Lone Star Will Sell Up To 60% Of Neinor When It Goes Public

8 March 2017 – La Vanguardia

On Monday, the US fund Lone Star announced its intention to initiate the flotation on the stock market of its Spanish subsidiary, the property developer Neinor Homes, with the sale of up to 60% of its shares. Neinor, which is due to debut on the stock market in April, will thereby become the first property developer to go public following the outbreak of the real estate crisis in 2007.

Market sources explained that Lone Star is valuing Neinor at around €2,000 million. The fund acquired the former real estate subsidiary from Kutxabank in 2014 for €925 million and then invested another €200 million in a capital increase in order to purchase land: with a cumulative investment of €1,100 million, the debut will allow the fund to capitalise on its commitment to the Spanish real estate sector in record time.

The property developer led by Juan Velayos (pictured above) explained in the preliminary documentation sent to the CNMV that the stock market debut will be performed in two phases. During the first phase, the firm will make a primary offer or IPO aimed at institutional investors, through which it hopes to raise €100 million, which it will use to reduce its corporate debt. It will then carry out a secondary offer, by selling shares that are currently held by Lone Star’s minority shareholders.

According to Neinor, the placement will leave between 40% and 60% of the company’s share capital as free float. Lone Star and the company itself have made a commitment to not undertake any additional sales of its shares for 180 days, whilst the management team led by Juan Velayos, the former CEO at Renta Corporación, has extended that commitment for a period of between one and three years.

Neinor owns land for the construction of 161 developments and 9,086 homes: as at December 2016, those plots had a gross value of €1,120 million and a gross development value of €2,548 million, which guarantees the company’s activity until 2021.

Since its creation, the company has been planning its IPO, applying standards of corporate governance, professionalisation and customary transparency in listed companies. Based on the valuation of €2,000 million that the placement firms are entertaining, Neinor will become the third largest real estate company on the Spanish stock market, behind only Merlin (with a capitalisation of €5,000 million) and Colonial (€2,450 million) and ahead of Hispania (€1,300 million) and Axiare (€980 million).

Original story: La Vanguardia (by Rosa Salvador)

Translation: Carmel Drake

Can Spain’s Rental Price Hikes Be Contained?

6 February 2017 – El País

(…) A strong increase in demand and a shortage of supply have led to increases in rental prices, which soared by 15.9% in Spain last year, according to Idealista. Barcelona and Madrid recorded historical rises, with increases of 16.5% and 15.6%, respectively.

No-one in the sector is talking about a bubble, but rather about an imbalance between supply and demand. Nevertheless, this mismatch has raised alarm bells in the two hardest hit cities. The Town Halls of Madrid and Barcelona have asked the Government to change the Law governing Urban Leases (LAU) in order to regulate prices and prevent disproportionate increases.

And the Government of Cataluña has gone even further: it is going to punish landlords who charge expensive rents. The regional government is going to establish a rental price reference index in the Spring, which will establish orientative prices per square metre, based on the size of the home, age of the building, characteristics of the home and its location. Work will be performed on the mathematical formula over the next two months.

Carrot and stick

The tool will reward or penalise ownera through the tax system, in the form of the Property Tax (IBI), in the autonomous section of the Income Tax Return (IRPF) and in renovation work. Moreover, empty home owners may even avoid fines if they rent their properties out in line with the “benchmark price”. “If the rent is lower than the reference index, then the incentive will be positive and if the rent is higher, then the incentive will be negative”, explain sources in the Housing Department at the Universitat Rovira i Virgili (URV) – which (…) at the guidance of its director, Sergio Nasarre, has coordinated the working group whose conclusions form the basis of the Generalitat’s new initiative.

The rental market is gaining weight in Spain. “It has gone from accounting for 17.9% of the market in 2001 to 22.3% in 2015”, said José Peral, Director of Sales and Marketing at Solvia, who notes that the rental sector is undergoing a seismic change. Moreover, we are seeing “market convergence towards average volumes and prices that are more aligned with those observed in other European countries”, said David Calzada, CEO at the Socimi Vbare. Calzada expects prices to continue to rise in Madrid and Barcelona, at a sustained, albeit more contained rate. Oscar Bellette, CEO at Inveriplus, forecasts that rental prices will rise by 7% in both cities this year.

Despite this, the creators of the index consider that Spain still has the smallest residential rental market in Western Europe. Moreover, “it is dysfunctional, expensive and poor quality in nature; 46% of homes are rented on the black market and more than 3.5 million homes are empty”, says Nasarre. (…).

The Catalan method, the first of its kind in Spain, is based on a methodology that has worked in Berlin for years, where 95% of rents are open-ended. The index fulfils its objective in the German capital: indexed rents rise by between 2.7% and 3% per year, whilst those not subject to the index increase by between 5% and 10%, p.a., says Jutta Hartmann, from the Berlin Tenants’ Association. (…).

Nevertheless, the initiative is generating a lot of questions and concerns amongst agents in the sector in Spain. “It is a useless and counterproductive measure, which will lead to an increase in black market activity and in the number of empty homes”, says Sergi Gargallo, Director General at Alquiler Seguro. (…).

Nevertheless, all of the agents agree that the market will benefit from professionalization, thanks to the arrival of companies such as Socimis. “In Spain, 3.8 million primary residence homes are rented out and 97% of those are owned by individuals”, says José Peral, at Solvia.

Original story: El País (by Sandra López Letón)

Translation: Carmel Drake

Sareb & CaixaBank: The RE Recovery Is Proving “Selective”

6 October 2016 – El Mundo

Some of the main players in the real estate and finance sector, such as Sareb and CaixaBank, have commented that the recovery that will take place in the housing sector over the next few years will be “selective”. They call for “caution” because the “wounds” of the last decade “are still healing”.

That was one of the conclusions to emerge from the panel debate about financing in the real estate sector at the National Conference of the Association of Property Developers and Constructors in Spain (APCE), which is currently being attended by 400 professionals in Madrid (5 and 6 October).

The Chairman of Sareb, Jaime Echegoyen, has confirmed that although the recovery in the real estate sector is still “selective”, we are seeing “favourable signs that indicate that it is here to stay”. Echegoyen described the current situation in the real estate market as a “sweet moment” thanks to the “favourable factors” at play, such as low interest rates, the professionalization of the sector and growing demand, which is why he highlighted that “it seems like the real estate recovery will last”.

We are doing everything right between us, we have learned the lessons of the past and we are benefitting well from economic growth”, said the Chairman of the bad bank, who added that it is “a reflection of the past and of what we hope for the future”.

Nevertheless, Echegoyen encouraged the sector to work to avoid repeating the erroneous actions of the past, without falling into the trap of financing innovations and, he asked that players “exert caution and a watchful eye”, given that “low interest rates have helped a lot, but they may not last for long”.

In the same vein, the Director General of CaixaBank, Juan Antonio Alcaraz, said that “the wounds are still healing” and he pointed out that entities are still recording a “steady decline” in their mortgage loans to individuals, as they are not “able” to replenish them. Moreover, he criticised the new regulatory standards, such as the code of good practice for the sector, which “have profoundly changed the rules of the game in terms of the relationship between banks and borrowers”, and contributed to the decrease of the loan book.

Nevertheless, Alcaraz clarified that mortgages to individuals are rising at a rate of 50%, but from historical lows, and he explained that we are currently seeing a change in the way that mortgages are granted, with more importance being given to people’s borrowing capacity and to interest rates.

In terms of financing, he warned that the new online platforms that facilitate financing may mean that a time comes when “we tear our hair out”, just like in the past, when it comes to the “problem of regulating” these sources of financing.

In this sense, Alcaraz referred to the impact of changes such as the introduction of floor clauses and the suspension of evictions, which means that legal uncertainty sits at the top of the list of factors that may harm the sector, followed by regulatory and digital issues. (…).

Original story: El Mundo

Translation: Carmel Drake