Spain Pain over as IPO Market returns.

Initial public offerings by Spanish companies account for about 8 percent of the $42 billion in cash raised in European stock-market listings this year, rebounding from zero in 2012 and 2013 as a recovery in the country’s economy attracts investors.

Merlin Properties SA, a Spanish real estate investment trust, aims to raise about 1.5 billion euros ($2 billion) next week in the largest IPO by a European REIT since 1998. It follows Lar Espana Real Estate Socimi SA (LRE) and Hispania Activos Inmobiliarios, which raised a total of 900 million euros in March and will add to the $3.4 billion raised in Spanish IPOs this year, the most since 2011, according to data compiled by Bloomberg.

“A year ago, no one wanted to invest in Spain but now, as the economy rebounds, investors are returning,” said Luis Benguerel, a trader at Interbrokers Espanola de Valores in Barcelona. “It’s logical that investors target real estate as it was the worst-performing sector during the crisis and offers most upside.”

After the collapse of Spain’s real estate market in 2007, which triggered the most severe recession in five decades and forced Spain to request a bailout for its banking industry, signs of a recovery are starting to appear. The economy is growing again, the yield on the 10-year bond is close to a record low and the country’s IBEX 35 stock market index has risen 47 percent in the past year.

Underperforming Stocks

Still, not all potential sellers may find investor appetite as some companies struggle to perform. Online travel business eDreams ODIGEO SL has lost 37 percent since listing. Spanish IPOs on average fell 1.4 percent this year, compared with a 0.1 percent drop in the Bloomberg European IPO Index over the same period, data compiled by Bloomberg show.

In 2013, Spain reduced the tax burden for REIT investors in an attempt to boost investment after home prices and commercial real estate prices fell more than 40 percent from their 2007 peaks. Pacific Investment Management Co.’s Bill Gross, Quantum’s George Soros and billionaire John Paulson have all since taken stakes in Spanish REITs that have staged IPOs in recent months.

Investment in Spain by funds, private-equity firms and other financial-services companies totaled 13.9 billion euros in 2013, according to Irea, a Madrid-based debt-restructuring firm. That was more than double the amount invested in 2012.


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