A reader has emailed asking if rumours that the IRM Group have gone into liquidation have any foundation.
The rumours stem from an article in El Confidencial published on 10th October, which state that the IRM group had entered into “concurso voluntario de acreedores”, which is a voluntary pre bankruptcy agreement, with debts of 630 million euros.
The IRM Group was formed in 2009, when the implosion of the construction sector which began in the first quarter of 2008, started to impact on the financial stability of the Polaris World group.
Polaris World was one of the most important developers along the Mediterranean coastline, building several prestigious residential urbanisations in the Murcia region, beautifully landscaped urbanisations which offered a safe and exclusive environment for “residential tourists” and second home owners, with well equipped facilities, attractive town centres and top level golf courses. The initial urbanisations were completed following an American urban model and rapidly sold out, spurring the company to continue advancing with further developments, but as the rate of building progressed, the quality started to deteriorate and by the time the property downturn began, Polaris was caught with incomplete urbanisations, unsold properties and a vast landbank of speculative plots acquired for a future expansion which was looking increasingly unlikely to actually ever take place.
As the property bubble imploded, the company decided to try and continue building, switching its resources to the Condado de Alhama urbanisation, completing the golf course, a vast perimeter ringroad, and a huge commercial centre, designed to cater for over 30,000 residencies, but only completed the initial phase of 3000 properties before the economic crisis took hold and the company found itself facing financial cashflow difficulties.
As sales slowed, costs continued to rise, financing the outstanding loans a crippling burden which revenue from the existing urbanisations and new sales was unable to finance, and the company found itself facing the very real prospect of bankruptcy.
The main loans belonged to the CAM, Bancaja, Banco de Valencia and Banco Popular, and following intense negotiations, assets belonging to Polaris were transferred to the ownership of the banks in lieu of payments, who in turn created the IRM group (Investments in Mediterranean Resorts) to manage the assets which had formerly belonged to Polaris.
This cleared debts of around 100 million euros, run up by Polaris owned companies: El Valle Golf Resort, Polaris World Sports Centre, Polaris Desarrollo, Hacienda Riquelme, Polaris World Development, Polaris World Alquiler de Maquinaria Industrial, Polaris World Hormigones, Polaris World Real Estate, Hacienda Verde, Nicklaus Golf Trail, Mar Menor Golf Hotel, La Torre Polaris Hotel, Centro Comercial El Oasis de Alhama, Oasis Polaris Ciudad, and Alhama Golf Resort.
Within a year the assets swelled yet again as Grupo Polaris failed to meet the next set of bank repayments, the IRM group slowly gaining the lands upon which the subsequent phases of the Condado de Alhama were to have been built, apartments which had already been constructed, the golf courses, some of the hotel assets and some of the retail assets owned by Polaris.
The plan was to manage the assets until they could be sold, but the continued general downturn suffered by the property sector made that option impossible to achieve without losing money on the assets and the much hoped for sale to the Premursa group of lands for the Paramount Murcia Theme Park failed to materialise as the price was too high for Premursa, who settled on an alternative plot of land. Since then, the failure of Premursa to obtain the necessary financing to initiate construction of the park has made it more difficult to obtain a good price for what is essentially potentially valuable building land nearby leaving IRM with assets and no cashflow.
This has been compounded by the financial standing of the bedfellows themselves, and the fusions and takeovers which followed the financial meltdown of the banking system. The CAM was acquired by the Grupo Sabadell, Bancaja become part of Bankia and Banco de Valencia was bailed out by the government. Finally the Spanish government created the SAREB, the Sociedad de gestión de Activos procedentes de la Reestructuración Bancaria (SAREB) “the society for the management of assets proceeding from the reconstruction of the Banking System,” better known as the “bad bank “ or “banco malo”. This absorbed the toxic property debts of cajas and banks, amongst them 309 million euros worth of assets transferred into the Sareb from Bankia and Banco de Valencia as well as participation loans totalling 581 million.
The current situation is that the capital of IRM is divided as follows: 164 million Sabadell, 144 million Bankia, 137 million Caixa ( Banco de Valencia), 124 million Popular, and Sareb 12 million, but the financial debt is 309 million to the Sareb ( 167 from Banco de Valencia and 142 from Bankia) while the Sabadell has 185 and the Popular 136.
Under the terms of Royal Decree-Law 1559/2012, which established the bad bank, Sareb has priority over the claims of its partners, which means that its own claim will be satisfied ahead of those of the Sabadell and Popular. The Sareb is charged with maximising the returns on its assets in order to make a profit for the banks and bodies which have in turn, invested into its creation, so has a responsibility to be hard nosed and ruthless when fighting to regain the money it in turn, is owed.
What this effectively means, is that the Sareb has refused to continue refinancing the IRM group, forcing it to enter into a state of voluntary bankruptcy protection.
This gives the IRM group 4 months in which to renegotiate and reach a settlement, but given the remit of the Sareb and the fact that Mediterranean property has devalued by more than 40% since the assets were first put into the IRM group to create it, it looks unlikely that anybody will emerge from the negotiations with anything other than the Sareb, which has first right on its claim.
Given the devaluation mentioned above, and the fact that the debt to the Sareb is more than half of the total assets, this means that the Sabadell and Popular will probably lose most of their money and the ownership of all the IRM assets transfer to the Sareb.
The bankruptcy protection was entered on the 9th October, so there are three months remaining before the Sareb can force the IRM Group into liquidation. This will simply mean that all outstanding assets will be owned by the Sareb, who will continue to seek ways of maximising its assets, manage what it owns and continue to try and sell off the properties and lands which it owns, exactly the same as the IRM Group has been trying to do up to this point.
In the meantime Grupo Polaris is left virtually naked, having been forced to sell assets to finance its constantly hungry debt, and seek ways of saving money, hence the temporary closure of the Intercontinental Hotel for the Winter season on the La Torre Resort and the sale of land on which the nursery for landscaping had formerly been situated for fruit tree growing, as well as the sale of other land which had been earmarked for the extension of the Condado de Alhama resort, which will also return to agricultural use.
So this is where the information has seeped out from originally and no further information has been published as far as we can ascertain, any subsequent articles all quoting the piece in El Confidencial on the 10th October.