(I) SACRESA competition: refinancing problems

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.