Lone Star To Spend €500M On Land For Homes in 2015

11 June 2015 – Bloomberg

Lone Star Funds, the private-equity firm founded by billionaire John Grayken (pictured above), will invest as much as €500 million this year buying land in Spain for housing developments as demand picks up.

“Despite the glut of homes in Spain, there are areas where stock is running out and we aim to fill that gap,” said Juan Velayos, CEO of Neinor Homes, the Lone Star unit seeking to become Spain’s biggest home builder. “We aim to build homes where there is solvent demand and where people can afford to and want to buy.”

Lone Star’s blueprint for Neinor signals the changing sentiment toward the nation’s residential property market, which is rebounding after a six-year slump when prices fell by as much as 40%. The company will buy land in Madrid, Barcelona, the Balearic Islands and some coastal areas where stock is being depleted, Velayos said in an interview in Madrid.

Dallas-based Lone Star bought Neinor from Spanish lender Kutxabank SA in December for €930 million. It has already signed contracts to purchase 230,000 m2 of land for €187 million to construct 2,050 homes, Velayos said. The firm will target middle class homebuyers aged 40 to 50.

House prices rose by 1.5% in the first quarter from a year earlier and there was a 9.4% surge in transactions. The Madrid region is helping to lead the revival, with sales jumping by an annual 20% in April, while the volume of transactions grew by 18% in Cataluña.

‘Astute’ Strategy

“Their strategy has a very high chance of success as properties are literally flying off the shelf in these areas,” said Fernando Rodriguez de Acuña, head of Madrid-based property research firm R.R. de Acuña & Asociados. “Targeting that stratum of the population is very astute given that that age bracket normally has stable employment, savings and already some equity in housing.”

Both domestic and international buyers evaporated when the economy collapsed during the financial crisis, leading to an international bailout of Spanish banks and the worst recession in the country’s democratic history. An excess of credit-driven construction before the slump led to a surplus of more than 1.6 million homes after sales plunged from 955,186 units in the peak in 2006 to 365,594 units last year.

Possible IPO

“Demand for homes in Spain will never go back to the numbers we saw at the peak of the boom and for this reason we have carried out extensive research,” Velayos said. “Many excess homes and land are situated in areas that will never sell because there is simply no demand. So we only develop in areas where we have the complete conviction that people can and want to buy.”

An initial public offering of Neinor could happen if the plans for the company work out, Velayos said.

Spain has an excess of 1.6 million empty homes, of which as many as 60% were built in areas where there is no demand, according to Rodriguez de Acuña.

“Madrid, Barcelona and good areas on the coast such as Málaga are where we are seeing the most activity and the jump in transactions that we are seeing corresponds to those areas,” Rodriguez de Acuña added.

Original story: Bloomberg (by Sharon Smyth)

Edited by: Carmel Drake

Funds And Developers Compete To Buy Land In North Madrid

9 June 2015 – El Confidencial

Land is no longer the most toxic asset in the market, rather it has become one of the most sought after by investors. Although, not all plots or all locations are of interest, it is clear that the number of transactions, especially in Madrid, has reached “cruising speed” during the last few months. But, what are investment funds and property developers looking for exactly?

“Land has to be ready to build on (‘suelo finalista’); it is imperative that we can begin to build on it within a period of six months”, says Roberto Roca, Investment Director, Head of Spain at Orion Capital Managers, a fund that has closed two of the largest shopping centre transactions centres in Spain in the last year: the sale of Puerto Venecia (Zaragoza), the largest shopping centre in Europe, for €451 million and the sale of Plenilunio (Madrid), for a record figure of €375 million.

(…)

The market for land in Madrid is in full swing, to the extent that some experts agree that there is “overheating” in certain specific areas.

“Most activity is concentrated within the M-30 and on buildable land. Also, outside of the M-30, to the North of Madrid, from the A-6 to the A-1, i.e. the area comprising the urban developments of Arroyo del Fresno, Sanchinarro, Montecarmelo and Las Tablas”, says Ernesto Tarazona, Director of Residential Property and Land at Knight Frank.

However, in the South of Madrid, “despite the decreases, prices have not dropped enough…to reflect the real demand in the area”, concludes Tarazona.

(…)

One of the most active players in the market is Neinor Homes – the result of Lone Star’s purchase of the real estate arm of Kutxabank – which has €1,000 million to spend on land in Spain, and which regards Madrid as one of its main targets. The company led by Juan Velayos has just bought four plots in Alcobendas and another one in San Sebastián de los Reyes – both towns to the North of Madrid – for almost €65 million. This has been the largest land transaction so far in 2015, both in terms of square metres acquired, as well as surface area purchased. The plots are completely established and ready for construction, with a total surface area of 70,000 m2 and a buildable area for the construction of almost 600 (unsubsidised) homes. The vendor was a private group, i.e. the land did not used to belong to the Public Administration.

This transaction comes after the recent purchase of three other plots of land, one in Madrid and two in País Vasco for €22 million. According to a statement from BNP Paribas Real Estate, which advised on the deal, the first plot – with a buildable area of 6,400 m2 – is in the Legazpi neighbourhood and has been granted a special plan, approved by Madrid’s Local Council, to build a 20-storey tower block. The other two plots are located in Gexto and Urduliz.

Meanwhile, the cooperative manager Ibosa is finalising an agreement with an investment fund, which will allow it to pay €70 million to buy 40,000 m2 of land from the Valdebebas Compensation Board, which will allow the construction of 1,000 homes (of which 100 will be social housing).

Nevertheless, the largest land-related deal in Madrid is undoubtedly the possible future auction – maybe after the summer – of the Ministry of Finance’s plot of land on Calle Padre Damián, which already has 4,000 individuals calling at its door.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake