27 October 2016 – Cinco Días
The reactivation of the real estate sector in Spain has a future stock market star in the making: Neinor Homes, the former property development arm of Kutxabank, which the US private equity fund Lone Star acquired in May last year. The goal is to list the company on the stock market in 2017 and it has been assigned a preliminary valuation of around €2,000 million.
Neinor Homes belonged to Kutxabank until May 2015, although the sale agreement with Lone Star was signed in December 2014. The US private equity fund acquired the company that groups together properties from the former Basque savings banks, created in December 2012 as a bad bank, under the terms of the royal decree governing the clean up and sale of real estate assets in the financial sector.
The company was sold to the US private equity firm for €930 million, but Lone Star’s goal was not to liquidate the property developments and land that the entity’s property developer owned and pocket the corresponding gains. Instead, Juan Velayos (pictured above), CEO of Neinor Homes, announced as soon as he joined the company – previously he worked for Renta Corporación, but left in 2011 to join PwC – that the mission was to invest in land and construct developments.
Financial sources indicate that the company is already holding negotiations to engage investment banks to assist with its debut on the stock market, expected in 2017. Preliminary appraisal values, pending the publication of the company’s accounts for 2016 and the evolution of the real estate market, amount to around €2,000 million. That figure represents a valuation that is more than 100% higher than the price at which Lone Star purchased the company.
“From day one, the company was designed to list on the stock market. It is the natural step”, say sources at the company. “We are working with investment banks to evaluate the option of debuting on the stock market in 2017, but the final decision has not been taken yet. We will do it when we think that it is the optimal time in the market”, add the same sources.
It will be the first debut by a bread-and-butter property developer on the Spanish stock market in recent times, given that the only debuts in the sector since the crisis have involved Socimis (Lar, Hispania, Axiare and Merlin, which list on the main exchange); and 25 Socimis, which have debuted on the Alternative Investment Market (MAB). Neinor is a rarity, because it has moved away from the traditional real estate ownership model focused on rental income and the office market. At Neinor, revenues are driven by residential property developments.
The last traditional real estate company to debut on the stock market was Realia on 6 June 2007. The share price of that firm, hwich is controlled by Carlos Slim, has plummeted by 86% since that placement.
Velayos designed a €1,000 million investment plan for Neinor’s land. In 2015, the firm recorded sales of €340 million and EBITDA of €25 million. Nevertheless, the latest accounts filed with the commercial registry show a clear split between the two periods –the firm recorded losses of €70.9 million between January and June 2015 and losses of €11.2 million between July and December.
The company has signed an agreement with Kutxabank to administer and manage its assets for an initial period of seven years, extendable on an annual basis, which guarantees it recurrent annual income. The accounts filed with the commercial registry show that the firm recorded revenues of €14.4 million in H2 2015 by virtue of that contract. (…).
Original story: Cinco Días (by P.M. Simón, L. Salces and A. Simón)
Translation: Carmel Drake