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

Cifuentes Presents New Land Act For Community Of Madrid

25 October 2016 – Expansión

Yesterday, the President of the Community of Madrid, Cristina Cifuentes (pictured above), submitted the draft bill for the new Law governing Urban Planning and Land in the Community of Madrid, an initiative long demanded by the Madrilenian real estate sector. The bill aims to clarify and organise the management of urban planning in the region, whereby replacing the existing regional Land Act, which dates back to 2001.

During its 15 years of life, the existing text has been partially modified 15 times, which, as the Ministry of the Environment, Local Administration and Land Planning itself admits, has ended up making it “difficult to understand and interpret”.

“Circumstances have changed considerably over the last 15 years and so the content of the Land Act has been completely distorted”, acknowledged Cifuentes yesterday during the presentation of the new draft bill. “This new law has been put together as a single piece of legislation to give coherence to the urban planning rules”, she added.

The regional Government plans to submit the Draft Bill to the Assembly before the end of the year and, according to Cifuentes, it hopes to obtain “the maximum consensus and support possible”. It is something that seems almost impossible, taking into account that eight months ago both the PSOE and Podemos left the technical and political tables that have been managing the text presented yesterday.

This was not helped either by the fact that Ciudadanos decided to put “an end” to these working tables in a unilateral way “to look for a new consensus”, according to an announcement last week from its spokesman in the Assembly, Ignacio Aguado. The orange party’s idea is to look for maximum political support to approve the law, and so it is advocating that the work of these tables be transferred to the specific report about the Land Act, which already exists in the Assembly.

“We want a Law that represents the consensus of all of the political groups and not another piece of steam roller legislation from the PP”, said Aguado. “Ciudadanos is going to fight to ensure that there is real citizen participation and genuine transparency in the way that urban plans are prepared. We want to put an end to the current opacity”, said the spokesman. (…).

New elements

In addition to the goal of making urban planning “more agile and transparent”, the Draft Bill presented yesterday by Cifuentes includes some important innovations. The most notable is its commitment to urban renovation and regeneration, compared with the model of expansionist urban planning under the previous legislation.

In this sense, one of the most innovative aspects is the fact that cities in the region will have the opportunity to undertake the renovation of large areas without the need to modify their General Plans. (…).

The new text retains the categories of urban land – buildable and non-buildable, but eliminates the category of unsectorised buildable land, which becomes non-buildable common land. Nothing can be built on this kind of land, under any circumstances, unless its classification is changed in the general plan upon request by the town halls themselves. “The aim is to achieve a more sustainable urban planning approach that avoids unnecessary urban planning developments”, say sources at the Ministry.

Other novelties include the creation of a Simplified General Urban Plan, designed for towns with fewer than 5,000 inhabitants and budgets of less than €6 million. Those towns may choose to adopt this framework, which is more flexible and agile than an ordinary plan, provided that the work focuses on historical centres and does not include any new developments. This framework may be applied to almost half of the 179 municipalities in the region.

Original story: Expansión (byLuis M. De Ciria and Carlota G. Velloso)

Translation: Carmel Drake