El Corte Inglés is Selling Major Offices on c/Hermosilla and c/Santiago de Compostela in Madrid

11 April 2019 – El Confidencial

The 95-strong asset portfolio that El Corte Inglés put up for sale a few weeks ago not only contains commercial assets. It also includes three important office buildings, all located in Madrid, which have sparked a great deal of interest amongst institutional investors.

They include one of the jewels in the crown of the retail giant, a 20,450 m2 office building located on Calle Hermosilla, opposite the group’s headquarters. It is currently occupied by the Purchasing Division and, according to sources familiar with the operation, may be converted into homes, which would make it a golden opportunity in one of the most sought-after areas of Madrid. Nevertheless, ECI would remain as the tenant of the property for at least three years under a sale and leaseback arrangement, with the option of extending that term for another three years.

The second office building is located on Calle Tomás López, which backs onto the Purchasing division’s offices. And the third office building, which is located on Calle Santiago de Compostela, 100, houses the headquarters of Provincial Court of Madrid. It is known as the Edificio Marbella and spans 6,200 m2. The regional Government has an agreement to lease the property and so the potential buyer would be guaranteed of a stable tenant, with a long-term contract and an annual rental income of almost €1 million.

Original story: El Confidencial (by Ruth Ugalde)

Translation/Summary: Carmel Drake

Madrid’s Most Indebted Town To Pay €3M More Due To Fraudulent Ex-Mayor

20 October 2017 – El Confidencial

The political legacy of Baltasar Santos (pictured below), who served as the mayor of Navalcarnero for 20 years (between 1995 and 2015), is still taking its toll on the public coffers. According to the Ministry of Finance, Navalcarnero is the most indebted town in the Community of Madrid (and number 24 in the ranking for the whole of Spain). Each one of its 27,000 residents owed more than €3,700 as at the end of 2016. Then, the tax authority based its calculation of financial debt of €101 million, although the current Government estimates that the figure is more like €230 million. And that amount is expected to increase gradually due to the steady trickle of legal rulings that are going to be made against the previous Town Hall due to mismanagement by the former PP-party mayor.

The most recent ruling, issued by the Provincial Court of Madrid on 28 September, ordered the Town Hall to pay €2.8 million (plus legal interest) to around fifteen local residents and companies because the local Government, led then by Santos, sold them land that was not actually owned by the Town Hall (…).

This is the first ruling of its kind, but José Luis Adell, the current (socialist) mayor, expects that more will follow, unfortunately, against the Town Hall due to the “disastrous management by Santos” (…). We estimate that we are going to pay around €70 million in relation to these types of rulings, which will increase the municipal debt to €300 million (…).

Nobody knows where Baltasar Santos is now. He was expelled from the PP in 2015, after hiding from the party that he had been charged for several legal misdemeanours. Santos participated in the municipal elections that year with another political party, URCI (…) but resigned just a few months later, in October 2015, just like he had done previously. Nobody has replaced him. The Town Hall has created an investigation committee to analyse his management. Moreover, it has engaged legal counsel so that all of the irregularities that have been detected can be brought to justice and it has asked the Chamber of Accountants to audit Navalcarnero’s accounts for the financial years from 2007 until 2015.

Original story: El Confidencial (by David Fernández)

Translation: Carmel Drake

Reyal Urbis Faces Key Week In Its Effort To Avoid Liquidation

29 May 2017 – Expansión

Reyal Urbis is facing a key week for determining whether or not it will receive sufficient backing from its banks and creditors to allow it to emerge from the bankruptcy in which the real estate company has been immersed since 2013 and whereby avoid liquidation.

The deadline for the creditors of the company, which is controlled and chaired by Rafael Santamaría, to communicate whether or not they accept the debt payment plan proposed by the firm, is this Wednesday 31 May.

The Tax Authority is one of Reyal Urbis’ largest creditors, given that the company owes around €400 million to the public purse, as well as to Sareb and the main financial institutions.

In the event that the real estate company does not obtain sufficient backing from its creditors, it would be forced to file for liquidation. That would constitute the second disappearance of a large real estate company after Martinsa Fadesa’s demise.

Reyal Urbis owes debt amounting to €3,572 million to the banks alone, and at the end of the first quarter of this year, it reported negative equity of €3,436 million.

The plan through which the company hopes to ensure its viability involves agreeing a unilateral payment plan with the Tax Authorities, different from the one offered to the other creditors.

The real estate company is proposing paying off the debt it owes to the financial institutions using real estate assets, an offer that, given the depreciations in values, would represent a discount (on the debt).

Overcoming paralysis

By emerging from bankruptcy, Reyal is also looking to overcome the paralysation that it has been immersed in for the last four years, during which time it has not constructed a single home and has barely managed to sell any assets or manage the hotels for rent in its real estate portfolio, covering 123,000 m2.

In this way, at the end of 2016, the company reported losses of €155 million, similar to the previous year.

In addition, Reyal Urbis’ bankruptcy procedure has been delayed, given that, at the end of 2015, Commercial Court number 6 in Madrid rejected the proposed agreement that had been presented by the company at the beginning of that year. After appealing to the Provincial Court, the real estate company managed to get the proposal agreed and processed more than a year later, at the beginning of 2017.

Original story: Expansión

Translation: Carmel Drake

Supreme Court: Gains May Be Unfair If Banks Make Profits On Sale Of Foreclosed Properties

23 February 2015 – Expansión

The Supreme Court has established a doctrine and clarified the jurisprudence on the understanding that a bank may be unfairly rewarded in the event that it obtains a significant profit on the sale of a foreclosed home.

The High Court reached this conclusion after studying the case of a bank that launched foreclosure proceedings after the borrowers failed to meet their repayment obligations. The entity foreclosed the home for half of the value specified in the deed (escritura).

In this case, given that not all of the loan was paid off (following the foreclosure of the property), the bank filed a lawsuit against the borrowers and their two guarantors, for the difference between the debt and the value of the foreclosed property, plus interest and execution costs.

However, the borrowers had understood that, as a result of the action (the foreclosure), the debt would be considered to have been repaid, since the value of the property had been set by the bank itself on the basis that it would cover all of the debt relating to the mortgage. They argued, therefore, that the entity had obtained unfair gains.

Establishing doctrine

Although the (local) court rejected the claim and denied the existence of unfair gains, the Provincial Court of Córdoba upheld the appeal of the defendants and concluded that the foreclosure of the property at auction for a 50% discount was equivalent to a deed in lieu. Nevertheless, the Supreme Court did not share that ruling.

According to established case law, the Supreme Court Chamber, which has studied this case, stresses that “in principle, the exercise of the legal right to demand the unpaid part of the loan from the borrowers (following the foreclosure of the mortgaged property for 50% of its appraisal value) could not be regarded as a case of unfair gain”.

Nevertheless, the Supreme Court qualified its statement and noted that in the cases in which the foreclosure (of the property by the bank) is followed by a subsequent disposal (of the property) at a much higher price that the foreclosure price and for a very significant gain, then “it should match it with any outstanding loan and any claim made by the creditor to (share in) the profit”.

The Supreme Court Chamber insists that this clarification is supported by recent legislation introduced to strengthen the (legal) protection for mortgage borrowers.

Original story: Expansión

Translation: Carmel Drake