The Category, which started its activities before the bubble burst, accompanied real estate investors in Europe and gathered those who still needed management after the tsunami. The company’s director of investment and strategy, Íñigo Basurto, speaks with EL PERIÓDICO DE ESPAÑA from the Prensa Ibérica group to explain the company’s past, present and future.
TO ASK. What is category?
REPLY. The category started in 2006 as a real estate asset manager just before the crisis and took Spanish real estate investors to Central European countries, mainly Poland and Hungary. The real estate market here was already overheated and there were many people who felt that investing in the Spanish real estate market was to invest in something with little potential, some already talking about a crisis. Eventually that crisis came and the company that took some investors there found that the market was miserable. What did that mean? That many investors who went there lost their manager and they were there with investments 4,000 kilometers away and without the opportunity to manage them, to generate income with them. At that time, our founder Kepa Apraiz developed an app that allowed us to see what was happening in real time: rents, invoices, real estate business accounts and any tax or administrative returns. It was the years of 2006-2007, and with this practice, the Category was bringing the properties under management and turning it into an asset portfolio of 800-1,000 pieces in a very short time. For example, a football player who bought ten properties in a building in Warsaw.
Q. Are all these assets in Poland?
A. Yes, in Central Europe, especially Hungary and Poland. These were atomized assets where information was collected and communicated to investors in real time with this application. The main purpose was not to make a big profit, but to save the furniture and to make the investor comfortable. Meanwhile, Category was only building a relationship with long-staying guests at first, and later turned some of its properties into tourist apartments to give it an outlet during the summer months. A few years passed, and while the returns were increasing, it was a relief for your investors. From there, they started asking us to step up and promote our own assets in one building, and we started with a student residence in Hungary.
Q. Did you purchase, design and build the land?
R. We first sold the investors’ fragmented real estate holdings, then to invest in a more homogeneous and scale-economy product. This greatly improved profitability and especially relations with guests. At first the dormitories were designed for medium and long stays, but we soon began to realize that if they are not living in the summer, we can put there tourists who live with people who stay longer. The years I was talking about were 2013, 2014 or 2015. Yields started to improve a lot and investors started asking us about developments in Spain.
Q. Were all investors Spanish or foreign?
R. There was everything but mainly Spaniards, orphans of a ruler.
S. Spaniards with capital invested abroad and now they want you to return.
Q. Yes, they started with a vacant flat first, then promoted to Category and offered them a flat in a horizontal partition they had in that building. And this is the essence of our business model: to own the property directly, but not to worry about the management, so you get a constant income of about 3.5% per month and a variable that is capped at the end of the anus. With this learning, we landed in Spain in 2017, purchasing land in Tenerife from BBVA to develop a complex where all collected ideas will come together. Nivaria Beach is the first of the complexes where guests stay for short and medium term stays. With this, I would like to emphasize that we do not have a mentality to reach sites to harm them. An integration model is offered to guests, both in the location and in the complex, aware of sustainability and its impact.
Q. How many flats are there? Sold out?
R. Nivarian sold very well and very quickly in 2018. There are 122 apartments for sale between 130,000 and 170,000 euros. It currently provides a fixed return of 3.5% and the rest is variable. It is produced between 7% and 8%.
Q. What were the next steps?
A. After this model, others are created, such as Nivaria Golf & Marina, which consists of 86 apartments and is very close. We also have about 100 apartments and another one in Lanzarote, the Gigantes de Tenerife project we are developing.
Q. Are you developing these last 100 now?
A. Yes, they will start work soon. Nivarian Golf & Marina will finish the works next year. Almost all of them have been sold and this is a huge qualitative leap. Prices here start from 180,000 Euros and go up to 280,000 Euros.
Q. What did you develop in the Peninsula?
R. Katégora has three business lines: vacation, apartments shopping centre in the center of cities and coliving, the latter was aimed at young students and professionals. We chose co-living on the Peninsula, where the investor did not buy an apartment, but developed it to later sell it to an institutional investor.
Q. How many assets do you have under management?
A. In Europe, we have two urban apartment complexes operating in Budapest, one in Vitoria with a co-living space and in Tenerife for the aforementioned vacation. In development, we have a 140-unit co-living in Pamplona, a 350-unit co-living in Valencia, two on vacation in Tenerife and an apartment project in Andorra.
Q. What is the market value of all this?
A. Between 300 and 400 million euros.
Q. What new operations will come in the future?
We are closing our operations in R. Estepona, Alicante, Sevilla and Barcelona.
Q. What is the merge model like?
C. The property consolidation model is a club of developers that develop it in strategic and peripheral areas of cities, but very well connected with universities, transport nodes or technology centers. The key here is to create large communal spaces for people to meet because it’s about attracting talent. You have some basic services associated with your apartment and then many additional services.
What is the profile of the investors behind Q. Coliving?
R. In almost 90% of cases they are always national investors and industrial or patrimonial families. They are people looking for productive investments in activities with staff that allow them to have tax savings in wealth tax and deductions when it comes to increasing the dividends created above all else. After 6-7 years, those investments are sold to institutional investors, they liquidate the company and move on to another project.
Q. How do you want to grow?
R. We will develop four projects per year in the future. Two of them will be divided horizontally, projects that were introduced and liquidated in three years, and an investor club comes into play here, the place where we are as managers, which is reserved when the apartments are sold to other investors. a fixed rental guarantee.
Q. They operate like a hotel chain in management.
R. Category has a subsidiary called Kora Rentals, which is responsible for creating housing, operational activity in the complexes and paying the insured rents to the owners. Investors are given their fixed income and at the same time report on the activity taking place in the apartments with hair and scars.
Q. Who is your model targeting?
R. It is designed for the middle class because you don’t need to be rich to buy an apartment. In addition, there is the possibility of financing 50% of the cost, which increases profitability and you have a property that will not cause you problems for the tenant. For example, since our real estate is always on the hotel land, it evades the Housing Law. There is also a caring manager who will always be in great shape no matter what time you go.
Q. Is it always tertiary hotel land?
R. There are some residential-only complexes, but they are the exception.
Q. How many investors do you have?
R. About 800, roughly, each with his own flat. On the one hand, once they understand what the Category is and receive their proceeds, organizers whose tickets are between 500,000 and one million euros are offered to jump in.
Q. What profitability is offered to promoters?
C. It is usually around 15% to 22%, depending on the investment round. It’s over 20% if you enter the very beginner stage, 15% or 16% if you enter the selling stage. We invite only our most qualified investors, or those with a wide level of diversity and a certain economic capacity, to enter this increasingly professional model.