Metrovacesa plans IPO as investors eye Spanish property market – Financial Times

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One of the Spanish property groups that blew up most spectacularly during the global financial crisis is planning a return to the stock market, hoping to capitalise on the growing investor appetite as the country’s house prices start to recover.

A decision was expected by Metrovacesa on Monday morning, said people familiar with the process, with shareholders expected to sign-off on selling between 25 to 40 per cent of the company in an initial public offering, likely to take place in early February.

With a net asset value of €2.6bn, according to company figures, the listing is likely to be the largest by a European residential property developer. The current record holder, according to Dealogic, is Spain’s Neinor Homes, which listed last year with a market capitalisation of €1.3bn.

The move points to the wider recovery in the residential property sector in Spain and follows a spate of similar IPOs over the past year, which started with Neinor Homes in March and then Aedas Homes in October. Another company in the same sector Vía Célere, has also been considering a float. Institutional demand for Spanish property has been strong, with Blackstone taking over €30bn worth of distressed property loans in August.

This comes as house prices in Spain, particularly in big cities such as Madrid, Barcelona and Valencia, have started to rise again over the past two years as Spanish economy has experienced robust growth, with gross domestic product expected to rise 2.6 per cent in 2018.

Investment back into Spain’s property market has come in stages, starting with international distressed debt funds from 2013 and then moving to real estate investment trusts — known in Spain as Socimi — investing mostly in commercial property. The latest stage in the maturing market signals the residential building market returning.

People close the Metrovacesa operation say that on top of the positive macro trends in Spanish property, the company should be attractive to the market because of its large existing land bank, which is worth €2.6bn and allows for eight years of development.

They also point to the strategy of having more land than rivals which still needs permissions to be developed on. This is higher risk, but has higher margins as well. Most of the land to be built on is in large cities, where demand is higher. The company is targeting 5,000 deliveries a year from 2019, up from 2,400 in 2017.

It has been a long road to recovery for the Spanish residential construction sector. In the boom years of the mid-2000s construction companies in the country built more residential homes every year than the rest of Western Europe combined. They also expanded internationally, with Metrovacesa doing the biggest property deal in British history in 2007 buying a tower in Canary Wharf.

But when the financial crisis hit, property prices in Spain fell as much as 40 per cent, and the vast majority of players in the highly-leveraged sector went bankrupt. Metrovacesa, which was owned by the Sanahuja family, was in taken over by its creditors Santander, BBVA and Banco Popular in 2008.

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