Wanda Sounds Out Market Re: Sale Of Edificio España

4 February 2016 – Expansión

The Wanda Group has started to sound out the real estate market regarding its possible sale of Edificio España. A priori, the group’s only requirement is that the transaction price be at least equal to the amount the Chinese company paid Banco Santander when it acquired the property in 2014, in other words, €265 million.

However, unless those terms are relaxed, the operation has little chance of success. According to the first round of preliminary conversations, investors with a potential interest in acquiring the skyscraper would be willing to pay between €180 million and €220 million. That amount could increase to €240 million if the Local Heritage Committee changes its mind and allows the demolition of the building’s façades; however, that is unlikely, at least until there is a change in the Government of the Community of Madrid (which chairs and holds a large majority on the board of that body), but in any case, the figures fall well short of the amount set originally by the holding company led by Wang Jianlin.

Although the sale of Edificio España is now its preferred option, Wanda has not yet ruled out the possibility of pushing ahead with the renovation of the property, which would involve the construction of around 300 luxury homes, a 200-room hotel and a five-storey shopping centre, with a budget of €700 million. The last meeting with the representatives of the capital’s Town Hall was held last Wednesday, and the only message to emerge from it was that the company’s spokespeople did not declare that they are planning to abandon the project, despite weeks of speculation to that effect.

There is also a third hypothetical scenario, assuming that the sale of the building does not go ahead and that Wanda rules out the option of renovating the property without demolishing the façades. This option, which Jianlin’s company is currently evaluating, would involve keeping the property in its portfolio for four years, whilst they wait for a change in Madrid’s government, which may result in urban planning actions that would not require it to conserve the skyscraper’s external structure.

Real estate sources indicate that the only option that the Chinese tycoon is not considering is that of abandoning the operation as he does not want to send the message that he has lost money. They also say that Edificio España is still a very attractive asset, thanks not only to its location, but also to the combination of authorised uses (hotel, residential, commercial). (…).

Although the renovation project has not been ruled out completely, the company has now rescinded the contracts that it had signed with several architectural firms and legal advisors in Madrid. It is keeping its sales office open in the hope that it may help the group achieve its goal of transferring the skyscraper to a new owner.

Meanwhile, Grupo Wanda suffered a further setback yesterday, in addition to the huge losses it has experienced on the stock market since the start of the Chinese crisis last summer: the ratings agency Fitch lowered its credit rating to BBB from BBB+, on the basis of lower sales forecasts for 2016 and 2017.

Original story: Expansión (by Luis M. De Ciria, M. Belver and R. Bécares)

Translation: Carmel Drake