Hello, good morning, and welcome to this webcast on Metrovacesa's trading update for the third quarter of 2023. My name is Juan Carlos Calvo. I'm Director of Strategy and Investor Relations, and today we also have with us, as usual, Jorge Pérez de Leza, CEO of Metrovacesa, and Borja Tejada, Chief Financial Officer. We are going to present an overview of our activity and key developments during the first nine months of the year. The slides of this presentation have been released to the market this morning, and they are available through the CNMV website and in the company website. We have also sent it by email to our usual distribution list for analysts and investors. At the end of this presentation, there will be a question and answer session.
If you wish to ask a question via conference call, you can register by pressing star five in your telephone keypad at any time, and you can cancel your question by pressing again star five, for a second time. So once again, press star five if you wish to ask a question. If you are participating via webcast, you can type your question directly in the webcast platform, and we will read it out, in the conference call, in the webcast. Now, I hand it over to our CEO to start with the presentation. Please, Jorge.
Thank you, Juan Carlos, and good morning, everyone, and welcome to our quarterly results presentation. Let me jump directly into page number five in order to comment on some highlights of the quarter or on the nine months of the year 2023. In regards to the market context, we still see that housing demand is holding up nicely, with a good tone in the residential market, despite the higher mortgage rates that we keep seeing in the financial market and also a volatile macro context.
This translates, also into a solid operational performance for Metrovacesa, with the third quarter being our strongest quarter so far in terms of pre-sales this year, with a significant increase as compared to 2022, despite also the usual seasonality, which for the third quarter, given that the summer is in some of the months, tends to be slower. Our backlog continues to increase, and we have a 13% increase versus December of 2022, and also with an average, higher price of close to 3%.
The construction starts, as we commented on last year, has on the last quarter, sorry, has come to a strong figure in the quarter with almost 1,000 units starting construction, and now with a total of a little bit over 1,500 in the four months. Sorry, in the third, in the three quarters. Finally, land sales, we see still interest, both in residential and also in commercial, that we commented last quarter as well, that, you know, we started to see some interest and some movement on that market, and so the binding contracts are gradually transforming into material sales as expected.
Finally, in terms of our financials, we announced that a new dividend will be paid, or will be subject to approval in the shareholders meeting next month, and if approved, it will be paid at the end of December. We confirm our cash flow targets of between 100 and 150 million EUR of cash flow generation. The proposed dividend is of 0.33 EUR per share, more or less 50 million EUR in absolute terms, and then this will be also the result of a strong deliveries in the fourth quarter, you know, as we again gave guidance at the beginning of the year.
Nice as well, that our gross development margins are holding up, you know, always within the guidance that we gave in the low 20s, but this quarter being, you know, stronger, a little bit on the higher side of that, of that low 20s. Moving on to page eight. I jumped seven, as it's a summary of things that I will touch in more detail in the subsequent pages. In terms of pre-sales, we've sold in the quarter 1,004, and sorry, in the three quarters, 1,402 units, which is a 5% increase, with an average selling price of 317,000 EUR per unit.
As I commented before, the third quarter has been the strongest so far in 2023, which is good result and shows that the market is behaving resiliently, despite all the macroeconomic uncertainty and interest rates going up. That translates into our monthly absorption rate of close to 2.5%, which is a healthy figure and very similar to what we have had in the previous, in the previous quarters. Also, that's a figure that, you know, allows us to have a good visibility on what we will be delivering, not just this year, but in following years. Going to page number nine. In terms of deliveries, we are on track to meet our full year targets, which were between 1,600 and 2,000 units.
We've delivered so far close to 1,000 units with a gross margin of 22.4% and an average selling price of close to 300,000 EUR, which is a nice increase to 13% compared to last year. Highlight of the quarter is that we delivered two BTR projects in Mallorca, amounting for a total of 204 units, and more of those will come before the end of the year. As I mentioned before, we do have a high concentration of deliveries in the fourth quarter, but this is not new. This we knew from the beginning.
The good thing about it is that we, as of September, we have more than 800 units already sold and built, just pending delivery on the final steps of the delivery process, getting all the permits, et cetera. In terms of the operational activity in page number 10, I think we show here solid figures in terms of our on the next coming years, in terms of deliveries. If we look at the pre-sales coverage, obviously for this year, we are close to 100% or even at 100%. 2024, we are at 80% right now of the pre-sales for the deliveries of next year, so a very high ratio.
And finally, for 2025, we are about 40%, exactly 42%. And even for 2026, we do have some sales already done now. So I think that again, you know, gives us a good visibility on the cash flow that is coming in the next few years. In terms of construction coverage, as I mentioned before, in 2025 deliveries, which is what we are starting this year, stands now at 70%, more or less, of the deliveries of 2025.
Towards the end of the year, remember that we've added about 1,000 new construction units in the third quarter, and then in the fourth quarter, we will see that 30% remaining again coming to construction in order to have all the 2025 deliveries already in construction this year. Moving on to page number 11, and to talk about land activity or land rotation. We do see some progress on land sales and acquisitions as compared to last quarter, especially on land sales, where, you know, we have a total right now of EUR 54.4 million, including sales backlogs. The land sales in binding contracts are EUR 41.3 million.
What you see, what you see in the P&L is only 13.1, because that is what has already been notarized. Of the 41.3, a large chunk of that will also be notarized within the year. And we do see also that in the fourth quarter, we will have additional binding contracts. 72% of those, by the way, are land for commercial use, which reflects the comment that we made last year, that we started to see some movement in commercial land. Also, in land purchases, we continue with our strategy of rotation, which is, you know, to basically sell the land, commercial land in the short term. Also, the residential land that we're not going to develop.
And then on top of that, we are selectively purchasing, making some land purchases as a top-up to complement our land portfolio, and also always with commercial, commercially attractive locations as well as good returns. Main recent purchases that you probably have seen on the press, or we have announced are Granada, where we acquired close to 200 units in the center, and this is already phase I is already launched and almost under starting commercialization. We also bought some land in Vinival. This is almost a beachfront location in Valencia, next to the university.
So, top, I would say, the top location in the Valencia area, where we added another 329 units to a land bank that we already own there, and now we are the majority owner. And this is an area that I would say is going to be, you know, a source of very good news for the company in the future, and where we are showing all of our power in terms of ESG, ESG efforts at the urbanistic stage. And finally, another plot of land in Tenerife, Santa Cruz de Tenerife, central location, close to El Corte Inglés, where we bought it in the fourth quarter, and we are already under commercialization and with an excellent commercial progress.
Moving on to the operating results, I will hand it over to Borja, our CFO.
Thank you, Jorge, and good morning, everyone. Just some key figures about our operating results. In terms of revenues, more than EUR 300 million. In terms of gross development margin, 22.4%, and our guidance remains low 20s for the future. As we always inform to our audience. And finally, our EBITDA, close to EUR 30 million, compared with 32 of the previous year. 32 increase and 32 double for the end of the year. Now, I will hand over Jorge with closing remarks.
Thank you, Borja. To finalize the presentation, I confirm again, that there is a dividend proposal at the shareholders' meeting of another 0.33 EUR per share, subject to the approval in the meeting that will be held on November 28. The payment will be then made, like we've done in previous years, on December, at the end of December, against paying reserves, and therefore with no withholding tax. We've in terms of accumulated dividends, with this new payment, we will have paid EUR 522 million in total returned to our shareholders since 2019. Another main point in the agenda is, that we will have a change in the board of directors, adding one or increasing in one member from 12 to 13 seats.
And we will have a new member that has been appointed or proposed by FCC, as a significant shareholder of the company. And finally, in closing remarks, on page number 15, market trends. As I mentioned at the beginning, the positive situation is holding up in the market. And even if we see some lower figures in second-hand sales for housing, I think, you know, like many of you, have been following in the recent months, the market for new homes is holding up nicely. Visibility for 2023 and 2024 until 2025 is, I would say, better than other years.
So, you know, 80%, like I mentioned, 80% of coverage of sales for next year and 40% for 2026 are excellent ratios. And finally, we will reiterate our full year guidance. And then, as we close the year, we will confirm that figure, which will be there in that range that we gave as guidance. And that would be it for the quarter. Thank you very much, and I hand it back to Juan Carlos.
Thank you, Jorge. We are now ready to start the question and answer session, starting from our participants in the conference call. If you wish to ask a question, please dial star five in your telephone keypads, and you can cancel the question pressing again, star five for a second time. Now, we will allow a few seconds so they can register for your questions. We currently have no questions from the audio conference call, but we do have several questions from the webcast, so I'm going to read them here. We have first question coming from Gerardo Ibáñez, analyst, from Oddo BHF. He says: "Good morning, thank you for taking my questions. I have two questions.
1, can you perhaps provide some color on the cancellation rates, and whether you are seeing any change in trends in the last couple of months? And second, can you give us some color on the binding contract prices? Do you expect to see similar discounts like the one presented today?
Good morning, Gerardo, it's Jorge. I will take your questions. I think in terms of cancellations, negligible, so a few units in, you know, when going from contract to notarization of the units. We do perhaps see in some developments that it takes, you know, a few days more. So it's not- we're not talking about, you know, a large period of time, but a few days more for the clients to close the mortgage, probably because they're shopping around better and also because they're negotiating the conditions. But again, I would say cancellations are negligible, just a few units so far in the 1,000 units delivered. In terms of the binding contracts, I imagine that you're referring to land sales.
As far as we go, in the third quarter, so far, we are, we're more or less at book value. In fact, even, even the third quarter, I would say, was slightly positive. But let's say that our aim, as I mentioned at the beginning, is to rotate land, which means, both in commercial as well as in the residential, we don't want to develop. And, you know, we should expect to, to do that in terms of, you know, close to book value, or even below that. And we will... I think if you ask me, you know, do you prefer, a slightly positive margin or, velocity in sales? I would say I prefer velocity.
Thank you. Second, question we have, we have from the analyst, Mariano Miguel from Banco Santander. Three questions from my side. Number one, pre-sale momentum continued in third quarter with the 494 units sold. Are you expecting these quarterly volumes into the next 12 months? Could you give us some more granularity on the sales coverages for the 2023, 2025 deliveries? Maybe with the rest, later, or?
No.
Okay. Oh, I read them now. Okay. Second, on the commercial land bank, any potential new projects on the pipeline you might be working on? Any news on the Clesa project? And number three, on land investments, we read this week, this week about a potential big purchase in Los Cerros, Madrid. Could you give us some more color on it?
Okay. Thanks, Mariano. Those four questions may take even longer than the presentation itself, but I'll try to go for it. So the, you know, the 12-month, the future 12-month sales are going forward. I think we don't have a crystal ball, unfortunately. So I would be, you know, I would probably just stick to the fourth quarter and to say that so far, October is strong as well. And in terms of pre-sales already booked, and I would say that in terms of leads and contacts, it's also, you know, a normal month. So therefore, what we see is that, you know, so far the fourth quarter looks okay as well.
Given the uncertainty, I mean, you know, in just the, you know, the political context, the macro context as well as, as well as interest rates that will, you know, likely hold up for a little bit longer, then it's difficult to say, you know. I think difficult to say. What I would say is that if employment holds up, then we're in business. And then also if, you know, we'll see how the, the mortgages continue to be, if they continue to be as attractive. I mean, we're seeing in the market now very, very attractive mortgage packages for clients with, you know, some mortgages being below 3% at fixed rate for 30 years. So if that still holds, then we're okay.
If that changes, we'll see. So we'll have to take it quarter by quarter. Sales visibility on sales on 2023-2025 deliveries, I believe I already said, yeah, 100% sold for 2023, 80% for 2024, and 40% for 2025. Then on the commercial part, as well as Oria Clesa, we call it now Oria Innovation Campus. I think, again, in commercial, you know, we do land sales or turnkey solutions or JVs. I would say that, you know, in land sales, without giving more specifics, there is pipeline that will materialize in the next coming quarters. If it's not in the fourth quarter, then it will be later, but there is pipeline to sell land.
Then in turnkey, in commercial, as we mentioned, previously, we already signed with Vita, you know, a deal for the turnkey solution of student housing building in Oria. And we are working on a second deal that will hopefully materialize in the next coming weeks, and we will announce it as it comes. And finally, in Los Cerros. Los Cerros, well, we didn't mention it here because it's something that has come in the you know, on the fourth quarter, after thirtieth of September. This is not yet a closed transaction, but we are the finalists that as it has been announced in the press.
You know, what I would say about this acquisition, which may seem like a large piece of land for Metrovacesa, given that we know we don't need the land. Nevertheless, we saw it as a unique opportunity in the Madrid market, which is, you know, as you know, I would say, in the number one market in Madrid, and strategically, is a, I think, a very good fit for Madrid, no? For Metrovacesa, sorry. Me being a shareholder, I would say, I mean, I would tell you that I prefer the returns that this land is going to give me than the dividends that we would have, the extra bit of dividend that we would have given, if we hadn't purchased this.
So I think from a return point of view, it's a great opportunity, no? Also, I mean, you know, I think that, again, Madrid is whenever you find a good opportunity in Madrid, you just have to go for it. And this shows that, you know, we are here for the long term, and that we will have a combination, a good combination between dividend distribution, but also not letting opportunities like this go by.
Okay, we have next questions coming from Ignacio Domínguez, analyst, from JB Capital. Actually, several questions. First, do you expect any impact from the new potential list of measures from the potential government plans that the potential government is planning to implement? Like, for example, the reduction in number of working hours from 40 hours per week to 37.5 without salary reduction. And secondly, there is high visibility for 2024 deliveries. Can you provide any guidance for full year 2024 in terms of housing units? Can we expect a slight uptick to between 1,800 and 2,000 housing deliveries? What about the increase in public housing? Do you see a potential impact on prices as housing supply increases? What share of your buyers leverage up to 80% of the purchase price?
Do you think the ICO, the ICO guarantees for young adults, will keep boosting demand for your products? And finally, what kind of average interest rates do your clients get on mortgages in the most recent sales, and how does it compare with the beginning of the year?
Okay. Well, you guys today didn't want to talk and wrote everything on there. Okay, just don't remove the screen there because I didn't write all the data. I will start, Ignacio, Jorge here. On the government plans and the reduction of working hours, I mean, this is something very preliminary, so I'm just not going to comment. I would say that as long as I think for housing, for the housing industry, as long as employment remains at current levels or even increasing, that's good news for us. So, you know, 2.5 hours, more or less, et cetera, I think, you know, in a few years coming and to a segment of the population is difficult for me to estimate.
I will just—we keep following, you know, the employment rate and household creation, and both of those are positive right now, so we will stick to that. In terms of housing units in 2024, I think we'll give guidance, you know, as we finish the end of the year. But yes, obviously, we will, you know, we're slowly drifting towards 2000 and beyond that in coming years, no? So we should see all that activity that you see on page number. If I remember which one it is, in page number.
Ten.
On page number 10, you can see all the backlog there in terms of sales, construction, et cetera, so that can give you a good idea of what's in the pipeline and when it will come. But again, we'll give more detail on that at when we present the full year results. Then, in terms of the public housing and, you know, how that can impact. I think there is demand for free housing and for three segments. I would say free housing, affordable housing, and then public housing as well, you know?
So I think even if public housing is increased, I mean, I would say that that's even good news, because I think, you know, there's a chunk of the population that needs it. Let me remind you also that we are doing a lot of public housing. I mean, only in Palmas Altas, in Seville, in Isla Natura, we do have more than, right now, 350 public housing units in commercialization with excellent commercialization figures, rates. We do have some in Catalonia as well, and we will do in Madrid, you know, as soon as we are in Los Cerros, for example, you know?
So I think that there's room, the pie is large enough for all those three segments that I commented. In terms of, you know, the share of the buyers and leverage up to 80%, I would say the figure is similar to last year, more or less. I would say around 50% right now, 45%-50%. It's not an exact figure. We'll calculate it at the end of the year, but around that mark. Big chunk is still equity, 30-35%, and then the difference is, you know, people who are leveraging less than 80%, in fact, quite lower.
The ICO guarantees for young adults, I mean, and this is something that we will—we have been pushing for at the local level and at the regional level, not just as Metrovacesa, but also through the Association of Developers. And we think it's good news. It has worked in other countries, and, you know, the more—the more the help for young people that can access housing there is in the market, the better, the better for us. Average interest rates, I—I'm not—I don't have the precise figure on the...
You know, what I can say is that, what we see on the market, attractive offers, is some on fixed rates between 2.4%-2.9%, 30 years, 2.4%-2.9%, I repeat. That's very attractive. And then on variable, we are looking at Euribor + 0.5%. That's what we're seeing. So I think on the fixed rate, you know, a lot of clients are drifting towards that. And again, as long as that holds up, great, great news for the, for us. And is that it? Or was there another one?
I think,
Yeah.
I think that covers all. Okay, next question comes from, well, Javier Beldarrain, and is from Bestinver . Actually, it's probably repeated this from a previous question: Is there anything you can say regarding the land acquisition in the news yesterday in Los Cerros in Madrid? Probably we can take that as, as, as already covered. And from the same analyst: What are your expectations in terms of appraisals, for the end of the year?
To be honest, I don't know. I think the residential market is holding up nicely, so that should be fine. And then commercial, we'll have to see. I have more... You know, that has more volatility right now, given the longer time that the interest rates will be up. But I have, I don't have-- We don't have an estimation right now.
Okay, I think we have covered all the questions we have from the, from the website. And we still do have questions from the audio. So from that point of view, I think this, if there are no more questions, we can, we can conclude the, the webcast and, and the conference call. Thank you for, listening and joining us for the trading update for the third quarter of 2023, Metrovacesa. The investor relations team, as usual, will be available to take any follow-up questions that you may have. We thank you for your participation, and we will hope we, we would meet again next quarter. That will be the full year results in February. Thank you. Goodbye.