They are the protagonists of the great M&A operation of the Spanish real estate sector. If you had to point out three attractions that you saw on Quabit, what would they be? Without Covid, do you think the “attraction” relationship would have been mutual?
The biggest attraction of the operation for us was the land. Quabit had an important portfolio of land, both finalist and under management in the regions of Spain with the greatest urban interest and therefore fully compatible with the Neinor Homes portfolio. Especially, this merger has given us a very important amount of land in Madrid, specifically in the Corredor del Henares area. In this way, Quabit provides a portfolio of 7,000 homes that we have been able to acquire at a very attractive cost; It is a high volume but one that fits well for the size of Neinor and that, thanks to our operational capacity, we will be able to digest very well. On the other hand, it allows the company to maintain an adequate level of indebtedness, especially after the success of our first issuance of green bonds of 300 million euros, of which a part will be used to refinance this operation.
As for the influence of Covid, it is a reality that the health crisis increased a delicate financial situation that Quabit was already going through and that was putting the company’s viability at risk. In our case, as a leading company in the market, we are always attentive to opportunities that may arise and are positive for our clients, investors and shareholders, and this, without a doubt, was.
They expect a quick return on capital with this operation. Where will the keys to achieve it be?
The soil bank provided by Quabit contains approximately 65% of “finalist” or ready-to-build land, with more than 1,300 units under construction and 250 units in finished product. If we add to the above that the rate of pre-sales in the promotions launched is very high, we obtain a return on the invested capital in a very short term.
Why did you decide to do a bond issue? How do you assess the result?
Bond issuance is a very interesting form of financing and the decision to carry it out is in line with the company’s strategy. Although Neinor Homes enjoys a privileged financial situation, as shown by the support of the banks in 2020 when they granted us about 400M of developer credit, we do believe that this issue could extend the maturity of the debt and, in view of the absorption of Quabit, allowed us a better restructuring of corporate debt. In fact, this issuance allows us to repay Quabit’s debt at a rate of 4.5% and with a maturity of almost 6 years, which means less financial expenses and more benefits for our shareholders.
We are very satisfied with the reception: the issue has had a demand of more than 1,500 million euros, that is, an over-subscription of 5 times the offer issued, and the investor profile has been very varied.
What purposes do you have for Quabit’s land portfolio? Do you have an estimate of how much volume you are going to divest?
Most of the land portfolio will be launched for the construction of new developments for Neinor Homes. At the moment we continue studying a part of the portfolio to design the appropriate strategy.
Neinor maintains its roadmap of delivering 2,400 homes this year and closing with an EBITDA of 150 million, a very ambitious goal in the midst of a pandemic and an absorption operation. Is the new work vaccinated against Covid?
The latest data reveal that the new work, indeed, has behaved much better and has been more resistant than the second hand. At the end of the day, it must be taken into account that the new construction was already adapted to a housing model that, after the pandemic, is increasingly in demand. That is, more spacious homes, with large common areas and on the outskirts of cities, surrounded by green areas. And there the new work has a product more adapted to that trend. In our case, for example, in this first quarter of 2021 we have added more than 700 pre-sales, which is the highest level of pre-sales in a quarter in the entire history of the company.
They are the only listed company in the Continuous Market with a rental housing promotion. What are the plans and forecasts for this division to 2023? Does the “rent at agreed price” bet enter into your plans?
We are very proud because of the first portfolio of 1,200 units that we launched, we already have around 40% under construction and the first development is ending now and will be put on the market in the first half of the year: Hacienda Homes, a high-quality project from almost 150 homes in Malaga. To this, we also add the 400 units of a PRS portfolio (finished and rented product) that we acquired at the beginning of 2021. Thus, we will close this year with more than 500 units in operation and generating income for our residential platform.
The goal is to reach a portfolio of around 5,000 Neinor Rental units by 2025. And, of course, to this figure we add the management of third-party rental homes thanks to the Guaranteed Rent purchase that we carried out in 2020 , and that allows us to offer a professionalized management of their rental properties to individuals. In fact, Renta Garantizada currently manages a portfolio of approximately 3,000 homes.
Regarding the agreed price, Neinor Homes has a strong commitment to affordable housing, both for purchase and for rent. In fact, we are currently finalists together with Cevasa as a private partner of the Habitage Metropolis Barcelona (HMB) for the construction of 4,500 affordable rental apartments
Are you worried about the future Housing Law?
It is necessary to draft a Housing Law that allows a more adequate development of housing in Spain, facilitating access to sectors of the population that are being excluded from the possibility of both renting and buying, with special attention to the younger generations . In addition, we must bear in mind that we are facing an excessively regulated sector, which has the consequence that supply is strangled. And, finally, this Law should also focus on contributing to the digitization of the urban planning of the administrations, something that will help improve the market.
In a future post-pandemic Spain, what will be the great challenges for the industry?
Access to housing, especially for the younger part of the population, is one of the great current challenges of the real estate sector. The solution undoubtedly starts from a true public-private collaboration that allows us to work together. The Administrations are taking very positive steps in this regard, such as the National Government’s Affordable Rental Housing Plan, the Madrid Community’s Plan Vive or the aforementioned HMB Barcelona City Council competition. If you work together and in an agile framework, the pillars can be established to provide the sector with the necessary strength to be key in this recovery.
Likewise, construction companies must be supported. As a consequence of the pandemic, the residential real estate market will see a reduction in the start of new developments, which will cause less taxes, generation of wealth and, therefore, less traction of the new home towards the rest of the economic activities. The construction sector can act as a lifeline and generate a large volume of employment, business and economic collection, but it is necessary to provide support.