ASG Homes Negotiates the Sale of 1,000 Rental Homes to Institutional Investors

19 June 2019 – Expansión

ASG Homes, the property development arm of the European manager ASG, is following in the footsteps of many of the major property developers in Spain by putting up for sale 1,000 rental homes.

The announcement comes in response to interest from institutional investors in acquiring and managing portfolios of rental homes, given the booming demand in the rental market.

Specifically, ASG Homes is negotiating the sale of 3 of its developments in San Sebastián, Madrid and Sevilla, which will be worth €200 million once finished, with investment funds, Socimis and family offices.

ASG Homes had planned to hold onto the properties and manage them itself but the strong interest from investors has resulted in a change of tack. In this way, the company is emulating the strategies of several listed property developers, such as Metrovacesa and Aedas Homes.

In total, ASG Homes has a landbank spanning 500,000 m2 with the capacity to build 5,000 homes distributed across Madrid, Alicante, Estepona, Marbella, Salamanca, Barcelona, Sevilla and Valencia. It launched its business in Spain in 2013 and invests not only in the residential sector, but also in the hotel, shopping centre and office segments.

Original story: Expansión (by Rebeca Arroyo)

Translation/Summary: Carmel Drake

CaixaBank Creates a Subsidiary to Finance Loans to Property Developers

17 June 2019 – Eje Prime

CaixaBank has created a new subsidiary to finance loans to property developers. The entity will operate under the brand CaixaBank Real Estate&Homes and will seek stable agreements with established property developers such as Neinor, Aedas Homes and Vía Célere, amongst others.

In 2018, CaixaBank financed 581 real estate projects lending €2.6 billion in total, up by 13% YoY. Moreover, 84% of the developments financed by the bank last year corresponded to projects involving less than 50 homes.

Original story: Eje Prime

Translation/Summary: Carmel Drake

Spain Needs 150,000 New Homes Per Year But the Market is Capable of Delivering Only 75,000

16 May 2019 – El Confidencial

According to the experts, on the basis of the rate of formation of new households and for a healthy residential market, Spain needs to produce between 120,000 and 150,000 new homes per year. Those figures are a far cry from the 650,000 units that were constructed in 2007, just before the outbreak of the real estate crisis. Nevertheless, the latest data reveals that even 150,000 homes is too ambitious a target, at least for the next few years.

That is according to the latest Real Estate Pulsometer, compiled by the Cátedra Inmobiliaria in collaboration with the University of Málaga, which estimates that 70,400 new homes will be finished by the end of this year and 77,100 by the end of next year. In other words, half the number needed. The reason? According to José Antonio Pérez, Director General of the Cátedra Inmobiliaria, “In simple terms, the sector does not have sufficient manpower to build that many homes. There are sufficient numbers of qualified people – such as architects and surveyors -, but there is a distinct lack of basic labour, such as workmen and builders”.

Tens of thousands of jobs were destroyed in the construction sector during the crisis. At the height of the boom, the sector and its related segments employed almost 2 million people, but by 2017 (latest available data), that figure barely exceeded 800,000. In other words, almost 60% of the workers had disappeared. Most have either left the country (many were foreigners) or reinvented themselves in other sectors and are reluctant to return to construction now.

Employment in the construction sector has recovered slightly over the last three years, with almost half a million people working in the sector. But that figure is not sufficient to build the homes that the country needs, which means delays and higher construction costs.

Lack of bank financing

The situation is compounded by the lack of available land and the shortage of bank financing to launch those 150,000 homes. The banks are willing to finance just 65,000 homes per year, according to Juan Antonio Gómez-Pintado, President of Asprima (the Association of Property Developers of Madrid). Several alternative financing funds are trying to cover the gap but they are not enough.

It is also true that stagnant salaries and problems of affordability for young people are other factors at play against the construction of so many homes.

Original story: El Confidencial (by E. Sanz)

Translation/Summary: Carmel Drake

Íbero Capital Lends €80M To Property Developers to Finance 600 New Homes on the Coast

28 March 2019 – El Confidencial

Property developers are finally able to access alternative financing. Over the last 12 months, Íbero Capital Management has granted loans amounting to €80 million to various property developers to finance the construction of more than 600 homes across Spain.

In its latest operation, Íbero CM has signed an agreement with Grupo Sankar to finance six residential projects in the province of Málaga for €40 million. The projects will involve the construction of more than 400 homes, and follow three other projects to which financing was granted (to another property developer) last year in Mijas.

Looking ahead, Íbero CM expects to sign several new loan operations during 2019 to close the year with total financing granted of almost €250 million. The manager is negotiating with national and regional property developers alike in regions such as the Community of Valencia, Andalucía and Madrid.

Alternative financing for residential development projects is finally taking off after years on the fringes. Other companies operating in the sector include MCAP Global Finance, Azora and Oquendo Capital, amongst others.

Original story: El Confidencial (by E. Sanz)

Translation/Summary: Carmel Drake

CBRE: New Homes Under Construction on the Costa del Sol Will Be Sold for c. €6,000/m2

18 February 2019 – Diario Sur

Six thousand euros or one million pesetas (…). That is what the buyers of the new single-family homes in Nueva Andalucía, in Marbella, can expect to pay per square metre. The real estate consultancy CB Richard Ellis has compiled a report about the characteristics of the new build developments that are being constructed on the Costa del Sol. And, the changing trend is reaching such an extreme that the analysts involved are talking about “a new building paradigm” in the residential market on the Costa del Sol, in this cycle of reactivation of the sector. The general conclusion is simple: better quality homes are being built, with more considered designs and common services, but also with much higher prices.

The document points out that in the past, the large number of transactions were sold for speculative purposes and, therefore, fundamental questions such as finishes, orientation, views and distribution were often neglected in the developments that were put on the market (…).

But times have changed. In this new cycle, property developers are taking care of their products and focusing their attention on clients with medium/high purchasing power and primarily those from overseas. It is not so much a question of location, be it in one specific municipality or another, but rather the quality of the product. (…). Now, most of the developers are backing more contemporaneous designs, with straight lines and large windows, with some of the best finishes in the market.

Change in model

“The reality is that during the last cycle, homes were built for the average market, but following the crisis years, almost everything is now being constructed to serve a niche in the market, of average-high purchasing power, which was previously unmet demand”, explains Andrés Moreno, Director of the Valuations Department at CBRE in Andalucía (…). “Now, much more care is being taken. Everything is designed with the final purchaser in mind (…)”.

The report highlights that the Costa del Sol is consolidating its position as an exclusive and luxurious destination. And that trend means that the newest flats are far from affordable for the general public (…).

In areas around Torremolinos, there are developments with sales prices of more than €4,000/m2, when the average for the area does not exceed €2,500/m2 for second-hand properties. In the Fuengirola/El Higuerón area, new build homes are being marketed for more than €4,000/m2. Prices amount to close to €3,000/m2 in La Cala de Mijas and rise to €6,000/m2 in Nueva Andalucía and Behahavís. The average budget of these clients ranges between €500,000 and €1 million.

Original story: Diario Sur (by Ignacio Lillo)

Translation: Carmel Drake

BNP Paribas: Valencia’s Logistics Stock Set to Rise by 100,000 m2

12 February 2019 – Valencia Plaza

The logistics capacity in the province of Valencia is going to increase by 99,457 m2 this year with the launch of five new platforms located in Riba-roja, Torrent, Paterna and Loriguilla, according to the latest report from BNP Paribas Real Estate.

Moreover, there are locations that will offer the possibility of “turnkey” constructions with a total constructed surface area of more than 200,000 m2.

The purchase price of logistics space has risen to €200/m2-€220/m2 in the most sought-after locations due to the interest in the purchase of land from property developers and investment funds, in an area where available logistics space currently accounts for just 2.8% of the total, and 77% of that surface area is located in Riba-roja.

Due to the lack of availability, maximum rental prices have increased slightly to reach €4.5/m2/month in Riba-roja.

In 2018, demand for logistics space remained high and 24 operations were signed, three more than during the previous year. The most sought-after area was Riba-roja, which accounted for 30% of the space leased.

Nevertheless, last year closed with 127,502 m2 of logistics space leased, a very similar figure to the average for the last four years although somewhat lower than in 2017 (by 30,000 m2).

The fourth quarter of 2018 saw high leasing activity and accounted for 43% of all of the surface area leased during the year.

Original story: Valencia Plaza 

Translation: Carmel Drake

Izilend to Spend €200M Financing Real Estate Projects in Spain

1 February 2019 – Expansión

Izilend has arrived in Spain with the launch of a vehicle, which has funding of up to €200 million to finance real estate projects in the country.

Since September, the alternative financing firm has already undertaken ten operations worth €20 million and it plans to finance operations amounting to €50 million during the course of this year.

Izilend, which has a presence in Portugal with a real estate crowdfunding platform, forms part of the holding company FS Capital Partners, which also includes a servicer, Fintech, Finsolutia and a financial advisory company (EAFI).

Izilend is thereby joining other alternative financing platforms specialising in the real estate sector that have made their debuts in Spain in recent months, such as Íbero Capital Management, from the US investment fund Oak Hill Advisors, and the firm promoted by Azora and Oquendo.

Focus

In the case of Izilend, the firm focuses on the financing of projects amounting to between €1 million and €10 million. To date, it has financed investors, property developers, cooperatives and Socimis for projects in Madrid, Málaga, Sevilla and the Balearic Islands. The financing fund intends to continue expanding the focus and to finance different types of assets ranging from housing, offices, retail and land in the main cities of Spain and Portugal.

Francisco Jonet, one of the people responsible for Izilend’s business in Spain, explains that the company offers a solution to property developers and real estate investors to develop projects that the traditional banks are not interested in either due to the type of product, the situation of the operation or the response times.

“To date, we have financed firms ranging from small property developers to Socimis, and products ranging from land to residential blocks, located in different provinces around the country”, said Jonet.

Gonzalo Gutiérrez de Mesa, the other person in charge of the fund, forecasts that the demand for alternative financing will double over the next five years and will thereby approach the market rates in more mature countries in Europe, where this type of financing accounts for between 30% and 40% of the total market. “We are creating a new niche in which we believe there is great potential”, adds Gutiérrez.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Aedas, Neinor & Merlin Properties Put €1bn on the Table for Sabadell’s Land

29 January 2019 – OK Diario

Banco Sabadell has now opened the sales process for Solvia Desarrollos Inmobiliarios, its real estate developer, for which the entity expects to obtain €1 billion. To date, the entity chaired by Josep Oliu has already sent the teaser to almost 30 interested parties. But there has been an important development, and that is that it is not only the typical funds that tend to participate in these types of auctions that are interested in the company, property developers are also keen, including Neinor, Aedas and Merlin Properties.

It is worth remembering that when Sabadell decided to sell Solvia, it separated the house-sale business and the real estate development business into two different companies with the aim of achieving a better offer. The land, which is owned by the second firm, forms part of the bank’s balance sheet and that is what is now up for sale.

According to sources speaking to OK Diario, the deadline for non-binding offers will finish in March; it will be after that when Banco Sabadell will start to receive binding offers. Sources in the know indicate that the operation will be closed in the second quarter. And, moreover, in addition to the aforementioned property developers, funds such as Cerberus, De Shaw, Blackstone, Värde, Apollo and Oaktree have also received the teaser (…).

The main plots of land owned by Solvia Desarrollos Inmobiliarios are in Madrid, Barcelona and several places along the Mediterranean Coast. The portfolio includes plots that the buyer will have to reclassify in order to be able to sell, resell or transform them, as well as plots that are ready for development. It is precisely in those assets that so many property developers have expressed their interest.

Banco Sabadell obtained a profit of €138 million from the sale of 80% of Solvia, its real estate subsidiary, to Lindorff, a company that belongs to the Intrum AB group, for €300 million. With that operation, Sabadell, which has retained ownership of the remaining 20% stake in Solvia, achieved a positive impact on its Common Equity Tier 1 (“fully loaded”) capital ratio of 15 basis points.

The completion of that operation, which is subject to obtaining the corresponding authorisations, is also scheduled for the second quarter of 2019 (…).

Original story: OK Diario (by Borja Jiménez)

Translation: Carmel Drake

Goldman Sachs Pays €63M for A Plot of Land in Madrid

6 December 2018 – Eje Prime

Goldman Sachs is targeting the prime housing market in Madrid. The US investment fund has just purchased a plot of land in the centre of the Spanish capital for €63.7 million. The development of luxury apartments planned for the site is going to be built by the Catalan property developer Uniq.

The acquired plot is located at number 147 Paseo de la Habana and has a finalist surface area of 10,000 m2. The vendors are members of a family from Asturias. In the bid for this plot, Goldmans competed with other funds and property developers, such as Grupo Ibosa, Grosvenor, Pryconsa, Domo and Nozar, according to El Confidencial.

With this partnership, Uniq will have the possibility of increasing its presence in Madrid, where it already has a project underway in a former tenement building in Plaza de San Juan de la Cruz. Now, the Catalan property developer is going to build a development less than 1km from Paseo de la Castellana and the Santiago Bernabeú.

The area in which the development will be located has been receiving a lot of investment from wealthy Latin American families, recently. They are driving prices up in the residential market since they are “willing to pay well above the market average”, according to sources in the sector speaking to Eje Prime. They are interested in withdrawing their capital from their countries of origin, many of which are unstable, economically speaking, to invest in Spanish real estate, which offers them greater security.

Original story: Eje Prime 

Translation: Carmel Drake

Ghost Towns Still Haunt Spain in Property Rebound a Decade After

25 November 2018 – Bloomberg

Juan Velayos’s biggest headache these days is getting licenses fast enough to hand over new homes such as the upscale condos his company is building in the northern suburbs of Madrid.

Less than 60 miles away, Ricardo Alba’s neighborhood tells a different story about Spain’s property market. The fencing instructor is one of only two occupants at a block of apartments whose development was frozen in its tracks when banks pulled the plug on credit.

“The real estate sector’s recovery in Spain is developing at two clearly different speeds,” said Fernando Rodriguez de Acuna, director of Madrid-based real-estate consultancy R.R. de Acuna & Asociados. “While one part of the country is consolidating the recovery of the sector and even expanding, another part of the country is stagnating and is showing few signs of returning to pre-crisis levels in the medium- and long-term.”

A decade after the financial crisis hit, Spain’s real estate recovery is a tale of two markets. Key cities and tourism hot spots are enjoying a fresh boom, fueled by interest rates that are still near historic lows, an economic recovery and a banking system that’s finally cleaning up its act. Private equity firms such as Blackstone Group LP are picking up once-toxic assets worth tens of billions of dollars and parsing out what’s still of value, often using their playbook from the U.S. real estate recovery to convert properties into rentals.

But travel a little beyond the bustling centers, to the outskirts of smaller villages, and ghost towns still litter the landscape — once ambitious developments, often started on agricultural land that was converted into building lots just before the crisis hit. They still stand half-finished, unable to find a buyer.

The “Bioclimatic City La Encina” where Alba began renting an apartment two months ago is one such development. Situated on the edge of the village of Bernuy de Porreros, about 10 kilometers (6 miles) from Segovia, it promised to be Spain’s first environmentally-friendly town, providing solar energy and recycled water for 267 homes, comprised of two-, three-, and four-bedroom chalets and apartments. A faded billboard speaks of the dreams that were sold, including communal swimming pools and gardens for residents who would “live… naturally.”

Today, only about a dozen of the homes are occupied. One street has finished homes but half have their windows bricked up to discourage break-ins, locals said. Alba does have solar panels heating his water, but his electricity comes from the local network. On the far side of the development, trees sprout out of the middle of a street that was never paved. Brightly-colored pipes and cables protrude from the ground. Bags of plaster on a pallet have long hardened.

Spain’s housing crash was fueled by a speculative frenzy combined with loose restrictions and corruption that allowed plots of farmland in rural villages to be converted to feed a demand for homes that never truly existed, said Velayos, who is chief executive officer of Neinor Homes. At the height of the boom in 2006, authorities approved 865,561 new home licenses when even in an economic boom demand is no greater than 250,000 homes, he says.

Banks were handing out loans to developers who had little to lose if a project didn’t find a buyer because the money wasn’t theirs. The result was an almost total collapse of the market and close to $200 billion of soured assets.

About half of them were bought in 2012 by Sareb, a bad bank set up by the government to help lenders. Sareb spent about 50 billion euros to acquire assets that were once valued at twice that amount, mostly loans to developers and real estate. Among the latter are also 97 of the 267 properties at La Encina. None of them are currently for sale as Sareb works through legal issues and construction of many isn’t finished.

Other assets were picked up by deep-pocketed investors such as Blackstone, which has 25 billion euros invested in Spain, according to Claudio Boada, a senior adviser at the firm. The New York-based company — the world’s largest private markets investor — is doing what it did at home after the financial crisis: renting out homes instead of selling them in a bid that fewer people can afford to own. Spain had a relatively high home ownership rate before the crisis but it has since come down.

Blackstone’s Bet

“We’re holding most of what we own and looking to rent it out for the foreseeable future,” said James Seppala, head of real estate for Europe at Blackstone. “There’s a meaningful increase in demand for rental residential around the world, including in Spain, driven by home ownership rates coming down.”

Private equity investors also backed a new breed of real estate developers that are bringing a different rigor to the industry. Companies such as Neinor and Aedas Homes S.A.U. are more tech-savvy when assessing markets, and emphasize industrial production techniques to improve efficiency. They’re behind a surge in licenses for new homes to 12,172 new homes in July, the highest monthly total in a decade.

But demand is uneven: Madrid is enjoying its most robust year of home construction since 2008 with an average of 2,151 licenses awarded per month in the first seven months of the year. In Segovia, just 27 minutes from Madrid on the state-run bullet train, an average of 25 homes licenses have been approved per month in 2018, compared with an average of 180 homes a decade earlier.

The volume of residential mortgages sold in Spain peaked in late 2005 before hitting a low in 2013. Since then they have gradually picked up, with 28,755 sold in August, a seven percent annual increase.

Velayos, chief executive officer at Neinor, said business is starting to pick up beyond Madrid and Barcelona to smaller cities and the coast. His company plans to hand over 4,000 homes by 2021, more than 12 times as many as in 2017. The biggest challenge has been getting licenses approved on time. Velayos had to cut his delivery target for 2019 by a third as often understaffed local councils cause bottlenecks in the production process.

More significantly, Spain’s real estate is now funded by investor’s equity and not credit, said Velayos. Neinor was bought by private equity firm Lonestar Capital Management LLC from Kutxabank SA in 2014 and went public in March 2017. Aedas is backed by Castlelake, another private equity investor, and was floated the same year. Metrovacesa SA, owned by Spain’s biggest banks, held an initial public offering earlier this year.

Shares of all three developers have declined this year at more than twice the rate of the local stock index, a reminder that the market’s recovery remains fragile, with higher interest rates and an economic slowdown on the horizon.

For the Bioclimatic City La Encina, that means it may take longer still until Alba gets new neighbors. Prices for half-finished chalets were slashed by half, according to residents. Some now sell for as little as 16,700 euros, half the cost of a mid-range car.

Alba doubts such cuts will lure buyers. Then again, that may not be a bad thing, he says in summing up the development’s advantages: “It’s very peaceful.”

Original story: Bloomberg (by Charlie Devereux)

Edited by: Carmel Drake