The Would-Base Developer of 13,000 Homes in Sevilla is Declared Insolvent

29 May 2018 – ABC Sevilla

Desarrollo Urbanístico Sevilla Este (Duse), the company that was going to build more than 13,000 homes on a 330-hectare site next to the airport, Parque Alcosa and Sevilla Este, has filed for creditor bankruptcy in Mercantile Court number 1 of Sevilla after accumulating debt amounting to €300 million. The company has filed for liquidation after waiting fifteen years for the Town Hall to execute general infrastructure work, for which it had paid the Town Hall €60 million when Alfredo Sánchez Monteseirín was mayor.

Just when it seemed that we had seen the last of the bankruptcy proceedings involving major companies in Sevilla, the demise of Duse comes as a wake-up call for the local real estate sector. The liquidation of this company means the suspension of the urban development that was set to become one of the great areas of expansion in Sevilla: Santa Bárbara.

Duse is owned by Sando Proyectos Inmobiliarios (53.9%); Realia Business (30.5%), linked to FCC; the investment fund Vertrauen Corporate, to which Unicaja sold its 5.99% stake in 2016; Bankia (2.7%) and Bankinter (1.12%), according to the Mercantile Registry. The company owns two plots spanning more than 330 hectares on the Santa Bárbara estate. Some of this land was expropriated in the 1970s and returned to its former owners over the subsequent decades, including the heirs of Augusta Peyré, which ended up selling their land to Sando in 2002.

Urban planning agreement

Before the new PGOU was agreed in 2006, the owners of those plots signed an urban planning agreement to collaborate with the Town Hall of Sevilla to execute the urban development plan. Thus, in 2003, at the height of the real estate boom, urban planning agreements were signed between Sando and the Leaders of the Urban Planning Department for the development of the two plots spanning more than 330 hectares.

In those agreements, the Town Hall undertook to establish a certain buildability ratio for the plots and the owners agreed to bear the acquisition cost of the general infrastructure work (involving the construction of streets, avenues, roundabouts…). The PGOU established that a maximum of 2 million m2 could be built in Santa Bárbara, which would allow for the construction of 13,853 private and social housing units (…).

In exchange for that buildability, Duse paid the Town Hall €15.4 million for the acquisition of land for the external general infrastructure and €42.6 million for the execution of the construction work. In total, Duse paid the Town Hall €58.1 million, according to sources consulted by ABC (…).

The municipal Government received that money but failed to execute the general infrastructure work following the end of the economic crisis (…).

In 2017, Duse filed a claim against the Town Hall for €75.4 million – the €58.1 million it had handed over plus €17 million to cover interest, damages and harm – for the breach of the urban planning agreements (…).

In order to execute the project, Duse signed a loan with Caja Madrid for more than €200 million, which has now risen to an outstanding balance of €300 million due to the non-payment of the principal and interest. As a result of the reordering of the banking sector and the transfer of toxic assets to the so-called “bad bank”, Caja Madrid’s loan for the development of Santa Bárbara ended up in the hands of Sareb.

Sareb’s unpaid loan

In March, the loan in question matured, and so Duse offered Sareb the option to renew it, now that the economic recovery has reactivated real estate demand, or take over the plots as “dación en pago”. According to sources close to the operation, Sareb rejected both proposals. The economic crisis and the failure by the Town Hall to execute the general infrastructure work have ended up economically suffocating the property developer, which has finally thrown in the towel and filed for credit bankruptcy, starting liquidation proceedings.

What will happen to those plots now? In all likelihood, they will go up for auction. If nobody is awarded them, they will end up in the hands of Sareb, which is now the counterparty of the almost €300 million loan that Duse has outstanding (…).

Original story: ABC Sevilla (by María Jesús Pereira)

Translation: Carmel Drake

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