Villar Mir Seeks Tenant For 5th Tower After Mount Sinai Withdraws

12 August 2015 – El Confidencial

The future of Inmobiliario Espacio’s new skyscraper is up in the air. Just four months after Juan Miguel Villar Mir’s company was awarded the concession to use the land next to the Cuatro Torres business district, it has been left without a tenant for the site and is assessing alternative solutions with various candidates.

The future of the fifth tower, which Madrid’s Town Council awarded to Inmobiliario Espacio in April as Ana Botella’s term in office drew to a close, is up in the air. And not just because of the change in local government and political ideology that took place following Manuela Carmena’s arrival at the Palacio de Cibeles in May, but also, and above all, for purely commercial reasons.

The proposal that enabled the company, controlled by Juan Miguel Villar Mir, to win the contest centred around the new skyscraper housing a private medical centre, as well as recreational and retail space – an arrangement that the businessman had agreed with the prestigious Mount Sinai group.

In fact, according to sources close to the deal, the medical group had signed a letter of intent with the Spanish company, but had not entered into a binding contract. As such, the prestigious US centre has been able to back out of the deal and leave Inmobiliario Espacio without a tenant and therefore, without the key required to access the bank financing that is so critical to making this project work. This situation has forced Villar Mir to start looking for alternatives.

Several sources have confirmed that various consultancy firms are working on the search for an alternative to the Mount Sinai project. The options range from reaching an agreement with another medical group – the Mayo Clinic, IDC Salud, HM Hospitales and Vithas have all been considered – ; to modifying the project to accommodate another kind of tenant, such as a university or business school; and even, to changing the initial idea of building a skyscraper to construct another kind of property instead, which would be cheaper to build. Any such change would require the approval of the Local Council.

“Hurricane Carmena”

According to sources close to the Villar Mir Group, the new Local Council has not yet definitely approved Inmobiliario Espacio’s proposal, which means that the project may still be suspended if the numbers do not add up. This threat has been looming since Ahora Madrid was elected into office (in May), but it would be difficult to justify from an economic perspective, given the (negative) impact its cancelation would have on the public coffers. (…).

According to the terms of the concession, the Town Hall will continue to own the plot of land next to the Cuatro Torres site and the winning bidder (in this case Inmobiliario Espacio) will have the right to use the land for a period of 75 years, in exchange for the payment of an annual fee throughout the concession term, which Ana Botella’s team had set at a minimum of €1.9 million, but for which Villar Mir ended up offering more than double (€4.0 million).

Since Inmobiliario Espacio does not own the land, it will have to finance the entire build cost of the skyscraper, estimated at €100 million out of its own pocket, or find a way of offering the banks some kind of guarantee (other than the land) to convince them to grant a loan…in these kinds of project, banks tend to rely on a guaranteed tenant, but that is something that Villar Mir lacks at the moment and explains the current wave of activity to find a solution.

The problems associated with the fifth tower come at a particularly difficult time for Grupo Villar Mir, as its flagship company OHL is struggling to generate cash, whilst at the same time is facing corruption and financing problems…in recent years, the parent company has embarked on several highly ambitious transactions, including the purchase of a 25% stake in Colonial, a 19% stake in Abertis, Operación Canalejas and the fifth tower. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake