Property Developers Start Buying Land Without Building Permits

11 October 2017 – Real Estate Press

Overseas real estate funds, with a major presence in the Spanish real estate market, are owners of large portfolios of land as well as of debt secured by land as collateral, and many are operating in association with Spanish property developers.

The estimates for this year indicate that 80,000 new homes will be built in total.

The funds Blackstone, Cerberus, Kennedy Wilson, TPG, Värde Partners and Apollo started to acquire servicers, created by the banks, when the real estate sector began to recover. Other funds, such as Lone Star, Centerbridge, HMC, Eurostone, Aquila, Oaktree, Castlelake, Värde and Pimco, have been backing residential development. In this way, they have become the new residential property developers that need land as their raw material.

Now, unlike in prior years, no one wants to risk buying land that still needs some kind of building permit approval to turn it into buildable land, due to the risks involved, and that is why the price of buildable land is rising.

Funds were able to acquire land in areas with high demand for housing, such as Madrid, País Vasco, Barcelona, the Costa del Sol and the Alicante coast, at low prices before residential activity started to recover. But over the last year, land prices have also been recovering in other large capital cities, such as Valencia, Zaragoza, Sevilla and Málaga.

Nevertheless, the potential that these entities see in the residential development segment has allowed them to reduce the urban planning risk in more mature markets, such as Madrid and Barcelona, until now, and start to place their focus on plots that still have not received building permit approval. Moreover, there is no shortage of people who are demanding that the administrations adopt their expansive urban planning policies once again.

Original story: Real Estate Press

Translation: Carmel Drake

Velayos: Neinor Homes Will Generate Sales Of c. €1,000M In 2019

9 October 2017 – El Periódico

Neinor Homes, the real estate company born out of Kutxabank and in which the fund Lone Star holds a stake, has now reached a production rate of 5,000 homes in Spain, according to the firm’s CEO Juan Velayos. In fact, the company has 72 developments under construction and now owns land on which to build 12,000 homes.

“We have 35 developments in the launch phase – around 3,000 homes – , we have already handed over five developments and we have three more approaching completion”, explained Velayo at a press conference prior to the celebration of Barcelona Meeting Point, which will take place in the Fira de Barcelona from 18th until 22nd October.

Velayos explained that the property developer expects to record turnover of almost €1,000 million in 2019. “We will come in just below that figure in 2019 and then we will exceed it in 2020”, he said. Specifically, the company expects to complete this year with revenues of around €300 million and to record sales and EBITDA (gross profit) of €400 million and €100 million, respectively, in 2018.

Neinor Homes currently has 64 developments underway; in 2018, it expects to have 92; in 2019, more than 100; and in 2020, 120 in total, which translates into the forecast completion and handover of between 3,500 and 4,000 homes per year from 2020 onwards. “That is the pace that we want to maintain over the long-term”, said Velayos.

The property developer, which operates in Madrid, Catalunya, País Vasco, the Balearic Islands and Andalucía, is also looking at opportunities in Galicia and Portugal. At the moment, 50% of its output is divided between Madrid and Barcelona, and the other 50% is spread across the rest of Spain. Of the two large markets, Catalunya accounts for 20% of the total. “We are not planning to increase the weight of that autonomous region in our portfolio, for the time being at least”, he said.

Original story: El Periódico (by Max Jiménez Botías)

Translation: Carmel Drake

Large Funds Thrash It Out To Buy Residential Land

9 October 2017 – El Periodico

The 10 largest property developers in the country are in a position to start work on the construction of around 20,000 new homes in 2018. That volume of output is possible thanks to the collection of buildable urban land that they have managed to accumulate over the last year. The large Spanish property developers – many of which are owned, at least in part, by investment funds – as well as overseas funds themselves, are competing, at an almost frenetic pace, to acquire plots of land on which they will be able to build without modifying the classification (to residential use).

“Overseas investors are very present in the new Spanish real estate landscape, be it as owners, debt holders, servicers or property developers investing together with other local property developers, both in the renovation of existing buildings and the construction of new ones, as well as in the rental sector and through the constitution of Socimis”, says Samuel Población, Director of Residential and Land at the real estate consultancy firm CBRE. The consultancy indicates that at the end of 2016, the large property developers in Spain owned €8,000 million in assets for construction.

80,000 homes in 2017

The real estate sector is expecting the output of new homes to reach 80,000 units in 2017. That figure is still below the short-term goals. “We should be producing 150,000 homes (per year), although we will not achieve pace that for another three years”, says Juan Velayos, CEO at Neinor Homes, one of the real estate companies – whose main shareholders are investment funds – that has purchased the most land over the last two years. “We set ourselves a land investment target of €380 million for 2017 and 2018, but we have already covered most of that budget this year”, he adds. His firm is currently working on the construction of 5,000 homes in Spain and hopes to achieve a completion rate of 3,500 units per year.

The funds Blackstone, Cerberus, Kennedy Wilson, TPG, Värde Partners and Apollo started to acquired the commercial and management platforms that the banks had created (the servicers) when the real estate sector started to recover in 2013. In parallel, the overseas funds Lone Star, Centerbridge, HMC, Eurostone, Aquila, Oaktree, Castlelake, Värde and Pimco are strongly backing residential development. In this way, they have become the new house builders. And they cannot build if they don’t own land.

The problem is that, for various reasons, the administrations are not producing raw material. “No reclassifications (of land) are being performed, because someone will always get hurt”, says Lluis Marsà, President of the Association of Property Developers and Constructors (APCE). “We do not take the risk of buying non-buildable land that has to be transformed because the production costs are rising, the risk soars”, says Velayos.

Nevertheless, that situation has the benefit that agents in the sector are adjusting output to the maximum in order to maintain returns despite the new quality standards for homes, which are higher than in the past. “One of the positive effects of the profound transformation of the sector, with the arrival of new players, is the greater degree of control over the finances and execution periods that we are seeing”, says Población.

Investors adding value

The profile of funds has evolved quickly from opportunistic to value added (…). The focus of these firms is to acquire plots in areas where demand for housing is high, such as Madrid, País Vasco, Barcelona, the Costa del Sol and the Alicante coast. But during 2017, there has also been a positive recovery in land operations in other large capitals such as Valencia, Zaragoza, Sevilla and Málaga (…).

Original story: El Periodico (by Max Jiménez Botías)

Translation: Carmel Drake

Realia & Pryconsa Buy Two Plots Of Land From Ministry Of Defence

5 October 2017 – Expansión

The incessant drip feeding of operations in Madrid involving the purchase of land on which to build homes is continuing. In this case, the stars have been the real estate companies Realia, controlled by Carlos Slim, and Pryconsa, owned by the Colomer family. The plots were put up for sale by the Ministry of Defence in July for a combined sum of €40 million.

The first is a plot for residential use, located on the outskirts of Alcalá de Henares. Measuring 14,395 m2 and with a buildable surface area of 44,755 m2, the asking price amounted to €27 million, according to the real estate portal Addmeet. In the end, Realia paid €27.524 million for the plot.

The second plot sparked even more interest. Located in Vicálvaro and measuring 13,723m2, it has a buildable surface area of 19,000 m2. The Ministry of Defence put that plot up for sale for €12.6 million. In the end, the plot was awarded to Pryconsa for more than €15.12 million, almost 20% more than the original asking price.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Ministry Of Defence Puts Former ‘Hospital Del Aire’ Land Up For Auction

4 October 2017 – Eje Prime

The plot of land (…) is located in the Arturo Soria neighbourhood of Madrid, one of the most expensive areas of the capital (…). 

The Ministry of Defence is looking to shed weight. The government department has received authorisation from the Council of Ministers to put up for auction the land on which the former Hospital del Aire used to be located. The block is in disuse and has been vacant since 2011 when the old hospital building was demolished.

The asking price for the ownership of the land has been set at €25.1 million, for a plot spanning 28,341 m2. The former hospital has been included in the Ministry of Defence’s portfolio of buildings since 1945, when the former Ministry of Air acquired it, through a normal purchase and sale transaction.

In 2010, the Ministry of Defence managed to reach a pre-agreement with the Fundación Universidad Empresa to sell the building, but just six months later, the protocol that had been signed in that regard expired.

The express authorisation of the Council of Ministers to launch the auction was mandatory in this case, given that the sales value of the site exceeds €20 million.

Original story: Eje Prime

Translation: Carmel Drake

International Funds Reactivate RE Sector By Building Thousands Of Homes

2 October 2017 – Expansión

After years of drought, the residential real estate market is starting to show signs of recovery, with a significant increase both in investment in land as well as in the construction of new developments. In this new phase, international investment funds have become a major player, with more than €1,000 million invested in the Spanish residential sector and thousands of homes under construction. “Interest from these types of funds in the residential property development market is the result of the recovery that the segment is experiencing, as a consequence of a clear improvement in the underlying macroeconomic indicators”, says Borja Ortega, Director of Capital Markets at JLL.

For its investments in Spain, large international funds such as Värde, Castlelake, Lone Star and Morgan Stanley have opted for alliances with local operators (…). “This formula (…) is very beneficial for the market as it combines access to capital and international sources of financing with knowledge and experience of the local real estate development sector”, says Ortega.

“In most cases, the international fund provides the bulk of the capital, whilst the local partner participates in each project with a smaller percentage investment, but bringing to the table its expertise in terms of the acquisition of land and the construction of developments”, highlights Samuel Población, National Director of Residential and Land at CBRE España.

Lone Star stands out amongst the major investors. The fund, led in Spain by Juan Pepa, has invested more than €1,000 million in launching Neinor Homes, the first property developer to debut on the stock market in almost a decade. Another key player, Castlelake, is willing to spend a similar figure on the creation of another real estate giant, in this case, Aedas, which will also make its debut on the stock market soon.

Alongside them, Värde, which channels its investments in the residential sector through two companies: Vía Célere and Aelca. These three funds lead the national ranking, with 11,189 homes under construction and almost 5 million m2 of land.

Property developments

The giants Lone Star, Morgan Stanley, Castlelake and Värde are not the only players to be investing in housing in Spain. The German fund ASG is another one of the most active investors. Through its Spanish subsidiary, ASG Iberia, it is currently working on the construction of 2,000 homes, across six sites, including in San Juan (Alicante), Alcalá de Henares (Madrid) and Málaga (…).

Other active players include Stoneweg; Harbert Management Corporation (HMC), which has teamed up with the Spanish management company Momentum; the German institutional fund Patrizia; and Pimco, which joined forces with the Socimi Lar España (…).

Other partnerships are purely financial. Such is the case of the agreement between Avenue Capital and Quabit, where the fund has granted two lines of credit, amounting to €100 million in total, to the property developer to buy land.

Pressure

According to CBRE, investment in residential assets exceeded €600 million between January and September. And, according to the experts, that figure is going to continue growing. “We will continue seeing interest from international funds, given that the outlook for growth in the sector is strong for the next three to four years. The funds already present will continue with their activity and it is probable that others (not yet present) will also join in, given that the investment pressure is high”, says Población.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Quabit Buys 8 Plots Of Land For €52M

25 September 2017 – Quabit

Quabit Inmobiliaria is stepping on its investment plan accelerator, redoubling its strategic commitment to the Costa del Sol with the completion of nine operations involving residential land in Málaga, and opening a new area of growth in the Balearic market.

Specifically, the company chaired by Félix Abánades has closed 8 operations involving buildable land amounting to €52 million, with a buildable surface area of 123,000 m2 to construct between 720 and 740 homes.

Quabit is going to finance 70% of the purchase with financial support from funds advised by the investment firm Avenue Capital Group, and the remaining 30%, with shares in the company, through one or more non-monetary capital increases.

“For the second time” – explains the Chairman Félix Abánades – “Quabit is using this formula to secure new land, given that at the same time as barely diluting the shareholders’ stakes and helping to grow and strengthen the company, it allows us to consolidate our real estate assets and collaborate in the reinvigoration of the sector”.

Malaga and Costa del Sol: 178,500 m2 of buildable land for 1,600 homes.

Quabit has also just closed a new portfolio of 7 buildable residential plots of land, the majority of which are located in Malaga capital, with a combined investment of €31.3 million, and a buildability of 48,000 m2 for the construction of 450 homes.

That large operation comes just a week after another involving land in Mijas for the construction of 674 homes and is in addition to the purchases made by Quabit in Málaga capital and the Costa del Sol during the first half of the year.

Overall, Quabit has 178,500 m2 of buildable land in total in the province of Málaga for the construction of more than 1,600 homes.

Moreover, the company is already marketing Phases 1 and 2 of another promotion of 100 homes on the Casares Golf course and is preparing to launch 2 developments in Málaga capital later this month, in the Puerto de la Torre area.

New land in the Balearic Islands

The company has completed another operation amounting to €21 million in the Balearic Islands to build a tourist and residential development with a buildability of almost 75,000 m2.

Visibility of the Business Plan for 2017-2021

The execution of Quabit’s Business Plan is continuing to gain visibility and its portfolio of land is gaining in value through all these important purchases of high-quality buildable land.

To date in 2017, the company has closed operations in Madrid, Corredor del Henares, Málaga and the Balearic Islands amounting to €114.7 million, with a buildable surface area of 321,500 m2 for the construction of almost 2,500 homes.

Altogether, adding to this figure the 1,226 homes to be developed in the portfolio, Quabit now has a portfolio of residential land on which to build 3,700 homes, which represents 90% of its target development between now and 2021 (4,090 homes) and demonstrates its vocation for growth and its commitment to take advantage of the opportunities currently available in the Spanish residential market.

Original story: Quabit

Translation: Carmel Drake

Aedas Homes Will Make Its Stock Market Debut Before Year End

25 September 2017 – Expansión

A new real estate company will debut on the stock market before the end of the year. On Friday, the property developer Aedas Homes confirmed its intention to debut on the stock market during the fourth quarter of the year.

The company, which specialises in the construction of homes, has not revealed the price at which the placement of its shares will take place. Nevertheless, market sources forecast that its market capitalisation will be higher than its Gross Asset Value, estimated at €1,345.8 million.

Aedas Homes was created by the US fund Castlelake, after that firm invested several hundreds of millions of euros in buildable residential land in Spain. After creating a portfolio containing 1.3 million m2 of buildable land, worth €1,000 million, Castlelake turned to the team at the Socimi Merlin Properties to design a business plan that would allow it to maximise the returns on its investments. For this project, the fund recruited David Martínez, a director with experience in real estate developments, such as Valdebebas and Castellana Norte, both in Madrid.

Castlelake’s intention is to place between 40% and 60% of the company’s shares on the stock market, through a primary offer and then a secondary offer amongst qualifying investors. The primary offer is expected to raise funds amounting to approximately €100 million.

Investors

“The stock market debut of Aedas Homes will allow us to access funds from a diversified base of investors, which will be used to finance the company’s expansion and development plans”, explains David Martínez, CEO of the property developer. Citigroup and Goldman Sachs are acting as the global coordinating entities of the placement; Banco Santander and UBS as the joint bookrunners; BBVA, CaixaBank and Sabadell are the co-lead managers; and Deloitte is the financial advisor.

Currently, Aedas owns a portfolio of land worth €1,370.5 million, distributed across sight Spanish provinces – including Madrid, Barcelona, Málaga and Valencia–, which will allow it to build more than 13,000 homes. These magnitudes place it amongst the top four property developers in Spain. The company is currently working on 11 projects, involving 576 homes. Its business plan forecasts the investment of between €200 million and €250 million on new acquisitions over the next 2.5 years to deliver 3,000 homes per year from 2022 onwards.

With this move, Castlelake is following in the footsteps of Lone Star, which was the first international fund to list its company, Neinor Homes, on the stock market, after investing in assets in the Spanish market.

The debut of Lone Star’s real estate company took place in March, with a valuation of €1,340 million. Since then, the company has appreciated in value and its market capitalisation now exceeds €1,420 million. Lone Star placed 60% of its company’s share capital in the stock market debut. Last week, it divested another 27%, to raise €394 million. On Monday, the fund Wellington acquired an 8.5% stake.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Quabit Buys Land From Rayet For €30.1M

25 September 2017 – Expansión

Quabit Inmobiliaria has purchased a portfolio of buildable residential land in the Corredor del Henares (Madrid) from its main shareholder, Grupo Rayet, for €30.15 million, according to a statement issued on Friday by the property developer.

30% of the amount will be covered by financial support from funds advised by the investment firm Avenue Capital Group and the remaining 70% will be financed by shares in Quabit, which will carry out a non-monetary capital increase at a price of €2 per share. The land transferred, according to the company itself, “are the plots with the greatest potential”, in such a way as that the transaction “redoubles” the group’s confidence in the strategic plan of its subsidiary. These plots have a buildable surface area of 131,000 m2 and will allow for the construction of 1,053 homes.

This is the third operation that Quabit has undertaken in September, after recent purchases on the Costa del Sol and the Balearic Islands, a result of which it will be able to build 1,400 homes. In this way, the company already has residential land on which to build more than 4,700 homes, far exceeding its objective for the period between now and 2021, which was set at 4,090 homes. Moreover, Quabit is preparing to convene an Extraordinary General Shareholders’ Meeting to subject the capital increases linked to these most recent land acquisitions to the approval of its shareholders.

Original story: Expansión

Translation: Carmel Drake

Ministry of Development: Urban Land Prices Rose By 11.7% In Q2

25 September 2017 – Eje Prime

The average price of urban land is continuing to soar quarter after quarter. The average price rose by 11.7% in cities with more than 50,000 inhabitants during the second quarter of 2017, according to statistics from the Ministry of Development. This increase means that the price of such land now stands at €326.3, the highest level since Q3 2015 (€331.1).

At the national level, average urban land prices have risen by 1.8%, to €166.4. With respect to the first quarter, the QoQ variation was slightly negative, with a decrease of 0.7%.

The highest average prices were recorded in the provinces of Granada (€510/m2); Barcelona (€491.5/m2) and the Balearic Islands (€321.5/m2). The lowest prices were observed in the provinces of Albacete, Ourense and Tarragona (€60/m2, €117.6/m2 and €130.6/m2, respectively).

Meanwhile, the number of transactions undertaken during the second quarter of 2017 amounted to 5,998, up by 36.3% compared to Q1 2017, when they amounted to 4,401, and up by 35.2% compared to Q2 2016, when 4,435 plots were sold.

In total, the total surface area sold during the second quarter of 2017 amounted to 7.2 million m2, for a total value of €1,073.8 million. With respect to the second quarter of 2016, the YoY variations represent 28.6% more in terms of surface area sold and 43.0% less in terms of their value.

Original story: Eje Prime

Translation: Carmel Drake