REAL ESTATE CONSULTING

Session 1. Healthcare Real Estate Consulting

Introduction
Healthcare RE: nursing/care homes, assisted living, senior living (independent)
Intended for seniors with dependency, or who need specific support or who are independent
Demand
· Aging population in Spain: > 9M over 65yo, >3M over 80yo (out of 42)
· By 2050: 21% of population with severe dependency, 13% with moderate dependency and
65% without dependency
The Supply Senior Structure
Spanish care homes: 5,420 centers = 373K beds (deficit)
Spanish coverage ratio is 4,04% but 5% benchmark recommended by WHO
Strong operator consolidation in Spain + greenfield development
Trend: create small units (15 ppl) within care homes in order not to dehumanize the process
Serviced Apartments: for low dependency seniors, includes services, lower staff ratios required
and lower costs for the operator
Senior Living: Independent senior wanting a community feeling with activities instead of just
medical services. Offered by local single asset operators => has been attracting international
players wanting to expand to the Spanish market (2 choices: small urban concept or bigger
coastal resort)
Large demand of UK nationals retiring in Spain
The Market
Players: operator + investor
Operator manages whole operation: analyze plot, sociodemographic, competition, pricing,
transport, business plan
Investor oversees the credibility of business plan, the DD of operator, the value of RE, the
duration of contract and responsibilities and insurance, Value alternatives
Advantages
Peaking asset class due to higher life expectancy, low fertility, undersupplied market.
Anticyclical sector: people will still be investing in health no matter the economic condition
(crises)
Low risk: long term contracts with triple net leases and low operator turnover

Risks
Reputational risk: relying on the death of the elderly
Change in regulation: double rooms => single rooms due to individualization trend
Location repositioning: is not adaptable, cannot easily reposition into a hotel because of the
morphology of the building and uses permitted.
Strong motivation to investor in senior living
Most assets are turn-key now, while before it was Portfolio M&A because of operator
consolidation
Compression in yields (lower) because the asset class is becoming less risky as we make more
research and care homes become more necessary

Business MODEL
Long term lease contracts (>15y, NNN)
· Resident pays fees
· Operator manages P&L
· Operator pays rent to owner based on P&L

Operator revenue
Revenue = Price of bed*nb of beds
(-) costs (biggest one being medical personnel)
= EBITDAR (EBITDA + Rent)
(-) rent: ay an effort rate of around 55%
= EBITDA

Rent is the link between operator and investor

Yield
Operator: rent paid/market yield = value of real estate to deliver to the investor
Investor: value of real estate*yield = rent to ask the operator for
Session 2. Offices & the Future of Work

RE accounts for 2/3 of real assets (which also includes inveotires, land, mineral reserves etc)
In 2022, 24% of real estate investments were in office, 4% in residencial, 18% in retail and 10%
in hotel, 20% in logistics

Capital Value Expectations and Rental Expectations were negative or very low in the US and
Spain, the investment sentiment was also negative in most of Europe.The most optimistic sectors
in terms of capital value expectations are data centres, life sciences, leisure, student housing,
aged care facilities and prime industrial. But even those sectors saw a decrease in expecations in
Q2 2023. The most negative ones are secondary office and secondary retail.
The most profitable assets in terms of risk/reward ratios are the following:
· senior living
· retail secondary
· industrial
· hotel

with the least profitable, but also low risk being healthcare and living. However, real estate
yields higher than stable bonds such as Germany or Spain (about 4 to 6% higher)

Madrid Office Market Stock Characteristics

· Market stock is not increasing significantly
· Market take up is increasing rapidly (334K => 400K 2021). Take Up in Q3/Q4 is above 30Y
average
· Most of the stock is located in the periphery (outside M30)
· Mostly Computers/IT sector (25%) or Consumer Services/Leisure sector (23%) Business
Services Sector (17%)

Barcelona Office Stock Market

· Market stock is not increasing significantly
· Market take up is increasing rapidly (158K => 270K). Take Up in Q4 is above 30Y average
· Most stock is in the periphery
Valuating an Office:
· Location
· Floor Plan + Free Height + Parking + Basement + Terasse
· Occupancy Ratio
· ESG Certification
· Amenities + Possibility for Mixed Use

Minimum Dimensions for Office: 2.5M Ceiling, 2m2 per worker area and 10m3 per worker
ESG Certifications/Legislation & Reporting

Kinds of Investors
Session 3. Consultancy & Retail

Types of Investors in Commercial RE: investors, real estate developer, business operations
Due Diligence needed in Real Estate
· Commercial
· Technical
· Legal: ownership history, outstanding obligations, legal liens and rights, zoning regulations
and access rights
· Liabilities
· Finance: income, V&CL, tax and insurance, OPEX, CAPEX
· Property & Land: architect + engineer inspection, feasibility + costs, status of building,
environmental regulations, land/wastewater
· Economic: prices trends, growth drivers, area factors, new supply, tenant turnover and wealth

GLA (Gross Leasable Area) = Outside Gross Area – Vertical Holes

ERV (Estimated Rental Value = opinion

Retail Sales Segments:

· High street 3.45%
· Shopping centers 5.3%
· Retail warehouses (online) 5.5%
Trends in retail evolution
· Omnichannel trend
· Complementing online businesses with physical stores (AliExpress, Amazon)
· Incorporating new models and lines of businesses
· Technology !
· Ecommerce taking over total retail sales in most WEU countrises

What about shopping centres?

· Growing visitors
· 2.8% annual growth in spain
· Offering leisure in addition to retail;
OASIZ example => coworking,
karting, VR, zip line, lake or
Mirasierra example => pharmacy +
veterinary + health clinic in addition to
retail
· IoT trend: collecting data from sensors
in the store, adopting contactless
payment, personalized promotions,
in-store navigation,
buy-onlin-store-pickup
Session 4. Consultancy & Logistics

Real Estate Consultancy Parameters

· Yield %: dividing the annual
income from the
investment/property and
dividing it by the purchase
price.
· Leverage IRR: is calculated
using initial Total Equity,
EBITDA, and Resale Value
(being the ratio of Net
Operating Income in the resale year to an assumed Cap Rate) less the remaining
principal balance of the project loan at sale.
· Capital Value (€/m2) : the price that would have been paid for a given asset or group
of assets if they had been purchased at the time of their evaluation

Lease Parameters: occupancy, solvency, mandatory period, guarantees, rent review, break
option clauses (a commercially negotiated term of the commercial lease which allows one or
other of the parties to terminate the lease earlier than the contracted term.)

“Logistics will continue to be one of the hottest markets as it has proven to be one of the
most resilient sectors throughout the pandemic and is most likely able to withstand the
current and coming economic uncertainty”

Industrial real estate

includes warehousing
(storage of
raw/finished products
and manufacturing)
Parameters to consider in warehouses:
· Ceiling heights (can store more but cost more)
· Material used and its life expectancy (concrete > steel > brick > wood)
· Column spacing in order to allow forklift and pallet access
· Due Diligence aspects: roof, structure, use of asphalt or concreate, ESFR system
(Early Supression Fast Response: sprinklers achieving efficient fire suppression
depending on building layout/type of storage), air systems & lighting
· Tenants usually look for: more height, a 5/10% office area, efficient plumbing and fire
detection system, dock loading (elevated) and grade loading (at street level, better for
trucks), location close to cargo airports or seaports, good infrastructure

Logistics has evolved into a profitable and hot segment of real estate thanks to the rise of
E-commerce, logistics vacancy rates have gone down while investment volumes have increased
rendering attractive yields neighboring 3/4% in WEU. Absorption of logistics spaces has
doubled in spain.
Threats to logistics trend: high inflation, increased cost of debt & slowdown of consumer
spending.
Opportunities to logistics trend: increased innovation and digitalization + automation =>
optimization and efficiency of logistics platforms. Opportunity to use ESG to monitor energy
usage, creation of energy through solar panels.

Future of logistics:
Session 5. Consultancy, Flex Office, Living (BTR & Co-living)

WeWork Case: The company was essentially renting long and subleasing short, leaving itself
exposed to the same risk as financial institutions that fund themselves with short-term borrowing
while maintaining long-term funding commitments
WeWork helped develop the Flex Office movement

VUCA: Volatility, Uncertainty, Complexity, Ambiguity

Permacrisis: an extended period of instability and insecurity

Scariest thing for CEO: mandatory period,

rigidity/havings tied hands
Difference between traditional lease vs. flex lease
· Traditional:
o Price based on sqm
o Lease period is in years
o Needs big deposit/guarantees
o Takes into account CAPEX
· Flex
o Price based on workstation
o Lease period is in quarters/semesters
o Deposit is small (1m)
o Takes into account OPEX
o Communal area events, amenities and services are taken into account in the
flex lease

Types of Flex Spaces:

· Coworking spaces: open-plan layout. However, they will also have private offices
available for rent. In the open-plan layout, you can either rent hot desks or dedicated
desks.
 · Hot desks: the cheapest type of flexible workspace where you simply rent a desk in
the open-plan layout, however, you aren't guaranteed the same desk every time you
come in.
· Dedicated desks: hot desk but you can keep the same desk every time
· Private offices: these are your own 4 walls and are found within coworking spaces and
serviced offices and are the most expensive type of flexible workspace, however they
will also grant you access to the open-plan layout
· Serviced offices:
· similar to a coworking space in terms of offering hot desks, dedicated desks, and
private offices; however, the focus with these operators is on their private offices.
Typically, they have a more corporate feel to their design as compared to a coworking
space.

Next step of Flex Offices: Workplace as a Service (WaaS) which can make the workplace
economical, flexible, customizable and helps balance work/life, reduce commuting time, etc…

CO-LIVING
Key Success Factors
· efficient building layouts
· modern marketing and lease management
· technology and services
· a sense of community and belonging

Coliving is an asset class within real estate which allows landlords to increase yields on their
assets up to 30% (by reducing vacancy I guess). Works well in major metropolitan areas where
supply is becoming limited and RE yields have decreased. It also offers single tenants a housing
solution that’s less expensive and more convenient, and addresses Gen Z’s concerns. Traditional
landlords need the help of special operators to maximize their yields.

Mission of co-living: end-to-end platform, where people can easily find a living solution for as
long as they want, with the people they want, to connect with a local or international community.
+ enjoying tailor made services