Neinor Homes Considers Buying Land in Canary Islands

27 December 2017 – El Periódico de Canarias

Neinor Homes is considering entering the real estate market in the Canary Islands in 2018, according to its CEO Juan VelayosIt is also planning to generate profits and start buying land in Cataluña again, despite the political instability. Finally, Velayos forecasts that house prices will continue to rise at a rate of 5% over the next two years.

“House prices will continue to rise at a rate of 5% due to the gap between supply and demand. Then, prices will stabilise and grow at a rate of between 1% and 1.5% per year”, he explained to Efe.

In his opinion, 500,000 homes should be sold per year in Spain and 30% of those should be new build properties, equivalent to around 150,000, compared with the 80,000 that are currently being sold. The difference between those two figures shows that there is still a great deal of potential in the real estate development sector.

In terms of the performance of his company, which made its stock market debut in March, Velayos explained that this year will end with a positive EBITDA and with almost 100 developments “launched”, of which 33 are already under construction (around 2,500 homes).

In total, the company owns a buildable land bank on which it can construct 12,300 homes, of which 8,000 correspond to developments already underway.

“We want to always have two thirds of our land working”, said Velayos, who explained that his firm will continue buying land, primarily in Madrid, Barcelona, País Vasco and Valencia, at the same time as looking at entering new markets such as the Balearic Islands, Canary Islands, Galicia and Lisbon (Portugal).

From 2019 onwards, the purchases will be financed using the recurrent cash flow that Neinor expects to generate, according to Velayos, who added that, if necessary, the company may also resort to capital and/or debt increases.

In Cataluña, which currently accounts for 22% of the value of Neinor’s total housing portfolio, the real estate developer’s commercial activity has not been affected by the political uncertainty.

“We have sold everything and we only have four plots left to launch. I want to buy more land there”, said the executive, who, nevertheless, warned that he worries that Cataluña will be “impoverished” if the instability continues.

“If the situation continues, Cataluña will go from being one of the main drivers of the company to being replaced by another region, but I hope that someone can bring coherence. In the short-term, regardless of what happens, we are going to buy more land”, said Velayos. The CEO added that the company is fulfilling its plans and so will start making profits in 2018. Moreover, it will reach its “cruising speed” by 2020, with the handover of 3,500 homes per year, a turnover of €1 billion, an EBITDA of €0.2 billion and a profit of between €0.13 billion and €0.14 billion.

In terms of the composition of its shareholders, Velayos expects that Lone Star, the founder of the company, will block sell the 12.5% stake that it still holds in Neinor in the short term, after the lock-up period that it signed up to has ended, on 15 December.

Original story: El Periódico de Canarias

Translation: Carmel Drake

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