Property Developers Start Buying Land Without Building Permits

11 October 2017 – Real Estate Press

Overseas real estate funds, with a major presence in the Spanish real estate market, are owners of large portfolios of land as well as of debt secured by land as collateral, and many are operating in association with Spanish property developers.

The estimates for this year indicate that 80,000 new homes will be built in total.

The funds Blackstone, Cerberus, Kennedy Wilson, TPG, Värde Partners and Apollo started to acquire servicers, created by the banks, when the real estate sector began to recover. Other funds, such as Lone Star, Centerbridge, HMC, Eurostone, Aquila, Oaktree, Castlelake, Värde and Pimco, have been backing residential development. In this way, they have become the new residential property developers that need land as their raw material.

Now, unlike in prior years, no one wants to risk buying land that still needs some kind of building permit approval to turn it into buildable land, due to the risks involved, and that is why the price of buildable land is rising.

Funds were able to acquire land in areas with high demand for housing, such as Madrid, País Vasco, Barcelona, the Costa del Sol and the Alicante coast, at low prices before residential activity started to recover. But over the last year, land prices have also been recovering in other large capital cities, such as Valencia, Zaragoza, Sevilla and Málaga.

Nevertheless, the potential that these entities see in the residential development segment has allowed them to reduce the urban planning risk in more mature markets, such as Madrid and Barcelona, until now, and start to place their focus on plots that still have not received building permit approval. Moreover, there is no shortage of people who are demanding that the administrations adopt their expansive urban planning policies once again.

Original story: Real Estate Press

Translation: Carmel Drake

Large Funds Thrash It Out To Buy Residential Land

9 October 2017 – El Periodico

The 10 largest property developers in the country are in a position to start work on the construction of around 20,000 new homes in 2018. That volume of output is possible thanks to the collection of buildable urban land that they have managed to accumulate over the last year. The large Spanish property developers – many of which are owned, at least in part, by investment funds – as well as overseas funds themselves, are competing, at an almost frenetic pace, to acquire plots of land on which they will be able to build without modifying the classification (to residential use).

“Overseas investors are very present in the new Spanish real estate landscape, be it as owners, debt holders, servicers or property developers investing together with other local property developers, both in the renovation of existing buildings and the construction of new ones, as well as in the rental sector and through the constitution of Socimis”, says Samuel Población, Director of Residential and Land at the real estate consultancy firm CBRE. The consultancy indicates that at the end of 2016, the large property developers in Spain owned €8,000 million in assets for construction.

80,000 homes in 2017

The real estate sector is expecting the output of new homes to reach 80,000 units in 2017. That figure is still below the short-term goals. “We should be producing 150,000 homes (per year), although we will not achieve pace that for another three years”, says Juan Velayos, CEO at Neinor Homes, one of the real estate companies – whose main shareholders are investment funds – that has purchased the most land over the last two years. “We set ourselves a land investment target of €380 million for 2017 and 2018, but we have already covered most of that budget this year”, he adds. His firm is currently working on the construction of 5,000 homes in Spain and hopes to achieve a completion rate of 3,500 units per year.

The funds Blackstone, Cerberus, Kennedy Wilson, TPG, Värde Partners and Apollo started to acquired the commercial and management platforms that the banks had created (the servicers) when the real estate sector started to recover in 2013. In parallel, the overseas funds Lone Star, Centerbridge, HMC, Eurostone, Aquila, Oaktree, Castlelake, Värde and Pimco are strongly backing residential development. In this way, they have become the new house builders. And they cannot build if they don’t own land.

The problem is that, for various reasons, the administrations are not producing raw material. “No reclassifications (of land) are being performed, because someone will always get hurt”, says Lluis Marsà, President of the Association of Property Developers and Constructors (APCE). “We do not take the risk of buying non-buildable land that has to be transformed because the production costs are rising, the risk soars”, says Velayos.

Nevertheless, that situation has the benefit that agents in the sector are adjusting output to the maximum in order to maintain returns despite the new quality standards for homes, which are higher than in the past. “One of the positive effects of the profound transformation of the sector, with the arrival of new players, is the greater degree of control over the finances and execution periods that we are seeing”, says Población.

Investors adding value

The profile of funds has evolved quickly from opportunistic to value added (…). The focus of these firms is to acquire plots in areas where demand for housing is high, such as Madrid, País Vasco, Barcelona, the Costa del Sol and the Alicante coast. But during 2017, there has also been a positive recovery in land operations in other large capitals such as Valencia, Zaragoza, Sevilla and Málaga (…).

Original story: El Periodico (by Max Jiménez Botías)

Translation: Carmel Drake

Large Overseas RE Funds Are Building Homes In Spain

10 April 2017 – Expansión

Large international funds such as Invesco, Harbert, Activum SG and Stoneweg are developing residential projects in Spain in search of high returns.

Following their arrival in Spain at the end of 2013, the international investment funds have become the players to watch in the Spanish real estate market. Attracted by the decrease in prices following the burst of the bubble, the funds entered the market looking for opportunities in the tertiary sector (primarily, in the office and commercial segments). Nevertheless, the price rises of these properties and the improvement in the macroeconomic situation in the country have led them to place their focus on a new type of investment: residential assets.

“The main advantage of investing in residential assets is the return. Currently, the returns on residential investments is greater – by between 13% and 20% – than those generated by other assets (be they commercial, logistics, etc.), which have been cut recently, as the upwards trends have been reduced by increasingly higher competition, due to the shortage of products in good locations and the rise in land prices”, said Gonzalo Gallego, Partner in Financial Advisory at Deloitte.

“We have seen many international funds and players investing in the residential sector: Kennedy Wilson, Lone Star, Greenoak, Grosvenor, Autonomy Capital, Invesco, as well as family offices and representatives of large equity firms such as Shaftesbury, the Capriles family, Stoneweg and Dazia, amongst others. In general, they promote to sell, but we are also awaiting the imminent arrival of international giants such as Greystar and Round Hill and Allianz, in the residential rental business, where they see an important niche for the professionalisation and institutionalisation of this sector”, explains Humphrey White, CEO at Knight Frank in Spain.

One of the most active funds is the German fund Activum SG Capital Management. Currently, that investor, through its Spanish subsidiary ASG Iberia, is working on the construction of 2,000 homes in six developments, such as in San Juan (Alicante), Alcalá de Henares (Madrid) and Málaga.

Another international fund that has decided to back the residential sector in Spain is Invesco. “We are trying to avoid or assume urban planning risk in our residential investments, with the aim of not exceeding our investment schedule. For this reason, we only invest in buildable land and in properties that do not need special urban planning procedures to change their use or buildability”, explain sources from the fund’s residential department in Spain. Its projects include the development of 30 homes on Paseo de la Habana in Madrid, another one on c/Serrano, also in the capital, and the transformation of an office building into 58 homes close to Calle Colón in Valencia.

Meanwhile, Harbert Management Corporation (HMC) has decided to invest in the Spanish residential sector through a local partner, the management company Momentum. “In 2008, partners that have experience working with funds founded Momentum. In 2012, we started to see opportunities for those investors in the residential sector and, in 2014, we purchased our first plot of land in Aravaca from La Caixa”, explained Gabriel Fernández de Gamboa, Founding Partner at Momentum. Alongside this management company, HMC has invested in six plots of land in Madrid and another one in Málaga for the development of more than 600 homes and is searching for new opportunities in the market.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

US Fund HMC Buys Old Office Building In Madrid From BBVA

13 March 2017 – El Mundo

The US investment fund HMC has acquired one of the real estate jewels that was up for sale in Madrid and which, according to El Mundo, was far from lacking in suitors. The company has purchased the building located on Calles Clara del Rey 26 and Corazón de María 17 from BBVA.

The property has a buildable surface area of 22,507 m2 and is currently a disused office. However, the days of tertiary activity there are numbered given that the new owner is going to develop an attractive residential project in one of the areas in the capital where no new build homes have come onto the market for years.

The planned investment for the Clara del Rey 26 project amounts to €60 million and the project will comprise one- to four-bedroom homes with common areas including a swimming pool, gym, children’s playground, multi-use rooms, amongst others. The marketing process will begin in a few weeks, although given the high demand that has already been received, a list of interested parties has been opened online at: www.claradelrey26.com.

The operation has been advised by the law firm Eversheds Nicea on the buy side and the sales process has been managed by the real estate consultancy firm JLL.

The operation forms part of HMC’s investment strategy in Spain, focusing on residential projects, in collaboration with its local partner Momentum Reim. Clara del Rey 26 is the latest in a group of projects that both companies are already developing in Madrid and Alcobendas: Aravaca Garden, Encinar Garden and Juncal Garden. In Málaga capital, they are also working on Teatinos Sky Garden and El Limonar.

Original story: El Mundo

Translation: Carmel Drake

HMC & Momentum REIM Buy Plot Of Residential Land In Málaga

14 December 2016 – Real Estate Press

HMC and Momentum REIM are redoubling their commitment to Málaga with the acquisition of a plot of land measuring 16,163 m2 in the Teatinos neighbourhood, Málaga, where it plans to construct 340 homes (known as the Teatinos Sky Garden development)

With this new investment, the firms will have 57,000 m2 of roofs under development within 6 months, making them one of the main residential investors in the city.

The alliance formed between the institutional investor HMC, which has more than €4,400 million under management, and the property developer Momentum REIM, is currently constructing six primary home residential developments in Spain, in which they are investing more than €231 million. The developments currently under construction are located in the most sought-after areas of Madrid and Málaga capital, focusing on middle-upper class families and are characterised by a differential value in terms of design, common area facilities, customisation and customer focus.

In 2017, Momentum REIM plans to expand its investments to other cities in Spain and to double its current investment volume during the course of the year. The outlook for the residential market in Spain is still positive, given the structural demand for housing, although in general terms, significant price increases are not expected.

Original story: Real Estate Press

Translation: Carmel Drake

International Funds Reactivate Residential Development Market

7 July 2016 – El Economista

After several years away, cranes are appearing on Spain’s landscape once again. Their return has come thanks to several large international funds, which have managed to reactivate the property developer market in record time and just at the right moment. Thanks to their presence, property developer activity in Spain grew by 30% last year, with 50,000 new construction permits; and the experts are certain that the residential business is now unstoppable.

The financial capacity of the new players is overwhelming in some cases. They have liquidity surpluses that the historical property developers would have envied, but, nevertheless, they do not know the ‘ins and outs’ of the local market, and their experience in terms of land is practically non-existent. For this reason, their entry into the Spanish market has been undertaken through the purchase of property developer platforms and through partnerships with local companies (…).

In light of the high profile partnerships that have been signed in the last two years, involving players such as Lone Star, Värde and Kennedy Wilson, the experts predict that the high level of activity will continue this year with the purchase of plots of land. In fact, they confirm that sales of non-developable land are starting to accelerate and that demand for land purchases will increase, especially those in the final stages of development, due to the high level of competition that has been generated between the key players in the sector – property developers, investment funds and cooperatives.

All of these players have realised that the opportunities that the residential development business is now offering “have yields that are considerably higher than those of other investments”, according to Solvia’s Market View report, which states that transactions have grown by 8.6% and prices have risen by around 4.5%. With these positive indicators, the development figures being talked about now include 150,000 new homes and 50,000 secondary residences per year until 2020.

Most of these homes will come onto the market thanks to Neinor Homes, which is looking to become the largest property developer in Spain. This company will be one of the most active over the next few years, given that according to its own forecasts, it expects to build between 2,500 and 3,000 homes per year. The firm, led by Juan Velayos – the former CEO of Renta Corporación – is the largest residential real estate company created in Spain following seven years of recession.

Its potential was proven last year, since between its creation, in May 2015, and the end of the year, it invested own funds amounting to €800 million on the purchase of land, on which it plans to construct 10,000 homes over the next few years, bringing together the largest bank of high-quality developable land in Spain (…).

But Lone Star is not the only fund that has made a long-term commitment to the Spanish residential market. The US fund has had a major competitor for several weeks now, in the form of Värde, which after acquiring 25% of the real estate arm of San José from Banco Popular, has now created a new property developer.

The company is called dospuntos and its Business Plan for 2016-2012 forecasts an investment of almost €2,000 million in the Spanish real estate market over the next six years, to complete the construction of 2,000 homes per year on average from 2019 onwards. For the time being, the group already owns a sizeable bank of land for the construction of more than 7,000 homes across Spain.

Inmobiliaria Habitat is another company with history in the sector, which in 2015, after finding itself in a very delicate financial situation and incapable of paying its debt, ended up in the hands of a group of funds – Bank of America Merril Lynch, SP101 Finance Ireland, Capstone and Goldman Sachs, amongst others. In this case, although the commitment by the funds has been key, it is nonetheless a temporary measure, given that they plan to exit the group within two or three years.

The latest residential report from the consultancy firm CBRE highlights other partnerships between international funds and domestic developers such as: Grupo Lar and Pimco; Renta Corporación and Kennedy Wilson; Momentum Real Estate and HMC; Aquila Capital and Inmoglaciar; Mina Inmobiliaria and Eurostone; Aelca and Värde; and Q21 Real Estate and Baupost. (…).

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake