13 March 2017 – Cinco Días
Realia, the real estate company controlled by Carlos Slim, is planning to relaunch its house construction and property sales business, by starting new developments in areas with “a consistent demand and limited supply” of new homes, such as Madrid and the central region, as well as Barcelona and Palma de Mallorca, amongst other locations. In this way, the Mexican businessman will enter the Spanish residential segment and whereby join other international investors who have already committed to building homes in Spain in light of the recovery in the real estate sector.
Currently, the main players in this sector include the funds Lone Star, Värde and Castlelake, through their respective real estate companies Neinor Homes, DosPuntos and Aedas Homes, which they constituted to buy assets during the crisis. Other, domestic firms, include Quabit and Acciona, amongst others.
In the case of Realia, Carlos Slim took over control of the company in the middle of 2015 and since then has been working to clean it up. The real estate company is now reactivating its residential business with the aim of “improving and strengthening” its revenues, which mainly (60%) comprise rental income from its real estate portfolio.
To this end, the firm raised funds amounting to €145 million through a recent capital increase and also owns a portfolio of buildable land covering 1.85 million m2. The bulk of that portfolio is located in the central region and Cataluña, both of which are areas chosen by the real estate company to resume its property development business, according to the company’s annual report for 2016. Realia is now going to start building new homes even though at the end of last year it still had a stock of 490 finished homes, pending hand-over.
Refinancing, the main challenge in the short term
One of Realia’s other objectives for the year ahead includes improving its margins, “through the rationalisation and optimisation of production costs and expenses, and improvements in prices”. Nevertheless, the main milestone for Slim’s real estate company in the short term involves closing the refinancing of the €678.15 million debt that is linked to its real estate business, equivalent to 75% of its total liabilities, which matures on 27 April.
In this sense, in its annual report, Realia ratifies its conviction that the refinancing of this loan, which it is currently being finalised, “will end successfully” before the maturity date.
The ultimate goal is to “consolidate” its real estate division “financially and over the long term”, which does not rule out the acquisition of new assets “depending on the market opportunities and always with the aim of improving the income statement and creating value”.
Realia owns a portfolio of office buildings and shopping centres with a combined surface area of 405,359 m2, worth around €1,500 million. Its portfolio includes iconic buildings such as one of the Kio Towers in Madrid and the As Candelas shopping centre in Santiago de Compostela.
Original story: Cinco Días
Translation: Carmel Drake