Doughty Hanson says hola to Spain(3)

The London-based firm is betting on demand for new apartments among Spain’s middle income families in order to deliver returns for its latest European property fund investors.

Doughty Hanson Real Estate revealed today it has bought a half stake in privately owned residential developer, Grupo Inmobiliario Aranco, for its European Real Estate Fund II.

The fund manager announced the purchase without detailing price, saying that Aranco has a pipeline of eight projects forecast to deliver more than 1,000 units over the next two years in second tier towns such as Guadalajara, Toledo, Cuidad Real and Segovia.

Doughty’s European Real Estate Fund II has now invested €245.3 million ($353 million), having closed the vehicle last year on €590 million ($831 million) of commitments. So far, three investments have taken place in the UK, one in Sweden and one in Italy, making the latest deal a first foray in Spain for the fund.

Juan Barba, Doughty Real Estate’s principal in Spain, said in a statement: “Aranco is a well-run and proven residential development business operating in the stable, primary residence market in Spain.”

By investing in Aranco, the firm is gaining exposure to some partially built and pre-sold developments in a country where the population is expanding and GDP is forecast to grow 3.4 percent in 2008. However, it is pointedly avoiding Spain’s second home market and Madrid’s upmarket residential sector. Values for second homes are suffering from oversupply in some parts of Spain while some investors fear deflationary pressures will lead to price falls in Madrid’s top end residential market.

Doughty joins another London based investor investing in Spain’s residential sector for the first time.

In May, Benson Elliot Capital Management announced it had teamed up with Catalan residential developer Promobuilding to acquire a prime residential site in Mont Roig del Camp on Spain’s Costa Dorada.

Coincidentally, the same firm announced today its fifth investment for the firm’s inaugural fund, Benson Elliot Real Estate Partners II.

It has teamed with Générale Continentale Investissements, a French real estate investment and development company, to acquire Le Berkeley, a 205,000 square foot office building in La Défense in Paris. The purchase price was just over €100 million.

Benson Elliot said this acquisition takes the fund’s portfolio to around €650 million since it began investing towards the end of 2006.