Aedas, Neinor & Merlin Properties Put €1bn on the Table for Sabadell’s Land

29 January 2019 – OK Diario

Banco Sabadell has now opened the sales process for Solvia Desarrollos Inmobiliarios, its real estate developer, for which the entity expects to obtain €1 billion. To date, the entity chaired by Josep Oliu has already sent the teaser to almost 30 interested parties. But there has been an important development, and that is that it is not only the typical funds that tend to participate in these types of auctions that are interested in the company, property developers are also keen, including Neinor, Aedas and Merlin Properties.

It is worth remembering that when Sabadell decided to sell Solvia, it separated the house-sale business and the real estate development business into two different companies with the aim of achieving a better offer. The land, which is owned by the second firm, forms part of the bank’s balance sheet and that is what is now up for sale.

According to sources speaking to OK Diario, the deadline for non-binding offers will finish in March; it will be after that when Banco Sabadell will start to receive binding offers. Sources in the know indicate that the operation will be closed in the second quarter. And, moreover, in addition to the aforementioned property developers, funds such as Cerberus, De Shaw, Blackstone, Värde, Apollo and Oaktree have also received the teaser (…).

The main plots of land owned by Solvia Desarrollos Inmobiliarios are in Madrid, Barcelona and several places along the Mediterranean Coast. The portfolio includes plots that the buyer will have to reclassify in order to be able to sell, resell or transform them, as well as plots that are ready for development. It is precisely in those assets that so many property developers have expressed their interest.

Banco Sabadell obtained a profit of €138 million from the sale of 80% of Solvia, its real estate subsidiary, to Lindorff, a company that belongs to the Intrum AB group, for €300 million. With that operation, Sabadell, which has retained ownership of the remaining 20% stake in Solvia, achieved a positive impact on its Common Equity Tier 1 (“fully loaded”) capital ratio of 15 basis points.

The completion of that operation, which is subject to obtaining the corresponding authorisations, is also scheduled for the second quarter of 2019 (…).

Original story: OK Diario (by Borja Jiménez)

Translation: Carmel Drake

Sareb Searches for an Ally to Develop Land Worth €2.5bn

3 January 2019 – Eje Prime

The bad bank is looking for a partner to increase its profitability through the development of its land. Sareb owns plots throughout Spain worth €5 billion, but almost half (€2.4 billion), lack building permits. For this reason, the company is combing the market to reach agreements with companies that specialise in converting plots into buildable sites.

The company is thus planning to turn the tide in its strategy for the management of its portfolio when the contracts that it has signed with several Spanish real estate servicers come to end, which they will do soon, according to El Economista.

At the end of the first half of 2018, Sareb’s buildable land had a value of €2.15 billion. The rest of the portfolio owned by the publicly owned company comprises rural plots, worth €450 million.

Sareb, with €36 billion on its balance sheet, is also working on the creation of a fund with a residential property developer in which it will own a large stake. By way of consideration (payment for that stake), the bad bank will grant land worth €800 million for the development of new homes. Aelca is currently the favourite in the running to be awarded that contract.

Original story: Eje Prime

Translation: Carmel Drake

Quabit Signs €50M Loan with Taconic & Grupo Royal Metropolitan to Fund Land Purchases

4 April 2018 – Eje Prime

Quabit has sealed a deal to continue operating in the property development business. The company has signed a line of credit amounting to €50 million with the aim of financing the acquisition of developable plots of land focused on the development of residential real estate assets, according to a statement filed by the company with Spain’s National Securities and Exchange Commission (CNMV). The real estate company has signed the loan with specific funds advised by the companies Taconic Capital Advisors UK and Grupo Royal Metropolitan España.

Specifically, according to the agreement, the provisions of this line will finance 70% of land acquisitions and the corresponding taxes, whilst Quabit will finance the remaining 30%.

The funds must be drawn down during the first nine months of the contract, and the drawn down funds must be returned upon maturity of the line of credit, after four years, with the possibility of making early repayments and reusing the funds to finance new investments.

For each one of the projects financed, a separate company will be used in which Quabit will hold a 100% stake, albeit indirectly. These stakes will be the guarantee for the loans, leaving the land free, if necessary, for banks to finance its development.

The signing of this line of credit forms part of the new investments financing scheme established by Quabit in its business plan for 2017-2022. The company chaired by Félix Abánades recorded turnover of €535.7 million in 2017, although its sales fell by 83% due to a reduction in stock during 2016, and because its new developments are going to start to be handed over this year, according to the real estate company.

Original story: Eje Prime

Translation: Carmel Drake

Blackstone Sells 19 Plots of Land in NW Madrid to Ibosa

12 March 2018 – El Confidencial

A large-scale operation has been closed in the real estate market in Madrid. Grupo Ibosa has purchased the largest batch of “finalist” land – also known as land that is ready to be built on – in the north of Madrid from the US fund Blackstone for €16 million. The plots are located in one of the areas with the highest purchasing power in the whole Spanish capital, next to La Zarzuela race track, in Valdemarín (Aravaca), where properties, the vast majority of which are family homes, cost upwards of €1 million.

According to various sources, the cooperative manager is working with Gran Roque Capital, the real estate management company owned by the Venezuelan businessman Miguel Ángel Capriles, and the fund Urbania Internacional, with whom it has constructed various projects in the area.

The acquired land is divided into 19 plots – with surface areas ranging between 500 m2 and 750 m2 each (…). They used to belong to Jardines del Hipódromo, a company owned by Inmobiliaria Monteverde, which filed for creditors’ bankruptcy at the end of 2011. At the end of 2016, Mercantile Court nº8 in Madrid convened the auction of the plots – the company’s only asset – which ended up in the hands of Blackstone, one of its creditors after it purchased the debt that the company had taken out with Banco Sabadell and La Caixa (…).

Grupo Ibosa has also purchased land in Aravaca from Blackstone, specifically, on Calle Diplomáticos, where it is going to build eight luxury family homes measuring 700 m2 on plots spanning 1,000 m2. And, it has an agreement with another owner for another plot in Valdemarín to build another dozen houses.

In total, three transactions – which amount to around 24,000 m2 in total – involving a very scarce asset in the capital, which has led to real competition between property developers and investment funds and an important upwards pressure in prices. In total, Grupo Ibosa is going to build almost 40 units from whose sale it expects to obtain revenues of more than €55 million. In all three cases, the developments will be carried out under the cooperative regime (…).

A sought-after neighbourhood

Valdemarín is one of the most sought-after neighbourhoods in Madrid for young directors and Spanish executives. A neighbourhood where homes cost upwards of €1 million and where plots of land – like in the neighbouring El Barrial – are really scarce. New build properties are also in short supply, which has led to significant price increases of 20% (10% per annum) in recent years. According to the sources consulted, everything that comes onto the market is sold very quickly.

“Within Aravaca, Valdemarín has become fashionable thanks to its good schools and access to Madrid,” say sources at Engel & Völkers, which places the maximum price that can be paid in the area at €6,300/m2 (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Irea: “Mistakes Are Still Being Made But We Are A Long Way From A Bubble”

22 February 2018 – El Economista

The real estate sector is booming and the euphoria that is being experienced, especially in the residential segment, is leading to a genuine war in the purchase of land. That is according to Mikel Echavarren (pictured below), CEO of Irea, who says that the first mistakes are starting to be made.

The Director, who has participated in significant operations in the sector, such as Bain’s purchase of Habitat, and who has acted as a financial advisor to Blackstone in its acquisition of Banco Popular, believes that the next alliances will be harder to forge, but, even so, expects to see greater consolidation in the sector.

Q: How is the fabric of the real estate business evolving?

A: The residential development sector is giving rise to eye-catching activities in the market, such as stock market debuts and corporate acquisitions. On the one hand, we have the upper part of the sector, with large companies and on the other hand, we have the vast majority of real estate companies, which are lifting up their heads, maximising everything they can with the few resources they have. They have more money now than they did in 2013 and they have resolved almost all of their debt problems (…). They are all taking their first steps with something that did not exist before the crisis: money from funds for specific projects. And that is causing companies to revive and, as always happens, the markets that are recovering first are the Costa del Sol, Madrid, Barcelona, Málaga, Sevilla and Bilbao. But there are still some markets that have not recovered at all.

Q: Do you need to be big to survive in this sector?

A: Being big in the residential sector means that you can access the land purchases that the majority of companies don’t have the capacity to afford. It does not mean you have to be listed, but being large allows you to access faster and cheaper financing, and with that, you can rotate your portfolio much more. Meanwhile, smaller property developers have to hand over developments that they started three years ago to be able to afford to invest in land now (…).

Q: So, whoever can afford to buy land is guaranteed success?

Yes. Whoever has funds today to buy land in good locations is going to emerge victorious. That is one of the reasons why being large makes sense. Land is a scarce asset and since no new plots are coming onto the market due to the active or passive inoperativeness of the Administration, and because there is no capacity to finance the development of new land, prices are going to soar. Developable land prices have decreased by a lot (since their pre-crisis peaks), by between 60% and 80%, and I am certain that they will rise by between 200% and 300% (…).

Q: This situation means that the greatest fights are now over the purchase of land…

A: Yes, punches are already being thrown in this fight and we are entering a time in which mistakes are being made because people are buying land that is too expensive. But given that they are making those mistakes with their own funds, we are not facing a bubble scenario (…).

Q: With Neinor Homes, Aedas and Metrovacesa now listed, do you think we are going to see a boom in the number of property developers going public?

A: Going public is a consequence of the fact that there are funds behind the real estate companies that are looking to obtain returns. Nowadays, there are so many players wanting to invest in property developers in Spain, because, in theory, their performance is going to be very highly correlated with the recovery of the Spanish economy, that with few listed firms and so much capital, the value of them is increasing and it does not make sense for a property developer’s share price to exceed the value of its assets. I think that in two years time, we will see half a dozen companies listed on the stock market, but no more. There are not going to be that many because it is hard for a property developer to be strong, and to have good and geographically diversified plots. There have been some clear examples that are not going to be replicated, such as in the case of Vía Célere, which is a really good company that was sold because it did not have anyone to take over, but it is hard for many more operations like that to arise. Funds that already participate in a property developer do so because they are sure that they are going to go public. But we can expect to see acquisitions, purchases that seem like mergers (…).

Q: One of the major social problems in this country is the difficulty that young people face when affording to buy their first home. Moreover, they are now also struggling in the rental market…

A: It is a big problem and it reflects a structural change, not a circumstantial change. There is a huge proportion of the population who cannot and will never be able to buy a home in their lifetime, and then there is a percentage of people who do not want to buy a home, who prefer to travel or buy a good car, or simply have more flexibility (…). What is happening is that there is an unstoppable process to expel people from their homes who traditionally lived in rental properties in the centre of cities. That has happened in all of the major cities in Europe and it is going to happen here too. The centre is reserved for people with more money and for tourist rentals (…).

Q: In your view, which operations and businesses do you think still offer good opportunities for investors in Spain?

A: Large investors still have the possibility of creating residential development platforms with good managers and to debut them on the stock market or sell them to another party. I also see options in the sector for alternative financing. If everyone wants to buy land and the banks don’t want to finance land purchases, then there is a niche to lend (expensively) to whoever wants to buy. I also see opportunities in the market for land purchases; for example buying land to develop it or to carry out the final management procedures and then sell it on (…).

Original story: El Economista (by Alba Brualla)

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

Property Developers Eagerly Await Blackstone & Cerberus’s Major Land Sales

26 February 2018 – Cinco Días

The residential market is going to undergo a real shake-up over the coming months. From the summer onwards, Spain’s residential property developers expect the main investment funds to place on the market the large land banks that they have been stockpiling following their purchases from the banks, whereby alleviating the shortage of plots for construction in those areas where activity has resumed. Thousands of millions in investments are at stake.

Specifically, the major stars are going to be Blackstone, which took control of Popular’s toxic property portfolio last year, and Cerberus, which did the same with assets from BBVA. Moreover, managers such as Bain Capital, with land proceeding from Liberbank, will also play a significant role.

The other major player that is going to star in this market over the coming months is Sareb, which is preparing its largest-ever land transaction under a new formula. It is looking to team up with a large property developer to contribute plots worth €800 million and integrate its residential business in exchange for entering the share capital of a company that will be listed on the stock market in the medium term. In fact, large funds are arriving to compete with the bad bank to supply land (…).

“Expectations are high”, says Pablo Méndez, Director of Capital Markets at the consultancy firm Savills Aguirre Newman. “We expect the funds to bring products onto the market during the course of this year. They are going to want to maximise the value of their land, and so they will sell it on a piecemeal basis. We do not expect to see large portfolios for sale, at least not in Madrid, Cataluña or Levante”, he explained. “Nevertheless, I think that we may see portfolio sales in other areas that are starting to reactivate and that are of interest to real estate companies, such as Galicia, Asturias, Santander, Burgos, Tarragona and other large cities”.

House building activity has reactivated timidly in Spain, with 80,000 new house starts last year and with the objective for the sector of reaching around 150,000 new homes per year as the healthy cruising speed. New companies, such as the listed firms Neinor and Aedas, together with others such as Aelca, Vía Célere, ASG, Amenabar and Metrovacesa (which returned to the stock market earlier this month) have boosted activity. But there has been a shortage of buildable land (plots with the necessary permits) in Spain’s large cities, above all in Madrid and Barcelona.

Simultaneously, the banks have been forced to divest property from their balance sheets, under pressure from the regulations set by the European Central Bank, like the entities that received public help did back in 2012, when they transferred their toxic assets to Sareb. In the funds, the banks have found the best partners for getting rid of their properties to start putting them on the market (…).

“We estimate that the large funds have land worth more than €15 billion”, calculates Samuel Población, Director of Residential and Land, at the consultancy firm CBRE.

Blackstone is going to become one of the key players over the next few months. The US fund purchased 51% of Popular’s portfolio worth €10 billion from Santander. Of that total, 42% corresponds to land. The agreement is not expected to be definitively closed until March. From then on, Aliseda will start to sell those plots. The new CEO of that servicer is Eduard Mendiluce, who is also continuing to serve as the head of Anticipa, the company that Blackstone uses to manage its housing portfolios.

Meanwhile, Cerberus acquired 80% of BBVA’s real estate portfolio for €4 billion. Almost 80% of those assets comprise plots of land. In that case, they are waiting until June, for the operation to materialise, before starting to place any portfolios on the market. That sales mandate will be entrusted to Haya Real Estate, the servicer that Cerberus is planning to list on the stock market. Note, the US fund also acquired a majority stake in the residential property developer Inmoglacier, which is expected to receive a small proportion of the plots to make it grow and become one of the new stars of the sector.

Finally, Bain Capital, on a smaller scale, acquired around €144 million of land from Liberbank, at the same time as taking over the Catalan property developer Habitat (…).

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Neinor Starts Buying “Non-Finalist” Land

23 February 2018 – Expansión

With its first birthday as a listed company just around the corner, Neinor is making a strategic shift. It is negotiating the acquisition of “non-finalist” land (plots that require urban planning management to become developable) to maintain its pace of development once it has reached its cruising speed in 2020. Specifically, the property developer, which has plots of land on its radar worth €500 million, is holding negotiations with banks, private investors and institutional funds regarding the possible completion of three land purchase operations involving “non-finalist” plots for around €200 million. They will allow for the construction of around 1,000 homes spread over various cities, including Madrid and Barcelona.

Under the framework of the negotiations, Neinor plans to make an initial payment of almost 10% of the total price to take control of the “non-finalist” land and to pay the remaining balance once the plots have been granted their corresponding urban planning permits, within a period of between three and five years. “My concern now focuses on acquiring a land bank to put into production from 2022 onwards”, explains the CEO of the company, Juan Velayos (pictured above).

The real estate firm, which announced results yesterday, closed last year with losses of €4.6 million but expects to become profitable in 2018. If we take into account the incentive plan for directors amounting to €19 million – of which €10.6 million corresponded to the CEO – paid in its entirety by the fund Lone Star, and the costs associated with the stock market debut,  then the property developer lost €25.9 million last year.

In 2017, Neinor generated revenues of €225 million, of which €77 million proceeded from its property developer business. It also recorded cumulative pre-sales of €746 million. The company, which delivered 313 homes in 2017, expects to hand over 1,000 units in 2018. It then plans to double that figure in 2019, to 2,000 units; and reach its cruising speed from 2020 onwards with 4,000 units. That would represent the high end of the range announced initially, although it will do so with an evolution in “more conservative phases to protect margins, improve the quality of revenues and deliveries”, he said.

Neinor owns 1.5 million m2 of developable land with capacity for the construction of 12,500 homes and a gross asset value (GAV) of €1.7 billion. The company, which invested €286 million in land in 2017 for the development of 3,100 units, plans to disburse another €200 million on purchases this year. Neinor’s share price closed trading down by 4% yesterday at €16.66.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Spain’s Large Cities Are Running Out of Land for New Homes

18 February 2018 – La Vanguardia

Spain’s large cities, led by Madrid and Barcelona, are running out of developable land on which to build homes, primarily due to administrative obstacles, according to experts, who warn that this shortage is pushing up final prices.

The urban planning regulations establish very long turn-around times and are very rigid when it comes to changing the use of land to be able to adapt plots to the demands of citizens, according to the Managing Director of the property developer association Asprima, Daniel Cuervo.

Moreover, the political changes in the town halls typically involve changes in the development plans for cities, which means more delays in the land management process.

In his opinion, the regulations need to be simplified, to make them more agile, and legal certainty needs to be strengthened.

Cuervo has advocated placing the responsibility for large city urban planning in the hands of a body of independent experts who would decide what is best for citizens, without their decisions being affected by political ideologies.

Currently, in Madrid, there is developable land ready for the construction of around 20,000 homes, according to Cuervo, who points out that, although there are lots of plots, they cannot be used because they have “legal problems” and are indivisible, which complicates their use as sites for house building.

“In Madrid and the metropolitan area of Barcelona, there is land under development but the political decisions of the town halls to suspend urban developments is leading to an increase in the prices of buildable land and, therefore, in house prices”, he added.

The President of Quabit, Félix Abánades, underlines that the shortage of land and tensions in prices “are happening only in certain areas of the large cities” and recalls that, currently, the average price of land is less than half the value it reached in 2007.

“In general, as property developers, we are being more rigorous in our purchases”, said Abánades, who indicates that Spain currently has enough buildable land for approximately 1.5 million homes.

At the current and forecast rates of construction, “that land will supply the market for the next 8 to 10 years”, but in some very specific areas, such as Madrid, Barcelona, Málaga, Bilbao and certain coastal towns, land needs to be developed as a priority.

In his opinion, if there is a shortage of land today it’s because, during the years of the crisis, all of the urban planning management processes were suspended. Moreover, “absolutely essential” projects are still being blocked in cities such as Madrid, including the Castellana Norte project and several developments in the south-east of the capital.

“It is essential that the administrations streamline urban land management, and facilitate and promote the processing of new urban plans”, he said.

Property developers are facing enormous difficulties in the generation of buildable land and there is a paradox in that the areas with the most acute shortages of land are precisely those where demand for housing is highest. Ultimately, that is hurting buyers the most because homes are becoming more expensive, according to sources at Neinor Homes.

The stoppage caused by the crisis led to a mismatch between the creation of buildable land by the authorities and the absorption of that land by the property developers, say sources at the property developer.

“It should be possible to reach an agreement between the politicians, businessmen and technicians to enable a more efficient way of managing the land”, according to Neinor.

The CEO of Aedas Homes, David Martínez, added that, as demand recovers and the stock of homes decreases, inflationary tensions are arising in terms of the available land.

The urban transformation process in Spain (from land not suitable for development to developable land) is tremendously complex, causing processing times to lengthen beyond what is “reasonable and desirable”, increasing the investment required to build homes (…).

Spain is a country where new-build homes suffer from “lots of administrative obstacles” says the Head of Research at Pisos.com, Ferran Font, who laments that the municipal administrations do not facilitate the creation of suitable new products for the consumer, given that they forecast less demand, which, in turn, puts upward pressure on second-hand house prices.

To avoid that “it would help to have greater openness and more dialogue on the part of the municipal administrations, given that new build properties could help to decongest the most central districts of our cities and move pressure away from them towards peripheral neighbourhoods, whose expansion is being compromised by excessively slow decision making”, he added.

Original story: La Vanguardia

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