EvoEstate comment

Even though the project is expected to generate 50% return in 34-36 months and all the numbers match well, we skip investing in this project because it is more likely that the project will take longer time therefor the returns per annum will be lower and we do not see any upside potential in this project

Detail Descripton

From Urbanitae, we present a new project that consists of the development of a residential development of 41 new construction homes in Pozuelo de Alarcón (Madrid).

The promotion is located in the municipality of Pozuelo de Alarcón located 15 km west of the city of Madrid. It is the town with the highest per capita income in all of Spain and has more than 85,000 registered inhabitants. It borders directly with the city of Madrid (Moncloa-Aravaca district, Latina), Boadilla del Monte, Majadahonda and the Casa de Campo. It is a fully consolidated urban area, with a historic urban center and a large development of urbanizations on the periphery.

The exact location of the plot is Rafael Frutos 4 within the area of ​​the "Old Slaughterhouse" of Pozuelo, next to the Cercanías station, in the heart of the town.

PROJECT DESCRIPTION

The operation is led by the promoter GESTILAR, a promoter company with a presence in the Iberian Peninsula born in the 80s. To date, they have delivered more than 2,000 homes and currently have developments in development in Madrid, Catalonia, A Coruña, Palma de Mallorca and Lisbon (totaling more than 1,300 homes in total). Its management team is a national leader with experience in the management of the entire chain of real estate value. It is one of the promoters with the greatest presence in the sector, having even reached alliances with funds such as Morgan Stanley to develop new promotions.

The project has a capital gains strategy, which consists of co-investment with the developer to develop housing development in the area of ​​the former slaughterhouse in Pozuelo de Alarcón. The slaughterhouse area is within an APE 4.2-8 planning area approved in May 2017. This planning has as its main objective the transformation of industrial degraded space and is located in the center of the town next to the station by train from Pozuelo.

The proposed promotion consists of 41 homes organized in a single building with access through two independent buildings portals. The construction of common areas is planned, including swimming pool, storage rooms for homes and two garage floors with 64 parking spaces. The houses are distributed in 11 units with 1 bedroom, 23 units with 2 bedrooms and 7 units with 3 bedrooms. The commercialization of homes is aimed at both first home and rental housing investors.

The developer has already drafted the architecture project and its presentation is planned at the town hall during the first fortnight of March 2020. The site is currently free of building and the start of commercialization of the homes is planned in the coming weeks. The developer plans to obtain a license for new construction during the first quarter of 2021.
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STRUCTURE

The operation will be structured through a company already constituted exclusively for this project where it will collect all the Urbanitae investors, called POZUELO NORTE CROWD S.L. In said company, a capital increase will be made where Urbanitae investors will take their participation as a monetary contribution. In turn, this company will participate directly in the promoter company, constituted and managed directly by GESTILAR.

GESTILAR will not only be dedicated to the integral management of the promotion (including the commercialization itself), but will also hold 60% of the capital necessary for its development. Urbanitae investors will have a 17% stake in the developer, and the rest of the necessary capital will be contributed by an investment fund that will also participate in the operation. Within the financial structure of the promotion, the participation of a banking entity is also planned for the financing of the work and part of the solar cost.

WHY INVEST?
There are several reasons to invest in this project:

The project is led by GESTILAR. One of the leading promoters in the sector throughout Spain.
Promotion located in the municipality of Pozuelo de Alarcón, the municipality with the highest average income per inhabitant of the entire country.
The project promoter commits to 60% of the necessary investment in the project, which aligns the interests of all the agents involved in the investment.
Opportunity to invest in a unique occasion where only professionals in the investment sector have access capacity.
The land is already owned by the developer.
The total estimated net return by the promoter is 50% in 34-36 months.

COST EFFECTIVENESS

The promoter expects to generate a total income of c. € 14.4M euros with the sale of the 41 homes, which would mean a net gain for the estimated investor (after expenses and taxes) of around 50%.

MARKET
A market study has been carried out to determine if the sales prices raised by the promoter are reasonable.

Currently, within the area of ​​the Old Slaughterhouse, there are several marketing promotions of similar type have already achieved a high level of presales (even sold in their entirety).

You can see more information in the documentation, Sales Witnesses, where you will find a list of homes for sale in the area.

WHEN WILL I RECOVER THE INVESTED MONEY?
The planned deadlines for the promotion are as follows:

First quarter 2021. Obtaining a new building license and commencement of works
Third quarter 2022. End of construction
Four quarter 2022. Obtaining a first occupancy license and home delivery.
Late 2022. Liquidation of the company. Return of capital and distribution of benefits.
It is important to keep in mind that in any real estate development the terms may vary both upwards and downwards.

RISKS

Below, we detail the clearest risks we have identified for this project:

Increase of the deadlines foreseen in the project, due to delays in the construction and the obtaining of the works license.
Deviation of fixed costs associated with an investment, unforeseen in construction.
Risk of not reaching the expected sales rates and consequently the delay in terms.
Risk of not getting the expected sales prices in the promoter's business plan.