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Iberdola Injects €617m Into Its Real Estate Arm

3 February 2015 – Cinco Días

The company has conducted a capital increase of €154 million.

Iberdrola has recapitalised the debt that it held with its real estate subsidiary, Iberdrola Inmobiliaria. The energy group has injected €616.7 million into its subsidiary through a capital increase of €154.2m and an issue premium, explained the company. In this way, Iberdrola Inmobiliaria “cleans up its balance sheet and is made stronger to face its new challenges”.

The group’s real estate subsidiary, chaired by Ignacio Sánchez Galán, recorded losses of almost €70 million in 2013 and turnover of more than €45 million, according to the most recent company accounts filed with the Companies Registry. The company held debt, primarily with its parent company, amounting to more than €500 million, according to those accounts.

Iberdrola Inmobiliaria was created in 1993 from the merger of Iberdrola’s real estate companies. During the 1990s, it grew its business as a residential developer. By the end of the decade, it had focused on three main areas: the development of housing; the development and operation of rental property; and the management and development of land.

During the years leading up to the burst of the real estate bubble, the company undertook some major investments and also launched businesses overseas. In 2006, it invested €240 million in the construction of a shopping centre in Valencia, together with local constructors, Gesfesa and Valencia Residencial. That same year, it approved a €200 million investment in the Porta Firal project, located at the entrance of the Gran Via Fair (in l’Hospitalet), which was in the middle of its own enlargement program.

In 2007, it recorded turnover of almost €400 million and approved a €300 million investment in a geographic expansion plan. In July of that year, it acquired a 35% stake in the tourist resort Puerto Peñasco (in the state of Sonora, on the west coast of Mexico) for €43.12 million. In 2008, it bought residential land in Bulgaria for €44.6 million for the development of a tourist resort.

The economic crisis thwarted the expansion plans of the energy company’s real estate subsidiary, which nevertheless continued to operate throughout the worst crisis to hit the Spanish real estate sector in decades. In 2010, Iberdrola injected €400 million into the subsidiary, in a similar operation to the one just undertaken. In 2013, it acquired a minority stake in Sareb.

Original story: Cinco Días (by Alberto Ortín Ramón)

Translation: Carmel Drake