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

Hello, everybody, and welcome to the Metrovacesa Full Year 2021 Results Presentation. My name is Bethany, and I will be your operator today. [Operator Instructions] I will now hand the call over to Juan Carlos Calvo of Investor Relations at Metrovacesa. Juan, over to you.

Thank you. Good morning. Welcome to the Metrovacesa results presentation for the full year 2021. The slides of this presentation have been released to the market earlier this morning, and they are 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. As a reminder, my name is Juan Carlos Calvo. I am Director of Strategy and Investor Relations. And together with me, the main speakers today, as usual, will be our Chief Executive Officer, Jorge Perez de Leza; and our Chief Financial Officer, Borja Tejada. At the end of the presentation, we will take questions from the audio conference call as well as those sent online through the webcast platform. I now hand it over to our CEO. Jorge?

Thank you, Juan Carlos. And good morning, everybody, and welcome to our full year 2021 results presentation. Moving on to Page #5. Let me go through the highlights of the year. For us, we consider it a year above expectations and a leap of change in our development activity and hence, consolidating our ramp-up period. Our residential deliveries are up 171% with 1,627 units delivered, which is on the higher part of the range that we gave as guidance last year. Also, presales activity are close to 2,100 units. That's 2x what we sold in 2020. Construction starts also close to 2,100. And land sales is standing at 40 -- close to EUR 43 million, 2.7x what we sold in 2020. And we'll touch upon that a little bit later. This results in a strong cash flow generation, which is becoming more visible than ever, and we exceeded our cash flow guidance for the year. And we did 2 dividend payments in the year, EUR 121 million, which is around a 13% yield -- dividend yield on current market cap. We have positive results in the year with a net profit of EUR 18.5 million; the operating cash flow that we will see later approaching EUR 180 million; and the dividend, as I mentioned, EUR 121 million. We will talk about the future dividends as well. I think Page #7, the key operational data, we can jump it because it's a summary of what we will see later on. And then talking about the Spanish market dynamics, I turn it over to Juan Carlos for this slide and comments.

Thank you. Just a few comments on the market dynamics. Essentially, what we see is that the demand-supply outlook looks very favorable for the next few years. We see continued strong data from the demand side. We can see that the number of transactions has been rising well above pre-COVID levels. And particularly when we look at the new homes, the new construction of new apartments, this is well above previous levels. This is way past the time when -- the question of whether this was pent-up demand. I think this is more underlying demand driven by a number of macro factors: low interest rates, different changes in the preferences from the buyers, et cetera. And so far, we continue to have -- to experience very good demand in the last few months and a continuation of that in recent months as well. From the supply point of view, we have seen some increase in the last few months, coming back to the pre-COVID levels, but essentially, that's it. I mean back to pre-COVID levels when demand is actually better than that. So the outlook from the point of view of supply/demand, we think, looks pretty favorable for the next few years. That should be translating into some positive house price appreciation, moderate. We continue to think it will be moderate increases, more acute probably in those areas with favorable demographics. But our view continues to be that -- one of moderate price increases over the next few years. From the cost side, construction costs, we have seen some increases in the last few months in the order of 4%, 5% in the recent billing that we have contracted recently. This is mostly driven by raw material increases but essentially absorbed by the house price appreciation. Therefore, our outlook for gross margins continues to be the same as it was before, which is the low 20s for the next few years, and that remains unchanged. And for the commercial segment, we see continued improved momentum in the demand and the interest from tenants, from investors, and we expect this to be translated in a more favorable environment in the year 2022. Back to Jorge.

Thank you, Juan Carlos. And now moving on with the KPIs, the operational KPIs, Page #9. In terms of residential deliveries, as I mentioned before, we were at the top of the range with 1,627 units delivered with a record delivery in the fourth quarter with 548 units. The average selling price for these units stood at EUR 290,000, a big difference compared to 2020 and turning into a revenue of EUR 472 million and gross margin of 22.1%. Also worth mentioning is that we have -- we had 600 units ready for delivery at the year-end. This means with the final work certificate, just pending to obtain the occupancy license, which means that we will see a strong quarter of deliveries in the first quarter of 2022. In terms of presales, once again, strong growth from 2020 and doubling in sales. And the total net -- again, this is net presales of 2,093 units. This is -- this represents a healthy absorption. But depending on how you measure it, whether it's over -- having in the denominator unsold plus sold units or just unsold, we are at a ratio of about 3%, which is what we measure as a healthy figure to sell a whole development in a 3-year period. Also, we see a sustained and solid housing demand in build to sell not just in the year, but also 2022 has started strong. And also visible -- in Costa Del Sol, I think the visibility is improving. And assuming there are no changes in the environment this year due to the recent events, I think we should see strong sales from foreign investors. Also, BTR is stronger than ever, and we'll talk about that in a second. Moving on to other KPIs of operational activity on Page 11. We have a presales backlog that is quite strong, is 3,000 -- over 3,000 units with an average selling price of EUR 280,000. 77% of that is already in contracts. 78% is retail clients. Remaining part is BTR, which means -- which turns into a strong sales coverage for '22 with more than 80% and also for 2023. The units under construction or completed is now at about 4,000 units with new construction starts at close to 2,100 units, and we obtained building permits of close to 2,300 units. The units under commercialization are now 5,000 -- over 5,500 units with 104 projects and 55% of all of that is already presold. In terms of active units, we are now at 7,500 after, obviously, all the deliveries with new net active launches of above 1,800 units in full year '21 and another 2,008 (sic) [ 2,006 ] units in the design phase. And we will see this figure growing in a couple of years. Talking about -- in a little bit more detail about the built to rent segment. We see solid demand from institutional investors or institutional buyers and also, I would say, a change or a shift in the profile of these institutional investors with lower cost of capital investors such as in the pension funds, insurance companies or sovereign funds coming into the market and I would say, with large equity ready for deployment. We had a recent deal of 152 units that were signed at the end of the year with an insurance company, with construction to be completed in 4Q 2022. This was an example of one of the projects that we call BTX, which we started construction with equity with a goal of selling it either to BTR or BTS. And in this case, it turned into a BTR project. The segment BTR represents 17% of our presales in 2021, in line with what we mentioned in our guidance for this segment that was to be around between 15% and 20%. We have signed overall 7 BTR projects with 726 [ units ], representing 24% of our sales backlog and with diversified locations. So what we were mentioning 1.5 years ago of Tier 2 cities, so beyond Madrid and Barcelona, becoming part of the radar of these investors is obviously now a reality and with increasing interest, I would say. We will continue in 2022 with our approach to be a turnkey developer for this kind of segment. And we see, as I mentioned, strong interest, and again, I think BTR should represent between 15% to 20% of our presales. Moving to Page 13. This is just a little bit of a more detailed view of Palmas Altas that we consider a success case for us, that we consider relevant because it should represent what will happen in other non-fully permitted areas that we have in our portfolio once they become fully permitted. And we have now -- as you may remember, sorry, Isla Natura in Seville, in the southern part of the city is a new district with over 2,000 residential units in the -- 100% controlled by Metrovacesa, where we started the urbanization and the accesses. And we launched at the beginning of the year around 5 buildings with 348 units, and with the success that we experienced, we launched another 6 buildings towards the end of the year. 40% of what's in commercialization is already presold and with healthy price increases. And we are expecting to start the construction of the buildings in -- as the urbanization reaches a certain threshold in the first half of 2022. This is, again, a good example of how we can also combine in this kind of big environments different client segments, meaning target by age, target by amenities, target also by pricing, by types of metros. And also, I think a potential interest for BTR will come this year in this area. Moving into the land management page in 14 -- Page 14. We are now at 82% fully permitted by GAV, taking into consideration that the way this calculation is done, every year, whatever we sell as fully permitted land or delivery units comes out of the portfolio. And in the period of '18 to '21, we've transformed to fully permitted around 2,400 units. And we will continue to do so in the coming years and I think in a more numerous way, as you can see on the right-hand side of the slide with some key plots, we expected -- with good progress expected in the coming year 2022 and also 2023. As examples, we are presenting Arpo/Pozuelo in Madrid; Los Cerros in Madrid, which is an area where we have 1,600 units and due to start urbanization this year; also, Getafe; and then Mesena in Madrid next to Arturo Soria. Also in Barcelona, the 3 Chimneys, we're expecting to have the approval of the plan director in the coming months. And finally, Seda-Papelera where we are moving towards approval -- fully permitted approval, expected at the end of 2023 or the beginning of 2024. Many of these areas are similar to what we experienced, I think, in Palmas Altas, and we will be able to probably accelerate launches as they become fully permitted. In terms of land sales, we've seen that the demand for residential land has remained solid. We sold EUR 42.9 million, including EUR 4.3 million that are in private contracts that we will authorize in -- during 2022. With prices very close to book value, we have a gross margin of minus 4% overall. But really, this represents only residential land. I think commercial land was probably, I would say, the less good part or what did not become as fruitful as what we would have wanted last year. However, we do expect a stronger year in 2022 with renewed interest in the recent months from prospect investors in the commercial segment and not only in mixed-use segments but also in the office space as we see that -- slowly companies going back to the office and new tenants or tenants looking for new space are becoming more and more conscious about what they want in terms of offices. Getting into more detail on the commercial portfolio. Let me remind you that our strategy, again, is to add value to the existing assets, either through land sales, through turnkey or in some cases, through JV. This year, in 2022, we will deliver Monteburgos 2 to one of our turnkey clients, Catalana Occidente. We will also deliver the health care residents in Manresa to one of the main operators in the country. And also, we are working and we will see some results during -- we will announce some results in 2022 in what we call our Project ORIA, which is Clesa, in which we will -- we are developing 80 -- close to 89,000 square meters of buildable area with the factory already -- the Clesa factory already handed it over to the municipality and where our investors will develop in the coming years a hub for life sciences. We will develop in this area a mixed-use complex with student housing, co-living and offices. Very, very strong interest from institutional investors for this development, and we will be announcing soon some of the results from that. In terms of sustainability and ESG, in Page 17, we continue with our increased focus in the 3 legs of the ESG. With environmental, becoming part of the Green Building Council and all of our projects now being certified by this and strongly becoming, I would say, focused on certificate -- energy certificate A or B in most of our projects. In terms of the social part, we've adhered ourselves to the United Nations Global Compact in 2021, also in Forética and Ciudades Sostenibles. And we have been selected again among the top 100 employees -- best companies to work in Spain as, let's say, voted by our employees. Finally, in terms of governance, the sustainability has been included as a key function that we created within the Board, and we created the, let's say, the S part within the remunerations committee, which is now the remunerations and sustainability committee. And the ESG targets from 2022 are now incorporated in the variable compensation of the management as well as for the rest of the workforce in the company. With that, I would finish with the operational KPIs. I hand it over to Borja Tejada, our CFO, for the financial overview.

Thank you, Jorge, and good morning, everyone. In terms of profit and loss account, here's some key figures. [ Revenues ] more than EUR 510 million, out of which residential deliveries of EUR 472 million, representing more than 3.6x previous year; and close to EUR 40 million from land sales. In terms of gross development margin, 22.1%, exceeding our guidance of low 20s. EBITDA close to EUR 51 million and net profit EUR 18.5 million, meaning close to EUR 40 million of recurring pretax profit. Now if we move to Slide 20. In terms of cash flow for shareholders based on our real figures, starting with EBITDA of close EUR 51 million. We just deduct corporate financial expenses and corporate income tax and adding cash recovered from land sales and development deliveries, assuming there is no need to replenish the land bank, we get more than EUR 176 million of gross operating cash flow, well above the initial guidance of EUR 100 million. Adjusting it with CapEx in urbanization and work in progress, good of -- cost of goods sold of deliveries ex land and changes in cash from clients, we get cash flows related to work in progress. And in order to get the valuation of net debt, you just need -- you just must deduct to this figure the dividend of EUR 121 million that we distributed last year. Summarizing, more than EUR 176 million of gross operating cash flow figure used as reference for dividend calculation. Now if we move to Slide 21. Concerning of our debt -- net debt, very solid position of the group, 6.2% loan-to-value; greater flexibility with our corporate financing, more than EUR 260 million loan refinanced for 5 years with no maturities in the short -- in a short-term period, 5-year bond issued in May and continuous use of commercial paper, a very cheap source of financing for the group. In terms of treasury, more than EUR 231 million of unrestricted treasury. And regarding our buyback, just some figures. More than EUR 21 million already invested, equivalent to 3.3 million shares, meaning 2.2% of our share capital. Finally, moving to Slide 22. About asset appraisal, 1.8% like-for-like with positive increase of 2.5% in our residential uses. EUR 2.6 billion of GAV, out of which 77% represents our residential portfolio and 23% commercial one. Finally, in terms of net asset value, EUR 15.82 per share or EUR 16.61 per share ex dividend. Now I will hand over to Jorge with the strategy and outlook. Jorge?

Thank you, Borja. Moving now to Page #24. We reaffirm our long-term strategy for the company, which, in a few bullet points, we would summarize it as: first of all, to reinforce our leading position as a housing developer in Spain; secondly, to reach an activity volume of north of 2,500 units annually. We are already, as you could see, in the 2,000 units in most of the KPIs, and now we will step it up to reach the 2,500 units; also, to have a land portfolio of a size of around 6 years of residential activity; and finally, for our commercial segment, to progressively reduce our exposure in the coming years and become more focused on residential. How we will do that is, first of all, in residential, continue with our focus on this core business for us with a drive in quality, innovation and sustainability as well. In terms of land management, our expert in-house team will ensure access to the quality land in the coming years as we have seen in the slide about land management with some key developments, key areas coming into fully permitted stage in the coming years. Land sales, we will aim to optimize the portfolio through the sale of selected noncore assets in residential. And then as well in commercial, we will, as I mentioned before, maximize our portfolio with the opportunistic approach, either through land sales, through turnkeys or in some cases, JVs. In the guidance for 2022, the implementation of that strategy puts us in terms of -- in residential development in a delivery range of 1,600 to 2,000 units, assuming there are no disruptions or anything like that in the construction. We are comfortable with this range for the next 2 years. In commercial development, we will deliver this year the office building for Catalana Occidente. And in land sales, we will sign agreements of more than EUR 75 million, including here those that are unauthorized and private contract as well. And that should give us an operating cash flow for the year 2022 north of EUR 150 million. And to finalize, I would like to again focus on our dividends, which our -- as you know, our key aim in these initial years of Metrovacesa, the next dividend to be paid in the second quarter of 2022. Similar to last year, we stick to our policy -- our payout policy to distribute 8% of the cash flow -- of the operating cash flow generated. The figure for the second quarter of '22 to be decided in the Board meeting in March and then approved in the AGM that would normally take place in April as last year. And this amount will be at least EUR 60 million, like we paid in December of EUR 0.4 per share. And then the distributions in 2021, just a reminder, have been in total close to EUR 0.8 per share or representing a dividend yield of 13%. And with that, I finish the presentation.

Yes. We take the floor back to the operator to see if there are any questions from the conference call, please.

[Operator Instructions] The first question comes from Fernando Abril at Alantra.

I have 3, please, if I may. So first is with regards to the update you have provided with the non-permitted land, specifically with the residential units. So you are expecting roughly 20% to 25% of your full portfolio of non-permitted land to be permitted by the end of '23, roughly 25% more or less. What is the percentage of your GAV? Because I've seen that all residential non-permitted land amounts to EUR 450 million GAV so I would like to know these units that are expected to be permitted in 2 years, what is the percentage that they represent. Then second question is with regards to your guidance of land sales. I don't know if you can give us more color what is the mix between residential and commercial and then also if you are exploring selling minority stakes in some of your commercial projects. And last is with regards to launches. So what is the volume of launches you expect for 2022? So we can see where the delivery range guidance could be more longer term.

Yes, Fernando. So Jorge speaking here, going through your 3 questions. On the first one, regarding the non-fully permitted land and how much of that will be transformed by the end of 2023, I think 25% would mean that roughly all of the land is transformed -- that is non-fully permitted will be transformed into fully permitted, and I think that will be too aggressive. It's not what we said. I think around half of that will probably be translated. What that represents in number of units, I don't have the figure right now on top of my head. So I would say let's hold on to that and we can come back later to you. But definitely, I would say north of 6,000 units by 2023. On your second question, which is land sales and the mix between resi and commercial, I would say we're not getting to that detail. I mean, I think the goal is to be over EUR 75 million. Commercial normally has -- is a little bit more binary, meaning that if we sell one big product line, then it becomes -- the figure much -- can go much higher. And -- but I don't want to be too specific about that because our strategy in land for commercial land can be the land -- direct land sales or in some cases, to maximize the value and to maximize the return, we may do a turnkey. Okay? So we consider that figure EUR 75 million to be a figure that we are comfortable with in combined. And the way we get there at the end, it shouldn't be something that affects our cash flow for the year, which is our main goal. In terms of -- you mentioned about selling the minority stakes in the projects. I'm not sure about what you mean there. The project that we have in terms of a minority stake would be -- could be the JV with Tishman Speyer for our project in Las Tablas. And there, as you know, first phase is completed, and we have -- we are right now under full leasing effort. And as compared to last year, I think not only the interest visits have increased but also, we have a few offers out there in the market. So I think this year, we will see the building becoming open and operational. And we are not planning to sell our 24% stake in that JV. Clesa is 100% owned by us. And I think in Clesa, as I mentioned before, I cannot get into too much specifics right now. But throughout the year, you will see how -- several initiatives being signed in order to put that project into adding value for the company. And then coming to your third question in terms of number of launches. We will -- in both 2022 and 2023, we will be getting closer, if not there, to the figure of 2,500. Because if you want to reach 2,500, our midterm goal in 3 years, we need to start getting close to that figure. So between 2,000 to 2,500 -- 2,100 to 2,500, at the end, it will -- I think if the year 2022 is as good as 2021 and no disruptions are seen due to the recent events, we should be close to 2,500.

Okay. Jorge, just one quick follow-up on the land sales again. Just wanting to know what -- how has it gone, 2021, in residential land sales compared to your initial targets? Because you almost completed your EUR 50 million guidance with only residential, but I was wondering what was your initial expectations.

So yes, Fernando, it has gone better or much better than expected, I would say, because, really, we didn't sell any commercial. If we have sold one of the big tickets in commercial, then we would have definitely been above EUR 50 million. And that is something that could happen in 2022 as well if you sell one of the big ticket ones. But that's -- again, coming back to 2021. What we have seen is all that figure being sold is with land plots in resi that are not strategic for us, either because they are in regions where we are -- we don't want to develop or small projects below 20 units and something like that. And so the figure has been better than we expected. And also, the -- what you can see in the gross margin of minus 4% is that if we have an opportunity, we are not going to not sell a plot of land because it has a slightly negative margin. That's not the goal. I mean if it was -- so again, going into 2022, if we do sell one commercial product land that is big, that figure could increase. I'm not saying no. But also, what we see right now, and I think that has an impact on the figure that we offer as -- that we present as operating cash flow target, is that -- what we see for big land plots, especially in commercial, is that you can sign something but you cannot be 100% that you will collect full payment of that in the year. So meaning if we sign a private contract, obviously, with a meaningful prepayment, it is something that you will not see in the P&L of 2022. You will not see the full cash flow in the 2022 but you will see it between the 2 years. So that's why we are a little bit more ambiguous in that figure. But I think private agreements, we will sign this year.

The next question comes from Florent Laroche-Joubert from ODDO BHF.

I would have 3 questions also, if I may. First question, so could you please maybe give us some visibility on the percentage of units presold for your 2023 deliveries? My second question would be on your recurring margin. I understand that it is 11%. So -- and I understand that maybe your recurring margin is maybe lower than some of your peers. So have we any chance to see some convergence with your peers regarding your margin? And my third question would be on the commercial exposure. So I understand that one of your strategic pillars is to reduce this exposure. So how many years can it take actually?

Yes, Florent. Thanks for your question. I think in regards to our deliveries for '22, I mentioned that we are above 80%. In 2023, I would say a healthy figure of a little bit more than 60%, 6-0. In terms of your gross margins, what -- we've always guided towards lower 20s, and I would say we stick to that figure. And it can vary slightly upwards or downwards depending on the mix that we are delivering. So if we are delivering more higher-margin projects like Costa del Sol, then it will be a little bit higher and if not, closer to 20%. But between 20%, 23%, that's our ballpark figure. Can that get better? That was your second part. Well, I think we are experiencing HPA in the higher-margin projects because they are normally in the best areas where affordability is less of an issue. But also, we have, let's say, construction costs threatening us in a way. And when I say threaten, it's a light threatening experience that we've had in the last year. And I think we feel more comfortable saying that we will maintain the margins and that the HPA will offset the construction costs that may appear. So -- and then I think that we will see -- comparing to our peers, we will see in subsequent years -- with the land that has been purchased more recently, I think we will see a convergence in the margins of all of our -- of all the industry. And finally, your third question around commercial exposure, I think our goal is to reduce that in 4, 5 years.

[Operator Instructions] The next question comes from Ignacio Romero at Sabadell.

I have a question regarding the guidance for our cash flow this year on Page 25. Jorge, you mentioned before that part of the -- I wanted to know the moving parts of the figure because according to my numbers, just with the deliveries, you should reach the EUR 150 million. And there's also the asset that you are delivering in the office building, and you also have the land sales. You mentioned before that part of the question here might be that not all the -- you are not going to collect all the money on the sale of the land. But please if you could tell us what the moving parts are here, that would be appreciated.

Yes, this figure is -- you should take it as going -- and the different moving parts, in the lower range. So if you take 1,600 units deliveries at EUR 280,000 and then multiply that by 30%, which is normally the cash flow that we extract off each delivery, you would be in a figure around EUR 130 million. You add on top of that the net from the commercial building that we are delivering. And then we are assuming, and that's where the upside is, that most of the land sales are, let's say, deferred in payment, which has not been the case in residential in 2021, by the way, because we signed EUR 42.9 million in total but we cashed in EUR 38 million out of that. So -- but let's -- our focus is, I think -- in our strategy is to sell the land -- nonstrategic land in residential and to sell commercial land. And that means that we and the market right now is expecting or is asking -- especially in the big-ticket land, is negotiating more on payment rather than on price. And so we don't want to be saying, "Look, we are signing EUR 100 million and we are collecting EUR 100 million and therefore, the cash flow should be much higher than EUR 150 million." I think if everything goes well and we are in the midrange of all the things, we will, like this year, be above that guidance. But we prefer to be -- to continue building our credibility, which I think is something that we've been very focused on in the last 4 or 5 quarters. I think 2020 for us was a year that -- as you may recall, not a very good year where, basically, our credibility was destroyed. And we just want to continue. This is an effort of quarter-by-quarter. And so what we will do is we will follow these KPIs every quarter. And then hopefully, by midyear, we will see whether we are close to EUR 150 million or better than that.

Okay. Very clear. And regarding the land sales, I don't know if you've mentioned this before, but could you please give us the breakdown between commercial land and resi land that you are planning in those EUR 75 million?

Yes. Ignacio, I think that question was asked before, and I -- to be honest, I wasn't specific. I just said that we will -- we feel comfortable with EUR 75 million, and that will impact the cash flow, which is what we care about for our investors. And so whether it comes from one segment or the other, it shouldn't be that being meaningful.

We have no further questions so I'll hand the call back to the team to conclude.

Actually, not conclude because we have quite a few questions from the webcast. So starting with the first one. We have a question from Mariano Miguel, analyst from Banco Santander. We have 3 questions on the cash flow guidance. EUR 150 million looks a little bit low looking at 2021 performance. Could you please elaborate a little bit on this? Although -- possibly, this one has been addressed, I think. About EUR 75 million land sales target split of residential and commercial, I think we have already addressed. Land CapEx stood at EUR 20 million in 2021, which looks a little bit low. Could you expect an important increase here going forward? And another follow-up from the same analyst is can you give some color on the situation with contractors and your expectation about construction cost inflation in the year 2022.

Okay. So I will go to the third and fourth question as the first 2 ones, I think, were already answered. And so the... [Foreign Language] Yes, sorry. On the land CapEx, the EUR 20 million in 2021, I think that figure in 2022 should be between EUR 70 million and EUR 100 million. And then regarding your fourth question, which is about construction costs and how we see that in the market. I think in 2021, we have had a construction cost increase that could be between 5% and 10%, depending on the project. Keep in mind also that -- and I think this is similar to what I've been seeing with our competition. Keep in mind also that in 2021, we did have a new technical code coming into place, which represents a cost increase on a like-for-like basis anyway for a similar project in the previous year, but around 5% to 10%. And in the recent, let's say, tenders -- different rounds of tenders that we've been receiving in the last weeks or at the beginning of the year, we do not see any big increases or anything that is not similar to what we had experienced last year. And in fact, I think a little bit of the feedback that we were getting from the construction companies is that some of the materials, which is the source of consumption cost increase so far, were already stabilizing. Obviously, now we have one new event, which is the recent events in Ukraine, et cetera. What that will mean in terms of construction costs, we have no idea. But so far, something, as I mentioned before, that does not affect our gross margins because we are definitely having HPA to cover that.

Okay. Thank you. Next question from another analyst, Ignacio Domínguez from JB Capital. First one, I think, has been addressed already about construction costs. Secondly, about guidance for development gross margin in the year 2022, will it remain roughly at 22% since last year that we had?

Well, I think that one has been addressed as well a couple of times, I think lower 20s and, let's say, between 20% and 23% and we will see at the end, depending on the mix that we will deliver on projects. All our projects are in that kind of range.

Okay. Next question from an investor. How is the presales going in the beginning of 2022? Particularly, how is demand from foreigners in Costa del Sol?

So we have data obviously for 2 months, very strong, so a healthy increase compared to 2021. So -- and actually, part of that as well is coming from the second part of the question, which is investors -- sorry, investors -- buyers in Costa del Sol. I think generally, January and February are not great months for Costa del Sol seasonality. It means that these buyers start coming more like in March, Easter -- around Easter time. But we have seen a good performance of our projects in Costa del Sol in January and February. So our feeling is that we are -- I think as Juan Carlos mentioned at the beginning, we are favoring from this good or -- let's say good balance for developers of supply/demand, and the sales are reflecting that with a stronger performance than last year.

Okay. Next question is from an investor, asking about the share price performance in the last 2 years after the pandemic. The performance has been negative over that period. How do you explain this performance? And what is the action plan? Are you purchasing more shares more aggressively?

Okay. So I think you have to look at -- here at share performance as well as dividend payment because I think both are remuneration for the shareholders. And if I take -- and also, if I take -- let's take 2020 and '21, like the question is addressing. If we take into consideration those 2 things, I think Metrovacesa would be plus 20% and our competitors, without giving names, I think likely plus 12% and plus 24%. So we are not that far off. And then if we look at 2021, which is -- as I mentioned before, 2020 for us was a year that was not great. And 2021, we -- our ramp-up was consolidating as we have seen. Taking into consideration dividend plus share performance, we are 31% compared to 22% and 1 -- plus 1% for those years.

Okay. We have 2 questions from the analyst of Deutsche Bank, Thomas. Do you -- are you also experiencing more slowly building permitting from the municipalities? In other words, is permitting a bottleneck for more sales? And can you provide an update on new residential regulation in Spain?

So permitting, I mean, I would say there's no change to what we saw in 2021. I mean, I think the pandemic did mean a slowdown because a lot of the -- or 100% of the administrative workforce of the municipalities want to work from home, and in some cases, they didn't have the tools and the means to work effectively. But that was, in most cases, addressed, and we are at around 9 months in average to obtain a license, which is what we consider in our building -- sorry, in our business plan as the standard case. And we have a huge variance. I mean some municipalities will take 3 months and in very extraordinary cases, so only a few projects, you take 3 years, so I think 9 months. And nothing that would say that has gotten much, much worse than what we have post pandemic. The second question was?

Yes, comments about the residential regulation in Spain.

Sorry, the residential regulations. I think, I mean, we've -- there's nothing new that we haven't seen in the last quarter or in the quarter before that. I think the kind of the new law, which is still quite vague in my opinion and needs to be more detailed in terms of implementation, it is what we have discussed in previous quarters. It has, on the one hand, some limitations in the rental business; and then on the other hand, some implications on the development business. On the rental business, we will see how -- again, how is that implemented at the national level and at the regional level. But what we see so far is that the interest from investors and from BTR institutional buyers is strong and has not gotten any weaker, in fact, I would say higher and with the change of mix of these institutional investors being pension funds and insurance companies, et cetera, that I think have lower cost of capital and a longer-term view. So this is not a PE firm wanting to flip around the assets in 2, 3 years or something. So that long-term view, I think, has -- is less worried about the implications of the rental limitations that will be finally implemented. On the part -- on the development side, the main implications there could be the land -- sorry, the percentage of social housing that is implemented in new developments. And in all the developments we're now not fully permitted, we are above that figure. So I think an example is Los Carlos (sic) [ Los Cerros ] in Madrid, social housing is close to 50%. So we are above that. In 3 Chimneys in Barcelona, the initial plan that was approved is with 40% social housing, which is in line with that. So nothing that should have a meaningful impact.

Okay. From the same analyst, he's asking whether an increase in interest rates or mortgage rates is already having any impact on sales momentum.

No. The reality is no. And also, keep in mind that somebody buying now not a finished product for delivery but buying off plan is thinking about getting a mortgage 1.5 years or 2 years from now. And there is a sentiment that, yes, the interest rates will go up. But I think if they go up and your fixed mortgage, instead of being 0.8% or 0.9%, is 1.5%, that will not affect the decision of buying your first one.

Okay. Another question from the analyst of JB Capital. Just to confirm, is the company's long-term target to reach a run rate of 2,500 deliveries?

That's the medium-term target, and it can be revised as we move forward and the non-fully permitted land becomes fully permitted.

Okay. We have another question from an investor regarding the timing of the dividend. Do you expect a similar sequence as last year? That is to say do you expect to pay a first dividend based on the cash flow of the year before and again, a second dividend of the cash flow clearly comes in higher?

Well, I think we will operate the same as in 2021. First of all, in the -- after the Shareholders' Meeting in April, we will have a dividend payment that will be based on the cash flow of 2021 and as I mentioned, at least EUR 60 million to be decided as the final figure on the March Board. And then towards the second half of the year, we will do the same as we did in 2021. We will see where we are at cash flow generation, what is the forecast for the end of the year, and the goal is to have a second dividend payment in November, December.

Okay. This is all from the webcast side. From the conference call, any follow-up questions?

There are no more questions on the conference call.

Okay. I think if that's the case, I think we can close the conference call and the webcast at this point. We thank you all for participating in the conference call and the webcast. We -- obviously, the team -- the Investor Relations team will be available for any questions that you may have during the rest of the day and the next few days and weeks. We expect to see you again next quarter. Thank you. Bye-bye.

Thank you.

Thank you.

This concludes today's conference call. Thank you for joining. You may now disconnect your lines.