The partnerships work between developers and investment funds for reinvigorating housing construction

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The crisis has affected the property sector since 2007 it has led to new alliances among major market players, such as unions and national promoters international funds have proliferated especially in the last two years.

With the return of credit to the real estate sector, although still suffering restrictions, have begun to alliances occur between international funds who want to go beyond the tertiary and move their money into the segment of residential development, waiting to consolidate the economic and demand recovery, and promoters of life, which are those with the know-how of the residential.

The president of the employers of promoters builders of Spain (APCE), Juan Antonio Gomez-Pintado, admits told Europa Press that the information available on these alliances is vague because the sector remains “very transparent” and figures are scarce. Data from the Ministry of Public Works indicate that the number of visas requested to build new homes soared 42.5% during 2015, adding up to 49,695 certificates in November.

However, this fact, despite being the best in the last five years, is still far from the maximum of 865,561 visas orders in 2006. In the midst of this opacity, Gómez-Pintado explains that it all starts when funds that manage “a lot of money and understaffed “decided to raise housing and” looking for a promoter who has deep knowledge of the area where you want to invest and have an advanced structure, “so that it can report weekly state expenditure accounts of the works and, However, that does not cast doubt on best practices and regulatory compliance. Gómez-Pintado notes that are medium or large development companies that interest funds, while CEO Aelca Jose Juan Martin, states that also have at the point of promoters look with knowledge of micro-markets.

New Real Estate Projects

When putting an ongoing operation, funds prefer to invest in new promotions starting from scratch with your partner. Again, risk aversion is there, and prefer to go hand promoter from buying land. “If you offer them yours operation, will be the question of whether you want to do an operation you think you will not go well and you want to share risks,” adds Gómez-Pintado, to annotate that, in the end, common practice is to “find a floor, show it to the bottom, see if you are interested, do preliminary studies and get going.”

CEO of financial consulting Irea, Mikel Echavarren explains that in matters in cases in which the promoter is responsible for building and marketing, often perceived around 3% or 4% of sales. In addition, you receive a rate close to 3% of the construction cost while, depending on type of opportunity, an additional incentive is also set to the promoter, once the capital of the fund and the investor reaches an internal rate of return after tax and financing default. As for the locations, Echavarren points to destinations like Madrid, the Costa del Sol and Málaga city, Balearic Islands, Barcelona and surroundings, and the Mediterranean Coast, as the most attractive for such partnerships.

“Great opportunity”

The sources agree that these alliances are a good opportunity for developers, especially for those who downsized during the crisis and want it back. Therefore, the president of PACE believes that it is “a model that is here to stay”. “The funds have a horizon of five to seven years that they have to recover the investment and if things flow normally will stay,” he adds.

According to Martin, “there is no time continuous relationships, but it is something that will go each day to more” because “the bank financing will continue to support, but there is an initial investment of projects that the bank never will.” Henceforth, the CEO of Aelca also believed to take place “lasting relationships” between developers and funds, but believes that only occur in the case of those promoters who have a vision of all or most of the domestic market. To Echavarren, it is a “great opportunity” for that promoter has not left damaged by the crisis to diversify their resources and enhance their capacities with a view to recompose part of its capital in a few years through participation in profits.

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