Tag: Cogesa

Ferrovial, FCC, Acciona & ACS Are Building Houses Again

25 May 2017 – El Confidencial

A decade after they sold or wrote off their real estate arms, the country’s largest construction companies are now returning to the residential property development sector. Ferrovial, ACS, Acciona and FCC have regained their appetite for property and although they have different paces and strategies in mind, they have all definitively decided to revive their real estate divisions.

In the case of the group chaired by Rafael del Pino, which sold Ferrovial Inmobiliaria to Habitat for €2,200 million at the end of 2006, it will lay the first stone of this new strategic phase in Valdebebas. It owns plot 128A there, in what is one of the most important urban planning developments in the north of Madrid, and it plans to build between 200 and 300 homes on the site.

And that is just the tip of the iceberg, given that as the group’s CEO, Íñigo Meirás, acknowledged to this newspaper, the firm “is willing to become a property developer once again”. (…).

This strategy, combined with the gradual recovery in the real estate sector, has allowed residential construction work to account for 5% of the group’s total building portfolio, having closed last year at €442 million, up by 31.7% YoY. The group aspires to increase those numbers, by resuming its property development activity, which has caused it to analyse land operations in different areas to the north of Madrid.

FCC Real Estate also wants to make a similar move. The division, led for the last year and a half by Xavier Fainé Garriga, has decided to start developing half a million m2 of land that it owns in the Madrilenian town of Tres Cantos. The company has owned the plots for years, and its construction division will also participate in their development, along with the real estate subsidiary Realia, which will collaborate on the marketing side. (…).

Meanwhile, Acciona has a more ambitious plan, after it tried, two years ago, to divest its real estate arm, by listing it on the stock market or selling a stake in it to a fund – it has now ended up deciding to return to development. That was recognised by the firm’s Corporate Development Director, Juan Muro Lara, in March, when he announced the launch of 16 housing developments: 13 in Spain and the rest in Mexico and Poland.

In parallel, the group is finalising the transfer of its rental properties to Merlin, in a deal disclosed by El Confidencial in October, which will see the former’s exit from the real estate business. It also wants to push ahead with the sale of its hotels and office buildings through individual operations.

In the case of ACS, the firm is carrying out its strategy in the development segment through Cogesa, the historical subsidiary of the group, which stands out because it is the owner of the group’s two main corporate headquarters, the office buildings located in Las Tablas and on Avenida Pío XII in Madrid, and for owning sizeable land portfolios in areas such as Montecarmelo, Arroyo Fresno, Las Tablas, Carabanchel and Ensanche de Vallecas.

The turning point for this subsidiary, which is led by the brother of Florentino Pérez, Enrique, came two years ago, when it carried out a capital increase amounting to €44 million and then acquired one of the last plots of residential land in Montecarmelo for €2,200/m2. That figure turned the operation into one of the most onerous since the burst of the bubble, but is now seen in a very different light. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Speculation Returns To The Market For Land In Madrid & Along The Coast

11 April 2016 – ABC

During the years of the crisis, investors regarded land as one of the least attractive assets. In fact, in the face of scarce demand and the paralysis in the construction sector, land values fell to historic lows. (…).

Sales of urban land, the substratum of real estate developments, are growing again after nine years of consecutive decreases. And they are doing so at a healthy – and on occasion, vertiginous – rate in certain areas of the country where the housing market has already started its recovery, such as the more illustrious areas of major cities, including the north of Madrid and established areas along the coast (Málaga, Palma de Mallorca and the Canary Islands). So much so that a warning is now spreading amongst analysts and agents in the sector: the scarcity of developable land – which does not require land planning approval – in certain areas, and renewed interest from investors is generating a new “overheating” in the price of transactions, something not seen since the burst of the real estate bubble.

The latest “Market Trends” report prepared by Solvia, the real estate arm of Banco Sabadell, warns that the expectation of a strong recovery in value is incubating operations of a speculative nature. “The fact that the supply of well-located land is scarce in areas with demand, that there is widespread liquidity in the market and that there is fierce competition to acquire assets, means that land purchases are being made for speculative purposes, in certain specific cases, for subsequent resale at significantly higher prices”.

In this sense, the study, which does not cite who is behind such transactions, highlights the cases of the Madrilenian neighbourhoods of Valdebebas and Montecarmelo. In the case of the latter, the price of land has risen by between 40% and 60% to €2,400/m2.

Montecarmelo and Valdebebas

Fernando Rodríguez de Acuña, Director General of Operations at the consultancy firm RR de Acuña y Asociados distinguishes between three players in the race for land: the financial entities and large investors, who have put their assets up for sale “in stages” and the small and medium-sized funds, which are more prone to speculative operations given that they seek high short-term yields. The confluence of these players has given rise to a situation in which both the activity and value of these real estate assets have increased significantly, if we exclude the statistical effect of operations carried out by financial entities foreclosing unpaid debt. Thus, the number of transactions carried out by operators in the sector (developers, funds and cooperatives) increased by 37% in 2015 compared with the year before and by 60% in terms of transaction volume. (…).

According to the experts, two operations in particular have caused prices in the land market in the Spanish capital to sky-rocket: firstly, the sale of 14 plots containing more than 93,000 m2 of buildable space, by the Valdebebas Compensation Board to the property developer Pryconsa for more than €55 million and secondly, the acquisition of a plot of land in Montecarmelo by Cogesa, which belongs to the Dragados group, for more than €20 million. (…).

Original story: ABC (by Luis M. Ontoso)

Translation: Carmel Drake

Cogesa Paid c. €2,200/m2 For The Final Plots In Montecarmelo

25 September 2015 – El Confidencial

Some people regard it as an Urban Planning Action Plan (‘Programa de Actuación Urbanística’ or Pau) for “rich people” only. But, Montecarmelo, the smallest of the three new neighbourhoods in the north of Madrid – together with Sanchinarro and Las Tablas – has become the talk of the sector. And it is no wonder. The neighbourhood has starred in the most expensive land operation to be closed since the burst of the real estate bubble, and although it did not trigger alarm bells per se, it did raise concern amongst the main players in the market, for whom the memories of the worst excesses undertaken during the boom are still fresh and vivid.

Less than three months ago, at the beginning of July, the company Cogesa, which forms part of Grupo Dragados and is led by Enrique Pérez, the brother of Florentino Pérez (the President of Real Madrid Football Club), paid an “exorbitant” amount for the final few residential plots in Montecarmelo. Specifically, Cogesa paid just under €2,200/m2 for the land, i.e. significantly more than the figure (€1,400/m2 – €1,500/m2) the experts consulted by this newspaper consider should have been paid for the launch of a profitable development, unless, of course, it is developed as a cooperative.

Montecarmelo, which is located next to Monte del Pardo, the Colmenar motorway and the M-40 ring-road, was conceived at the beginning of the 1990s. With more than half a million square metres of land allocated for residential use – 8,500 homes, both unsubsidised and subsidised – it became the destination of choice for hundreds of young couples who saw the neighbourhood as a good place to live that allowed them to travel into the city centre each day to work. It was born as a commuter town (neighbourhood), just like Sanchinarro and Las Tablas, but is now witnessing the “overheating”  of land prices that seems to be happening once again. (…).

Knight Frank…estimates that there is only around 50,000 m2 of buildable space left in the development, i.e. 5% of the total, since the remaining 95% is under construction or has already been built. (…).

Cogesa’s bid took the other participants in the tender completely by surprise: Construcciones Amenabar and Grupo CP, two companies that have been involved in previous projects, as well as Momentum and the cooperative DMS have said as much…none of the other offers even came close to the figure that was put on the table by the Grupo Dragados’ company, to acquire the last large plot for sale in Montecarmelo. The company already has a presence in the neighbourhood, with around one thousand homes in several developments. At one of them, Las Terrazas de Montecarmela, the company has been selling homes for just under €3,000/m2.

“Cogesa already has interests there. It owns several plots, which means that by paying the amount it has done for this plot, it has also increased the value of its own portfolio there” says an expert consulted by this newspaper. (…).

However, the most recent land operations are raising concerns that the segment is “overheating”. In fact, the numbers do not add up for some developers. “A those prices, they would have to sell the homes for more than €3,500/m2, and not only is it going to be difficult to find buyers willing to pay that much, the figure also leaves minimal scope for profit. A logical price would have been €1,400/m2-€1,500/m2, because even if the cost of the land attributable to the final price of the homes was 50%, they could be sold at €3,000/m2 and not lose money”, explains a source at one developer, who prefers to remain anonymous.

“At these prices, the only thing that would make sense is a development on a cooperative basis, a formula that this company has adopted in the past. The developers need to make a profit of between 15% and 20%, however, in a cooperative, the manager does not earn any more than 10% and the risk is diluted amongst the cooperative”, says Ernesto Tarazona, Partner and Director of Residential Property and Land at Knight Frank, who believes that the lack of supply in the area benefits any project that is undertaken in Montecarmelo. (…).

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake