others that want a standing investment. We can see eight to 12 bids for a product going into the market. And we are not talking about small volumes as well. We are currently marketing a portfolio of 20 warehouses of around EUR190 million, and we have received 12 offers. That is the potential of those who want to invest in Portugal. We have seen this in several other situations over the year. At the end of 2021, we sold a property fund of seven hospitals, the largest healthcare/real estate deal in Portugal. The buyer was French, and we had seven offers. We started in early October and closed the deal before the end of the year. We sold 4,400 apartments in a residential deal worth about EUR330 million. We were more cautious at the start of 2021, having estimated that recovery would be slower. However, we quickly realized investors were back on track and wanted to find the right opportunities and investA part from all said before, Covid-19 has set a new paradigm and many companies are looking for new offices. In the end, you need a really good reason to call your staff back into the office. We are seeing a wide variety of companies leasing offices. We closed two deals with American investors.

How do you shape your competitive advantage to maintain your leadership in the local market, and what key features make your company the reference point in the sector and in Portugal?

First, we are a one-stop shop for our clients. We provide services across the entire cycle of the product. We have excellent teams that can take care of those investments for our clients. After they invest, there is always a great deal of work to do in the properties, and locally we have a strong property management business. This is one of our strongest selling points. As of April, we will manage 18 shopping centers and retail parks. We manage more than 1 million sqm of logistics with nearly 70 office buildings. We also keep a constant eye on the products we support to sell or buy, sothis enables us to be close to the client and the asset during the investment period. Throughout this period, we bring our project management and advisory teams. Capital advisors is another one of our strengths, which none of our competitors has. We have one thing that is gold: data. We can play with that data in favor of our clients and benchmark their assets against a wider portfolio. We can bring synergy and efficiency by being managers of such a huge portfolio. We have merged our business with Spain a few years ago. We have an integrated property management team that we call The Property Management Iberian Platform. In Capital Advisors, we do equity raising, M&A, joint ventures, and debt advisory. We bring the loans for our client’s financing here. We also have a team for the more complex real estate structures. Banks are now used to working with us when we knock on their doors to talk about financing. This is something that no one else does in Portugal. We also have a strategic advisory team to help our clients with important real estate decisions before they go ahead with their projects. We do a great deal of work to design the concept of the product. We do all the strategy, which could be about targeting the potential users in the future. We also have a growing team on ESG, one of our strategic growth pillars. 

What are the short-term targets and focuses on your agenda?

In Portugal, the multi-family product does not exist yet. About five years ago in Spain, the belief was that it would not happen because of the culture and the fact that people prefer to buy and have a mortgage. Suddenly, we are starting to see many transactions happening for multi-family and PRS. This trend is definitely coming to Portugal. There is a new generation with a different mindset, and it is also getting more difficult to get a loan for a mortgage. There are lower LTBs and shorter mortgage periods. Therefore, it is becoming more expensive. People will need to shift to the leasing market. ESG and living are our focus areas for next year. In terms of strategy, ESG is still our priority. Our team is overwhelmed by requests from clients; it is a tsunami. Portugal, as always, is sometime slower in adapting to new things. In the future, clients will not be able to go to a building that is not ESG compliant. We currently have about 230 people doing an ESG Cambridge program for eight weeks; we really want to be on track with the ESG world.

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