Spanish residential property developer Neinor is ‘closely monitoring’ the central Western region of the Spanish peninsula for potential future expansion, CEO Juan Velayos has told PropertyEU.
‘Today we are present in six different regions of Spain with a local team, active on the ground because real estate is a local business. We are closely monitoring the centre-west, regions such as Galicia and cities like Lisbon for future entry,’ Velayos said.
Neinor Homes was bought by Lone Star from a Spanish bank for some €900 mln in 2014. The US private equity group listed Neinor's shares on the Spanish continuous market in Madrid on 29 March this year in the largest-ever IPO for a European residential developer at the time. Priced at €16.46 per share, the oversubscribed IPO gave Neinor a market capitalisation of €1.3 bn. Lone Star currently has a 12.5% stake.
The company, which is based in Madrid, has had a very busy year with €275 mln worth of new land acquisitions and the launch of 70 to 80 new developments, with over 30 developments currently under construction. '2017 has been a very important year for us. In our region the last period has been extraordinary, we have been buying a lot of land and launching several new projects. 2018 will be a year of execution and a year of consolidation. We have thousands and thousands of new units being launched and over a thousand deliveries planned. We will also continue to buy land and to consolidate our business model.' In total, the company plans to complete and deliver around 22 projects next year, a 4-fold increase on 2017's levels.
Funding
Neinor has finance available to fund its development pipeline and will not need to tap the equity or debt markets for further funds. In August it received a €150 mln bridge financing from JP Morgan to fund its acquisition pipeline, in addition to some €50 mln in cash available, according to its nine-month financial results. Its loan to value stands at a low ratio of 25%.
The company, which with 1.3 million m2 claims to own the largest residential land bank in Spain, will focus on organic growth but it does not rule out a potential M&A deal in the future. ‘We have always said that we believe in organic growth,’ Mr Velayos said. ‘We also believe in the consolidation of the Spanish residential market and we have a commitment to be leading this market. If the market continues to evolve this way, we are open to every possibility.’
Competition is heating up in the Spanish residential development space, with new foreign investors entering the sector and a number of companies tapping the equity markets. Aedas – owned by US private equity firm Castlelake – sold €665 mln worth of shares in an initial public offering in October, priced at the bottom of the €31.65 and €33.15 range. This resulted in a market capitalisation of just over €1.5 bn.
CEO David Martínez said at the time that demand was three times the amount of shares being offered and largely came from international, institutional investors.
Meanwhile Metrovacesa - a Spanish commercial real estate heavyweight during the last boom - is planning a comeback to the Madrid Stock Exchange as a pure residential developer. According to news reports in the Spanish media, the flotation would give Metrovacesa a market cap of €2.6 bn, the same as its gross and net asset value, as the company currently has no debt.
Also, last week US private equity group Cerberus emerged as the buyer of developer Inmoglaciar for an undisclosed amount.
Velayos welcomes the competition. ‘New foreign investors and the creation of good competitors are more than welcome, they contribute to the liquidity of the market,’ he said, adding that he is not concerned about the sector getting too crowded. ‘The Spanish market today is still building 10% of what it used to build a few years ago. There is still plenty of room for growth.’
