Shaken by the bursting of a bubble from which it never fully recovered, atomized after years of crisis, and hit by the pandemic , the Spanish real estate sector seeks to regain muscle.
The market came to a boil in just the coldest week in decades , with the takeover of Quabit by Neinor Homes, a move that ended more than half a year of negotiations, and which the company estimates values Quabit at around 370 million of euros.
The exchange of shares of 26 Quabit shares for each one of the promoter will leave the current owners with 93% of the capital of the resulting company compared to 7% of Quabit.
Neinor has not had to pull cash to make a cash outlay. It will use its 6% of treasury stock and increase capital by 7%, with which the dilution for shareholders will be 1%. The agreement also involves assuming a high debt of 240 million euros, which will place the liabilities around 400 million , 25% of the value of its assets, despite the reduction of around 50 million agreed in the merger.
The operation opens the way for Neinor to new customer segments interested in acquiring homes at more affordable prices, an activity that will combine with its traditional courtship of the upper-middle-class buyer, more focused on the replacement market, that is, on replacing their home by another broader.
A look at Quabit promotions proves it. Only two of the 13 that it offers in Guadalajara exceed 200,000 euros per apartment, and none of the 300,000, a pattern that is repeated with few exceptions in Malaga, Madrid or Zaragoza. The opposite happens with its new owner, who barely offers homes below 200,000 euros.
Both companies are complementary in the type of client, which makes up for a geographic overlap that could lead to layoffs, as has been the case in bank mergers. Quabit’s dependence on a lower-income buyer, more affected by having less possibility of teleworking during confinements, has made the firm more vulnerable to the ups and downs caused by covid-19, which have accentuated inequality despite public efforts for leaving no one behind.
This has meant that while Neinor has resisted with profits of 22 million euros in the first nine months of the year of the pandemic, Quabit has recorded losses of more than 57 million.”We have always defended that the market, and especially in a complicated year such as 2020, also creates opportunities,” say sources from Neinor.
Quabit’s bad year has been the last straw that has led her to throw herself into the arms of a new owner under a premise: in times of turbulence, it is better to get on a big boat.
“This is no longer like in 2007, when banks financed everything, now size is crucial to access financing. And the bigger you are, the more you can go to debt markets, large companies have a competitive advantage ”, explain sources close to the operation.
If the shareholders’ meetings of both firms endorse the agreement – among those who must take sides are famous investors such as the Mexican Carlos Slim, owner of 3% of Quabit -, Neinor, with his new stock of affordable housing in his portfolio, will be more attentive to possible regulatory changes.
The developers are committed to Spain adopting the help to buy model , already implemented in the United Kingdom, whereby the buyer who can pay the mortgage payment but does not have enough savings to face the entry, receives a non-mortgage from the bank. for 80% of the appraised value, but for 95%, the State endorsing the bank for the 15% difference through the ICO.
Neinor executives already anticipated months ago that the sector should begin a consolidation process, and the merger may be the first of others to come. “In the Spanish market, the ten largest companies have a very small share, just the opposite of what happens in the British market, and it is normal for us to go towards that model,” say the same sources. E n an article published in the country in May, the CEO of Neinor, Borja García-Egotxeaga vindicated the change in mentality of the real estate companies after the crossing of the desert that they went through with their collapse.
“We are facing a development sector that has learned from past mistakes, whose debt levels are lower than ever and that, for example, never starts a new project without having previously sold between 30% and 50% of the houses ”, he defended.
The market has reacted well to the news . Quabit shares appreciated more than 12% on Tuesday, and Neinor’s around 1.5%. Along with the additional land to build 7,000 homes that Quabit will contribute to the new group, which leaves its total capacity at 16,000, the defenders of the suitability of the agreement cite two other factors: with Quabit comes the construction company Rayet, and the new listed one will be more liquid for investors.
“To be on the radar of large investment funds it is necessary for the share to have daily volume, in Spain they all move on the stock market less than 500,000 euros per session, they are very illiquid,” explain sources linked to the agreement.
Neinor expects to deliver about 2,400 homes in 2021, while Quabit estimated to do the same with about 1,100, so its merger seems far from causing competition problems. Not everything will go for sale. Neinor sources indicate that they are studying renting 1,500 Quabit homes, which would allow them to double the current figure.