Good day and thank you for standing by, and welcome to the Neinor Homes 9M 2021 results presentation conference call. Currently, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and 1 on your telephone. Please be advised that today's conference is being recorded. I would like to hand the conference now to your first speaker today, Mr. José Cravo. Please go ahead, sir.
Okay. Thank you. Hi, good afternoon, everyone. My name is José Cravo, and I'm the head of investor relations at Neinor Homes. Today, we are going to go through our 9 months 2021 results presentation. As usual, we are here with Borja Garcia-Egotxeaga Vergara, our CEO, and Jordi Argemí, our deputy CEO and CFO. We shall start by reviewing the main highlights of this set of results and analyze the key trends affecting the development activity and the rental platform.
On section three, we will give you a glimpse of how Neinor Rental product will look like, and afterward, we will go into conclusions. Now I hand over the word to Borja.
Thank you, José. Thank you. Thanks everyone for joining. Before going to the presentation, the one message I want to relay is that you will see a solid recurrent business with fundamentals that have never been so strong in our company. This allow us to be on track to meet our 2021 guidance and also give us strong momentum for growth in the near future. Now let's start on page 5, so I can give you a few highlights of the 2021 third quarter results.
On the financial side, we recorded EUR 500 million of revenues and EUR 96 million adjusted EBITDA. This represents 65% of our yearly target. Bottom line, this represents an earning per share of EUR 0.79, almost 200% increase over the last year. It means 12% return on equity, the highest in the sector.
Important to mention also is that only six months after the integration of Quabit, we have recorded a positive operating profit of EUR 5 million. It's not that much, but we have integrated this company in a record time, and we are already generating profits. At the operational level during the third quarter, we kept seeing a positive momentum with 1,938 units pre-sold in the year, which implies a growth of 78% versus the same period of 2020.
Moreover, we have started to increase prices during the year with 2.5%-3% SPA above the business plan. On the rental business, the performance has also been quite strong, and we continue to balance occupancy increases with rental growth.
In the year, we leased 15% of total GLA, the gross leasable area, of service portfolio while increasing rents by 19%. Regarding the investment activity, this is the time to go for good and accretive acquisitions. Despite the commercial strength, our land acquisition program has not slowed down. This year, we exceeded our acquisition guidance, so we acquired over EUR 600 million in good land, well located and with great margins.
We acquired Quabit and cherry-picked land plots for more than 10,000 units. Finally, on the rental platform, let me remind you what I said in February 2020 before the pandemic arrived. Build-to-rent was the most attractive investment opportunity in the Spanish residential sector. Back then, we had two options to face build-to-rent.
The first one was to sell our assets at a discount to their face value, reducing commercial risk, but lowering margins. The second one was to incorporate the whole operation of build-to-rent as a new business line in our company, which was the most difficult path, but also the one that maximized our margins, the value of our land bank, and ultimately the returns on our shareholders. Today, this build-to-rent is a reality. We have 400 units under operations.
This week, we are adding another 140 units in Málaga, and we already secured the financing for an additional 2,000 units that will be part of our of our rental platform soon, and we will keep growing our platform. Moving to next slide.
As always, here you can find a summary on the main operating KPIs of the business that continue to show a strong growth momentum. On the development activity, we had very intense nine months with a focus on acquisition, a strict integration of Quabit, and launching new projects. Let me highlight the following aspects. The implicit price stood at EUR 280,000 per unit due to the high percent coverage ratios of Quabit's future deliveries.
However, we expect the implicit average selling price on the order book to continue increasing in the coming quarters towards a level around EUR 310,000. That implies a 10% increase and is in line with what we have sold year-to-date.
On the rental platform, the passing GRI currently stands at EUR 2.8 million, and this figure will continue to grow quarter after quarter as we start to deliver our own build-to-rent assets. Currently, we have 2,000 units in different stages of development, whose CapEx needs are fully funded and are expected to be delivered by 2024. Looking at the residential services, we continue to expand Rental Garantizada, our rental OpCo. We have opened new offices in Barcelona, Valencia, and Malaga this year. Currently, we are already managing close to 3,300 units, and this business will continue to grow also.
On HMB, the social housing in Barcelona, we are very happy to announce that all the bureaucratic procedures have been successfully concluded, and two weeks ago, we made our first equity commitment of EUR 6 million to the joint venture, and now we will kick off the launches. On slide number 77, you can find the financial results that I just mentioned. Just to add here that even for this part of the year, we keep working under a prudent loan-to-value of 25%.
We move to next chapter on business performance review. In slide number 9, you have the evolution of the monthly net absorption rate from early 2020 until September 2021. The pace of pre-sales accelerated post-COVID, with absorption rate effectively doubling.
In October and November, commercial activity has continued to perform well, and we should finish the year with approximately 2,400 units sold while pushing for higher prices, which is a key part of our strategy under the current environment. Let's move now to slide 10, and here you have a summary of our land acquisitions during 2021. On top of Quabit, on this slide you have a summary of the cherry-picked land acquisitions during this year.
We have acquired more than 3,000 units and invested more than EUR 250 million, clearly surpassing the annual targets. Of these, 70% of the units are located in Madrid and Barcelona. These acquisitions were made from a diversified group of sellers, from other developers, funds, auctions, banks, and private individuals.
In slide 11, you can see a summary of the main operational and financial KPIs of our rental platform. The most relevant aspect is the intense leasing activity with 15% of total GLA rotated while increasing rents by 19%. This can be seen by the 30% increase in passing GRI since January. In the coming quarters, tenant rotation will decrease, and we will be focused on increasing occupancy while keeping maximizing rents. Now please follow me to section 3 of the presentation, where we will have a deeper look into our rental platform.
In this slide, we have a first look of what Neinor Rental product will look like with 5 core principles on its DNA, design, technology and innovation, wellness, sustainability, and security. Now we are going to play a video where you can see this.
At Neinor Homes, the leading residential platform, we take a step forward to transform the rental sector with the launch of Neinor Rental, an innovative project which offers solutions for the different market needs and allows us to approach new audiences and types of families. Neinor Rental offers much more than a home. We provide complete and singular experiences for a more flexible, healthy, and sustainable lifestyle. Because the question now isn't whether you buy or rent, it is how do you want to live? Neinor Rental is a commitment to sustainability, to comfort and well-being, to security and peace of mind.
It is a commitment to technology and innovation with its car-sharing service and the MyNeinor Rental app, which gives access to the whole experience from your phone. Always with Neinor Homes as a quality guarantee of its products and services.
This ambitious business model means that we will be offering more than 3,500 homes for rent in the following years and is a key milestone for the company. Furthermore, we consolidate our commitment to society with the IMPSOL agreement to build 4,500 affordable rental homes in the city center of Barcelona. Because at Neinor Homes, we go further. We want to transform the way we live, to build the future we want to live in.
As you can see, the key aspect of our strategy is that we are adding prime assets to a market where there is a clear scarcity of product, and we expect this differentiation to translate into a superior performance. Let's move now to slide number 14. This is just the case of Attenda Homes, our first build-to-rent project delivery with 1,400,000 sq m GLA, with a total of 146 units. In this slide, you have the main characteristics of the rental building, amenities, and our product offering.
The main message is that we don't just rent apartments, we offer experiences. We invite clients to live and enjoy experiences when renting our apartments.
On slide 15, you see more details on location and the market, and in the following page, we explain how we are going to transfer these assets from the development business into our PropCo. Now let's head into conclusions in slide 18. In introduction, I have said that Neinor is on track to deliver on its 2021 guidance and that future results look very promising given sector fundamentals and the transformational impact that the build-to-rent strategy will have in our business model.
Now let me elaborate a little bit more on this. First, we feel comfortable that we will achieve our EUR 150 million EBITDA target as all development scheduled to be delivered in this year have already been finished.
Second, as you all know, fundamentals on the development activity continue very strong, and we do not see any sign that show us it can change in the short or mid-term. If anything, the imbalance between supply and demand keeps increasing. On the construction side, we are proactively managing supply chain bottlenecks so that our 2022 deliveries will not be affected. We have already reached agreements with different suppliers and contractors to secure output. Cost inflation will probably be around 13% next year as construction companies will want to be prudent under the current scenario.
We expect this to be fully offset by higher selling prices. We have accelerated our land acquisition program with best-in-class execution. We invested close to EUR 600 million in good locations and with good margins. Finally, just a comment on the growth.
We will keep pursuing opportunities given our strong operational platform that is highly scalable. We will find good land, and if the price is correct and deals are accretive to our shareholders, we'll take them. On the rental platform, I want to conclude by repeating the rationale of Neinor's build-to-rent strategy. We didn't do build-to-rent to de-risk our business plan. We do it because we are confident that it maximizes the value of our land bank and shareholder returns. We entered in this journey two years ago, and today this is already a reality.
Over the next three years, the build-to-rent portfolio will enhance the earnings power of Neinor and drive our ROE even higher. Over the medium term, once the assets are stabilized, it will significantly lower the risk profile of our earnings, becoming less volatile and more predictable.
With these remarks, we reach to the end of this presentation, and now we move into the Q&A session. Operator, you may now start the Q&A session.
Okay, ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. Once again, that's star and one if you wish to ask a question. Okay, sir. Right now, we have one question in the audio. Would you like to take it now?
Yeah. Let's start by the other, please.
Okay. Our first question comes from the line of Fernando Abril-Martorell from Alantra. Your line is now open.
Hello. Thank you for taking my questions. I have a couple of them, please. First is on M&A. You've confirmed that you are in negotiations with Vía Célere. I would like to know what is the strategic rationale behind this, and how are you thinking to structure the deal. I don't know if you are considering only a share swap deal or a cash payment within it. In that scenario, what would be the leverage saving that you are considering. Second question is with regards to the residential law. I don't know if you can comment on it. What are the expected impacts on your two core businesses, development and rental.
Thank you.
Okay. Thank you, Fernando. I will pass the first question to Jordi Argemí, that, as we said, is here with me, and I'll take the second one.
Hi, Fernando. Look, we said that last week through CNMV. You know, we have exclusivity with Vía Célere. We are working on it, so that's right, we confirm that. But it's also true that we. I mean, there is no decision taken yet. Okay. I think that the good thing here is that we have anticipated the market again with this exclusivity. The only thing that we can say today is basically that the portfolio of Vía Célere is a good one, and that we would only do this if this is accurate for our shareholders and also if this makes sense from a leverage perspective.
There is a lot of noise out there in the newspapers. Obviously, this is not true, and this is not confirmed by us.
We will only do if the structure makes sense for our shareholders. That's the only thing we can say at this moment, Fernando.
Okay. Taking the second question about the new law, the project of law, better say, of housing. Our first thought about this is that it is welcome, a law that is taking care of the problem existing in Spain with the access to housing. This is not only a problem of Spain, in fact, it's happening in all Europe. In Spain, it's tougher for many collectives to get the access to housing, especially young people. From our point of view, we are losing a big part of the demand that the market should have. From that point of view, we are happy that this law is coming and that it's opening a debate in Spain on how to resolve this problem.
We are sure that this law is still going to have many changes. Since you have to look at short-term and medium-term measures to get the access to housing. There are some controversial aspects in the law. I will say there are two main points. One is the rent price control suggested in Areas Funcionales. The second one is the consideration of reserves for social housing that this law is considering. Regarding the first one, really, we have analyzed the impact that this rent control could have in our business.
The implication is very, very low, since most of our assets that we are renting are in the surrounding areas of the cities, and we are not working with a product that could be considered very expensive. We are working with prices, rent prices that should not be affected by this law. Considering the reserves for social housing, as you know, or you may know, basically this is affecting reserves in the consolidated urbanized areas in the middle of the cities. This, again, is not in our business. In fact, we have analyzed all of our land bank, and the impact is basically nothing.
All the land plots that Neinor owns have already given reserves for this social housing in a portion or in a percentage greater than 30%. That is what this law will or could introduce. Finally, one thought is that as you may know, housing regulations in Spain are responsibility of the regions. Therefore, since the regions are governed by different political parties, we consider that it will be very important that in order to be successful with this law it should be a great consensus between political parties.
We are on different working groups making our suggestions to the government. We hope that whenever this law is implemented this will be good for our sector.
Okay. Sorry, may I just have a follow-on and then another question as well, please? A follow-up by Jordi on the M&A. I don't know if you have any leverage threshold that you know as a ceiling of the deal or you are not even at that point either.
You are insisting, eh, Fernando?
Sorry.
Well, you know, I have always said, and I keep the position, that the normal loan-to-value for this company should be between 20-25% loan-to-value. Punctually, we could be above if we find good opportunities out there. Whatever is above 30%, we will not really like, being honest. The cap, in any case, for the bond issuance, at least for, you know, the comments that we have as of today, should be 35%. You can play with all, you know, these numbers, but.
Okay. Thank you, Jordi. Fantastic.
You are welcome.
Another question, sorry, is on the pre-sales. You've mentioned that you wanted to be at 2,400 gross pre-sales, I guess, no?
I don't know. This is a bit, net pre-sales would be a bit below that, and I think, if I recall correctly, your aim, your goal is to deliver 2.4 every year, no? I don't know why, at this point in the cycle, no, with this strong demand, you prefer to be a bit below. I don't know if you are a bit aggressive or not, or this is because of the price hikes you are implementing or I don't know. Any comment on this would be also very appreciated.
Fernando, to respond to this, we have here Mario Lapiedra, our CIO. He can explain you a little bit what is the strategy behind this policy.
Yeah. Now we see the imbalance between the supply and the current demand. We are trying to maximize the HPA play. We have a very good ratio of coverage for 2021 and 2022, even for 2023. We are just looking to be aggressive on the price increase and contain a bit the curve to capture most of the value for our shareholders.
Okay, thank you very much for the answers.
Thank you very much.
Okay. Once again, if you wish to ask a question, please press star and one. Okay, sir, no questions in the audio as of the moment.
Can we move to the webcast then? On the webcast, we're receiving a couple of questions. We'll start with one for Borja on how do we see construction costs evolving for the next year.
Thank you, José. Yeah, we are facing some cost inflation and increases of prices as we are seeing in our society, you know, with the increase of cost of raw materials and also increases in the cost of energy that are really affecting to some of our suppliers and to our construction companies. This is the normal life that we have to live when we make buildings, and sometimes we go through more inflationary moments. We'll say that now we are going to face until the second quarter of next year cost inflation situation.
We are considering that this will represent or this will imply more or less a cost increase in the new contracts between 5%-7% for the starting of the year, and that it will be lower in the second part of the year. All in all, we are working more or less with an average of a cost inflation of 5% for next year. We think that this will be offset easily with a cost increase that we are applying also to our houses. Therefore, this is for us normal conditions, normal things that happen in our business.
Thank you, Borja. Next question also from the webcast. If we could provide some details on the performance of the portfolio of Quabit to date, if we have taken any impairment on this, and how much unsold stock in WIP is held from the Quabit acquisition.
I take this one. Regarding the performance, you know that we closed, legally speaking, the transaction end of May. Basically, in these numbers, we have four months, June to September. Okay? In these four months, basically, we have recorded EUR 46 million of income through recorded sales, obviously. Basically, this has given to us EUR 5 million of EBITDA. This is a contribution in only four months. This basically means 11% margin, which is significantly above what we expected.
Actually, we are very, very happy and positively surprised with the results. We were conservative in underwriting, that's obvious, but the reality is the performance is doing very, very well.
In terms of pre-sales, we have done almost EUR 100 million in value in these only 4 months. Everything is doing well. We don't have finished product from Quabit and Salt. What we have is work in progress that obviously we will deliver once we get to the end of the construction. But the vast majority of them are very pre-sold because, you know, the pre-sale levels of this company were too high or really high because they didn't have financing. We are benefiting from that.
Okay. Thank you, Jordi. Another question, if we can provide an update or some guidance, some visibility on the land investments for the following year, for 2022.
Okay. Kieth, I take this one. We keep finding good opportunities, that's the reality, both in the cherry-picked land and the portfolios. Currently, we stand with a very solvent pipeline with close to 4,000 units on the cherry-picked deals. I would say 50% fully permitted, 50% strategic. On top of that, we have close to 50,000 units on portfolios, 40% fully permitted, 60% strategic. We feel that we keep in a good investment momentum, and we have all the acquisition machinery in good shape.
Thank you, Mario. Another question we have from the webcast regarding the Kutxabank servicing contract. What would be the impact that we are expecting on our figures from losing this contract?
I take this one also. You know, we have always said that there was a renewal to be done that obviously for us makes sense at a minimum profitability. The reality is that, I mean, there was so much competition behind that. Basically the new contract for us in our numbers and our margins basically would imply around EUR 1 million to EUR 2 million, so nothing relevant, you know, and as a result, we just rejected not to be there anymore. In our numbers, we would like to be between, you know, EUR 5 million and EUR 8 million. That would be a profitability that we would like to have in the future, but will not be there.
Obviously we are working on other potential businesses and contracts. Let's see that before the end of this contract, which is May 2022, if we have you know on the table other things that will completely offset this potential negative impact. In any case, as you said, in July, I think it was, we have not changed the guidance. Even if we lose that, we will be able to keep the guidance as it was.
Okay. Thank you, Jordi. We have currently no further questions, so I would just like to make a reminder about tomorrow's session with CBRE. It will take place at 12:00 P.M. CET, and we hope to see you there. Okay? Thank you very much, and we'll see you tomorrow.
Thank you very much.
Thank you.
Thank you.