Spain Real Estate News

Spanish savings bank Cajamadrid said Friday it is in talks with five other such institutions to merge some of their operations.

The announcement reflects ongoing consolidation in an industry that is heavily exposed to the Spain's now-collapsed real estate sector.

Cajamadrid is Spain's second-largest savings bank and its fourth largest financial group. In a filing with stock market regulators, the bank said it is in talks with smaller savings banks Caixa Laietana, Caja Avila, Caja Segovia, Caja Insular de Canarias and Caja La Rioja.

Cajamadrid said the six are negotiating an arrangement under which they would pool assets to provide each other with liquidity but retain their distinctive brand names.

Source:  Businessweek

Spanish savings banks, already struggling with a deep economic downturn, will be the hardest hit from tighter rules governing the way the country's banks set aside cash against bad loans, a banker and several analysts say.

The Bank of Spain on Wednesday outlined a proposal that includes a faster recognition of provisions for past due loans, and bigger provisions on real-estate assets banks acquire or foreclose on.

The rule change follows mounting concern that banks aren't recognizing the true scale of their losses from exposure to Spain's troubled real-estate sector.

A Spanish banker, who declined to be named, said the rule change would be hardest for the country's savings banks, known as cajas, and smaller banks.

Analysts welcomed the move, saying it may reduce uncertainties about the health of the Spanish banking sector and force the troubled savings banks to seek merger partners quickly.

A spokesman for the Spanish savings bank association CECA said it is studying the impact. Spain's AEB banking association, which represents listed banks, wasn't immediately available to comment.

"For the Bank of Spain and the banking sector it's an exercise of transparency with respect to the exposure to the real-estate sector, which is what international investors were asking for," said Banesto Bolsa analyst Ignacio Soto Palacios.

"We also believe that it adds to the pressure on the savings banks in the midst of a restructuring process, since they will be the most affected by these measures," he said.

The proposal comes just days after the Bank of Spain shocked financial markets by seizing ailing regional savings bank CajaSur, a relatively small lender based in Southern Spain. The intervention has since weighed on Spanish equities, bond prices and the euro.

Investors are worried about potential fallout from the sector which is reeling from the collapse of the housing market. The cajas control around half of Spain's banking business and many of them were more aggressive lenders to the real-estate sector than their listed rivals.

The listed banks were lower early Thursday. At 0903 GMT, Banco Bilbao Vizcaya Argentaria SA (BBVA) was down 0.5%, while Banco Santander SA (STD) shed 1.5%. The smaller banks were also lower. The weakness in the banking sector pulled the IBEX-35 down 0.3%.

The proposal calls for banks to set aside provisions covering the full amount of a souring loan within a year. Banks currently have between two and six years.

On foreclosures or when banks swap loans for real-estate assets, lenders will have to provision 10% of the acquisition value right away, another 10% after one year, and another 10% if they still hold the asset on their books for more than two years.

Banks' real-estate holdings are growing fast as they seize homes from owners who default on their mortgages, and as they agree asset-for-debt swaps with struggling homebuilders following the collapse of Spain's decade-long housing boom.

The rule changes did include at least one positive element for banks. The new provisioning rules incorporate the value of real-estate collateral, applying a haircut of between 20% for a home that is the primary residence of the debtor, to 50% of a loan for undeveloped land. Current rules don't make a distinction between collateralized and uncollateralized loans, meaning banks are obliged to make 100% provisions on a bad loan regardless of the value of the collateral.

Source:  advfn.com

 Sir Geoff Hurst won a High Court fight yesterday over a £600,000 investment in Spanish property.

The England World Cup hero, along with six other investors, sued Mark Cordner, their former financial adviser, for misrepresenting terms of a £2 million deal for off-plan villas in 2003 and 2004.

They claimed that, because of “deceit”, they paid the full price up-front for five apartments in a development called Aloha Royal, near Puerto Banús, in the south of the country.

Sir Geoff, 68, was used as a figurehead for the venture to encourage others to invest. He was offered apartments at a “special” price of around £300,000, believing that once built he would double his money.

He appeared in a promotional video for Royal Marbella Group, a Spanish property company that he believed would build the luxury apartments. However, it emerged that the company did not own the land, where the flats were eventually built by another company.

However, he lost the entire investment in what he said was a “cynical scheme” to con people. At an earlier hearing he told the court: “I feel some remorse at getting involved in allowing my name to be used and abused in the way it has been. Most of the people I have been associated with have been very forgiving of my role in this.”

Sir Geoff said that at the start he trusted Cordner, 47, and his boss Michael Hone, 63 over the planned development. But he added: “With hindsight looking at the documents today we would not have gone anywhere near this.”

He admitted he had not done nearly enough research into the backgrounds of the two men. He had not taken any advice before signing an image rights deal in June 2003 for him to promote the scheme. “I was at fault for not looking at the deal more closely,” he said.

He said promotional brochures using his image and words backing the scheme were approved at first even though they made up things that he was supposed to have said.

Later on in the campaign he said “absolute lies”, including the idea that he was designing a golf course — “ludicrous” for a former footballer — were also put out by the men. They also wrongly claimed he was investing in four other apartments.

After ending his links with the organisation his image and quotes were still being used.

Mr Hone has since disappeared, and so Sir Geoff brought his claim against Cordner, who lives with his wife Sandra in a £2.2 million home in Hertfordshire.

Mr Justice Keith, sitting in London, ruled that Cordner was liable and that the seven investors were entitled to damages, with the amount to be assessed later. Sir Geoff’s is the largest part of the claim and includes a £350,000 loan he made to Mr Hone in May 2004, with £110,000 not repaid. But the judge cleared Cordner of responsibility for that loan.

The judge said even though Sir Geoff was advised that it would be “unwise” to make the loan he decided to trust his own judgment and lend him the money.

The judge found that Cordner persuaded them “by deceitful or negligent misrepresentation” to buy apartments. Cordner had claimed that he too was a victim of Mr Hone.

Source:  Timesonline

The main culprit behind soaring Spanish debt levels is the over-leveraged property developers, not public spending, Arturo De Frias Marques, research analyst at Evolution Securities, told CNBC Tuesday.

“The developers are the main reason for private sector debt inflation,” Marques said.  Private sector debt currently stands at 171 percent debt of gross domestic product (GDP), compared with the government debt ratio 53 percent.

Without the developers, the Spanish private sector debt would be only 10 percent higher than in Germany, and well below the UK, US and France, he argued.

Lending to developers in Spain accounts for 29 percent of Spain’s GDP, or 320 billion euros, “which is a very big number,” according to Marques.

Financially vulnerable Spanish regional banks -- those most exposed to weakness in Spain's property market -- are starting to merge operations to improve solvency, and the government has given cajas -- as Spain's savings banks are known -- a June 30 deadline to consolidate.

“It is serious. It will take years to be fixed," Marques said. "I don’t think it’s going to end up in an ‘out-of-control’ situation, however. Particularly because the major banks are quite solid.”

Marques emphasized that Spain needs structural reforms, which will mean higher unemployment and lower growth.

“Clearly we have a couple of tough years, but it won’t end up in disaster," he said. "The steps we’re seeing are the steps that had to be taken for many years.”

Meanwhile, the balance sheets of Santander and BBVA -- Spain’s two largest banks -- are robust relative to their regional competitors, due to the banks’ “diversification and lending policy,” according to Marques.

Read more at CNBC

Spain's central bank early Saturday seized Church- controlled savings bank CajaSur, a significant step forward in its efforts to clean up the country's ailing mutually owned banks.

The takeover of the small, Andalusia-based bank comes at a time of rising concerns over Spanish creditworthiness. Earlier this month, the European Union put together a giant financial backstop to ease concerns that Spain and other countries could default on their debt. Spanish banks have encountered increasing difficulties getting funding in international markets.

CajaSur's failure is the second in Spain since the start of the global financial crisis more than two years ago, and comes at a critical time for a banking system that until now has been able to resist intense pressures from the global financial crisis. Unlisted savings banks, with strong ties to local governments and communities, have been the hardest hit.

CajaSur, based in the Southern Spanish city of Cordoba, has EUR13 billion in loans and holds a marginal 0.6% of the total assets in the Spanish financial system. CajaSur, which was founded by the Roman Catholic church of Cordoba in 1864, was considered the weakest link among the savings banks. Its solvency had deteriorated significantly by a fast-growing pool of souring real-estate loans.

Many savings banks grew faster than their listed peers during the country's decade-long construction and real estate boom, in part because they lent more to local real estate developers. As the housing bubble started to deflate and the economy stagnated, Spanish banks saw their bad loans rise at unprecedented speed.

The bulk of the country's 44 savings banks, which account for about half of Spain bank business, are now scrambling to restructure via mergers, and the central bank is pressuring them to move faster, as merger talks have become bogged down by interference from the regional governments that control many of these institutions.

The boards of CajaSur and larger Andalusian peer Unicaja agreed to merge last August. However, CajaSur had been reluctant to accept the conditions of Unicaja's merger proposal, particularly regarding labor issues and extensive layoffs.

Read more: Nasdaq

Various moves are being announced in Spain that give hope to many British owners whose property has been declared illegal and face demolition.

Owners of property declared illegal in the Valencian municipality of Catral, most of whom are British, may have a case to sue both the Valencian government and the town hall for damages, according to the European Association of Town Planning Consumers (AECU).

It is estimates that 1,272 homes have been illegally built on rustic land around the town of Catral, most of them sold to British couples relocating to the region to enjoy their retirement.

The town hall has plans to charge owners around €20,000 each to legalising their properties, whist developers and town planners involved in the scandal get off scot free.

But having consulted a legal expert in town planning at the University of Alicante, the AECU argue that the Valencian government and Catral’s town hall are to blame for failing to enforce town planning laws, and may even have encouraged illegal over development in the area. As a result, owners may have a case to sue the authorities for damages, say AECU.

In Valencia the regional government is drawing up a plan to certify the quality and legality of holiday homes in the region. It will mean officials visiting every property and specialists at the Valencian Building Institute will issue a certificate for properties deemed to be of suitable quality and with legal title deeds.

Officials said that homes with the certificate will have added value as they have an official stamp of approval. Critics say it is a ploy to try to sell a glut of 20,000 newly built holiday homes on the Costa Blanca.

A webpage providing more information is planned and the IVE has approached other European building organisations for their backing, focusing on the UK, France, Germany and Holland. It is thought this will add more value to the Valencian stamp of approval, and inspire more confidence amongst buyers from other European countries.

Spanish property expert Mark Stucklin does not think it will have much affect when demolitions are still continuing. ‘The problem with the new seal is it will do nothing to make the bad press go away whilst the underlying abuses continue. So with the Generalitat and local developers continue blaming others for their own mistakes, it looks a bit like an empty gesture,’ he said.

Indeed there is growing concern that fast track demolition is being accelerated in some parts of Spain. Owners of homes in Andalucía which are retrospectively judged to have fallen foul of regional planning rules face being given just four weeks notice as part of a crackdown on excessive development in one of Spain’s most popular regions.

Thousands of homes that were bought or built in good faith across the area are at risk since the regional authority began reviewing local councils’ planning approvals and concluded that in many cases, permission to build should never have been granted.

Source:  PropertyWire

MADRID  — A Spanish news network says former James Bond star Sean Connery will be questioned over a real estate deal.

Cadena Ser and other media outlets say Connery and wife Micheline Roquebrune will be called to a court in coastal Marbella over matters related to the sale of an area estate.

For 20 years Connery vacationed at his lavish property, Malibu, before selling it in 1998. After the sale, a block of 70 apartments was built on the spot.

Madrid and Marbella lawyers Diaz-Bastien & Truan — who media reports Friday said represented the Hollywood actor — told The Associated Press their offices were raided Wednesday by Treasury inspectors, but declined to confirm if Connery was a client.

Neither the Marbella court nor the Treasury department would comment.

Source:  NewsVine