What’s the current footprint of Morais Leitão in Portugal, especially in real estate activities?

Morais Leitão stands as Portugal’s foremost independent law firm. Our dedicated team of top-tier professionals includes 12 experts solely focused on corporate real estate M&A, working in close collaboration with urban planning, environment, and tax departments. We’re well-equipped to meet the demands of the evolving real estate market, boasting a proven track record in innovative solutions and corporate structures for real estate investment. An example is our involvement in establishing Portugal’s first REIT (SIGI) in partnership with Sonae Sierra and Bankinter.

What prompted the emergence of vehicles like REITs and other funds in the market?

Portuguese REITs exhibit unique features: they enjoy full tax exemption, with only dividends to shareholders subject to taxation, and their real estate acquisitions must focus on leasing purposes. This tax advantage and the ability to pool equity from investors for real estate investments contribute to enhancing Portugal’s capital markets. Such vehicles have been successful globally, driving significant interest in Portugal’s real estate industry. However, further legislative adjustments are needed to enable existing large property company groups in Portugal to transform their holding companies into REITs, similar to Spain’s framework.

How receptive is the banking sector towards financing real estate projects in Portugal?

Following the 2008 financial crisis, real estate financing nearly vanished, experiencing a resurgence only in the last five to six years primarily from traditional Portuguese banks. However, this surge appears to be slowing down, making it challenging to secure traditional bank financing for real estate projects, except for the most solid ones. Nevertheless, an emerging trend involves investors finding alternatives, particularly through forward funding structures, financing the development of future projects before acquiring them, likely continuing in 2022 and beyond.

What impact has the pandemic had on various property market segments?

The pandemic initially led to a slowdown in demand and investments from March 2020 onwards. Retail suffered notably due to rising e-commerce and closures of shopping centers, while tourism grappled with lockdowns and travel restrictions. On the contrary, the office sector remained resilient, experiencing high demand amidst limited new builds. Logistics emerged as a star sector globally, including Portugal, highlighted by a major transaction where a Portuguese bank is selling a large fund holding logistics assets.

Despite pandemic setbacks, the market gradually rebounded in 2021, witnessing over EUR 2 billion in real estate investments, albeit still EUR 1 billion less than pre-pandemic levels. Optimistic forecasts for 2022 anticipate investment values exceeding EUR 3.5 billion, potentially reaching pre-pandemic figures. Significant transactions, like a EUR 1 billion hotel portfolio sale, indicate market momentum.

Have there been significant changes in the legal framework in recent years that investors should be aware of?

Recent legislative amendments, particularly revisions in the Golden Visa legislation and alterations in lease framework regulations, have impacted real estate investment in Portugal. Changes in Golden Visa regulations limited eligibility for residential property acquisition in Lisbon, Oporto, and Algarve for non-EU citizens. However, investors are exploring alternatives, such as acquiring units in private equity funds holding real estate assets, as an alternative to qualify for the Visa with reduced investment thresholds. Moreover, lease framework revisions aimed at tenant protection have created challenges in the lease market.

Anticipated shifts in governmental and mayoral strategies, favoring foreign investment, notably in real estate and tourism, are expected to create a positive industry outlook.

What are Morais Leitão’s primary objectives in the next two to three years?

Our paramount goal is to consolidate our prominent position in the Portuguese legal market, particularly within the corporate real estate sphere. We aim to strengthen our reputable corporate real estate practice, encompassing M&A, corporate structuring, and capital markets related to the real estate and tourism sectors. Our focus remains on solidifying our position as the foremost legal advisor in these areas in Portugal.