Ghost Homes: 200 Buyers Lose €3M in Mallorca’s Biggest Real Estate Scam

30 August 2018 – The Local

Scores of budding homeowners on Spain’s biggest Balearic island have been defrauded out of their life savings after putting forward money for apartments that were never built or never existed.

On paper, real estate group Mallorca Investments offered clients the chance to buy apartments through local developer Lujo Casa for a price below the market average.

Budding homeowners would then give an advance of at least 10 per cent of the property price to the developer in order to supposedly tie down one of the apartments before it was built.

The new proprietors would even check that the plans were presented at city councils on the island, which would often instigate a request for a higher percentage from the developer, El País reported.

Some people put forward as much as €200,000 to own a luxury home in a coastal neighbourhood of Palma, Mallorca’s capital.

However, as time passed, construction work on the commissioned apartment buildings never seemed to get off the ground.

When the buyers demanded explanations from developer Lujo Casa, whose offices were shared with Mallorca Investments, no proper explanation was given.

“When we went months later to ask for explanations, the real estate agency had changed address and there were no employees from the building company either,” one of the buyers who put down first €23,500 euros and then €70,500 euros when the plans were presented at a town hall, told the Spanish daily.

“When we managed to contact them the real estate agency would ignore us or tell us they had no new information and that they had also been cheated.

“Nobody at the developer’s answered our e-mails either”.

This nonchalant and evasive reaction was part of the modus operandi of the property group, which according to Spanish Civil Guard sources could be behind the biggest real estate scam in the history of Spain’s Balearic Islands.

Following numerous official complaints from 50 of the disgruntled buyers – young, old, local and foreign – a covert investigation was carried out by Spanish authorities which led them to understand how the estate agency and the developer were operating together and how they were run by the same businessman.

A quick check online confirmed that the suspected scammer, an Italian man, was continuously sharing pictures on his social media accounts of his ostentatious jetsetter lifestyle, travelling business class to Dubai, popping bottles of the most expensive champagne and driving lavish sports cars through Mallorca.

The man, called M.P. by Spain’s Civil Guard, has been arrested and is awaiting trial for numerous counts of fraud.

But for the 200 people who put money forward for the ‘ghost homes’, many of whom sacrificed their life savings, there is little indication as to whether they’ll ever see their money or their properties materialize.

Original story: The Local

Edited by: Carmel Drake


Banco Popular Records Losses Of €137M In Q1

8 May 2017 – La Vanguardia

Banco Popular recorded losses of €137 million during the first quarter of 2017, its first set of accounts to be published since Emilio Saracho (pictured above) took the helm. And it is clear that he has not escaped from the fallout of the property sector, the evil that tormented his predecessor Ángel Ron. In fact, the loss in Q1 is primarily explained by a €496 million provision against the entity’s real estate portfolio.

Compared to the previous year, the panorama is completely different. During the first quarter of 2016, Popular recorded a profit of €94 million. The need to clean up and strengthen the balance sheet means that the numbers have gone into the red, but the new provisions increase the coverage ratio to 45.2%, with €570 million in non-performing assets and raise the default rate to 51.4%, according to figures published by the entity on Friday.

The bank is going through a difficult time, it registered losses of almost €3,500 million last year. To stay afloat, on Friday, the entity ruled out selling assets “in an indiscriminate way”, given that it will take the decisions that it considers appropriate “always taking into account the value that may be generated for the shareholders”, according to the bank’s CEO, Ignacio Sánchez-Asiaín.

Popular is looking to sell both WiZink and Totalbank if it receives good offers for them and has said that the bank is holding “advanced conversations” for the sale of its non-strategic assets.

Similarly, the director revealed that Project Sunrise, which had been driven by Ron and which sought to place the entity’s real estate assets into a type of bad bank, has been “completely abandoned”. “If we don’t have to recognise any extraordinary provisions, of course, we expect to generate profits this year”, he added.

Popular lost €800 million in deposits in February due to the relevant events that marked the transformation of the entity and reductions in its rating by the credit rating agencies.

Nevertheless, the bank is “succeeding” in recovering deposits and specified that in this sense there is a monthly volatility, which means that Popular is not “worried” by what has happened over the last few months.

The accounts reflect gains of €180 million in the retail business, where the bank specialises in SMEs. The volume of loans granted decreased by 5.6% to €100,859 million, with a default ratio that rose to 14.91%, compared to 12.68% a year before. (…).

Meanwhile, the real estate activity recorded losses of €317 million. Property sales amounted to €459 million, with an 18.5% increase in retail sales, at the same time as the sale of real estate loans reached €402 million.

As the end of the quarter, the capital ratio amounted to 11.91%, above the requirement of 11.375%.

Original story: La Vanguardia

Translation: Carmel Drake

Idealista: Garage Rental Yields Averaged 5.6% In Q1 2016

13 June 2016 – Expansión

Investment / Buying a parking space for rent generates an annual gross yield of 5.6% in Spain. That figure is even higher in the most sought-after neighbourhoods of the large cities, where it reaches up to 8%.

Now that debt and deposits are offering such meagre returns and the stock exchange is trading well below the levels seen a year ago, alternative investments are gaining strength. That is the case with housing, and also with garages. In this sense, the central areas of Madrid and Barcelona are full of very attractive opportunities to buy parking spaces and rent them out, with yields of more than 6% gross per annum.

The average return on garages in Spain is 5.6%, according to a study from Idealista, compiled using data from Q1 2016. That is, no less than 1.1 percentage points higher than the figure a year ago (4.5%) and four times the yield on 10-year government bonds (1.4%).

The highest average returns are obtained in Murcia (5.7%), followed by Málaga (5.5%), Almería (5.4%) and Castellón (5.1%). Parking spaces in Pamplona (4.6%) and Guadalajara (4.5%) also perform well. At the opposite end of the spectrum, the (regional) capital cities with the least profitable garages are Barcelona, with 2.1%, Oviedo (2.3%) and Salamanca (2.6%). In Madrid, the return is 2.8%.

But the arithmetic means are not representative in the two largest cities, as the markets there are very heterogeneous. In peripheral areas, there is hardly any demand for garages and there they generate minimal returns, whilst in prime areas of Madrid and Barcelona, parking spaces generate yields of more than 6%. (…).

Original story: Expansión (by Juanma Lamet and Rebeca Arroyo)

Translation: Carmel Drake

Popular, BBVA & Sabadell Have Lowered Their Lending Rates The Most

18 February 2015 – Expansión

«We will have to work up a sweat»: Warned the Chairman of the Banking Association, José María Roldán, at the end of last year, when he predicted that the fierce competition between financial institutions to supply credit to solvent clients in Spain would continue well into 2015.

The economic recovery, the lower cost of financing and the ever declining profitability of fixed income securities are spurring a trade war between the banks, which first took each other on in a battle to provide loans to SMEs and then moved onto mortgages.

In the race to expand their customer bases and secure customer loyalty, whilst at the same time protecting their market shares, banks have reduced the cost of credit in the last year, although the size of the reductions vary a lot between entities, according to information compiled from their respective results presentations.

Popular, BBVA and Sabadell have lowered their lending rates the most in the last year. The entity led by Ángel Ron (Popular) leads the ranking in terms of commercial aggressiveness, with a decrease of 34 basis points, which placed its credit yield at 3.53% at the end of 2014. Even so, its yield remains the highest in the Spanish banking sector.

Next, BBVA and Sabadell have applied a price cut of 20 and 19 basis points, respectively, bringing their interest rates to 3.32% and 2.80% in each case. To a lesser extent, Santander has also made its loans in Spain cheaper (by -6 basis points), and so too have Caixabank (-2 basis points) and Bankinter (by one basis point).

Popular, Sabadell and BBVA also lowered their lending rates during the last quarter of 2014, with respect to the previous quarter, whereas all of the other entities chose to maintain their rates unchanged. In any case, the downwards trend in the price of loans granted by Spanish banks is mitigated by the fact that the overall yield depends on the performance of the whole portfolio and not only on that of new loans.

Bankia is not included in this analysis, because it has not yet presented its results for 2014. It is awaiting notification of the percentage of the charge that the Fund for Orderly Bank Restructuring (the FROB) will assume in the payment of compensation for the claims made against its IPO in 2011.

The banks consider that reducing returns on deposits will continue to offset the lower returns on its loans, and therefore they will avoid any squeeze on their client margins, which is following a slight upwards trend, and will allow them to protect their results from the top of the income statement.

However, the price of retail liabilities is ever closer to bottoming out, and therefore the main challenge facing the banks in the short term is to try to offset cheaper loans with higher volumes during a year in which the total credit balance will remain stable or increase slightly, according to some entities.

In any case, in the second phase of the loan war that has begun this year, price is not the only competitive advantage being offered by the banks; they are also increasingly striving to adapt their products to the needs of clients.

In terms of loans to companies, businesses value the speed of response to their loan requests and in-depth knowledge of their business and needs. In terms of the mortgage offer, the requirement to link them to other indicators and products (payroll, average balances, credit cards, insurance, pensions, etc.) is decreasing and the amount loaned as a percentage of the property value (LTV) is increasing.

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake