Archive June, 2010
29 June, 2010 No Comments
All the media are reporting that the bank has refused to refinance the debt and has not accepted the plan submitted by SACRESA, which in its attempt to become one of the largest Spain real estate entered into an excessive debt (with the purchase of Metrovacesa), which has led it in an economic collapse situation.
To undertand how this could happen in 3 years, to be on the top of the top ten ranking real estate companies to fall into insolvency, it is necessary a bit of company history and the evolution of its growth.
Like other real estate developers, Sanahuja’s family company began building homes in Barcelona due to the high emigration suffered by this city and its industrial belt during the 60s. From building blocks of flats in popular neighbourhoods went to make bigger real estate developments. In recent years, they have been present in large transformation projects of Barcelona, like Illa Diagonal, Basketball City Badalona, the shopping center Les Arenes and the underway project Porta Barcelona, next to residential area of Barcelona. After that, their expansion covered the rest of Sapin to go ahead in the foreign market.
Sanahuja entered the capital of Metrovacesa, a company owned by Joaquin Rivero and, to gain control of the company displacing Rivero, winning the presidency and control 80% stake in the compoany. It had to assume a debt of close to € 6.000 million. This project went wrong when the bank not allowed the fusion of Metrovacesa and Sacresa; this union would hace made more affordable the debt incurred by Sacresa, all further aggravated by market crisis and the current slowdown in sales.
After having take Metrovacesa’s control, with 80% of capital (which he lost a year later), began buying important product based on debt, and do went to buy the headquerters of HSBC bank, one of most expensive buildings in Europe by € 1.600 million, competinfçg with a major Saudi group.
Perhaps one of their mistakes was not looking at the value of what they bought, and so again Metrovacesa resell HSBC bank tower a year later by € 1.000 million. But there have been billions of euros that became an unsustainable debt that has led to this situation.
Sources: La Vanguardia, Expansión and Cinco Días newspapers.
28 June, 2010 No Comments
Once the general description of what legally constitutes a reverse mortgage, I would like to get deeper on this subject from the practice.
In fact, we are trying to see the possibility that home ownership to be a source of income for retirement, because the properties are usually one of the main assets for people during their retirement age.
This type of mortgage assures the owner will receive a monthly amount in exchange for his home, keeping it as a place of residence to his death.
Normally, is possible to earn a starting spot sum, to pay the expenses resulting from the completion of the contract and the reforms that have to do, etc. Since that time, periodic amounts are charged; depending on the financial entity, they can reach 90% of the initial appraisal.
The operation can be canceled at any time, but typically would receive the income until the death of the holder, when the heirs will receive the property and their loads. This leads, today, that some reverse mortgages are being made on second homes, as a way to dispose of apartments that are not selling in the market.
On the other hand, the initial idea of a reverse mortgage, which originated about the year 2005, was to have a high valuation of the property and thus receive a higher monthly income. But now, valuations are lower, that’s why the income that can be achieved with the same property are much lower than those obtained earlier, due to a fall of the housing market.
There is another element that can create uncertainty for the bank to make reverse mortgage: life expectancy is now set to reach the 80 years in many cases. The bank wants to make sure income, which adds costs to the operation to avoid reaching what the financial market is called “negative equity”, which means that the debt exceeds the property value.
To eliminate the obstacles that appear to have the reverse mortgage at the moment, there is the idea that in Spain, “who has an apartment has a treasure”. Therefore, older people think well before taking a reverse mortgage to offset income his small pension. Furthermore, the sons are not yet aware that this house belongs to their parents, and so they are not obliged to let them it in heritance.
27 June, 2010 No Comments
The reverse mortgage becomes a formula created for retirees supplement thier pensions, so that older homeowners may obtain some extra money by charging an annuity, in exchange for their home, without sacrificing ownership or use thereof.
The requirements of the law are:
- That the applicant and the beneficiaries are 65 or older or are suffering from severe dependence.
- That the property on which the mortgage is either the main residence.
- That the debtor of the loan amount available through any regular or unique.
- That the debt will only be payable by the creditor when dies last borrower.
- That the property was rated ans insured against damages.
With a reverse mortgage, homeowners can continue living in their home, without having to leave it, until their death. This assures that they will remain owner of the property.
When the owner of mortgage dies, his heirs may get the house, returning to the bank the payments it has made the mortgage more interest. It corresponds to the heirs liquidate the situation with the credit institution. In this case, the institution can not demand any compensation for the cancellation of the mortgage. Once they have paid and the heirs have released its load housing mortgage, can inherit it in the same way as any other good.
If the heirs do not want or can not cancel the mortgage, the institution may foreclose and collect the debts due more interest. But the agency may only collect the goods they have in the inheritance, without being able to collect anything from the personal capital of the heirs.
In this type of mortgage, the homeowner receives a periodical payments or a single payment for a maximum amount, which determines the percentage of the valuation at the time of the mortgage creation, and to reach that figure, they stop have income, but the debt continues to generate interest.
25 June, 2010 No Comments
A few months ago was considering the sale of the Sabadell Bank building, in Passeig de Gracia 36, Barcelona (Spain).
The receipt of offers was carried out by the consultancy C & W, the sale conductor. According to articles published in business and local journals (as La Vanguardia), there have been formal offers for this property by MANGO and APPLE. After a quick sale process, the media confirmed that building was eventually acquired by Mango.
The building has a total of 4.600m2 constructed, distributed on 1.100m2 ground floor and 4 floors of 600m2 each, all with a front line of 20m. Located in one of the best areas of Barcelona, right in the center of business, at the confluence of streets Consell de Cent and Diputació.
The main value of the property is the shop, which consists of 2290m2, well above the value of the offices. Inf act, in 2004 the Reig family bought the top of this building to the Sabadell Bank for € 15 million, with the idea of luxury flats, but this plan was paralyzed due to the housing bubble.
A few months ago, the Sabadell Bank repurchased the top of the building for € 20 million, thus selling the entire building, what would bring greater benefits. The amount of the sale would be € 50 million, assuming a gain of € 30 million.
The buyer, Isak Andic, who made the offer through one of this holding companies, is president of textile group Mango, besides being one of the private shareholders of Sabadell Bank, with a 5.7% stake. In October, he was named president of the Instituto de Empresa Familiar (IEF), relieving the position of S. Pedro Barceló.
Turn to assess the marketing strategy of this transaction, we see a clear reflection of the idea of the fashion leading companies, looking to have a greater presence, occuping key places in the main streets of big cities, in detriment of competence. At number 16 of Passeig de Gràcia is a Zara store located in an excellent strategic place, in the very corner of Gran Via… really we must also recognize their real estate success throughout the world.
A question still in the air is: Why Apple has not been imposed in the bid? As the company has not commented in any way, guess who has decided to leave because he has found another place better or perhaps, after the negotiations process, it has not been as profitable purchase, or its planned investment to open shop Barcelona was only for the value of the premiser and was not interested in the whole building… Whatever reason, we must wait to see where the new Apple Store will be located in Barcelona, which will have wide acceptance (currently there is only one small Apple in FNAC).
14 June, 2010 No Comments
Following the Spanish Government announcement of increase the reduced IVA (7% to 8%), which taxes the sale of new homes in Spain, the answer of the autonomous communities has been increase, in turn, the ITP (Transfer Tax) applicable to the purchase of second hand homes.
Cantabria, Andalucía, Asturias, Balearic Islands, Catalonia and Extremadura are the Autonomous Communities which have announced that the ITP will rise from 7% to 8% more expensive home purchases for tax purposes, compared to the rest of Spain.
As always, there are exceptions to the rule:
- Rate applied by Canary Islands is 6.5%, because here the IVA does not apply and instead, there is an excise tax at a lower rate.
- Cantabria and Andalusia only taxed at 8%, the sale of houses from € 300,000 and € 400,000 respectively. Here we can guess that could appear rogue …
If we assume a home purchase of 300,000 €, Catalonia, Asturias, Baleares, Cantabria and Extremadura would pay € 24,000 in taxes, while the rest of the country would pay € 3,000 less.
In Catalonia, in addition to this, we must add the payment of stamp duty (which so far was 0.1% of the total loan) and that the Government has announced a 0.2% rise, which no other Autonomous does it.
In summary, Catalonia has the highest personal income tax and it is also the territory where to buy a new house or second-hand is more expensive.
11 June, 2010 No Comments
We find in Costa Rica this unique home without walls.
Costa Rica is one of the countries of the world that has a higher natural variety.
It has a very different climate in the Pacific coast and the Caribbean, which allows the existence of an great fauna and flora diversity.
I can not imagine how it should be living in this house without walls … in the middle of a tropical forest (Costa Rica has 35 national parks), where wildlife can roam freely at home in every room, lounge, kitchen, bathrooms, … !!
Obviously, with the slogan “Costa Rica: No artificial ingredients”, this house would be the most relevant example.
It is being in touch with nature at all times, it is something unique … this is allowed by the mild weather and the safety of the area.
Costa Rica is a jewel of global environmental movement, which affects a greater increase in tourism in the country. It’s a real country, very nice to be explored.
Sometimes it has been referred Costa Rica to be the Switzerland of Central America, for its natural beauty, comfortable lifestyle and peaceful democracy.
So this a very desirable country to invest in property.
4 June, 2010 No Comments
Walking in frotn of the old building BANESTO in Plaça Catalunya of Barcelona, 10-11, corner of Passeig de Gracia, you wonder what fate awaits it and who will be the next owner …
Maybe back in the hands of banks or funds that were in Spain and it seems to slowly come back, or perhaps some FO … Of course, the building’s location is unbeatable.
It is another building in Barcelona that seems to always been there, and it becomes uncommon to see the state of neglect in which it is now, pending a settlement of the bankruptcy that is immersed in the present owners, Monteverde Group Ballester and real estate from Valencia.
Still have hung posters where it began to advertise the future promotion. Projected starting any building project in the short term this is not feasible, therefore, what happens is most likely decline over time which gives a bad image to the thousands of tourists who visit Barcelona in general daily.
This unique building was acquired in 2006, worth approximately € 100 million for the Monteverde Real Estate. This Valencian real estate gruop, together with the group Ballester, formed the partnership society Andybal for the rehabilitation of buildings in privileged enclaves, with the acquisition of buildings in Madrid and Barcelona, for the promotion of exclusive homes. In this case it was a construction project of 52 exclusive apartments with parking, but the resulting paralysis of the real estate market led the project, like many others, would slow down at first, then stopped altogether.
Currently the building is already in the market for a potential buyer.
Another building also for sale is a former hospital dated from s.XV, in Barcelona city center, which is at an advanced stage of rehabilitation, respecting the old structure which has a central cloister surrounded by arches. The project was to make a small hotel, even luxurious, but the owner’s heirs decided to sell it.
However, due to the evolution of the current economic situation, the few aid given by banks on credit or mortgage, plus the uncertainty in the price of current market value of the property, make purchase transactions be difficult to be reached.
2 June, 2010 No Comments
We have been seeing for several months, studying, analyzing past, present and future problems of housing market.
Rarely could be made an optimistic forecast about it. But maybe today I would at least contribute something more positive after having reflected on past crisis.
… And considering some of the ideas of Warren Buffett, the Oracle of Omaha, which broadcasts to their customers / shareholders, where:
- It makes the anticipation that the U.S. housing market in 2011 will be out of the crisis, although prices are not still the ones of 2005.
- Advises that people always has to have a good cash position to take advantage of investment opportunities when they arise.
- Indicates that it is much better to invest in business models, which are easy to understand.
ABOUT HOUSING, if we make a historical note that after previous downturns, people in general turned to buying a house or brick, whether to make a safe investment, have wealth in their old age, leave a legacy or make a donation their children.
For any reason whatsoever, prices are now falling. The problem is not to know if we bought an appartment or brick which is purchased from a market price today and is well bought, or bought only half right, since it is difficult to set prices in today’s market, in recession, because today taxation prices for sure in a month or two are no longer valid, and in most cases should be aware of the offer that makes you a potential purchaser to come to negotiate.
The good idea is to have purchased at the time the market price was low, so that in time, as happened after the other crises, we may see that real estate property will be worth double or triple.
I’m just speaking from the point of view of the experiences had during the time and that is expected to be repeated within + / – long time, as the housing market is cyclical, plus being one of the engines of our economy.
But always thinking in case that a real estate purchase has been made with an accouracy study, for example, in a city like Barcelona, buying in any of the areas that usually have been easy to sell, foreseeing that in future there will still be enough demand (in streets such as Passeig de Gracia, Diagonal, etc.).
ABOUT CONSTRUCTION OF HOUSES, reflecting the thinking that makes Garcia-Montalvo, economics professor at 23.05 Vanguardia, whether it is right to build in a place where there are many houses to sell, the immediate response that comes to the head is not.
But he believes it, and the example is Las Vegas, where despite having a large portfolio of empty houses, and prices suffered a decline of 60%, construction has doubled. And the trick? since the fall of the price of land and construction costs of the new homes are very competitive against surplus product already on the market.
This is a warning to Spanish developers who have not reduced prices below the mortgage value.
… Let no one take it as a council to follow, since it is only my view … a feeling + the history of past crises + the pulse of the street + how to invest today for wealthy + opportunities market price + Euribor down + …
After having take Metrovacesa’s control, with 80% of capital (which he lost a year later), began buying important product based on debt, and do went to buy the headquerters of HSBC bank, one of most expensive buildings in Europe by € 1.600 million, competinfçg with a major Saudi group.
