Metrovacesa S.A. (MVC) Earnings Call Transcript & Summary

Hello. Good morning, and welcome to the Metrovacesa Results Presentation for the First Semester 2021. The slides of this presentation has been released to the market earlier this morning. They are also available through the CNMV website as well as the company website. We have also sent it by e-mail to our usual distribution list for analysts and investors. My name is Juan Carlos Calvo. I am Director of Strategy and Investor Relations. And our main speakers today are as usual, our Chief Executive Officer, Jorge Perez de Leza; and our Chief Financial Officer, Borja Tejada. At the end of this presentation, we will take questions from the audio conference call as well as those sent online through the webcast platform and others sent by e-mail in written format as well. I'll now pass the word to our CEO, Jorge?

Thank you, Juan Carlos, and good morning, everybody, and thank you for attending our first half of 2021 results call. I am now going to go through the presentation, and turning into Page #5. Brief highlights on these 2 quarters. First of all, we are happy to report that we see a continued recovery in the housing demand. And as I will talk about it later, with a new record quarter in presales for Metrovacesa and with a figure very close to the full year 2020. And also, seeing a positive evolution in fulfilling or in complying with the guidance that we gave at the beginning of the year. Secondly, we would also like to highlight the new build-to-rent agreement signed with AEW for 206 units in Valencia, which, as you know, we normally consider as Tier 2. So beyond Madrid and Barcelona, that proves what we were seeing a few months ago that the BTR turnkey agreements would actually reach Tier 2 cities. And finally, a positive view on the second half of the year as we step up the operating plan, so increasing the number of launches, increasing the number of construction starts, et cetera, in a way to follow this market trend that is better than what we had envisioned at the beginning of the year. And I think this increased activity will show up in the second half of the year. So we don't see it here yet, but will likely bring, if the situation continues as it is, a better second half of the year. Turning into Page #7. Probably this one, I always skip because we will get into the details of each of the metrics later. So Page #8, maybe, Juan Carlos, you can comment on how we see the market dynamics.

Yes. Thank you. And in this Slide 8, we have some key features about the evolution of the market on demand, supply, prices and margins. Essentially, firstly, on demand. We show here the business statistics about the recovery in demand, which is quite evident in the last few quarters and actually accelerating in the last few quarters. And actually, even stronger in the case of new housing, which is -- the number of transactions of new housing is clearly higher than pre-COVID levels, whereas the overall general market statistics is more or less at the same level as the recovery of pre-COVID levels. And we think this is interesting because we think the key drivers here are the strong savings rate during the pandemic, the favorable mortgage terms and also changes in buyer preferences. And most of these reasons, we think, are here to stay, and that makes us confident about the next few quarters. From the point of view of supply, it remains relatively modest. It went down during the pandemic and is very, very slightly going up. So we're still way behind what it was pre-COVID. And mainly because there are some restrictions for most of the -- for many developers, which is tougher access to financing, which is tougher now than pre-COVID; and a scarcity of quality land, which has always been the case, and we think continues to be in this [ current ] asset. House prices have been moderating, the increase, over the last couple of years. We now have a relatively balanced market, leading to moderate performance of house prices. The house prices are a little bit stronger and now closer to inflation in some specific areas where the supply-demand balance is more favorable, but however essentially, we see moderate price increases. With respect to margins, our view is similar to before. I mean we have not changed that. Our outlook and speaking out from a company point of view, our margin continues to be -- we continue to expect in the low 20s in the next few years. It's true that there is a risk on rising commodity prices, and potentially, labor costs. But so far, there has been no impact in margins based on the recent contracts that we have been bidding for in the last few quarters and complete a smooth execution of the work in progress. So we don't see that reflected in the current conditions. Obviously, there is a risk going ahead. But we think that the impact should be probably very moderate, particularly spending on the moderate volume of construction starts, which is a key factor in this new process. So back to you, Jorge.

Yes. Moving on to Page #9. Residential sales. As I mentioned before, this has been a very good quarter, a record quarter with 549 units sold, presold, and a semester with 956 units, which brings us to a total figure of 1,000 -- sorry, 956 related to last year that was for the full year, 1,037, almost reaching that figure. The absorption rate is 3.6%, and this is achieved or calculated by in the numerator, putting the total presales and in the denominator, all the product that we have in commercialization. And that is a healthy figure. We normally consider between 3% to 3.3%. What is the optimum? So 3.6% is there, and more or less within the range that we see in the market of between 3% to 4%. In Costa del Sol, we have increased our sales by 50% versus last quarter, but we think that there is still potential to improve. As Juan Carlos mentioned, we see favorable changes in our buyers' preference. Preferences that actually fit well with the product that we have on the market with the units in the suburbs versus the city center, larger-sized units, good terraces, et cetera. So at the end, what we see is that this kind of product is performing much better than what it was last year. And also, I think the presales activity is a good activity, it's the result of our innovation or improvement in our sales channels and processes, where we have now fully digital commercialization. And in fact, despite the physical visits to the sales force -- sorry, to the sales offices, in many of the cases, we end up closing the transaction and signing the transactions in a fully digital way. Our sales offices have improved in image, in size, in showing the final product that we're offering to our clients. We've also signed an agreement with El Corte Inglés to implement point of sales orders in several department stores, which will actually, as we are seeing already, increased, the leads, and therefore, should turn into more sales. And finally, we continue with the implementation of internal sales force in some of our developments, now having about 13% and probably in the next few months, increasing to at least 20% of the development. In terms of deliveries, we've delivered 645 units in the first half of the year, which is a significant increase compared to last year. Also important to highlight that with higher unit prices, so the average selling price is at EUR 307,000 per house, and this proves what we were saying in the past about the mix of product that we are delivering. Now we see the bulk coming with higher selling prices that we -- compared to what we have delivered so far. Also in terms of margins, the margin of the units delivered in -- gross margin of the units delivered in the second quarter is 21.5%, which is considerably higher than the one in the first quarter, 14%. And again, this is due to the mix of product that now is coming to deliveries, not only this quarter, but in subsequent quarters that are coming that we will be always above this 20%. So complying with what Juan Carlos mentioned about our guidance being in the low 20s. Also important to say is that with these deliveries, basically, we are at 50% of our guidance for the year, the lower range of the guidance, which is 1,300. Also important, I would say that in July, we would be above 60%, so more than 800 units at the end of July, which makes us quite confident of that lower range. And also 700 units that are already with the final work certificate and presold. So again, good visibility towards the end of the year. And then some room to exceed the low end, which would come from units that are finished in Costa del Sol that are not sold, finished but not sold. But that we see that the client that is coming now to Costa del Sol is preferably buying units that are already finished. So that's why we consider this a good input or a good product available to improve our deliveries at the end of the year. And then another 800 units that we finish construction in the next 2, 3 months, and therefore, be prime for delivery as well. We signed a new build-to-rent agreement that we announced last week in Valencia with 2 buildings, Moreras Torre, which is 150 -- probably the best development in Moreras in this district with 21 floors and 156 (sic) [ 155 ] apartments. And a second tower of 11-storey buildings with 51 apartments. And I think we have tailor-made at the end or adjusted the product for what AEW wanted as a future rental product for this market. The construction works will commence shortly, in fact, the tower has already started. And the 11-storey building will start in the next days and with the completion scheduled before 2023. The total sales price is close to EUR 50 million, which brings the average selling price per unit close to around EUR 240,000, which is a very, very healthy figure compared to other transactions that we see in the market. And basically, what this has not -- is not included in the first half of the year figures that we have reported and will be reported in the next quarter. I think just to highlight again that the strategy of Metrovacesa is to continue on turnkey agreements, on bilateral agreements that allow us to maximize sales price and margin. I think the margin in this deal is good, it's equivalent to build to sell. So -- and then we -- just as a summary, with this one, we have 7 build-to-rent projects with a total of 702 units with institutional buyers. One of the projects is already delivered in Madrid. And this BTR represents 19% of our backlog in locations such as Madrid, Barcelona, Mallorca and Valencia. This 19%, I think we've always mentioned that we would like BTR to be between 15% to 20% of our total sales backlog, and therefore, we are there. In Page #12, we also wanted to bring this example of one of our key projects or main projects, which is Palmas Altas, now called Isla Natura in Seville because this is a good example of what is coming in Metrovacesa in terms of land being transformed in -- transform, meaning becoming ready to build, and we have several examples of this coming in the next year. So land in prime location with a high volume of units and will be a key competitive advantage for Metrovacesa. Palmas Altas, just to bring it to your attention for those ones who don't know it yet. This is the -- an area in Valencia -- sorry, in Seville, in the South of Seville, next to the City of Justice and next to the shopping center [indiscernible] and it's an area fully owned by Metrovacesa with a total of more than 2,000 residential units in -- with 70 -- 67 hectares, where we have designed the organization with very high sustainability and environmental standards with more than -- close to 250,000 square meters of residential space and a big area for parks, et cetera. And where we've had an initial launch that has really exceeded our expectations. And I think this proves once again that a good area with sustainability embedded and close to the city, but where you can have larger-sized units and an area that will allow our clients there to be out in the air -- in the open air, et cetera, is something that is a winning product right now. We launched 3 projects with 240 units in March of this year and really, in 4 months, we've sold more than 45%. And therefore, we are already launching some -- a couple of more projects have already been launched, 2 more coming. And so towards the end of the year, we will have a very significant offer in the Seville market consolidating here in Palmas Altas. And obviously, now the second phase is being launched with higher prices. And again, I want to reiterate that this is probably a good example of what is coming in [indiscernible] and [indiscernible] in Barcelona. What is coming in Valencia in areas like [indiscernible], [indiscernible] in Barcelona, [indiscernible] also. Projects were located in top areas within the cities and where we have a very high percentage of ownership. Moving on to Page #13. This -- our backlog increased by 12%. We now have close to 2,900 units with again, an average selling price, which is now getting close to EUR 300,000. And important as well is that 80% of this backlog is contracts and 20% reservations. This -- obviously, the figures that I talked about are net presales, so excluding cancellations. Just to briefly mention that cancellations are back to normal figures completely. So they are, I wouldn't say negligible, but at the normal that we can expect. And again, that's good news compared to last year where we had a very high figure of cancellations. The units of construction -- under construction now is 3,620 in total with 708 units that initiated construction in the first half of the year. This figure will increase towards the second half of the year significantly, with 1,240 (sic) [ 1,237 ] building permits obtained as well. And again, we're continuing with our strategy of working with large contractors that will lower our execution risks. The units that we have in commercialization now is 98 projects. So we added a few projects in the first half of the year and 55% of that is presold with an average selling price of 300,000 units. In land activity, we see a good progress in land sales with close to EUR 30 million of sales agreements signed. Of this, which represents close to 60% of the target for the year that we mentioned of EUR 50 million. The land sales recorded in the first half. So that means that with final notarial deeds signed, it's EUR 12.4 million, with a lot of small transactions in locations like Huelva, Alicante, Tarrassa, Córdoba. These are residential projects that are not key strategic for us and meaning that we do not want to develop, and that's why we are selling them. And in addition to this EUR 12.4 million, there is another EUR 17 million that is signed in private contract with some prepayments already and that will be notarized before the end of the year. And therefore, [indiscernible] are sold in the full year figures that we will obviously report a few months from now. I will comment about it later on the commercial side. But probably in land sales, this is where -- in the second half of the year is where we are expecting the commercial land segment to bring in a transaction. In terms of land management, we continue with our transformation of units into fully permitted with 105 -- close to 200 units transformed in the first half of the year in Barcelona and Málaga. And then other relevant milestones, well finally, in Palmas Altas, we started the organization and access works. In ARPO, in Pozuelo, which is one of the most sought after districts in, I would say, not only in Madrid, but in Spain, the rezoning plan is now registered, the organization, some of the access works are underway. And we think that by the end of the year, some additional works will be started, and therefore, bringing this development close to where we wanted to be and close to the launching time. And then we are -- we keep on track to transform more than 6,000 units into fully permitted by the end of 2023. In the commercial segment, we see growing investor interest, but this is still moving slower than the residential, but we definitely see more interest. And a good example of that is Clesa in Madrid. Just as a reminder, Clesa is a development located to the district to the north of the city, close to the 5 towers and in tangent to what will be the [ Distrito Castellana Norte ]. And here, we have a plan to build close to 90,000 square meters. And where we've already started the preliminary works on the demolition of the parts of the factory that are not are not protected and then in some of the organization works. Important to say is that the ownership of the old factory, which is transferred to the Madrid City Council soon, has already got a huge or a future use, which will be led by current -- by the fund current science partner, which will basically refurbish the factory and will develop a life sciences hub based on biotech research, which has -- which actually helps us in creating a life sciences hub that is now attracting several investors for specifically in the area of co-living or student housing to provide living solutions to this hub that we are creating. And so good news will come from this development in the coming months. Also in Puerto de Somport, which is the building that we've developed with Tishman Speyer as our JV partner. The Phase 1 is completed and delivering -- delivered, and now in commercialization with the visits increasing. Nothing materialized yet, but it's important to say that the feedback from the clients, first of all, in terms of the floor plan being able to deliver 4,000 square meters in one only floor, and that's something unique in Madrid. And then also the way we finalized the building with all the COVID protocols and COVID standards being implemented make us be more optimistic about the commercialization in the coming months. Finally, I would like to emphasize that we continue our commitment to sustainability. As you know, we approved our strategic sustainability plan in 2020 to 2022, and we are implementing several of the measures that are considering that plan. Obviously, in the 3 axes of ESG. In environmental, with being very conscious about energy certification in our projects as well as circular economy. In the social dimension, working more and more with the local communities, especially in the urban transformation in some of our big developments. And then finally, as well in the G dimension, where not only we comply with the highest of standards of corporate governance, but also in terms of gender equality, et cetera, we rank the highest position in the country and in the sector. And well, in the last month, we also joined the United Nations' global sustainability initiative. We also joined the Green Building Council in Spain. And finally, the organization, Forética, where we're a member. Not only that, we are in 2 vertical areas leading the effort of Forética. And that would conclude the operational part. And I now hand the floor over to Borja to talk about the financial overview for the first half of the year.

Thank you, Jorge, and good morning, everyone. [ Key messages ] about our financial accounts. Total revenues, more than EUR 187 million, out of which, residential deliveries represent EUR 175 million, representing more than 4x compared to previous year and EUR 12 million from land sales. In terms of cumulative gross development margin, 18.5%, which represents 21.5% in Q2. Positive EBITDA and recurring pretax profit. Concerning our financial debt in Slide 17, just 4 messages. 8% of loan-to-value. EUR 219 million from the number of net debt. EUR 258 million preapproved development loans for new constructions to be filed in the next months and no significant maturities in the next 12 months. In the Slide 18, let me explain our cash flow and how we understand the concept of free cash flow to equity based on our real peers. Starting with an EBITDA of EUR 8 million, which is, a, the cash recovered from land sales and development deliveries, assuming there is no need to replenish the land bank and deduct corporate financial expenses and taxes. With this, we get a gross operating cash flow of EUR 56.4 million. This figure will the base for dividend calculation, representing as of today, 56% of the full year cash flow target. If you want to get [ appreciation ] of net debt, EUR 9.8 million, you must deduct this figure: CapEx in land and in urbanization; CapEx in work in progress; the cost of goods sold, excluding the land, obviously; and the changes in cash advances from clients; and restricted cash balance. Obviously, deducting the dividend paid during the year. At this stage, let me reinforce the strong cash conversion, thanks to Metrovacesa's business model. Slide 19 about our GAV evolution and appraisal update. In terms of NAV per share, EUR 16.04 (sic) [ EUR 16.05 ] per share -- sorry, it's Slide 21, sorry. I mixed the slide. Gross asset value of more than EUR 2.7 billion, 78% residential assets and 22% commercial land like-for-like slightly positive. I would like to finish with a key message. As of today, Metrovacesa's over EUR 1 billion market cap is similar to the GAV of our current active units. With the current stock price, the implied value of all other assets, I mean, EUR 1.7 billion of GAV will be free for a new investor. Now I will hand over to Jorge, with closing remarks.

Thank you, Borja. So in Page 23, to remind again and reinforce what is our strategic position and what are our competitive strengths, which now we believe are more and more reinforced. And this would be access to land on the one hand, access to financing and finally, the operational flexibility. Access to land, as I mentioned, the example of Palmas Altas, I think having strategic land very close to transformation in very well-sought areas is something that we consider is already and will be more and more a bottleneck in the sector. Secondly, the access to financing with the smaller developers, having difficult access to -- or more difficult access to financing than what we have. I mean what we are seeing in the market is that we are having no issues at all with the development financing. And in fact, not only the first half of the year, but we already have all our commercial launches in the second half of the year pre-agreed with the banks. And so we see no -- in our case, no restriction there. And with sales -- presales levels of around 40%, which are distant to some examples that we see in the sector in some developers that are being asked for 70% of presales. Not only that, I would say that in the corporate financing. As you know, in the first half of the year, we approved the EUR 100 million mark for alternative market bond, with a maximum figure of EUR 100 million. We launched the initial 30 million more than a month ago with 2.5x over subscription at a cost below 4%. And we are having other players, other banks or other financing institutions where with whom we are not -- we do not have any financing relationship yet. And that will -- that are interested in financing Metrovacesa. So again, I think that is, for us, a bottleneck in the sector has turned into a competitive advantage. At the end, our value growth proposition continues to be the strong cash flow generation. And taking into consideration at the end, the number of units that we have active already plus what we will launch in the next half of the year, I think you will see that the cash flow to be generated in '21 and '24 exceeds our current market cap of over EUR 1 billion. We will continue strongly to basically dispose of EUR 600 million of land assets that are identified between commercial and residential in the next years. And again, that will support our cash flow generation but at the end, translates into -- then, it should translate into dividends. Our payout continues to be more than 80% of the cash flow that we generated. As of May, we paid a dividend of EUR 0.4 per share. And for this year, the cash flow guidance generation was to be at EUR 100 million. As we have already talked about, we are on track to deliver that, and that would imply a dividend of more than EUR 80 million from the results of this year. And additionally, we continue with our share buyback active, and the execution today is EUR 20 million. And the closing comment is that while we are, as I mentioned, on track to meet the full year targets with a delivery range of 1,300 to 1,700. We -- as of June, we are -- 50% of that is already done. In July, it's more than 60%. The land sales close to 60% achieved to date, including notarized and private deals signed. So therefore, that cash flow generation of more of EUR 100 million or more being 56% achieved looks closer and closer. And I think as I mentioned at the beginning, with the step-up in the activity towards the second half of the year, these figures will become even more clear than we are right now. So at the end, we are on the back of improved market conditions. I think limited construction starts in the market continue to be the case and Metrovacesa's access to good financing. And with that, I would close the presentation of today and hand it over to Juan Carlos.

Thank you, Jorge. So operator, we are ready to take questions from the conference call.

[Operator Instructions] Our first question is from Fernando Abril from Alantra.

I have a couple of questions, please. First, very strong presales in the quarter. My question is can you provide any update on how July is going? And then also taking into account that, well, you have almost 20% of your product in Costa del Sol and is still a bit mute is now reactivating. How do you see presales in H2 compared to H1? Is it going to be -- your forecast, is this going to be about similar or slightly below? I don't know. Any comment on that would also be very appreciated. Then my second question is on land sales. So apparently, you are -- it's a bit challenging to reach the EUR 50 million land sales only taking into account residential land plots. So everything will depend on commercial and the commercial segment. So how confident you are on reaching a sale on any of your commercial land plots in H2? That would be all.

Fernando, Jorge speaking. So regarding your first question about sales or presales, I think, yes, the first half was good in terms of presales. July is going well as well. And according to -- you have to take into consideration, seasonality that we build into our budgets. And normally, July and August actually is slower months, especially in first homes. So we are still, I think, as happy with the results that we are seeing. And also, we have to add the BTR 206 units that we signed with AEW. The rest of the year, I hesitate to give our forecast yet. I think everything seems to point out that we will consider -- continue the good trend that we've seen until now. And if we manage to just continue with north of 150 net sales per month, then we will continue the trend. I think that there is nothing so far to point out despite the bad news about the pandemic, et cetera, et cetera, we don't see any negative sign as of today. So therefore, we are positive. However, given always our conservative stance, let's wait to see how the September, October, et cetera, happen. In terms of Costa del Sol that you also mentioned, I think, yes, 20% of our commercial offer is there. And I think we do have significant upside potential in sales there. And let me just give you a brief figure. As I mentioned, our absorption rate is at 3.6%, and this is taking into consideration all presales divided by 100% of the product under commercialization. And here, just to clarify, because I think some other players calculated differently in the denominator. We are including as well all sold -- unsold units, sold units, plot units, every unit that is in commercialization is in there, okay? And our average is 3.6%. In Costa del Sol, this figure is 2.9%. Despite the fact that we've increased versus the last quarter by 50% the sales, I mean, obviously, increasing from a low figure that the percentage may give you -- may be meaningless. I think what we measure, which is the absorption, 2.9% is already a good figure. But if we went to, let's say, 3.3%, which is where we think the optimal figure is, that would mean increasing by 0.4%, 0.5% on the figures, which could put another -- an additional 40 to 50 units per month being sold. So I think that's where we want to be. Will we be there in September? We don't know yet, and we will see. I think the travel restrictions that are coming up do not help. But nevertheless, I think we have a -- despite all these restrictions, the 2.9% figure that we have right now is not at all a bad figure. Then in terms of land sales, I mean, you mentioned that with resi only, achieving EUR 50 million is challenging. And I would say, it is challenging, but we've already identified the land with interest from parties that will allow us to get to that here. And in fact, July has a significant number of transactions being closed this week. So we believe that only with residential, we could be reaching that figure. So the good thing is that any commercial transaction that comes in will actually come -- we'll be on top of that. And then, I mean, I would like to highlight as well that if you look at the gross margin that we have right now is very close to GAV. So we are -- which is our target to sell the land at gross asset value pricing. And we will continue with that trend. I think the residential transactions that we're closing are, except for a couple of them. The other ones are small transactions of below EUR 1 million. And where at the end, we're managing to negotiate the price to bring it to close to GAV. So we are fairly confident that we will reach the EUR 50 million figure.

Okay. Jorge, just a quick follow-up on that one. So if any commercial land plot comes in H2, what could be the transaction amount? I mean because, I guess, that commercial land plots are worth much more than smaller land plots in residential. So how much could it be? I mean EUR 25 million to EUR 75 million? Or are we talking lower than that?

Well, I mean, I would tell you that we have commercial land plots on the market that are between -- and with some interest, let's say, between EUR 8 million and EUR 40 million. So any range between in there. And this is very binary. So I cannot say. But what I would say is that EUR 8 million is the smaller ticket that is on the market, and then we have tickets close to EUR 40 million from there upwards.

And maybe, Fernando and for the rest, I mean, considering this conversation, I had a text message on my mobile. Someone asking me about the absorption ratio, what we mean by that. I mean what we mean by that is the percentage of the development that is sold monthly. So we calculate it on a monthly basis. So when we talk about 3.6%, that means that we are selling 3.6% of the units every month on average in the last quarter basis, just to clarify this point. Operator, any more questions from the audio conference call?

We currently don't have any further questions on the audio call now.

Okay. I guess I will -- I can change to questions that we received from the webcast. We have a question from an investor saying thanks for the conference. How is the land price evolving during the first semester? Is inflation pressuring high? Many thanks and congratulations for the ramp-up.

I think let me talk about it from a high-level point of view and then from a micro point of view. On a high level point of view, I would go to our evaluation. And I think on a like-for-like, an increase of 0.3%, that basically means up. So meaning that there is no -- in global, in our portfolio, there is no price inflation. And just as a side note, the EUR 3.6 million that you see in the P&L as provision, that is the result of some land actually being above this 0.3% increase average and some land being below, given that Metrovacesa and this compared to other peers has basically our book value is equivalent to GAV, any increase in 1 piece of land will show up in the P&L as a provision, whereas an increase in another -- from the previous GAV in a piece of land does not necessarily mean any -- have any reflection in the P&L. So overall, I would say flat. Then when we go to the micro level and that meaning the transactions that we have closed and basically, looking at land, 1 operation, 1 per 1. Depends on the areas. In areas like -- that are hot like Valencia, Alicante or Barcelona where we have sold land. There, we see that we have several bidders on some of our pieces of land and we can actually sell well above GAV. And then in some more, let's say, areas that are more where the buyers are very, very local developers, smaller plots of 15 units, et cetera, there we see GAV or below GAV. So -- but overall, I would not say that the inflation is super high. Except for example, in Palmas Altas, where we are having demand for land that as of today, we are not selling because we consider that as the organization advances and also as our launches and commercial success increases that we will be able to sell at a higher price. So I think we -- in summary, I think I'm mumbling here a little bit. But I think that in good locations, we will see price inflation and therefore, margins, that will be tighter. And in other places, we will be very happy to sell at GAV or minus 5%, minus 10% of GAV. That for us is a good success.

Okay. We have another question on the financing side. An investor is asking, can you elaborate on the tougher financial conditions currently in the market compared to pre-COVID? Is the change similar for all the developers? Or is there any difference comparing the smaller and less creditworthy developers?

Good morning. Well, as Jorge already mentioned previously, we've seen a slide that say increase in the presales requirements for this signature of the development loans from the pre-COVID 30%, for example, up to 40% in our case. However, in the case of a small -- medium or a small developer, this figure could be up to 60% or even 70% of presales in order to approve the risk from the bank. Banks after COVID are more focused on big players instead of small or medium developer because, well, they are giving priority to the good -- how to say it, the good health, financial health of the company instead of assume an extra risk that they used to assume. Therefore, in our case, we've not seen any decrease in the appetite of the banks. And therefore, we are still on track with the financing of our projects. As Jorge mentioned, 100% of all our project to be -- that the construction will be started in the second half of the year are already pre-agreed with banks, and loans will be signed as soon as we get the licenses for construction.

Okay. Thank you. Another question from the webcast. And again, from an investor, he's asking, are you planning to increase the weight of internal sales in your development? What is the driver to hope for either external or internal?

Yes, Jorge speaking. So the -- I think I already mentioned that, yes, we are planning to increase but not to 100% level. Basically, the driver for us at the end is what is the best mix for selling in each location that -- and then prior to starting the commercialization, we have some ideas in mind but always look for, is it better internal or is it better external? I think when some, let's say, criteria, that our key criteria that shifts our decision towards internal sales is, for example, having a large volume of units in the area, and that will basically keep us in commercialization there for a few years. An example of that is Palmas Altas where we have many projects that are coming on the pipeline. And therefore, it means it's a good thing to sell ourselves, which at the end is not just more cost efficient, I think in this case, we're able to invest more in the training of our salespeople and having great salespeople. Another example is Tarrassa, where we have in the suburbs of Barcelona, where we have 4 projects now under commercialization and more coming. And there, we actually have a mixed approach where we have our own internal sales force, but we also collaborate with external parties that bring us -- refer us some deals, et cetera. So at the end, there's no specific driver. We really -- what we want to do is achieve the best result possible. And we do have identified 2, 3 more developments towards the end of the year where we will do internal sales. But at the end, external are also a very important part of our channels. And we will continue to work with them and in some specific areas, we continue to believe that they are the best option.

Okay. Moving on to the next question for the webcast. Congratulations on the strong presales. Is there any news regarding the land in Valdebebas, which was canceled last year? And what is the current situation there?

No. So there is no -- unfortunately, there's no news yet. We continue, I think, on a dual track approach. First one is to defend our rights, our shareholder rights on the legal path. And that takes time, unfortunately. And secondly, we're always open to finding a negotiated exit, if needed. And I think -- so no news there, but we continue to defend our rights. On a market note, I mean, just because this has come up, I think Valdebebas is actually, I would say, probably Clesa first and then Valdebebas is the second asset in commercial in Madrid where we have most interest from parties. So I think the new -- the consolidation of Valdebebas on the residential district, the new bridge that has already been finalized linking Valdebebas with the airport, the development of the pandemic hospital and the start of the works in the exhibition center, IFEMA, have really brought back the attention of this district. And so we actually have some interested parties in this piece of land. So let's continue -- we will continue a dual track approach and hopefully, reach a solution soon.

Okay. Next question from the webcast is asking about demand. Have you noticed any change in client demand and you see more institutional second buyers? So I guess that means repossession buyers. Is demand picking up from individual buyers?

Yes. Yes. I mean, I think all our presales of the first half are from individual buyers. So there's no BTR in there. And therefore, that strong increase from last year means that there is demand. And we believe it will continue to be so. In our view, this is driven by a very healthy balance between demand and supply. Supply is limited and will likely continue to be -- not to expand aggressively, and that means that demand is being satisfied. So -- and that I think it's important that we see in the coming months that this equilibrium between supply and demand keeps swinging that way. On top of that, we've always said that the BTR projects on top of that, 20% -- 15% to 20% of our presales should come from that, and that is what we're seeing now. I think if you remember at the beginning of the year, we talked about our [ BTX ] strategy, which meant actually starting the construction of some projects in order to be able to sell to BTR for repurchase clients. What has happened in those units is that -- well, actually, 2 of them have already been sold to 1 fund. Another one has started construction. And then 2 of the others are starting construction in the next, in September, most probably, but we are actually shifting the approach and dedicating them to build to sell because we have sold everything that we have in first -- in the previous phases, and therefore, we're turning them into build to sell. And we will bring others into this channel of BTX [ being dedicated ]. So I think a good mix of retail or individual buyers as well as institutional buyers.

Okay. Yes, I have another question from -- actually, by WhatsApp received, yes. What about the house prices outlook? With the picture that you're describing, it sounds like it is quite positive. So are you expecting an acceleration in house prices?

I think overall, I would say, flattish. I think what we are seeing is in some areas where demand is clearly exceeding supply, we do see that pressure, and therefore, we are raising prices. But if you ask me, do you see any -- a sustained HPA in all the portfolio and in coming -- in 4 years, I would say that as of today, we're not there. I think we are seeing some price increases in some specific developments and we are monitoring it on a weekly basis through our CRM systems. And definitely, we are increasing there where we feel that the market can absorb that. My view is that in the EUR 250,000 to EUR 300,000 segment and in some areas like Valencia, to put an example, I think the buyer is extremely sensitive to prices. And then there, we are -- we prefer to keep up with the velocity, with the sales velocity rather than increase 5%, for example, 4%, 5% that will not be absorbed by the market.

Okay. One more question from the webcast asking about the loan-to-value ratio. Currently, it's 8%. Is it not very conservative, taking into account the very good financial and business conditions of the company?

Yes. Yes, it is. I think the -- this will increase. I mean as -- obviously, as the organizations of CapEx is -- goes into place and the construction share continues to ramp up, et cetera, et cetera, this figure will increase. We know that 8% is not an optimal figure. And we will see in the next quarters as how we get closer to a figure of around 20%, which is where we feel we should be.

Okay. From the webcast, that's about it. Operator, can we come back if there is any last minute questions from the conference call?

We have currently no further questions from the conference call. [Operator Instructions]. We don't appear to have any questions, so I'll hand back over to you.

Okay. So well, thank you very much. I think this concludes our first semester results presentation of Metrovacesa. Obviously, after the call, the Investor Relations team will be available to take any follow-up questions that you might have. And we thank you for your participation. We hope you have -- will have a very nice summer break and hope to speak with you again next quarter. Thank you, goodbye.