Metrovacesa SA

MAD:MVC

Earnings Call Transcript 2022-Q2

[Operator]

Hello everybody and welcome to the Metrovacesa 1H 2022 Results Presentation. My name is Sam, and I'll be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Juan Carlos to begin. Juan, go ahead.

[Juan Calvo, executive]

Hello, good morning and welcome to the Metrovacesa results presentation for the first semester of 2022. My name is Juan Carlos Calvo, I'm Director of Strategy and Investor Relations. And just to say that the slides of this presentation have been released to the market earlier this morning. They are available also through the CNMV website, as well as the company website and we have also sent by email to our regular distribution list for analysts and investors. The main speakers today 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 over to our CEO, Jorge.

[Jorge Perez de Leza Eguiguren, executive]

Yes, thank you, Juan Carlos, and good morning everyone to our half year results presentation. Let me go directly into Page number 5 with the highlights for this first 6 months of a year and that I would summarize in a good performance for Metrovacesa in a changing context, in an uncertain environment. We have had strong results for the first half of the year, with total revenues comes to EUR 250 million, representing a 30% -- more than 30% growth year-on-year. EBITDA, which is EUR 23.2 million, again with a significant growth over the year and a net profit of EUR 12 million.

Our operating cash flow, which as you know, is our main operating target for the year is now at EUR 76 million, with a 35% growth year-on-year. And as you know, we paid a dividend of EUR 91 million in May of 2022. I would say that we are -- the company is successfully managing in a changing or an uncertain context. We've seen construction costs with a high degree of volatility in the first half of the year. However, now stabilizing with no major impact and as we will see later, on the timing or margins of our project in the coming years.

We've also seen housing demand starting very strong at the very -- at the beginning of the year and somehow slowing down, again with these changing environment of inflation, increasing interest rates, et cetera. But we've been managing crisis unit-by-unit, optimizing revenues and margins, so that our guidance in terms of margins remains unchanged, as we will see later. Finally in the commercial segment, I would say that our deal flow that we've been working in the last quarters intensively is now starting to materialize. And now just a few slides on the market context and I will hand it over to Juan Carlos to take over.

[Juan Calvo, executive]

Yes, a couple of slides on the market context, starting with construction cost. Obviously, as we said earlier, the first semester has been relatively volatile with a very steep increase in raw materials in the first quarter of the year. And this is starting to stabilize and come off slightly in the last few months. We can see that we have taken an example of the corrugated steel prices in Spain, the chart on the right hand side of this slide. As you can see the steep increase in the first few months of the year and it has actually corrected in the last couple of months and is back to what it was at the beginning of the year.

Obviously, compared to a year ago, it is still higher but the good news is that these important raw material, as well as order that we could take as examples have been slowing down and coming off from peaks in the last few months. So that means that the pressure on construction cost is starting to ease recently and therefore we expect a better context for the second half of the year to initiate constructions.

Also we can see that evidence in the recent bidding and tendering of the construction contracts, where we see much less volatility, much less disbursement between different construction companies. One consequence of this scenario is that there has been a decrease in the number of construction starts in the sector and the more recent starts or construction starts in the chart, which you can see there, minus 28% year-on-year.

So the supply is reacting to these and eventually it will come back we think. From the Metrovacesa point of view, again we didn't have any material disruptions in the timing or the evolution of the construction works. And even though we postponed some of the construction starts at the beginning of the year, we do expect to catch up in the second semester.

Moving to the next page, Page 9, regarding the market. If we look at the statistics on the market demand, prices, et cetera, they look actually quite robust. In fact, the volume of transactions in the first 5 months of the year is up 24% versus the year before and prices increasing with the recent data from INE or the ministry showing around 6%, 7% increases. We have some data points from other sources, slightly lower than that in the following months, but still we've -- we believe that the HPA will remain positive in the full year.

However, the reality is that we have experienced some weakening in demand in the second quarter, I mean, the first quarter was stronger than the second quarter. And there are -- there is a number of factors affect or eventually imply some of these new risks like the increase in inflation, mortgage rates and the macro slowdown and still probably soon to say what is going to be the full impact of these. But if the demand remains more or less as it was in the second quarter, it should be a healthy demand rate. And so from our point of view, from Metrovacesa point of view, we are not changing our plans or expectations, which is gross margins around low 20s and the volume of new starts in the volume of 2,000 to 2,500 annually.

Back to Jorge on the operational data.

[Jorge Perez de Leza Eguiguren, executive]

Thank you, Juan Carlos. So well, now moving on to Page number 10. So we had net pre-sales of 980 units in the first half of the year, which is slightly higher than what we had in the first half of last year. What we have seen is a slight decrease in the number of pre-sales in the second quarter versus the first quarter. However, the monthly absorption ratios which stand at 5.8% for the first half on unsold units or as we measure it 2.8% on the total project units. In both cases, they are above the historical average that we have.

Just for clarification purposes, in the 5.8% if we took the rolling 12 months that would be 6.9%. The increase in selling prices that we are experiencing is significant and therefore is -- it's what's helping us in maintaining the margins that we guided. And we -- the sales that we had, had an average selling price of EUR 311,000 per unit, which is up 8% year-on-year. And as I mentioned, we're implementing price rises between 4% or 10% in selected projects. In the last 12 months, we've pre-sold about 2,120 units, which support our future deliveries of between 2,000 to 2,500 units.

Moving on to deliveries, we are very much on track to meet our full year targets of between 1,600 and 2,000 units. We delivered so far 952 units, which is 60% of that target that we mentioned, with an ASP of EUR 252,000 that will increase towards the end of the year. This is just a reflection on the quarterly units delivered.

The gross margin, as Juan Carlos mentioned and I also mentioned at the beginning has been 22% in the quarter and 21% on the full semester, so in line with the guidance. I have to say as well that in order to give further visibility on the deliveries for the full year, almost 100% of the construction works were completed as of June and I would say as we are penning 2 just to CFO, so final certificate for -- a slow number of units, I would say that's 100%, probably 100% in a couple of weeks and the sales coverage is 93% of the target.

So again, we are fully confident that we will meet the target that we set at the beginning of the year.

In terms of further operational activity, our pre-sales backlog continues to be strong 3,000, almost 3,100 units with an average selling price close to EUR 300,000. This has -- it means an increase of 7% versus December. 72% is contract and 28% is reservation, so quite strong over a healthier mix.

And as I mentioned, 92% coverage for 2022 and more than 70% already for 2023 deliveries, so quite confident on that as well. The units under construction are now 3,360 units and I think it's worth mentioning here what Juan Carlos mentioned is, the -- given the uncertain environment in regards to construction at the beginning of the year, we decided to postpone or defer a few months the start of some construction works until that uncertainty basically come down.

What we found on top of the changing or environment in pricing, what we found at the beginning of the year is that some of the construction companies were unable to give us a fixed price, given the uncertain environment and we took the decision not to go with variable contracts and to wait until the market is stabilized. And what we have seen in the last -- in the last couple of months is that the construction companies that we normally work with, the large ones are now back again to signing the traditional fixed price contract in development. And therefore we have more than 500 units that are approved and tendered to start in the coming weeks. And so we are, as Juan Carlos mentioned catching up, so that 2024 deliveries are not affected by these deferral of construction starts.

In terms of units in commercialization, we have close to 6,000 units, so a big increase in this first half with 100 projects -- 114 projects in commercialization and 52% already pre-sold. Again, just to come back to the ratios I mentioned before, we normally think about selling 3% of total units of the projects in a month, which means that you would sell the whole project in about 3 years. And we now in the first half of the year, we're at 2.8%. If we take the rolling 12 months, we would be above 3%, that's something like 3.2% or...

Moving on to land activity, we have and then here touching on land sales as well and as well as in land transformation. In terms of land sales, we've signed agreements amounting EUR 24.5 million and this is a combination of EUR 5.8 million, which appears in the P&L, so meaning signing -- sorry notarial deeds signed and another EUR 18.7 million in binding contract. So again this is probably about a third of the target for the year and remember that a target for the year EUR 75 million, is not EUR 75 million in the P&L, but rather a combination of signed notarial deeds, as well as private sales agreement.

In terms of land transformation, the highlights in this area are Palmas Altas, that we've talked about it already in the last couple of quarters. We are advancing very successfully on the urbanization works as well as on the North and South access. And we've already received the building permits to start about 350 units and we will be starting those in parallel with the urbanization in the next few weeks.

In Los Cerros, Madrid, which is one of the big areas in the southeast of Madrid, that will provide very necessary units or residential units for the Madrid demand and which is clearly unmet and where we have 1,600 units. It's on the final stages to become fully permitted and now the urbanization plan has been fully approved. The team managing the area is working on the tendering for the urbanization work will start in the second half of the year. So, good area with 1,600 units ready to be launched very, very soon.

Mesena, which is another, I would say, high segment project that we have in the center of Madrid with 160 units is now fully permitted with the final approval of a detailed study and ready to apply for licenses and we've already launched the first phase of it. Additional to that, in Valencia, we've had a project Agustin Lara in the center of the city with 133 unit, which is now fully permitted and ready to launch, as well as another one in Oviedo.

Commercial segment, as I said at the beginning and moving to Page 14, we see now the deal flow that we've been working on is materializing and with a good progress in Madrid, in Puerto Somport, which is building that is part of a JV with Tishman Speyer. We've leased 5,200 square meters to multinational company on a long lease term and then we are basically working on additional prospects that look quite good in order to keep filling the building, that would imply also that maybe in the coming months we launch the Phase 2 of the project as well.

Monteburgos 2, which is the project where we're doing a turnkey building for an insurance company in Las Tablas as well, construction is to be delivered in 2022, construction continues to be on track and unaffected by the construction, let's say uncertain or moving environment and the delivery is planned for the year, end of the year contributing to the cash flow generation of Metrovacesa.

Oria which is the name that we have given to -- the commercial name that we are giving ORIA Innovation Campus to our Clesa project in the North, center North of Madrid. We have signed the first deal with VITA, as you know, one of the leading operators in Europe for student residences and co-living solutions, where we will be developing the first student residence in the area, we're in a joint venture, in a joint development effort with an exit planned already where VITA will be the 100% owner of the building upon completion.

This is a 20,000, roughly 20,000 square meter building with 588 studio apartments, again in the location there. This to say that this deal is equivalent to a land sale of EUR 26 million plus a development margin. So I think we've always mentioned that in terms of our commercial assets, we follow a strategy which is either a land sale, either forward purchase agreement or in some cases JVs. I would say this is an example where land -- land sale would have brought to us a lower margin and therefore we pursued a strategy which at the end of the day is -- it delays a little bit the cash in of these EUR 26 million in land for this 20,000 square meter, however it will bring additional margin and therefore better results, better return for our shareholders.

And finally, we've signed one binding agreement in Palma de Mallorca for retail use with a supermarket. It's now private agreement and will probably materialize in the public deed in the next year in 2023. And then we have ongoing negotiations and probably another EUR 5 million coming imminently that we sign in the next few days.

Just expanding a little bit more on Oria Innovation Campus, you know this is the largest development, commercial development project that we have with a total estimated development of -- investment of EUR 330 million, which is located in the former Clesa factory, attractive location next to 2 major hospitals in Madrid and with great connectivity to public transportation. And this will become a great hub for biotech, pharma, life sciences with, you know, as you know, talents investing on the factory owned by the municipality right now and ourselves developing for buildings of which part will be 2 -- combination of 2 office buildings. One of them a tower with 40,000 square meters, second office building with 6,000 square meter and then a student residence which I just talked about, as well as a hospitality building with 22,000 square meters.

Following the deal signed with VITA and the strategy that we put in place to become its life sciences hub at the north of Madrid, we will continue negotiating alternatives for the remaining 3 buildings with the aim to start the construction at the beginning of next year. We are already working on the different reports, environmental, transportation, et cetera, that will allow us to apply for building permit in the next, again in the next few weeks.

Moving on to Page 16 and just some highlights on ESG matters and sustainability. We are making progress on our ambitious ESG commitments set by the new plan that we approved recently and we need to say that we've launched 100% of the projects that we have launched and that we will launch are expected to obtain some sustainability certification either GBS (sic) [GBC], Green Building Council or in some cases BREEAM as well. 41% of our developments are AA Efficient Energy Rating and we've become a member of the Cluster de la Edificacion, which is non-profit in which we form part in order to research and develop improvements in residential buildings.

In the S part, our focus on activity in our land transformation is basically to -- we've created a team to work on being more participative with the communities where we are transforming the cities and to make sure that we create functional, livable and wanted spaces in the lands that we are transforming. And so we've already -- are working on different participatory diagnostic studies in areas like Vinival, in Alboraya, Benimaclet and Percebeiras in A Coruna.

So giving a lot of importance to this social part, given that we are one of the leaders in transforming land, which is now fully permitted into livable spaces. And finally in the governance part, all our ESG KPIs for 2021 have been successfully validated by external audits and we will now continue to do so in the non-financial information. And then we are also continuing with our innovation effort in matters related to Blockchain technology that we believe will be a key in the future for more transparency and for more access to different clients in the future. We are now working with the community of Madrid on a Blockchain Cluster to continue to push that technology into the real estates.

And now moving on to the financial overview, I hand it over to our CFO, Borja Tejada.

[Borja Tejada Rendón-Luna, executive]

Thank you, Jorge, and good morning, everyone. In terms of profit and loss account, just some key figures. 32% rise in total revenues, compared with the previous year from EUR 187 million to EUR 247 million, round figures. That means an average sales price of EUR 253,000 per unit delivered. For the year-end, we are forecasting an increase in this figure.

In terms of margin, gross margin, 21% of development margin in line with our guidance of low 20s and more than EUR 23 million of EBITDA and net profit of EUR 12 million. In the Slide 19, concerning our cash flow, we are on track according to our budget, more than EUR 76 million of gross operating cash flow, meaning 35% increase of year-on-year. This figure is the base that we used for dividend calculation. Once deducted, cash flow related to work in process -- in progress and dividend paid, we get changing our net debt of EUR 7.3 million.

If we focus now into Slide 20 on our net debt, we can say that we still keep a very solid financial position with 6.6% of loan-to-value. In terms of treasury, close to EUR 270 million, out of which EUR 190 million is unrestricted cash flow -- cash treasury sorry, despite of EUR 91 million of dividend distributed in May. Focusing on maturities and the impact of interest rates increase, we can say that close to 90% of our debt has fixed interest rate or it's already hedged and additionally, no significant maturities before 2026.

On top of these information, let me inform you that we have already committed more than EUR 300 million of financing for construction begin expecting during the second half of the year. Finally, about -- talking about our asset appraisal for the semester, 2.7% of like-for-like increase, with positive increase of more than 3% in our residential portfolio and close to 1% in commercial uses. EUR 2.57 billion of GAV, if we account it according to the status, then 37% represent -- of our GAV represent of our active residential project, quite close to our current market cap; 21% of residential fully permitted non-active project to be launched in the next years; 17% of residential non-fully permitted that it will be launched once its transforming fully permitted and 25% of commercial uses.

Now I will hand over to Jorge with closing remarks.

[Jorge Perez de Leza Eguiguren, executive]

Thank you, Borja and moving to Page 23, just a quick note to summarize the partial public bid that was by FCC, which was finally completed in the month of June, with a bid acceptance of 11.47%, which in addition to the stake held by FCC Group in prior to the public takeover bid. We have to say now that the FCC has a stake of 17.23% in Metrovacesa. And we've seen the post bid trading volume that has been higher than during the year 2021 and we will continue to monitor liquidity in order to maintain it as high as possible.

Moving on to closing remarks, again we will -- we want to confirm our 3-year target which at the end it sums up of the operating cash flow of more than EUR 150 million, which now stands at 51% progress. And this is the main and overall target as a combination of the housing deliveries, the land sales, the cash coming from the land sales agreements, as well as the commercial delivery of the Monteburgos 2 project. And we reiterate that our strategy remains unchanged and we continue enforcing our housing development, land management and commercial segment with the main focus on cash flow generation, as well as the attractive dividend distribution that we've had until today.

And with that, I would close the presentation and hand it back to Juan Carlos.

[Juan Calvo, executive]

Thank you, Jorge, We are now ready to take questions from the audience. We will start with questions from the audio conference call and then questions from the webcast. Operator, please.

[Operator]

[Operator Instructions] Our first question comes from Florent of ODDO BHF.

[Florent Laroche-Joubert, analyst]

This is Florent Laroche-Joubert from ODDO BHF. So I will have several questions if I may. So first question maybe on the resident student part. So would it be possible maybe to have more colors on the percentage of pre-sales for your 2023 deliveries? Maybe also, is it possible to have an update on what is the dynamic on the residential pre-sales in July and what do you expect in September due to the current context? Maybe a question on land sales, I understand that maybe it would be -- I don't know if it is difficult or a challenge to meet your guidance, your annual guidance for land sales in H2. So what do you expect for -- as to in terms of land sales? And maybe a question, third question on the commercial segment, so [Audio Gap]

[Jorge Perez de Leza Eguiguren, executive]

[Audio Gap] mentioned that if we were to consider a similar range of deliveries as we had in 2022, our coverage would be higher than 70% as of June. So, I hope that answers the question and we have obviously towards the end of the year, we will be more clear on guidance for next year.

I think the dynamic of resi to sales, we -- I think we -- as I mentioned, we saw a strong beginning of the year, so very, very strong until April, somehow starting to weaken in May and June and continued in that situation in July as well. And probably, I would say that for the remaining part of the year, we will see that the sales are not, the rhythms velocity absorption are not as a strong as in the first half of the year, but however are strong enough or in order to meet our targets, of course, the deliveries for this year 2022, but also for 2023 and beyond.

So, I think we have to think that in our opinion, January till April, we were selling well above that 3% that we consider is a healthy monthly absorption rate and again this 3% is sales sold units divided by total number of units of the project. If you are selling well above that, it means that you are selling the project maybe too fast and that you should raise prices or I think -- in the combination of the full year, we will meet that 3% is what we see and probably it means that stronger beginning of the year and a little bit slower second half of the year.

And I think this is coupled, basically, if you look at the macro environment, I think it's very -- in uncertain situations, it is very hard to be precise. But what we do see in terms of precise figures is that the construction starts and projects put on sales are decreasing by about 30%. And therefore, that means that even if demand decreases a little bit, there is increased tension from the supply side. So at the end, we think there will be a combination that again will continue to absorb the decreasing number of units put on the market.

It is true, however, what we see from our clients, when we look at the sales funnel in terms of the contacts, visits and then leads that are generated. Contacts are not decreasing and what we're seeing is that the clients are -- they get a little bit more time to decide in a changing environment where the -- especially interest rates, there is or there was a little bit of uncertainty until now and probably still remains to be seen where Euribor ends up.

But now with the last increase in Euribor, what we have seen is that the fixed mortgage for somebody buying a house in Spain has gone up from about 0.9% to 1.5% which is still a very reasonable rate to buy a house. Will that continue to grow up, probably a little bit, but still within healthy number. So we remain cautiously optimistic, as I said, for the remaining part of the year, combined with a very strong initiated part of the year that we will comply with our targets.

I'm sorry for the long -- I think there was also a question from the web regarding the residential dynamics that probably has been answered with this as well now. In terms of the land sales that you mentioned, on our annual guidance, just for clarification, at the beginning, we said EUR 75 million as a combination of public bids, as well as private contract. So it means that you will not see EUR 75 million reflected in the P&L. What you will see in the P&L is that public bid component of that EUR 35 million.

We are reporting now close to EUR 25 million already signed, another deal coming imminently to be signed, but I would say that probably to be fair into what we consider in those EUR 75 million, we should have as well the land component related to VITA deal which is another roughly more than EUR 25 million. So that put together is already EUR 50 million and then I think towards the end of the year, we will continue signing residential smaller deals. And then I think on the commercial partners, well be it as a forward purchase agreement or be it a land sale, we will also add another north of EUR 20 million to that.

So we put all that into combination, I think we are comfortable with EUR 75 million target. And then finally in the commercial what we can expect say to be honest, I cannot be very precise on that because there is a combination. I think in commercial, we've always been very direct in saying that we look for the best alternative to monetize that portfolio in the coming 4 to 5 years and that is a combination of land sales as we have seen with EUR 7 million signed already in the first half of the year or another EUR 5 million probably to be signed very soon. But also a combination with forward purchase agreements like the VITA deal or what we are delivering for the commercial segment. And so to be more precise than what I have already mentioned on the VITA deal, I can say that we're working on more deals to come, but I cannot give you a full 3-year projection unfortunately.

And I hope that answers your 4 questions?

[Florent Laroche-Joubert, analyst]

Yes, thank you very much. That's useful.

[Operator]

And our next question comes from Fernando Abril of Alantra.

[Fernando Abril-Martorell, analyst]

I have 2 please. So first, with regards to demand, I was wondering if you could give us more color on this slowdown in demand, I mean by -- now if you see by any specific product, by geography or by type of client, domestic versus foreign and second residences as well? And then second is with regards to the construction starts, so I just missed what you said about your forecast for the second half of the year in regard to this, I don't know, how many are you targeting?

[Jorge Perez de Leza Eguiguren, executive]

So I think on demand, I will try to be more direct because I've already been mumbling a little bit about what's happening on the demand and on the supply side. But I would say that geographically, it's pretty -- I would say, the slowdown is across all geographies. So not a specific region where we see a weakening demand already. I think international or second homes thus remain strong. So I think residential, Canary Islands, where we have project for second homes, that remains strong.

And then what we do see is an increasing or increased demand for finished product. So whatever is already finished or close to finish that sells better or has not -- we've seen an increase on that and that is probably coupled I think with more certainty on what kind of mortgage am I going to get if I sign tomorrow or in 2 months, rather than if I sign something on plan now and then what will I get in 2 years.

I think the second part, what will I get in 2 years? I think once the clients see that the environment is moving within certain thresholds, they will again feel comfortable to buy, but in the long -- in the short-term with higher uncertainty, finished product is performing better. On the construction starts, we aim in order to keep our run rate of between 2,000 to 2,500 units, we need to start actually in the lower part of that, because we have already started construction on -- in the previous years to deliver more than the 2,000 per year in the coming years. So if we start at least 2,000 this year, we're getting track to -- in-line to continue with our targets and that's what we aim to do.

What I did mention is that we have 550 units that we have not started. Well, actually we deferred less than those, we deferred about 400 units from the first and second quarters into the second part of the year. Of those, now we're starting 560 units. So we're already catching up with the 400 units that we delayed and then we need to just to traditionally start a few 100 more to comply with that target.

We feel more comfortable now because as I mentioned, we decided not to go with variable contract, which is what some construction companies or other companies more adopting and we prefer to wait and to see the market to stabilize more and to continue with our strategy of fixed contracts, large construction companies that we know will finish the construction site and that is coming back now with obviously higher construction costs, but again with higher prices as well, so that we're able to maintain our margin target of low 20s.

[Operator]

[Operator Instructions] And there are no further questions, so I'd like to pass the call back to Juan Carlos for any webcast questions.

[Juan Calvo, executive]

Yes, actually, we do have several questions from the webcast. Starting with Mariano Miguel, analyst from Banco Santander. He is asking 2 questions. On the Oria project, if I'm understanding well, are you going to develop speculatively 46,000 square meter of office space? Is this not a risky bet as of today? Second question, looking at 2023, which level of deliveries would we expect in?

[Jorge Perez de Leza Eguiguren, executive]

So on the first question that's undecided yet, we will continue to decrease our risk or hedge on risk in the overall 89,000 square meters. Now 20,000 square meters are fully hedged and we will continue to do that and we're confident that we will decrease the risk before making any decision on construction starts. At that point in time, whether we have something for the offices or not or for the remaining parts, then we will decide what percentage of the -- the role of the overall buildable area is hedged. And then we will decide whether to start full construction or not. So, I'm rather vague on the answer, because right now as you mentioned with the uncertainty in the market it's difficult to be more precise, but we'll continue and I think we will succeed in diminishing the risk measure on percentage of square meters on the whole site.

On the second question, no, we haven't given guidance for 2023 yet and as you know, our policy is to, in uncertain environment, an increasingly uncertain like we've seen in the couple of -- in the last couple of months, we give short-term targets. What we -- what I did mention is targets for the year clearly in place and so if we were to assume similar targets for as of 2022, which is 1,600 to 2,000 units, you take our construction backlog and sales backlog, you should see that, that is doable, then we would have pre-sales of more than 70% of that -- of those deliveries.

[Juan Calvo, executive]

Okay. And another question from Thomas, analyst from Deutsche Bank. In a way, I think may has been answered already, but just in case if you want to highlight more. The question is considering the first signs of headwinds in the sector lower demand, higher construction costs and delayed project starts, should we become little bit more cautious for the next year?

[Jorge Perez de Leza Eguiguren, executive]

I think -- well I think I've talked already a bit about that, I think again for us, 2022 remains unchanged. We've seen no construction delays coming into our deliveries, 100% of the projects were really finalizing in the next couple of weeks. For 2023, as well, what we see the impact on all the logistics issues with construction companies result in projects with no delays or some of them with a month's delay that does not put into risk from our construction or delivery timing point of view, any of the deliveries next year.

And I think on sales, what I think -- I would say that, that we will be able to meet that 3% target per year, it looks like. And for year 2022, we consider with that we have a more -- it's closer in time. I think I feel more confident, year 2023, I think with the supply-demand dynamics that we see, it's likely that will continue like that. But I cannot be unfortunately as precise as you would like because the market remains uncertain, but with more than 70% we sold of similar deliveries to this year. I think we should be able to sell in a year and a half, 30% of what is remaining.

[Juan Calvo, executive]

Thank you. Another question from the webcast, from an investor from France. In the past you have mentioned that you have identified around EUR 600 million of land for sale. When is the timeframe to sell these portfolio and in global terms, can you say whether you're on track on that target? And secondly, are you going to distribute the cash flow only in dividend or are you considering buybacks as well?

[Jorge Perez de Leza Eguiguren, executive]

So I think the second answer which is easier first and mostly dividends is our preference with the low liquidity in the market, I think until now the buybacks have not been very successful. So we are very much focused on dividends, we consider to have the most attractive dividend yield on the market right now and we will continue with that.

On your first -- on the first question regarding the land sales, I think that remains the case that of the EUR 600 million, a big chunk of that is the commercial portfolio. And the timeline to do that is 4, 5 years and definitely in an uncertain environment is more difficult to do so, but we started to be more proactive in adding value to the projects, not just expecting to do a land sale and I think the Oria project is an example.

If you take the GAV of the Oria project, which probably would have been EUR 120 million, EUR 130 million as a straight land sale. If we try to sell that in one shot in an uncertain environment would have been very difficult. If you actually work on the master planning for the site, if we work on the demand analysis to understand what the area needs, if you create a life sciences hub in the area and break down the uses and what the life sciences have, that is an example of how we consider land sales on a value-added mode and we will continue to do that work on the remaining projects and with still that target of 4, 5 years. Obviously, more uncertain, more difficult, I mean, it doesn't mean that we're changing our view on that.

[Juan Calvo, executive]

Thank you, Jorge. We don't have any more questions from the webcast. Operator, do you have any follow-up questions from the audio conference call?

[Operator]

There is no follow-up questions on the audio call. [Operator Instructions] And there is still no further questions, so I'd like to hand back to the management team for any closing remarks.

[Juan Calvo, executive]

Okay, thank you. So this concludes the result presentation for the first semester of 2022 from Metrovacesa. As usual the Investor Relations team will be available to take any follow-up questions that you may have. Thank you for your participation. We hope you have a good summer break and we hope to speak with you again next quarter. Thank you and goodbye.

[Operator]

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