Neinor Homes invests 800 million in land

Last May, a North American enterprise called Lone Star acquired Kutxabank, creating the new company Neinor Homes with a previous investment of a billion euros in land to create the first enterprise in the sector in Spain, leading the recovery of the Real Estate sector. Just 6 months later, the company purchased lands valued at 800 million euros where 8,000 dwellings will be erected. 

The housing market recovery is leading to new adjustments in the sector. After the irruption of the Real Estate Investment Trust, it is of responsibility of property developers to prepare for the new housing cycle. Behind many companies there are investment funds that took advantage of the crisis by acquiring former subsidiaries of banks or companies about to succumb to the crisis

One of them is Neinor Homes, the CEO of which, Juan Velayos, explained that the company is based on “an industrial model”, unlike what the company has been based on in the past. “It is a significant change. We understand it needs to be an industrial business, with financial acumen, in depth studies of demand, strong project management to deliver on time results, systemized processes…”, said Mr. Velayos. To that end, it is first necessary to avoid the “urban risk” which property developers fell into during the bubble. It was about purchasing lands that required a lot of paperwork – even rural areas – to develop. If those lands were authorised with a change in land use, the property developer earned a huge figure. In other words, the profit margin was tied to the land, not to housing promotion. “We only purchase finished land, so dwellings are what added value”, said Neinor’s CEO. Those lands are purchased with the company’s money so additional funds are required funds for promotion.

The entity, created from Lone Star’s business in Kutxabank, plans to construct 8,000 dwellings on the lands

In order to keep developing this “industrial” process, the enterprise needs to be based on both pillars: I+D investment and drafting of a White Paper. “We research acoustics, lighting, shared areas and creating an identity. On the other hand, we’ve created a construction and design manual, so each process we test and validate are written down in that book from which architects and builders work”, explained Velayos. 

Velayos claims that the enterprise doesn’t take on risk regarding the property development locations. For the moment, the “Soil Bank” that has been acquired is divided, according to him, “harmoniously” between the Basque Country and Costa del Sol – both plots previously owned by Kutxabank and currently by CajaSur -, Barcelona and Madrid. According to Velayos, in these areas the stock of proprieties for sale is running out, unlike in many other regions. In total, in 2015 the enterprise launched 23 promotions and it is expected to launch 32 more in the coming year. “I’ve never seen before a soil bank with these features: completely finished and of sufficient quality, located in major cities”, said Velayos.

Lone Star’s presence provides him the required funds to purchase the land. “Lone Star searched for value by creating this enterprise and in becoming a leader market” said Velayos. In the long run, when the company achieves it, the fund may look to obtain its market value for its interests, even though six months after creating the company is not enough time to know whether its solution is either to go public on the stock market or an alternative route.

http://economia.elpais.com/economia/2015/12/11/actualidad/1449870569_266739.html
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