Oversubscribed IPO hailed as ‘milestone’ in recovery of the country’s property sector
Shares in Spanish property developer Neinor Homes jumped 9 per cent on their first day of trading, in the latest sign of growing investor demand for the country’s recovering real estate sector.
The company’s initial public offering was priced at €16.46 per share, giving Neinor a market capitalisation of €1.3bn. The flotation was more than four times oversubscribed. Lone Star, the US private equity group that bought the housebuilder from a Spanish bank in 2014, retains a 40 per cent stake. Juan Velayos, Neinor’s chief executive, hailed the float as a “milestone for the recovery of the real estate sector in Spain”. He added: “This is the first IPO of a property developer in Spain for 10 years and the biggest listing for a European homebuilder ever. We represent the transformation of a sector.” Spain’s property sector fell into a deep crisis in 2008, when a decade-long debt-fuelled housing boom finally turned to bust. At the height of the bubble, Spain accounted for more housing starts than Germany, France, the UK and Italy combined — and derived more than 10 per cent of its national output from real estate. The bursting of the bubble prompted a steep decline in house prices, and eventually triggered a severe banking crisis, as lenders were forced to make massive provisions against losses on their toxic real estate assets. Property prices started recovering in 2014 but remain below their pre-crisis peak. Until it was bought by Lone Star, Neinor formed part of Kutxabank, a savings bank based in the Basque country. The US private equity fund paid €930m for full control of the business, echoing a string of similar deals made by buyout groups across Europe. Today, Neinor claims to be Spain’s leading developer of residential property, with the largest land bank in the country. It owns buildable land covering 1,250 square kilometres, most of which is in areas where the recovery has been strongest, including Madrid, Catalonia, the Balearic Islands and the Basque country.
Mr Velayos said that the real estate sector was ripe for consolidation. “We want to lead the sector,” he told the Financial Times. “My personal feeling is that we can do that mainly through organic growth, by buying more land and building more homes. But if at some stage there is [an acquisition] that makes sense we will be ready to do it.” Private equity groups like Lone Star have played an increasingly important role in Europe’s real estate market. At the height of the financial crisis, private equity firms were able to buy large packages of distressed debt in Ireland and the UK, and turn them into revamped property assets. As the economic situation improved, buyout groups looked further afield. Spain has provided particularly fertile ground for partnerships between local residential development companies and international investors like private equity firms. For private equity groups there are still a plethora of investment options related to portfolios of non-performing loans in Spain, where banks have been selling assets at discounted prices.
Source: Financial Times