Navas de Tolosa: Positive returns despite unforeseen events
Last Updated on 29 April 2025 by Urbanitae
At Urbanitae, we always emphasize that every investment involves risks and that, although we do everything possible to minimize unforeseen events, we cannot guarantee a specific return. The case of the Navas de Tolosa project in Barcelona, which we recently closed, illustrates this reality and also how, through proactive management focused on protecting investors’ interests, it is possible to achieve positive results even in adverse conditions.
The project, financed in December 2021, involved the development of a building with 15 residential units, one commercial space, and 16 parking spaces. Although it was initially planned with a 22-month term and an estimated return of 29.9% (with an IRR of 15.3%), the project ultimately closed with a gross return of 16.2% and an IRR of 4.7% after 39 months.
What happened?
The project development was affected by several circumstances that were difficult to foresee at the time of financing:
– Increase in construction costs: The tendering of the works coincided with a period of sharp price increases and material shortages in 2022. Final construction costs ended up being 23% higher than estimated.
– Urgency to begin construction: In order to prevent the building permit from expiring — which would have required allocating 30% of the building to subsidized housing — construction had to start quickly, prioritizing tasks such as earthmoving and foundations. This reduced the ability to negotiate with suppliers and contractors.
– Adverse economic environment: During the sales phase, rising interest rates and regulatory uncertainty (especially around the golden visa) slowed sales. When construction was completed, over half the units remained unsold.
– Higher financing and sales costs: Due to the economic situation, the interest rate on the development loan rose to 5.5%, compared to the initially projected 2.5%. In addition, marketing efforts had to be ramped up and real estate agent commissions increased to boost sales.
What Urbanitae did
Despite these challenges, Urbanitae worked closely with the developer to find solutions that would minimize the impact:
– Project optimization: Certain requirements, such as the obligation to allocate space for an electrical transformer station, were removed. That space was converted into sellable residential area, increasing revenues.
– Flexible sales strategy: Sales strategies were adapted, including furnishing some units and collaborating with new real estate agencies.
– Purchase of remaining assets: To finalize the operation, the developer purchased the last three parking spaces at the published price, avoiding a discounted sale.
Thanks to these measures, even though the return was lower than initially projected, the project closed with a positive return of 16.2% for investors. There were no capital losses, and the investment was preserved in a very challenging environment.
A lesson on risk and real estate investment
The Navas de Tolosa project highlights one of the key aspects of investing in real estate: returns are not guaranteed. Like any investment, there are risks that can affect both timelines and profits. However, it also shows that, unlike financial markets, real estate is much more resilient. And finally, it proves that professional, active management can make all the difference, helping preserve capital and achieve positive outcomes even in unfavorable scenarios.
At Urbanitae, we remain committed to providing our investors with complete transparency, explaining both the opportunities and risks of every project. Our goal is to continue building a long-term relationship of trust based on clear information, careful project selection, and active management focused on protecting the interests of those who place their trust in us.
