JPMorgan has provided a €150 million bridge loan to accelerate Spanish land acquisitions by local developer Neinor Homes.
The two-year loan has been written at an annual all-in cost below 450 basis points, which is “very competitive”, as pricing from international banks in Spain for similar projects has been seen at around 600bps, Neinor Homes’ CEO Juan Velayos told Real Estate Capital.
“This pricing proves that JPMorgan trusts in our project, as we have a solid balance sheet, with conservative ratios,” Velayos said, adding that the LTV post-deal will be at approximately 35 percent.
“Compared with Spanish banks, JP Morgan can offer more agility and flexibility when it comes to financing. It can also provide more structured deals, instead of plain vanilla operations,” he added.
US private equity firm Lone Star bought Neinor in 2014 and the firm was floated in March.
Neinor expects to repay the loan with the proceeds resulting from the ordinary business within the next 18 months. The loan features a net debt/gross asset value ratio covenant of less than 4 percent, to be reviewed on a quarterly basis.
The debt facility will allow Neinor Homes to bring forward its land acquisition programme, initially scheduled for 2018, to the last quarter of 2017.
The Spanish builder will start deploying this credit line almost immediately, as it has a pipeline of deals totalling more than €100 million in “advanced negotiations”, Velayos said.
“We have already about 11,000 residential units across 172 building sites, and we invest mainly in Madrid, Barcelona, Andalusia’s Costa del Sol and Valencia – 75 percent of our portfolio is for primary residency and 25 percent is for second homes,” he said.
Mainor’s CEO highlighted the current “residential momentum” in Spain.
“The Spanish residential market is benefiting from all the macro factors that increase demand: GDP is growing, unemployment rate is decreasing and consumer confidence is up.”
“Another important factor is the mortgage market. Banks have understood that mortgages not only generate business, but also allow banks to attract new clients. There’s more access to mortgages, but obviously banks’ scoring is more rigorous,” he said.
On the other hand, owing to the halt of new residential developments following the financial crisis in Spain, the gap between supply and demand has widened, so residential prices are up, Velayos added.