Project Case Studies

 
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SUCCESS STORIES

A few examples

Net de Gerrers is a long-term relative value investor and investment manager that searches for investable projects that demonstrate a sustainable competitive advantage through price-leadership or monopolistic differentiation. We serve as an active investor, working hands on from the bottom up on the success of each individual project. With NdG, investors receive a detailed analysis of proposed projects, which include the projection of future cashflows, quantified through a rigorous underwriting of assumptions, including the risk analysis of underlying market conditions, local operating partner groups, and detailed project characteristics. Below are a few example case studies of successful projects that exemplify the characteristics of our investments, and operational management capabilities.

 
 
 
 
 
 
 
 
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Sant Just - Large real estate development in Barcelona

146 apartments & 16 townhouses

 
 
 

‘The success of the project was based on engineering the most effective combination, and collaboration of individuals - that resulted in exceptional returns over the required time frame.’

Ignacio Jimenez - Senior Director of Real Estate

 
 

A: Opportunity / Challenge

We have a very good relationship with Solvia which is the Real Estate service provider of Banco Sabadell, and this was a plot of land they had in their portfolio to sell. The location is aspirational for many families from Barcelona looking to relocate near the city but close to open spaces like Collserola Park. It is also an entirely new neighbourhood with all the services and utilities families look for, so those fundamental aspects validated Sant Just as a valid opportunity.

The key challenges where negotiating the right price for the land, as well as connecting the right financing partners for the project. From the very beginning, we knew that the balancing the operational management of the financing parties, main constructor and promotor was crucial in order to ensure the highest return.

B: Project / Operations

We worked closely with Solvia to narrow down price differentials and raised financing for the land from Banco Sabadell. Finding the right construction partner for the project took a significant amount of time and included the rejection of many candidates. We finally partnered with the highly competent TR group.

Financing the construction was tough, due to the lingering after-effects of the financial crisis influencing the committees of many of the major banking institutions. There were difficulties in obtaining a loan that could not only fulfil our requirements, but also the needs of our customers and the future subrogates of the mortgage loans. Finally, bank Ibercaja provided the most agreeable, solution. Lastly, during the final phase of the project a construction over run threatened to stall its completion.

C: Results / Outcome

The project was highly successful in terms of sales, both in terms of fast absorption, final sale prices, and in economic and financial returns for our investors. The construction over run was successfully re-negotiated with the construction company, and we successfully managed to complete within the contracted deadline.

In summary, managing this project was like conducting an orchestra, with so many individuals and enterprises involved, that being able to attend everyone’s needs - in order to meet all deadlines and contractual obligations - was the biggest challenge we overcame.

Most importantly, we sold the project at the right price and over the correct time-frame, which served to validate our initial projections and the return for our investors.

 
 
 
 
 
 
 
 
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Alcalá de Henares - Large apartment development in Madrid

254 apartment units developed in two phases

 
 
 

‘The challenge of this project was to successfully judge market conditions and the timing of sales, in order to realise the highest returns.’

Fernando Pijoan - Director Of Development & Infrastructures

 
 

A: Opportunity / Challenge

We discovered this asset within the portfolio of Sareb with an interesting discount. Alcalá was, at that time, slowly starting to recover, yet there was still a lack of real demand in the market. The area belonged to the famous soap brand GAL, they sold it for a huge amount of money to the Spanish real estate developer REALIA, who urbanized it and started to develop it until getting caught by the financial crisis.

The plot was located in an expansion area at a walking distance from the historical center; the area was well-known for a neighboring development that sold at a much higher price. The size of the development, the market timing and the possibility to secure a top-rated architect made this project a highly attractive prospect.

B: Project / Operations

At the time we bought the plot, it took us a while to explain the local market conditions in Alcalá. In addition, during the due diligence phase, we had to rush to solve and explain to one foreign investor all of the details that could affect the development - such as the soil decontamination from the soap factory - before potentially losing the plot to another bidder. Financing a development this big in two phases was an extra challenge, since most of the banks at that time preferred single phases of around 150 units.

During the first phase of development we could foresee the construction costs rising dramatically and the probability of renegotiations with the contractor increasing, which would have seriously impacted the development, and its financial returns.

C: Results / Outcome

The underwriting and acquisition of this project, required us to work efficiently under pressure, in order to provide the right answers in time for our investors, and secure the project. However, neither of the issues involved were new to us and promptly were solved, especially those regarding the market, the product design and the due diligence.

Towards the end of the second phase of the development, it was necessary for our development team to intervene in the renegotiations opened by the construction company regarding the increases in the construction costs. Having foreseen this during phase one, we were successfully able to renegotiate, and prevent a significant overrun in costs.

The experience and agility our team allowed us to take advantage of market conditions and complete a high-end development in a historical town in the province of Madrid that was accepted by the market with excellent sales and superior returns for our investors.

 
 
 
 
 
 
 
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Atocha - Historic Development In Central Madrid

25 apartment units

 
 
 

‘As early entrants in the real estate cycle, we produced an excellent investment opportunity in one of the most dynamic locations of Madrid, with great value for money and excellent returns.’

Fernando Pijoan - Director Of Development & Infrastructures

 
 

A: Opportunity / Challenge

The Attocha project was a ‘work in progress’ (WIP) and was the first NdG opportunity we analyzed and successfully closed in an auction process. Fortunately, the previous owner had already completed most of the heavy-duty rehabilitation, turning the old wooden and load wall structure into a new beam and pillar structure. The Attocha building is prestigious and historically significant since it was the working office of the Atocha’s Lawyers that suffered an attack during the transition to current Spanish democracy in 1977.

The building is centrally located in Madrid, near Santa Ana Square and very close to Puerta del Sol, Plaza Mayor and the main museums, such as Prado and Reina Sofía. When we participated in the auction, there were not as many players in the market as there are now, and rehabilitation projects where few and far between. For this reason, we were able to close the auction at a price that was almost impossible to achieve for new entrants. For that reason, the final product came onto the market at a competitive market price and was very attractive for those who wanted to acquire a historical apartment in the city center.

B: Project / Operations

Initially, it was necessary to check the condition of the project. We chose to use the architect that was hired previously, since he was more likely to apprise us of many important details about the historic structure. The construction company also contributed a lot and were able to provide honest and accurate information regarding the technical issues and also related to construction budget projections.

Sales began started soon after the main construction process was completed, so we had the opportunity to adjust the price points and the economic projections. Since we did not start the construction with a bank loan, we did not have to accomplish the usual pre-sales covenants that would have led to more conservative estimates and lower sales volumes. Once we achieved a reasonable sales volume and development was on track, we presented it to Sabadell who structured a loan that allowed us to recover the capital investment, which then increased the internal rate of the return.

C: Results / Outcome

The underwriting and acquisition of this project, required us to work efficiently under pressure, in order to provide the right answers in time for our investors, and secure the project. However, neither of the issues involved were new to us and promptly were solved, especially those regarding the market, the product design and the due diligence.

Towards the end of the second phase of the development, it was necessary for our development team to intervene in the renegotiations opened by the construction company regarding the increases in the construction costs. Having foreseen this during phase one, we were successfully able to renegotiate, and prevent a significant overrun in costs.

The experience and agility our team allowed us to take advantage of market conditions and complete a high-end development in a historical town in the province of Madrid that was accepted by the market with excellent sales and superior returns for our investors.

 
 
 

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