The Appetite Of Funds For Rent Is So High That It Remains Despite Housing Law

The promoter will close the year with a turnover of 280 million

Culmia has established itself as one of the promoters that are clearly committed to the development of affordable housing in Spain and its plan is to deliver some 800 units of this type per year through what will be one of its three business branches together with Build to Rent (BtR) and Build to Sell.

As a whole, the company expects to deliver some 2,500 units per year from 2024, since another 1,700 units will be added to the 800 for protected housing (VPO), of which between 15% and 20% should be for rent. At the head of this ambitious project is Francisco Pérez, CEO of the company , who recalls that Culmia was born a year ago with a portfolio of land inherited from the former Solvia Desarrollos Inmobiliarios with the capacity to build around 15,000 units.

“We started with about 4,000 homes in commercialization spread over 75 promotions”, so that from the beginning the promoter of the Oaktree fund was positioned as a player of reference in the sector.

“The objective for this year is to double the commercial sales of 2020 and reach 1,200 homes , which translates into about 400 million euros,” explains Pérez, who assures that they are making steady progress towards that goal. With these figures, the developer hopes to obtain a turnover of about 280 million euros, by registering around 850 units, with an ebitda of about 28 million.

Bet on VPO
The manager knows first-hand the ins and outs of the affordable housing business since more than 30 years ago, when he took his first steps in the world of brick, he worked in a municipal company making social housing. “I know this market closely and the company has extensive experience in promoting this type of product, which is so scarce and lacking in Spain,” emphasizes Pérez.

In fact, Culmia has detected such an appetite on the part of the funds that it is studying the possibility of “doing Build to Rent projects with our VPO homes , which would be something new in Spain. We will build, package and sell them” explains Pérez, who assures that despite “the messages that have been launched in recent days about the future Housing Law, we are finding that investors are showing us that they are still interested in this product.”

According to the manager, this is due to different factors such as the fact that currently “there is an excess of liquidity , which adds to the fact that the funds want to change the composition of their portfolios, which were dedicated to retail and offices, and now they want to give a greater weight to residential and logistics “. In addition, Pérez highlights that Spain is one of the few countries in Europe that is large enough for this market to develop.

Precisely for this reason, Culmia is firmly committed to this sector, in which it has taken an important step by being the provisional winner of lot 3 of the first phase of the Plan Vive Madrid .

“This is a land portfolio of the Community of Madrid in which we will raise 1,700 affordable rental units with an investment of 200 million euros,” explains the manager who assures that his ambition is greater since “we are going to continue betting on the Live Plan in its next tenders and we are open to other similar plans such as the one planned by the Madrid City Council and in other regions “.

Pérez trusts that the injection of 1,000 million from European funds will accelerate the contests that are pending to come out. “The affordable rental business has a condition for there to be private investment and that the rental price has to be at 8.5 euros per useful m2. If it is below it it does not work and this happens in many regions, that is why it is very important that the Government make a good distribution of the subsidies so that these projects go ahead “, warns the CEO of Culmia.

For the development of the first portfolio of the Plan Vive Culmia has opted for industrialization through an alliance with Avintia. “The objective is to control deadlines and try to minimize all the impact that the rise in prices of materials may have. In the case of VPO, and more so for rental, it is very important that costs are not diverted since the margin is in case very tight ” . In fact, “our intention is to apply industrialization also in all those Build to Rent projects of free housing that we can”, highlights Pérez.

Industrialization can be a solution “not only to the rise in prices of materials, but also to the problem of labor, which has become an endemic evil and is something that worries us a lot,” acknowledges Pérez, who believes that ” the sector must start up and make the necessary changes to be more attractive to young people and also to women, who now have more options in the sector thanks to this new production model. ”

Housing Law
“From the Housing Law, get to know the music and it does not sound very good to us. It has already been shown that rent control has not worked as expected in other countries . Furthermore, in Spain we are supposed to be trying to increase the rental pool , but I do not know if the Administration does not realize that the promoters of BtR are the same ones who are making affordable housing “, explains Pérez, who warns that it is impossible for there to be” a great promoter only for affordable housing. ”

“They don’t realize that the developers who build rental flats are the same developers who build affordable housing”

“We can make this product because we have economies of scale that allow us to do an activity that is less profitable, but if the BtR business does not work, I do not know if we will be able to move forward with the affordable one” , alerts the CEO of Culmia .

Strategy with your floors
Of the total land, the company will develop two thirds, since the other part, with capacity for 5,000 units “are land that we consider non-strategic because they are small -for 20-25 homes- and some larger projects that are not in our radius of action”. With these sales, the firm expects to earn 150-180 million before the end of next year .

On the other hand, “our goal is to invest 450 million in land for around 7,000 units by 2025. 200 million will be disbursed this year and we have already advanced 160 million”, clarifies the manager.

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