Metrovacesa, a leading residential development and land manager group with a shareholding led by Banco Santander (49.4%) and BBVA (20.9%), is making progress in developing its asset portfolio, overcoming its ramp-up phase during 2020, which has conditioned its results during its recent trajectory.
The aforementioned portfolio of assets of the company has reached a joint high GAV (Gross Asset Value) of 2.68 trillion euros at the end of 2020, characterized by its adequate diversification in the main regions of Spain and associated visibility. The company maintains 5,440 units under commercialization, of which 47% are already sold, increasing this percentage to 80% of deliveries by 2021.
The group also develops Built to rent projects for institutional investors that reached 486 units at the end of 2020 to be delivered between 2021 and 2023, reinforcing its capacity to generate funds while reducing commercial risk given their typology as turnkey projects ‘.
On the other hand, Metrovacesa began a new stage in 2016 with the partial spin-off of the activity and its equity segment that formed Merlin Properties. This factor, together with the incorporation of a management team with high expertise and the solid support of its two benchmark shareholders, Banco Santander and BBVA, place the company in a phase of relevant growth and further development of its land that is expected to begin to show significant returns from 2021.
Regarding the results in 2020, they were affected by the lower volume of land divested compared to 2019 and the still limited pace of home delivery. On the other hand, the significant volume of assets under construction given the still early stage of development development in which Metrovacesa was in until 2020 conditioned its operating cost structure, placing the EBITDA in negative values of 8.99 million euros.
Additionally, the recurring revaluation of its assets and the impact of Covid-19 on the real estate market negatively affected its results, providing impairments of 137 million euros and showing significant accounting losses of 163.5 million euros.
Its optimal level of net worth (2,180 million euros in 2020) together with a controlled financial leverage (with a net financial debt of 228.4 million euros that represents a minimum ‘Loan To Value’ ratio of 8.9%) favor your credit fundamentals.
Metrovacesa also shows an available treasury of 207.4 million euros at the end of 2020 and a liquidity profile that is reinforced by a high capacity to generate cash without replacement requirements of land derived from the volumes owned, providing it with competitive advantages over direct competitors by reducing your purchasing needs for the next few years.
At Axesor Rating, we consider that the short-term visibility and sales prospects for 2021 (between 1,300 and 1,700 units) will favor your credit profile, maintaining a maturity schedule that is acceptable in the short term, given the type of your financial debt.
Consisting of this, mainly, for developer debt that is canceled at the time of the effective delivery of homes and obtaining the first occupancy license. Therefore, we granted a BB rating with a positive short-term trend, estimating a more balanced income structure for this year, which we value as consistent and achievable.
Thus, we consider that Metrovacesa has adequate capacity to meet its payment commitments. However, we cautiously assess the prospects for property development activity in the longer term given the type of this business, requiring the maintenance of recurring sales levels and favorable environments in terms of demand for new homes that could deteriorate in a scenario unfavorable economic prospects in Spain.