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Insur Carves Out its Property Development & Rental Businesses

29 January 2018 – El Confidencial

In order to adapt itself to the preferences of investors, Grupo Insur is carrying out the separation of its two main branches of activity: property development and real estate management – the latter arm will hold onto the rental properties. This carve-out could be described as historical given that the firm, which is listed on the main stock market and led by Ricardo Pumar, has used the combination of both businesses as its best antidote against the cyclical crises of the real estate sector. But now, although the two activities will continue to be owned by the parent company and consolidated for reporting purposes, they will generate independent income statements, belonging to the two subsidiaries.

According to sources close to the Sevillan company, the first step in this sense has been to increase the share capital of Insur Promoción Integral, the real estate parent company, to reach assets worth €80 million. The firm had a frantic 2017 in terms of house sales, with activity soaring by 41% in the last two quarters to reach €37.4 million between June and September (including the sale of properties jointly owned with third-party partners, whose amounts are not recorded by Insur).

In total, the group’s development activity generated sales of €60 million between January and September – up by 82% YoY – of which €28 million proceeded from revenues for the construction of housing developments, both in-house, as well as for initiatives with partners such as BBVA, Santander and the bad bank (Sareb). Insur planned to have 1,000 homes under construction distributed across 18 developments in Andalucía and Madrid by the end of last year.

By contrast, the real estate management activity is continuing to see a decline in its contribution, in line with previous years. Insur owns rental buildings spanning around 116,000 m2, almost all of which are located in Andalucía, although it is currently building a business park in Madrid. Its vacancy rate has fallen by 10 points in recent months, to 23% in September, and the rental income generated during the first three quarters of last year amounted to €7.5 million compared with €8 million during the same period in 2016.

The Junta de Andalucía, to which Insur has traditionally leased space, especially in Sevilla, vacated 12,000 m2 in May 2016 and whereby increased the total amount of space that it has stopped leasing during the final years of the crisis to 33,000 m2. Insur details in its accounts to September that the annualised rental income from tenants that have already signed contracts (not all of them have moved in yet as the offices are being refurbished) is €12.7 million. The picture of this business area is completed if we look at the request for additional information about the accounts for 2016 that Insur sent to the CNMV in October, which shows that each year it spends €6.8 million on these rental properties (…).

Coverage from Sabadell

For all these reasons, and according to the same sources, the managers of Insur rule out the creation of a Socimi to group together the real estate management activity, for the time being, given the need to improve its results and have better visibility over its evolution in the future. Moreover, there is no need for it to provide liquidity to its shareholders, given that 43% of Insur’s share capital is free-float. The company’s 15 directors control 37.5% of the share capital.

Insur’s share price has increased by more than 50% over the last 12 months, to reach €12.50. Its shares are soon going to be covered by analysts at Banco Sabadell, who will join the more specialist firms that have been following the stock until now: Arcano, Kepler and Fidentiis.

Original story: El Confidencial (by Carlos Pizá de Silva)

Translation: Carmel Drake