2023-06-14 07:31:31
In October 2015, Spain revolutionized the public auction system. This reform put an end, almost definitively, to the murky traditional formula: auctioneers at the doors of the courts, preventing free competition or even rigging the maximum prices. As stated by the General Administration of Justice, it was intended give transparency to the procedure y get higher returns in a flurry of proceedings following the bursting of the housing bubble. In this way, any citizen could bid for an embargoed property in any part of the country.
“Normally, what governments do is badmouthed, but from the point of view of the system, the State has been a success in auction portal of the Official State Gazette (BOE). Before it was a market where four cats participated and the properties were not valued. Since the implementation of the new system, only in homes, there have been more than 110,000 auctions”, explain Guillermo García-Mauriño, CEO, and Diego Álvarez Núñez, analyst, both from Round Robin (a firm specialized in buying homes at auction ), in an interview with THE SPANISH NEWSPAPERfrom the Iberian Press group.
Parallel to the implementation of the state auction portal, a group of executives undertook the business adventure, based on technology applied to auctions. “We traditionally come from the real estate world, but we have always been eager to incorporate data technology into our operations, such as sales times, rents or prices. Initially, we create a tool big data chew all the information and, now, an artificial intelligence tool to keep all the analysis of whether to bid or not to a minimum,” says the CEO of Round Robin.
They started investing with almost no capital
The main barrier to entry for investing in auctions is that the acquisitions cannot be financed. While an investor specialized in buying flats to rent can borrow from banks between 50% and 80% of the purchase cost, In the case of auctions, the entire capital must be advanced to tocateja. Round Robin began with the money that the partners contributed to the project and, when they confirmed that the system worked, they came to have half a million euros, an insignificant amount when it comes to investing in the real estate sector.
In its initial phase, the company focused on buy, reform and sell households in the shortest possible time, all within the M-30, the highway that separates the center of Madrid from the districts on the outskirts, the place where there are more people interested in buying. “At the beginning our capital was so meager that we had no choice but to rotate it to get capital gains from the assets. We began by winning 35% of the auctions of flats within the M-30, we even got to keep one in two residential assets that went on the market”, says Guillermo García-Mauriño. However, with the passage of time they rotated their model.
Becoming a socimi, a necessity
At the moment, Round Robin is included in the socimi tax regime (Listed Real Estate Investment Company). This formula exempts the company from paying corporate tax, in exchange for listing on the stock market and distributing most of its profit through dividends, where shareholders are already taxed. “Why did we become a socimi? Through a strategic reflection: first, taxes kill us, because, when buying, we are obliged to pay Property Transfer Tax (ITP), which is added to the full payment of the asset. Besides, we saw that our hasty sale of the properties did not squeeze the value. Now, as socimi, we are obliged to rent our properties for a minimum of three years, although our vision continues to be to rotate: award ourselves an asset, work on it, rent and sell the third year”, comments the CEO of the company specializing in auctions .
In February of last year, Round Robin went public on the Portfolio Stock Exchangea new stock market created and authorized by the National Securities Market Commission (CNMV) in 2022. After this, the listed has launched a capital increase of 10 million euros to make new investments. However, his intention is to grow more. “Our investment capacity is very high: we can invest 150 million in capital, which would rise to 200 million with debt, which would allow us to buy 1,700 homes, including operations outside Madrid,” explains Álvarez Núñez.
investment strategy
In addition to location, which only invests in homes within the M-30, the company is looking for a rental profitability of 7% per year for your real estate. “We meet our return expectations because our awards have a lot of discounts. While rental profitability in Madrid is 4%, we buy at least with a 25% discount,” says Diego Álvarez Núñez. “This allows us to pay the interest on our debt, the cost of the manager and earn money in the third year, when we sell the asset,” adds García-Mauriño.
In addition to real estate intended for traditional leasing, Round Robin is also buying commercial premises in areas with a lot of tourist interest. “We buy cheap and transform it into tourist housing because it makes a lot of sense in some areas and gives a good return, such as in Lavapiés, which as a commercial premises have little value,” says the top manager of the real estate company.
For now, has not distributed dividend and it has only implemented a repurchase of shares, in order to remunerate the shareholder. “Historically, we have always distributed dividends of 7%, but, at the moment you start the transformation to socimi, the problem is that until you sell you don’t have the real benefit. This year we will already make a profit, but it is small and it is not enough to pay out an attractive dividend. From 2025 we will be able to start distributing“, concludes the CEO of Round Robin.
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