“Ask yourself, when you read this recent article about Spain’s housing bubble and bust (which also mentions Ireland’s), how does the uber-liberal…Bernie-Warren Democrat’s view (not a single Republican signed onto Obama’s Financial Crisis Inquiry Commission’s Democratic-majorities findings) that reckless and greedy American bankers, Wall Street, and mortgage lenders, FORCED(!) and/or deceived Americans into taking out risky homes loans…

…and fraudulently sold these loans in publicly-registered securities to the most sophisticated institutional investors in the world, and were the primary cause of the 2008 financial crisis. How does that liberal narrative of the crisis hold up, when you see these bubbles and busts in all these other developed countries, where American bankers, Wall Street, and mortgage lenders did not operate? And wouldn’t it make more sense that all these housing bubbles and busts, were caused by something else? Something they all had in common, say central bankers, like The Fed, manipulating money and rates? I’m not saying government central bankers are the sole cause, because in the U.S. there’s a myriad of causes, but I am saying the liberal Democrat view that greedy and reckless bankers, Wall Street, and mortgage lenders caused the crisis is a false narrative, a Red Herring…”, Mike Perry, former Chairman and CEO, IndyMac Bank

Art Patnaude, The Wall Street Journal, March 7, 2017

Markets

A Spanish Builder Preps for IPO Amid a Glut of Unsold Homes

Housing market shows signs of recovery, with demand up in major cities like Madrid and Barcelona

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Unfinished modern low-rise apartments sit behind barriers during construction in Madrid. PHOTO: ANGEL NAVARRETE/BLOOMBERG NEWS

By Art Patnaude

Empty homes are scattered across Spain, relics of the 2008 financial crisis. But at least one Spanish home builder is gearing up to go public, hoping investors will bet there is appetite for even more new homes.

Neinor Homes, owned by U.S. private-equity firm Lone Star Funds LP, is planning an initial public offering in Spain, the group announced Monday. The IPO is expected by the end of this month, according to Juan Velayos, Neinor’s chief executive.

The offering comes amid a recovery for the Spanish housing market, which suffered a huge bust during the biggest financial crisis in generations.

Much of Spain still suffers from empty houses left over from the boom. There were nearly 390,000 unsold new homes in Spain last year, according to lender Banco Santander. Spanish housing transactions are just 40% of their 2007 peak, according to Fitch Ratings.

But there are signs of a recovery, spurred on by a growing economy, improving employment levels and a greater availability of mortgages, analysts said.

Spanish home prices rose 4% in the third quarter of 2016 from a year earlier, according to the most recent data from the European Union’s statistics agency. The number of residential transactions last year is estimated to total around 450,000, up from 300,000 in 2013, according to Banco Santander.

“Housing demand is on the rise,” said Andrew Currie, an analyst at Fitch Ratings.

More than a decade ago, cheap mortgage lending helped drive construction booms in countries such as Spain and Ireland. The market in Spain, clogged with new homes, started to collapse in 2008.

Even now, as recovery takes hold, some housing markets in Spain are still struggling. In central Spain, for example, any recovery remains a way off, analysts said.

Demand for homes has been strongest in areas at the forefront of the country’s economic recovery: major cities such as Madrid and Barcelona, and tourist hot spots along the coast. Residential construction there has started to pick up, although not at a pace matching demand, analysts said.

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Abandoned homes in Andalucia. The housing market is beginning to pick up, but much of Spain still suffers from empty homes. PHOTO: DE AGOSTINI/GETTY IMAGES

U.S. private-equity firms such as Lone Star and Värde Partners LP invested years ago in Spanish house-building companies. Dallas-based Lone Star hopes to sell around half of its stake in Neinor Home’s IPO, which is aiming to raise €600 million to €800 million ($635 million to $847 million). Lone Star bought Neinor Homes in 2014 from Spanish lender Kutxabank for €930 million.

International funds like Lone Star have been able to enter the market during the downturn because “traditional home builders in Spain are not in a healthy financial situation to build new properties,” according to Santander, which was hired to work on the Neinor Homes IPO.

Spain’s housing construction market is fragmented, with small regional developers responsible for the bulk of construction. Lone Star and Värde are aiming to create firms that operate on a national scale akin to companies in the U.K. or U.S.

“We’re alone. We’re a first mover,” said Neinor’s Mr. Velayos. Neinor, which built 2,000 homes last year, met with institutional investors from the U.S., the U.K., France and Spain this year ahead of the IPO.

Investors were wary at first because of the longstanding image of empty homes in the middle of nowhere, Mr. Velayos said. But the demand in certain areas and the improving economy have won them over, he said.

‘Housing demand is on the rise. ’

—Andrew Currie

Minneapolis-based Värde last week bought Spanish property developer Vía Célere for €90 million. The company will be merged with a developer that Värde already owns. An IPO for the new group is a possibility, said Tim Mooney, global co-head of real estate at Värde.

Värde has experience with floating European house builders. The firm bought U.K. group Crest Nicholson Holdings PLC in 2011, which was listed on the London Stock Exchange in 2013.

Värde is considering an IPO for Vía Célere but hasn’t hired banks to facilitate the process, Mr. Mooney said. A private sale is another viable exit strategy, he said.

“The IPO market is fickle. It’s not open every day of the year,” said Mr. Mooney at Värde. “We’re getting the company in a position where we could do an IPO. But it’s not our only option.”

The overall IPO market around Europe was slow last year. For real estate, there were just $1.7 billion of IPOs in 2016, the lowest level since 2012, according to Dealogic.

Posted on March 11, 2017, in Postings. Bookmark the permalink. Leave a comment.

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