Tag: indebtedness

Realia’s Profits Drop By 91% To €5.2M In Q1

9 May 2017 – Expansión

Realia closed the first quarter of the year with a net profit of €5.2 million, which represents a decrease of 91%, due to a sharp drop in the firm’s extraordinary income.

The real estate company controlled by the businessman Carlos Slim said to the CNMV that, during the first quarter of 2016, its profits were favoured by the positive financial result of €51.2 million, due to discounts on its first three payments of residential debt.

As such, if we exclude the positive impact recorded in 2016, the recurring net profit would have increased during the first quarter of this year by 16.9%.

The company obtained turnover of €23.3 million, down by 8.6%, due to a 20.8% decrease in property sales in the residential segment. The company completed 21 units during the quarter for a total amount of €4 million, compared with 27 for €5 million during the same period last year.

By contrast, rental income from the real estate business increased by 4.5% during the period, to €14.9 million.

In terms of indebtedness, Realia decreased its net financial debt by €187 million during the last year, to reach €738 million as at 31 March 2017.

Moreover, following the end of the quarter, Realia Patrimonio signed a new syndicated loan with the banks amounting to €582 million and cancelled its previous syndicated loan signed in 2007, as Expansión revealed on 27 April.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

Núñez i Navarro Invests €45M To Build 166 New Homes

3 May 2017 – Expansión

Núñez I Navarro (NiN) has started its largest real estate development since before the crisis. The development in question is known as the Nou Can Gambús urbanisation, close to Sabadell (Barcelona), and its first phase has a surface area of 23,336 m2. The company is planning to construct 66 family homes and four residential blocks containing 100 flats in total.

During this first phase, the company will spend €45 million, excluding the price of the plots of land. The company, which is owned by the family of FC Barcelona’s former president, Josep Lluís Núñez, acquired the estate years ago in a deal completed in equal part with Anova. During the recession, the property developer took ownership of 100% of the site.

Several months ago, NiN completed the construction of the first row of homes, comprising eight houses, and it has already agreed their sale or rental. Now, NiN has started to build the second row of houses, comprising 16 units in total. The deadline for their completion is the second quarter 2018. The property developer expects to begin construction of the first two residential blocks around that date.

Low level of debt

NiN is one of the largest Catalan property developers and also one of the entities that is best avoiding the economic crisis thanks to its very restrictive indebtedness policy, with debt amounting to zero in the case of some of its developments. The property developer has strengthened its refurbishment business, although it has not stopped building at any time.

The main business of the family company is the real estate sector, comprising homes, commercial premises, warehouses and offices. Its area of influence is Barcelona, although its presence extends across the whole of Cataluña. It also has some parking and hotel businesses.

The market for new homes in the autonomous region is recovering, although more slowly than the sector had expected. The Association of Property Developers of Cataluña (APCE) states that last year construction of 8,313 homes was started. That figure represents a 34% increase compared to 2015 but is 18% lower than the 10,000 new homes that were planned.

Original story: Expansión (Gabriel Trindade)

Translation: Carmel Drake

Málaga Will Need 6,000 New Homes Per Year To Meet Demand

5 April 2016 – La Opinión de Málaga

Indicators for the housing market are starting to recover after years of a complete slump in house sales, however high rates of unemployment and family indebtedness mean that most of Málaga’s population still has limited possibilities when it comes to buying a home.

Nevertheless, the Bank of Spain predicts in a report that the province of Málaga will require 84,812 primary homes between now and 2029 to meet the demand for new households that will be constituted during that period. The study predicts that in Málaga, in a scenario built on actual economic and population trends in recent years, more than 6,000 new households will be created each year, a figure that makes it the second most dynamic province after Madrid (where more than 21,000 households are expected to be created) and ahead of Sevilla (4,097), Murcia (3,564) and Granada (3,104). The figures are negative in 17 Spanish provinces because the population forecasts indicate that there will be fewer households overall. (…).

These calculations do not mean that all of those homes will have to be built from scratch. The report reminds its readers that one of the legacies of the crisis in the country has been the persistence of the stock of finished homes that have still not been sold. In fact, the Bank of Spain says that the potential demand reflected in the study “may be met through the construction of new properties, but also in the first instance, through the sale of homes that have already been built”. Besides, many new families may choose to rent or buy second-hand homes.

In Málaga, according to the most recent official figures from the Ministry of Development, the housing stock contained 12,672 homes at the end of 2014, although the Association of Construction Companies and Property Developers in Malaga (ACP) believes that this figure may have now been reduced to almost half. (…).

The rest of the country

At the national level, the report says that 63,000 households will be created each year in Spain, under the base case scenario and 238,000 households will be established in the most optimistic scenario, resulting in a potential housing volume for that period of between 900,000 and 3.3 million. According to the Ministry of Development, the stock of new homes pending sale in Spain comprised around 540,000 units at the end of 2014, having decreased gently since 2010. (…).

Original story: La Opinión de Málaga (by José Vicente Rodríguez)

Translation: Carmel Drake

Significantly Fewer Homes For A Much Smaller Population

7 March 2016 – Cinco Días

The real estate sector is preparing to undergo a comeback this year after the burst of the real estate bubble caused house prices to depreciate by 35% since 2008 and more than half of its productive fabric was destroyed. The cranes have returned, albeit, in moderation, for the time being. And the demographic projections support this caution, given that between now and 2029, Spain is expected to lose one million inhabitants.

In the face of some apparently overly optimistic estimations from certain players in the real estate sector about the evolution of the market this year, experts and other operators, such as the national trade association of property developers APCE emphasise the need for prudence and restraint when taking on new projects.

The truth is there are many reasons to be optimistic. House prices seem to have bottomed out across most of the country, sales are continuing to maintain the good tone with which they closed last year and the return of financing has resulted in a higher volume of solvent demand. If the improvement in the labour employment continues in the short and medium term, then property developers will be in no doubt that 2016 will be the year of the return of construction with figures showing the market taking off, after it lived the worst crisis of its recent history.

But, as always, there are risks and threats that cannot be ignored. The most short-term factors will be those relating to the good performance of the economy: employment, credit and interest rates are three key variables. Plus, the political climate. (…).

However, one of the variables that was critical during the previous real estate boom and which all Governments and economic agents must bear in mind is that of demographics.

At the end of this year, the National Institute of Statistics (INE) will update its long-term population projections, which it does every two years. The last update, at the end of 2014, drew devastating conclusions that the real estate market cannot ignore if it wants so avoid another phase of runaway growth, with the undesirable effects on price, supply, indebtedness, activity and employment. Thus, in 2015, INE’s first prediction was fulfilled. It was the first year during which the number of deaths exceeded the number of births, and so began the population decline that INE has forecast will happen over the next 15 years, which will amount to 1.02 million inhabitants (2.2%) in total and will amount to 5.6 million inhabitants over 50 years. In this way, there will be 45.8 million residents in Spain in 2024 and just 40.9 million in 2064.

The reduction in the population will happen as a result of this gradual increase in deaths over births, a trend which, if nobody remedies it, will become even more accentuated, above all from 2040 onwards, and which will not be mitigated even by the flow of migration. Not even considering that over the same period there will be a net positive migration balance of 2.5 million people  (the difference between immigrants who arrive in Spain and Spaniards who move overseas). The truth is that the baby boom generation, the largest in Spain’s recent history, explains to a large extent how the most prolonged period of rising prices and house sales last century was created from the end of the 1990s. (…).

Gómez-Pintado has already launched a study at APCE to calculate, in the most comprehensive way possible, what the demand for homes will be by autonomous region between now and 2017. “The purpose of the study is to establish ranges of need for housing and to avoid constructing in places where there is no demand”. (…).

Although the study has not been completed yet, Gómez-Pintado revealed that his projections will fall in the intermediate range, between the most pessimistic, i.e. those who calculate demand of just over 60,000 homes per year, and those who are convinced that almost 250,000 new homes may be built.

According to Josep Oliver, Professional of Applied Economy at the Universidad Autónoma de Barcelona, not even the pull on demand for housing from foreigners can justify the construction of 250,000 homes per year. (…).

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Tinsa: Most Homes Bought In 2015 Cost Between €50k & €100k

31 December 2015 – El País

(…) Most of the homes bought this year cost between €50,000 and €100,000. That has been the most popular price range in the provinces of Madrid, Valencia, Sevilla, Zaragoza, Málaga and the Canary Islands. Homes were more expensive in Barcelona and the Balearic Islands, where they typically cost between €100,000 and €150,000. Those are the findings of Tinsa’s IMIE Local Markets Index for Q4, published yesterday, which concludes that the average price of finished homes (new and second-hand properties) rose by 1% in Spain in 2015.

This data, which represents the first YoY increase since the beginning of 2008, reflects the changing trend in the evolution of prices. Just a year ago, in the last quarter of 2014, the same index reflected a YoY decrease of 4.5%. (…).

During 2015, average prices increased the most in YoY terms in the Catalan provinces of Girona (10.7%), Barcelona (5.8%) and Lleida (5.3%), as well as in Albacete (4.5%) and Madrid (3.3%). In terms of provincial capitals, Barcelona led the ranking with a YoY increase of 8.5%, followed by Badajoz (5.7%), Ávila (4.3%) and Madrid (3.8%). Prices are expected to increase at rates of less than 5% during 2016. Nevertheless, the evolution of the market will be determined by the political panorama in Spain, as well as by the high level of debt that the economy and families still hold, and the quality of new jobs. The creation or otherwise of new solvent demand will be the main driver, to the extent that the pent-up demand, which is currently boosting the market, loses power.

“We should not forget that the market is extremely heterogeneous and is moving at different speeds depending on the area. If we compare average prices in Q4 2015 with those from the same period last year, then average prices have increased in 21 provinces and 15 provincial capitals, but at the same time, they have decreased by more than 5% in nine provinces and ten provincial capitals”, say sources at Tinsa. (…).

How long does it take to sell a property on average? 

On average, it takes 10.2 months to sell a home in Spain, compared with 10.6 months as at June 2015. Cantabria is the province where sales take the longest: 18.6 months. Sales periods significantly above the national average are also reported in the provinces of Álava, Segovia, Ávila, A Coruña, Salamanca and Vizcaya, where it takes more than 14 months on average to sell a home. The provinces where buyers are found most quickly include: Ceuta (3.7 months), Melilla (5.3 months), Soria and Santa Cruz de Tenerife, both with an average of seven months.

Barcelona stands out as the provincial capital that requires the greatest financial effort to buy a home, with 23% of gross annual household incomes being used to finance the first year of mortgages. Meanwhile, Madrid is the major provincial capital with the most liquidity when it comes to selling a home, since it takes less than six months (5.8 months) on average to sell a home, compared with 6.1 months in Barcelona and 13.5 months in Valencia.

Original story: El País (by Sandra López Léton)

Translation: Carmel Drake

Renta Corporación Intends To Double Its Profits In Five Years

24 July 2015 – El Economista

Renta Corporación has launched a new five-year strategic plan (for the period 2016-2020), in which it details its plans to double its profit to €20 million by 2020, compared with the €9 million that it expects to generate this year, according to the real estate company.

Thus, the company, which exited from bankruptcy proceedings last year, embarks on a new growth phase, driven by the economic recovery and the real estate sector.

In this context, the real estate company, which specialises in the purchase of buildings for their renovation and subsequent sale, will focus on “taking advantage” of the opportunities that arise in the sector “mainly, in the management of assets for third parties” and in increasing the number and size of its transactions.

In this sense, Renta Corporación expects its turnover to almost double (+88%) over the next five years to reach €340 million by 2020.

The real estate company will combine this new policy with its compliance with a creditors agreement (through which it emerged from bankruptcy in June 2014), as well as a unilateral agreement it made with the Tax Authorities to repay its senior debt.

During the first half of the year, Renta Corporación recorded a net profit of €4.5 million, i.e. 47% less than in 2014, because of the effect of a reclassification that it had to record for part of the debt it holds with the Tax Authorities.

Appeal to the Supreme Court regarding its debt with the Tax Authorities

Specifically, as a result of a ruling issued by the Provincial Court of Barcelona, the real estate company had to classify €9.3 million of the amount it owes to the Tax Authorities as senior debt.

Nevertheless, the company has appealed against the ruling to the Supreme Court and estimates that “the effects of this reclassification may be reserved in the event that this judicial review considers it appropriate”.

Renta Corporación’s half year results were also affected by the extraordinary items that the company recorded in 2014. Profits remained stable during H1 2015 at €4.4 million; meanwhile, the company recorded a negative EBITDA of €500,000), compared with an EBITDA loss of €25.2 million a year earlier.

At the end of June, Renta Corporación held net financial debt amounting to €17.6 million, roughly in line with its debt balance at the beginning of the year.

The company’s new strategic plan also envisages a gradual reduction in its level of indebtedness, from a liability of €17.5 million forecast for the end of 2015, to €4.9 million in 2019, to a positive balance by 2020.

Original story: El Economista

Translation: Carmel Drake

RE Sector: Are The Mistakes Of The Past Being Repeated?

3 June 2015 – Expansión

Overseas investors are exerting significant buy-side pressure, which is driving up property prices; the experts hope that rental prices will increase accordingly, otherwise another bubble will begin to grow, they fear.

The mass entry of foreign capital into Spain’s real estate market after six years of absolute drought has led to significant changes in the sector, but some (experts) fear that the mistakes of the past may be repeated. At a meeting of experts from the real estate sector, organised by Expansión and KPMG, the speakers agreed that the (economic) cycle has now changed, but they warned against the speed of the price increases in certain segments and the indebtedness of some transactions.

CBRE’s CEO in Spain said that “two years ago, we could not have dreamed of such a rapid recovery”. He added: “From the outside, the investment sector validates that Spain will do its homework and that rental prices will recover, however these rents must increase, since they are the lifeblood of the sector; if not, we will be inflating a new bubble”.

The director of the Masters in RE Consultancy at the University of Barcelona, Gonzalo Bernardos, is more pessimistic. “We are witnessing a new cycle of growth that is going to result in further price rises in Spain; whether that is harmful or not will depend on the financial institution, but I personally have serious doubts as to whether the banks have learned anything”, he said.

(…)

By contrast, the partner responsible for Real Estate at KPMG in Spain, Javier López Torres said that “banks are reviewing transactions with tremendous care, they are not managing land any more”. And he confirmed that “in a residential building, for example, the loan to value ratio must not exceed 50%”.

The CEO of Hi Partners, Alejandro Hernández-Puértolas also thinks that “the analysis that banks are currently performing with respect to hotel assets goes beyond their mere value, it is completely different from a few years ago”. He said that “increasingly, there are more sophisticated investors in this segment: it will be an important year for investment by private equity firms, Socimis and private individuals”.

Rebound effect

All of the speakers agreed that there has been a rebound effect in Spain after the investment drought. However, the co-founder of Elix, Jaime Lacasa, is concerned about the debt that is accompanying the investment operations. He thinks that “the banks’ models are too short-termist” and…he considers that many people are practically being forced to invest their money.

The CEO of Colonial, Pere Viñolas, also thinks that “the mistakes of the past will be repeated in the future: significant errors may already be happening in some deals in Spain”, he said. In Madrid, for example, “players are investing in office buildings on the outskirts, at very dubious prices. In general, in the prime areas, property values are now just 30% below the peaks reached in 2007 and the recovery in terms of rental income has not even started yet”.

(…)

Financing

Martínez-Laguna wanted to point out that the property (ownership) business should be distinguished from the property development business…Lacaso affirmed that in the development sector “the riskiest financing is to developers; if we solve that, then financing to end buyers is not risky”. He also called for “regulation of the development sector..”.

Bernardos thinks that “Spain will be fashionable for a few more years” and also that “the Catalan independence process will crush the office market in Barcelona”.

Original story: Expansión (by Marisa Anglés)

Translation by: Carmel Drake

The AEB Thinks That The Mortgage War Is “Very Positive”

6 January 2015 – Expansión

AEB/ The Chairman of the bankers’ assocation says that the current battle for mortgages indicates that the financial sector is still competitive, despite the concentration of entities.

The on-going battle between banking institutions to offer new mortgages is a clear sign that the system is performing well following the restructuring of the last few years, according to the Spanish Banking Association (Asociación Española de Banca o AEB). Its Chairman, José María Roldán, said yesterday that it demonstates “that we have a competitive financial system. We are seeing a very strong degree of competition, to the extent that opportunities and confidence have allowed, and I believe that this is very encouraging. The most important thing is that the choice of loan is appropriate in terms of risk. All of this indicates that, despite the process of concentration that has taken place, healthy competition is still very much alive”.

Re-activation

Roldán was speaking at the Conference on the Spanish banking sector, organised by the Valencian Institute of Economic Research (el Instituto Valenciano de Investigaciones Económicas or IVIE). In his speech, he said that the most important thing right now is that demand for credit in Spain is returning. “Excessive leveraging has been corrected, in some cases loans have been written off and in other cases they have been refinanced, and so we now have sectors with less debt, which the uncertainties would not allow to commit to any investment projects”, he explained.

Now “we are in a situation in which the banks are fully prepared to finance the process of economy recovery, financing rates are very low and demand for credit is beginning to return. At present, there is strong competition between banks to grant loans. Although that does not mean that everyone asking for a loan will be granted one”.

Growth

Nevertheless, he considers that it is “difficult to predict when bank credit (on an aggregate basis) will begin to grow, since it depends on two processes. One, in which economic agents with good financial standing are able to demand and obtain credit, and the other, whereby the agents that are still heavily indebted are continuing to service their debts”.

But he reiterated that “that is not the most important thing. What is important is that demand for credit is increasing and that financial institutions are prepared to meet it”.

Original story: Expansión (by J. Brines)

Translation: Carmel Drake