David Martínez: “Aedas Has Land on which to Build Homes for the next 4 Years”

8 September 2018 – Expansión

Aedas, the property developer in which the US fund Castlelake holds a stake, is continuing to push ahead and take on new challenges. As the first anniversary of its debut on the stock market approaches and with its business plan on track, the company is considering starting to buy plots of land that still require urban planning approval to anticipate possible price rises and improve margins, as well as to launch projects to sell to specialists companies in the rental sector, such as Socimis.

“We have a land bank spanning more than 1.5 million m2, which will allow us to build more than 14,000 homes. That gives us four years of visibility with respect to our business plan”, explains David Martínez, CEO of the company.

Aedas became the second largest property developer, after Neinor, to make its debut on the stock market after ten years of drought following the burst of the real estate bubble. It was followed shortly after by Metrovacesa, and several other companies are lining up to take the plunge, including Vía Célere and Aelca.

Aedas is sticking to the objectives announced in the listing brochure and unlike its rivals is not contemplating a reduction in its initial forecasts. “Our objective is to hand over more than 200 homes this year, more than 1,000 homes in 2019 and to exceed 2,000 homes in 2020. In total, by the end of 2020, we will have handed over more than 3,200 homes and we already have 114 developments underway, with more than 4,000 homes in different phases of development, which gives us a great deal of visibility over the objectives. We designed a realistic business plan and we will fulfil the forecasts for 2018, 2019 and 2020”, said the director.

Investment in land

The CEO of Aedas explains that during the first half of 2018, Aedas invested almost €100 million and purchased land for 1,905 homes, almost doubling the planned investment figure for the entire year. In addition, the company signed a corporate financing line for €150 million to continue expanding its land bank.

“We have detected interesting opportunities that fit with our investment criteria that are not going to be available in six months time. For that reason, we decided to bring forward our investment plan. Recently, we formalised a loan amounting to €150 million to provide us with sufficient financial resources to continue bringing forward the purchases planned in the business plan between now and 2023”, he explained.

At this point, Martínez opened the door to the possibility of purchasing non-finalist land. “There is a lot of land classified as “urbanisable” that still requires urban planning. Given that we now have land to cover our requirements for the next four years and we are not in any hurry, nor do we need to buy finalist land, we are considering land in areas with demand that has the partial plans approved but that still require some urban planning management”, he revealed.

Martínez highlighted that a significant percentage of the €150 million resulting from the loan formalised a few weeks ago will be used to buy non-finalist land. “With the economic recovery, new property developers are emerging who need to buy finalist land to get to work. For this reason, in some places, the prices of some plots of finalist land now exceed our expectations. We want to take advantage to buy land at more affordable prices even if that requires more management subsequently (…).

Rental

Similarly, the property developer is exploring other business opportunities, such as the sale of homes to Socimis and other vehicles specialising in the rental market. “One of the challenges involves supplying homes to young people. Aedas is exploring formulae that allow the construction of homes for rent, basically developing projects that we can sell to companies that specialise in rental. We have a very extensive and urban land bank”.

The director anticipates a “long” upwards cycle. “We are at the beginning of a cycle and notwithstanding the fact that we may see some adjustments in prices in certain specific towns, in general, it is going to last”, he predicted.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Juan Pepa: “The Recovery of the RE Sector Has Solid Foundations”

29 June 2018 – Eje Prime

Spain is doing well. At least that is according to the heads of the domestic and international funds that participated in the Square forum, a business meeting that is being held at the moment in Ibiza and which has brought together the leaders of the Spanish real estate sector to discuss new concepts and disruptive models.

Under the slogan “money never stops”, Javier Faus, founder and CEO of Meridia Capital, said at Square that “money will continue to be invested in the Spanish real estate sector for at least the next ten years”.

For the Catalan businessman, real estate is “growing” and he pointed out in a debate about investments at the meeting, moderated by Stephen Newman, the CEO of Savills Aguirre Newman, that “Spain has always been unique: despite the economic crises or threat of Cataluñan independence, and now the change of Government, large funds have always come here to invest”.

Of the same opinion is Juan Pepa, another of the guests at the roundtable organised by Square. Perhaps, the main driver behind the IPO of the property developer Neinor Homes, in his capacity as the former senior director of the fund Lone Star in Spain, Pepa highlighted that “the recovery of the real estate sector has solid foundations”. “You just have to look at the way in which the banks are now lending money in the residential sector: they are being very cautious”, said the now co-Managing Partner of Stoneshield.

In this regard, Faus added that in the market where his corporation dominates the most, the office segment, “we are not going to see rents return to their 2007 levels for another five years”. Therefore, according to the director, there is still scope for growth in a sector that in Barcelona and Madrid is looking very strong, taking advantage of the pull of the economic recovery and the arrival of international companies to the country.

Logistics and alternative assets, the great desires

“Now, everyone wants to invest in logistics”. That is how one international heavyweight committed to Spain summed up the target of the funds. Evan Carruthers, Managing Director of Castlelake, recognises that for his opportunistic fund, those types of assets are not attractive, given that “there is too much money looking for logistics assets”, he said.

His investment firm, which, amongst others, controls the listed property developer Aedas Homes, remains faithful to the residential market, in contrast to the other experts around the table.

For Juan Pepa and his fund, student halls, one of the most sought-after alternative assets at the moment, are very attractive “and so too are logistics assets, but we don’t touch them because we are small”.

In the appeal of halls of residence, the Argentinian business agrees with Brookfield, “the largest real estate company in the world”, according to the Spanish leader Ismael Clemente, CEO at Merlin and one of the promoters behind Square’s debut this year. The Director of Investments in Europe at the US giant, Brad Hyler, added that the problem on the continent is political instability but he did not assess in any detail the Spanish market, where his firm does not yet have a presence.

Those who are investing a lot of capital in Spain, and it seems that they will continue on this path over the coming years, are Latin American property companies and family offices. Pepa said in his intervention that “we will see much more money from Latin Americans investing in the country”.

In his closing comments on the second of three days, Clemente wanted to point out that in a real estate world in which the fashionable term is “to create experiences”, real estate “is, without doubt, the most human productive sector: we create employment and there is a healthy atmosphere between us”.

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake

Spain’s Large Property Developers Own Land to Build 1,500 Homes in Valencia

16 May 2018 – Levante EMV

The four Spanish property developers backed by investment funds that make up the Big Four have acquired large batches of land in Valencia and now own plots on which to build 1,500 homes over the next few months.

The property developers in question are Neinor, Aelca, Aedas and Vía Célere, and they share financial muscle in common, which has allowed them to outperform the competition. The key is that the four firms are listed or are aspiring to make their debuts on the stock market and so they need to quickly grow their portfolio of homes to attract investors. The latest major operation has just been closed by Aelca, which is going to invest €7.5 million in the construction of 62 homes on the PAI de Moreras.

Sources in the sector warn that there is hardly any buildable land left in Valencia and they lament the fact that this is going to result in a “reheating” of prices. The same sources state that land in Patraix, which cost around €200/m2 two years ago is now being sold for €450/m2 due to the voraciousness of the large property developers. “Aelca purchased land in Patraix for €425/m2 and is now costs €450/m2. The large property developers have driven up prices because they need to take positions ahead of their stock market debuts”, say the experts.

In other areas, such as Malilla, Neinor paid €600/m2 for a plot with capacity for 400 homes, and the US fund Harbet Management Corporation (HMC) and its local partner Momentum Real Estate Investment Management (REIM) purchased 30,000 m2 of land in Nou Campanar and Alfahuir for €800/m2. The problem is the impact that this is going to have on the final prices of those homes, given that, according to the experts, they will have to soar above €2,000/m2 to be profitable. “We are going to see homes costing upwards of €220,000. Who can pay those prices in Valencia? What happens to permanent employees who are 40-years old and who can only be granted mortgages of up to €160,000?” ask the same sources.

Aelca – 368 homes

Aelca is a property developer founded in Madrid in 2012. Four years later, a fund from Minneapolis (USA), Värde purchased 75% of that firm. The company arrived in València with two developments comprising 192 homes in Patraix (own) and Nou Campanar (owned by Sareb). Now it is building 44 homes in Malilla (on Calle Isla Formentera), 70 homes in Nou Moles (on Calle Brasil) and 62 homes in the PAI de Moreres. Aelca is also preparing its stock market debut.

Vía Célere – 22 homes

Vía Célere is another property developer linked to the fund Värde that is also preparing to debut on the stock market. Its first development in València is a 22 home building with a swimming pool at number 55 Avenida de la Petxina. The cheapest home there costs €310,900 (€348,703 including costs).

Aedas – 399 homes

Aedas is a listed property developer, controlled by the US fund Castlelake. The firm currently has three developments underway in València where it is going to build 399 homes. The company is going to construct an urbanisation containing 220 homes on a plot on Avenida Maestro Rodrigo (…). In addition, it is building 59 homes in Quatre Carreres. Also, the company has just acquired another plot on Avenida Antonio Ferrandis to build 120 homes (…).

Neinor – 713 homes

Neinor arrived in València in March 2017 and has become the largest landowner in the city with a portfolio for the construction of 713 homes. The property developer, whose main shareholder is the Israeli fund Adar Capital, is currently marketing a 49-home development in Malilla and another 216-home development in Nou Benicalap. It is also working on a 416-home development in Malilla (…) and a 100-home development on Avenida Antonio Ferrandis in Quatre Carreres.

Original story: Levante EMV (by Ramón Ferrando)

Translation: Carmel Drake

Overseas Funds Compete to Finance & Buy Land in Spain

15 April 2018 – Voz Pópuli

At the beginning of 2012, at the height of the economic crisis, one of the directors of the Bank of Spain – José María Roldán, now the President of the AEB – faced a tough meeting with investors. One of them told him that land in Spain was worth nothing. “If that’s the case, then I’ll take it all”, replied Roldán.

And if he had done so, today, the executive would be a millionaire and the same funds that raised doubts over the banks’ balance sheets would today be knocking at his door to buy that land and finance developments on it.

The good times in the Spanish economy and the real estate recovery are causing the opportunistic funds to look for ways to take advantage of the situation. They are buying assets, real estate companies – Habitat and Inmoglacier are the most recent examples – and trying to fill the gap left by the banks in the financing arena. That is where they have set their sights on land, the last bastion, where traditional entities are still wary of lending.

“Bank financing is available for projects and occasionally for parts of plots, but it is inflexible and restricted to certain locations and pre-sales levels. Ours (financing) is flexible in terms of volume, periods and conditions”, says Luis Moreno, Senior Partner at Ibero Capital Management, a firm that has just teamed up with Oak Hill Advisors to lend the property developer at least €400 million. In just a few weeks, they already have projects on the table exceeding that amount.

Types of investors

“Bank financing is still almost non-existent and is only granted in very low percentages in situations of high pre-sales”, says Pablo Méndez, National Director of Capital Markets at Savills Aguirre Newman.

The example of Oak Hill is just one of many. Julian Labarra, National Director of Corporate Finance at CBRE, explains the different types of investors that are interested in land. A first group comprises funds that provide bridge loans. Whilst the banks require “that a development already has the necessary permits and a certain level of pre-sales”, some of the funds financing certain projects with “yields of 14-15%”. And they exit after 18-24 month, by which point the development meets the requirements of the traditional banks (…). Active funds in this segment include Incus, Oquendo and Avenue.

Other funds have chosen to team up directly with Spanish property developers: they put up the capital to buy and develop land and the managers contribute their knowledge. There are several examples: Lone Star with Neinor, Castlelake with Aedas, Cerberus with Inmoglacier; Bain Capital with Habitat; and Morgan Stanley with Gestilar.

Another similar, more recent, example is the association between FS Capital – from Finsolutia – and Inmobiliaria Espacio, a company owned by the Villar Mir group, to relaunch the construction business and sell homes by investing €400 million on land purchases (…).

Other funds also interested in land are those committed to financing the whole process, such as Oak Hill, and those that are buying portfolios of land from the banks and from Sareb, but not to resell them, such as Deutsche Bank and Blackstone.

By location, the experts agree that financing has gone from being limited to the large capitals to appearing in increasingly more cities. “(…). Until two years ago, interest was limited to Madrid, Barcelona, Málaga and the Balearic Islands. Now we are seeing operations along the whole coast, as well as in Sevilla, Zaragoza and Pamplona, amongst others (…)”, says Labarra, of CBRE. “This year we will see operations in cities such as Bilbao, Vigo, Salamanca, Zaragoza and Murcia, which have recently come onto the radar of the large investment groups”, adds Méndez, of Savills (…).

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

ASG Homes Is Planning to Build 10,000 Homes in Spain

9 April 2018 – Cinco Días

Metrovacesa, Aedas, Neinor, Vía Célere, Aelca… they are the everyday names of the new players that are reviving the house building sector following the real estate crisis. They are the companies that have stolen the limelight thanks to their ambitious plans and the return of these kinds of businesses to the stock market. But there is a quieter successor that is silently gathering a giant portfolio of land and with some ambitious plans of its own in the residential development sector. The company in question is ASG Homes, backed by the British fund manager ASG Capital Management and its subsidiary ASG Iberia.

Recently, the initiative has been baptised ASG Homes, the brand that will reach out to potential homebuyers. That will be the logo that clients will see when they visit one of the developments. Behind the brand is the ASG Iberia team, which in recent years has been acquiring a collection of plots in different provinces across Spain to accumulate 500,000 m2 of land in total, one of the largest portfolios in the country.

“We are the great dark horse”, recognises Víctor Pérez Arias, CEO of ASG Homes for Spain and Portugal. The current portfolio of land gives the company the possibility of building 5,000 homes. “The aspiration is to double our existing capacity”, he adds. That means investing more over the coming months to accumulate a portfolio with the potential for the construction of 10,000 homes. To date, the company has invested €400 million of its own funds to obtain its current land portfolio.

The property developer focuses on operations involving the purchase of debt with real estate collateral and on complex situations to reduce the prices it pays. Precisely for those reasons, the company rules out competitive tenders for acquiring land.

Currently, its plots are located in Valencia, Alicante, Málaga, Costa del Sol, Madrid, Salamanca and Sevilla. Specifically, in the Andalucían capital, the company is already planning to build 1,100 homes. So far, it has not entered the market in Barcelona, above all because prices are high in the city, but it does not rule out future opportunities.

Based on data provided by the companies, ASG is positioned in fifth place in the ranking of property developers planning to build the most homes, with around 2,000 units in the pipeline. It comes in behind only Neinor, Metrovacesa, Aelca and Amenabar.

Moreover, this year, the property developer plans to sell 1,500 new homes and hand over 500 homes to its clients. The market is looking at all of these new companies with a magnifying glass, above all of those that are listed on the stock market, to check whether they are capable of fulfilling their plans. Pérez Arias says that the company is already handing over its first developments in Alicante.

In Spain, these types of international funds have starred in the recovery of the house building sector, either through the creation of new property developers, such as in the case of ASG, or by refloating companies with problems.

The new property developers include Neinor, backed initially by Lone Star, after it purchased Kutxabank’s real estate business for €935 million. It was the first property developer to debut on the stock market in more than a decade and its main shareholder has already collected its profits after selling all of its share on the market.

It was followed on the stock market by Aedas Homes, backed by Castlelake. The 100-year old Metrovacesa also returned to the stock exchange, in that case, led by Santander and BBVA. Moreover, the fund Värde has two property developers that are currently sounding out the same path (Aelca and Vía Célere). In turn, Baupost has created Q21 Real Estate. Cerberus has also acquired the historical Inmoglacier and in the same vein, Bain Capital has purchased Habitat. Another example is the alliance between Gestilar and Morgan Stanley.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Q21 Real Estate & Baupost Buy Luxury Property Developer Levitt

1 March 2018 – Eje Prime

A new corporate operation has been closed in the Spanish real estate sector. Q21 Real Estate, a company created by the former Grupo Pinar and the US fund Baupost, has acquired the luxury property developer Levitt. Following the purchase, the group will consolidate its position as one of the reference players in the luxury residential market in Madrid, as well as in the northeast and northwest of the Community of Madrid.

With this purchase, Q21 is going to increase its existing portfolio, comprising more than 1,700 homes, with 145,000 m2 of residential buildability in the northeast and northwest areas of the region, and with more than 75,000 m2 of buildable surface area in the tertiary sector. Levitt is going to provide the buying company with a contribution of land and housing under development in prime areas of Madrid.

According to the latest information available in the Mercantile Registry, Levitt-Bosch Aymerich had net assets worth €162 million at the end of 2016. The company recorded turnover of €61 million last year.

Besides Baupost, some of the other US investment funds that are very active in Spain also submitted bids for Levitt, such as Lone Star, Värde and Castlelake; they all expressed their interest in the property developer in recent months.

Levitt, founded in 1929 to construct luxury homes in New York, arrived in Spain in 1971 at the hand of José María Bosch Aymerich. In 1973, the company completed its first development, the Monteclaro urbanisation, on the outskirts of Madrid. Since then, it has constructed various high-standing developments in Madrid and Barcelona, as well as several office developments.

Original story: Eje Prime

Translation: Carmel Drake

Socimis & Property Developers: Two Sides of the Same Coin

4 March 2018 – Expansión

Property developers and Socimis are two sides of the same coin on the stock market. The two large segments of the listed real estate sector in Spain are moving at different speeds on the stock market after the 2017 results season. Whilst the Socimis, which specialise in the rental of non-residential buildings, are maintaining their cruising speeds, the purely residential property developers are being punished by investors, especially in the case of Neinor.

The company led by Juan Velayos has recorded a share price decrease of 18% this year, reaching its lowest levels since it started trading on the stock market at the end of March last year.

The property developer has just presented its results for 2017, which reveal that it registered a loss of €4.6 million despite generating revenues of €225 million. Moreover, just €77 million of the revenue figure proceeded from the property development business, with the delivery of 313 homes, a rate that is well below the 4,000 units that the firm promises to reach within two years (2020). For 2018, its objective is to hand over 1,000 homes. Investors have penalised the announcement that the company is not going to be able to maintain the volume of house deliveries forecast in its initial roadmap either this year or next.

Punishment

The market’s reaction against Neinor has been virulent. “The time it takes to obtain licences is getting longer and the curve of expected deliveries for 2019 is being delayed until 2020”, explains Velayos, who acknowledges that “we measured poorly”. The company has revealed that it is going to change its strategy of buying only “finalist” land (plots that already have the necessary licences for development) and is going to invest €200 million buying land under management, which is more abundant in terms of supply but which will involve much longer construction times.

Like Neinor, Aedas is also trading below its debut price on the stock market. Its share price has lost just over 9% of its value so far this year and did not vary following the results. During its first year of activity, the real estate company created with land purchased by the fund Castlelake over the last few years recorded revenues of €38.6 million, with a net margin of €12.2 million and a loss of €40.1 million. The losses are due primarily to non-recurring expenses relating to the company’s stock market debut, which had a negative impact of €31.55 million, and a one-off cost of €26.1 million linked to the incentive plan for senior management (…)

Following the cumulative punishment this year, the discount on the net value of their assets amounts to around 5% in the case of Neinor and reaches the double digits in the case of Aedas. But, are they attractive prices? (…). For the time being, analysts are maintaining their ‘buy’ recommendations for the pair (…).

Moreover, the experts consider that both Neinor and Aedas have a bullish potential of around 35% from their current levels (…).

In the case of the classic real estate companies, the results have been varied. Quabit (…) saw its turnover decrease significantly, by more than 80%. The company has handed over just six homes this year, after years focusing on its financial restructuring and the sale of its stock. Now, it has launched an ambitious business plan, which will allow it to resume its property development activity and its share price is up by 6% on the stock market so far this year.

Meanwhile, the Socimis are experiencing a different reality. The four large real estate investment companies (…) debuted on the stock market in 2014 with a combined valuation of €2.6 billion and no assets on their balance sheets. Now, their combined market capitalisation stands at more than €9.3 billion and their portfolios are worth more than €18.6 billion. Including Colonial, the combined profit of these companies has grown by almost €1 billion YoY.

The valuations of the Socimis are much more adjusted. The large players have closed the first two months of the year with share price gains of between 4% and 5%, with the exception of Axiare, which has been limited by the takeover price set by Colonial (…).

Original story: Expansión (by Rocío Ruiz and Enrique Utrera)

Translation: Carmel Drake

Deloitte: Residential Property Developers Set Their Sights on Consolidation

1 March 2018 – Expansión

The residential sector is on a roll. After years of significant declines in property development activity in Spain, the housing industry recorded its best year since the crisis in 2017, with a total of 500,000 transactions, of which almost 85,000 involved new homes, although the evolution of house sales is still light years away from the levels seen in 2007.

In this context, prices also recovered, recording an increase of 6.6% between 2014 and the third quarter of 2017, albeit with significant differences by province. This recovery in prices came after a cumulative decrease of 27.3% between 2008 and 2014, according to data reflected by Deloitte in its report The Residential Development Handbook. According to that analysis, there are currently 2,150 developments underway, with 114,000 homes being built. Of the total new developments, almost 80% are located in just 10 provinces.

This recovery is happening in the context of a favourable macroeconomic evolution with GDP growth of 3.1% in 2017, a reduction in unemployment and a favourable demographic makeup: Spain has 21 million citizens aged between 25 and 55 years, who may become potential buyers.

Moreover, financing is working in favour of house sales as the banks have opened the credit tap once again, although with greater demands on borrowers and more rigorous controls.

Alberto Valls, Partner responsible for Real Estate at Deloitte, explains that there is “growing unmet demand, which extends beyond the 10 main provinces”. In this sense, sources at the Deloitte have identified 272 hotspots where both demand and prices are growing, unemployment is decreasing and the market dynamics are favourable. “One third of those hotspots are not being covered by any property developers”, explains Gonzalo Gallego, Partner at Deloitte in the Financial Advisory Real Estate team.

These hotspots are located in 158 areas of the country. Specifically, Madrid and Barcelona account for more than 35% of them. In this context, funds such as Castlelake, Cerberus, Blackstone and Värde saw an opportunity in the wake of the recovery and have set up shop in the country. Others, such as Lone Star, have already completed their cycles, and with the sale of its entire stake in Neinor, which has been listed for less than a year, has collected its gains.

For Valls, the Spanish market continues to offer opportunities for investors to create value. “They are continuing to invest through alternative structures: alliances in projects, purchases of property developers and development of platforms for their subsequent debuts on the stock market”, he says.

The Partner responsible for Real Estate at Deloitte also recalls that, despite the creation of new players, the residential market in Spain is “highly fragmented”. And he predicts: “The market for real estate property developers is going to become more concentrated”.

Specifically, the five largest property developers in Spain account for just 6% of the market in terms of units handed over and 12% of the units under development. If we compare those figures with other more mature markets, the Top 5 British property developers account for 39% of the total units handed over, whilst the top five French developers account for 42%, according to data from Deloitte.

Large listed companies

Placing the focus on the large listed property developers, Metrovacesa, Aedas and Neinor, which have a combined stock market capitalisation of €5.2 billion, together, they own a portfolio of land with capacity for the development of 61,500 homes. Their French counterparts Nexity and Kaufman Broad, which have a combined market value of €3.3 billion, own land for the development of 72,100 homes. Meanwhile, the eight largest property developers in the UK, including Persimmon, Taylor Wimpey and Barratt, which have a combined market capitalisation of €37 billion, have potential land for around 300,000 homes.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Aedas Recorded Losses of €40M in 2017 Mainly Due to IPO Costs

28 February 2018 – Expansión

Aedas, the property developer controlled by Castlelake, which debuted on the stock market in October, closed last year with net losses of €40 million, due primarily to non-recurring expenses relating to its IPO process, which resulted in a negative impact of €31.55 million.

That result also includes a cost of €26.2 million associated with the director incentive plan, which was paid for in full by Castlelake, and which is reflected in personnel expenses.

The property developer highlights that, excluding extraordinary operations and expenses, its losses for the year as a whole amounted to €8.55 million. Of that amount, €8.27 million corresponded to the first half of the year, “an amount that was already reported and discounted by investors from the price of the stock market debut”, says the company. By contrast, the firm closed the second half of the year with losses of €280,000 and an EBITDA of €3.3 million.

Aedas, which was created in July 2016 and which started to market its first homes in March 2017, reported revenues of €38.6 million in 2017. The gross value of its assets (GAV) amounted to €1.475 billion, which represents an increase of 7.2% with respect to its IPO valuation.

The property developer indicated that from 2018 onwards, it will start to register its first “significant” revenues through the delivery of its first large batch of homes and said that the 915 commercial sales that it has closed represent gross revenues of €310 million.

Original story: Expansión (by R. Arroyo and J. Díaz)

Translation: Carmel Drake

Valencia Sparks Significant Interest Amongst Investors & Property Developers

26 January 2018 – El Economista

In 2015, the developable land market in Valencia was almost at a standstill. In 2016, a few operations were closed, in some of the up-and-coming areas of the city, with prices ranging between €200/m2 and €300/m2. In 2017, by contrast, those figures soared in the areas with the greatest potential, to reach €650/m2, boosted by growing demand from large groups and international investment funds, which have become the dominant players in a market that is clearly recovering. Sources in the sector estimate that around 80 developments are currently underway in Valencia – at different stages of completion, from requesting licences to construction – corresponding to more than 3,000 homes.

In recent months, interest from property developers has focused, above all, on first-time buyers, in response to the growth in pent-up demand over the last few years. The stoppage of construction work due to the impact of the economic crisis; the lack of stock that fulfils the new expectations of real estate buyers – in terms of quality, size and energy efficiency critiera, amongst other points -, and the improvement in the purchasing power of families, due to the economic recovery and employment, have resulted in a boost in demand for new build homes, with the return of off-plan sales.

“Our projects in Valencia are being very well received. By way of example, the rate of sales exceeds 70% in the case of the development on Carreres, 10 (…)”, says Juan López, Director of the Levante Regional Delegation at Aedas Homes.

“The region has been a little slower than average in terms of the recovery of property development because the impact of the real estate crisis here was much more profound. But 2017 saw the reactivation of projects. This year, players will focus much more on sales and we will have to see whether demand responds and what the rates of house sales are; most of them will be handed over in 2020 and 2021. It is time to turn the words into actions and we have no doubt that buyers will respond. The key is to consolidate a healthy, strong and transparent market that inspires confidence”, said Juan Velayos, CEO at Neinor Homes.

Currently, the Community of Valencia accounts for around 10% of all the new homes being built across the country, still well below the 15% that companies in the sector think it will represent in the coming years – it is expected that the number of new build homes per year in Spain will stabilise at around 150,000, almost twice the number registered in 2017 (80,000).

In 2017, the Town Hall of Valencia received licence requests for more than 2,480 homes, compared with 1,270 in the previous year. The municipal technicians signed the authorisation for 1,180 homes and around 2,000 more are being processed – some, presented almost two years ago, whose delay, according to the sector, is holding back the creation of between 10,000 and 15,000 jobs and €800 million of investment (…).

Pressure on prices

This investor interest in the city of Valencia has resulted in an increase in the average price of developable land and, even, in the signing of land repurchase operations between property developers. Examples include the sale of a 50,000 m2 plot by a local company, Urbem, to Neinor – for which it paid €27 million – as well as the purchase by Aelca of a 6,000 m2 plot from the Libra cooperative; both operations were closed in the neighbourhood of Malilla, one of the up-and-coming areas.

The President of the College of Real Estate Agents of Valencia, Alfredo Cano, warned in December that “house prices in Valencia have increased significantly in 2017, and if there is no change in the trend over the coming months, the situation will be accentuated in 2018. That could give rise to a mini-bubble (…)”.

Nevertheless, experts in urban planning, property developers and constructors rule out that risk in the current climate. “We are not seeing any signs of a bubble in the residential sector. You have to take into account that we are starting from minimum levels and, logically, if there is more demand, prices rise, due to laws of supply and demand, but they will start to normalise”, says Antonio Olmedo, President of the Federation of Property Developers and Urban Planning Agents in the Community of Valencia (Feprova).

Moreover, “and unlike in previous cycles, the lack of mass bank financing for land purchases is limiting investment capacity to a smaller number of professional operators and is forcing rigour in terms of investments; capital consumption is now transferred to the balance sheets of property developers from day one”, says Sergio Gálvez, Director of Strategy and Investment at Aedas Homes (…).

Restructuring of the sector

In terms of the major players, Aedas Homes – in which the fund Castlelake holds a stake – owns developable land in the Community of Valencia for the construction of more than 2,250 homes and is keen to buy more (…).

In addition, Neinor Homes – in which the US fund Lone Star held a stake until the start of January when it sold its shareholding – is heavily backing the region. Over the last nine months, it has closed seven land purchase operations in the city of Valencia and its metropolitan area – with capacity for around 1,200 homes (…).

Aelca – owned by the US fund Värde Partners (…) – is another of the major player taking positions in the region, where it owns land for the construction of more than 2,300 homes (…).

These new players are having to share the limelight with some of the large traditional groups from the sector – such as Metrovacesa, which has 36 developments underway in the Community of Valencia – and with local property developers, which are also standing their ground to an extent (…).

Original story: El Economista (by Olivia Fontanillo)

Translation: Carmel Drake