Corvera Golf and Country Club from the air

A group of 10 British buyers is taking legal action against Calidona, the developer of Corvera Golf and Country Club in Murcia, arguing breach of contract and demanding their money back. The group are represented by Irwin Mitchell, a firm of British solicitors with offices in Spain.

The buyers are also worried they may lose all their money – in some cases the bulk of their life’s savings – if the developer of the resort goes bust like hundreds of other Spanish developers in recent times.

With the Spanish property market in crisis, this is a real risk. Listed Spanish property developer Martinsa-Fadesa, for example, has been forced to seek protection from its creditors, leaving numerous British clients without a home to show for their money, whilst Murcia’s mega-developer Polaris World narrowly avoided bankruptcy proceedings only last week.

Off-plan buyers at Corvera Golf have paid deposits and stage payments of up to 200,000 Euros for homes costing between 190,000 and 550,000 Euros. Irwin Mitchell believe that more than 100 British clients could be affected by Calidona’s alleged financial troubles and failure to deliver on spec. The developer is now said to be chasing clients for further payments.

Breach of contract

Irwin Mitchell argue the developer is in breach of contract for not having built luxury facilities that were promised at the time of sale, for example “a five star hotel, in-door swimming pool, spa, medical centre, equestrian centre, leisure facilities and tennis courts, as well as a commercial centre with bars, restaurant and shops.”

“The group claim that none of the five star leisure facilities have been built, and that they are now being chased for final payment and face the threat of being sued under Spanish law by the developers Corvera Golf and Country Club, SL, despite being informed that building licences are not even in place for some facilities,” explain Irwin Mitchell.

“And to add to their concerns, they also fear that the failure to build the facilities on this and on a previous site, Roda Golf, is a sign that the developers have run out of money and may go bust, taking the group’s hard-earned money with them.”

Solicitor Alex Radford, from Irwin Mitchell Abogados in Malaga – the Spanish arm of UK law firm Irwin Mitchell – said the issue was of increasing concern to a growing number of people who had committed hard-earned money in Corvera, and who travelled to the emergency meeting in Birmingham from across the country.

Radford said: “This is obviously a very worrying time for all of these people. Buying a property in Spain is a big decision. These people have worked hard to earn the money to buy these homes and saved for a very long time. To pay out this money was a decision they would not have taken lightly.

“Misled by the developers”

“Having done that, quite rightly, they expect to receive what they have paid for. They have been promised five star facilities to go with their homes, and they have been very badly let down indeed. Clearly they have been misled by the developers, and we want to get justice for them.

“These people want their money back or all the facilities they were promised to be built – it really is as simple as that. We believe the developers are in a breach of contract because of the lack of facilities that they said they would build when they first sold homes to our clients and a large number of other people who have also invested hard-earned money in a deal the developers haven’t honoured.”

For more information visit Leeds Man Among Spanish Home Buyers Taking Legal Action Over Property Firm Collapse Fears

I hope I am wrong, but I think it is. By assuming the worst in these kind of situations I haven’t be wrong yet.

First of all, let’s look at the administrators’ report in more detail.

An audit of the company’s assets and liabilities found 62.5 million Euros owed to creditors, not including clients who handed over deposits and stage payments to the tune of 53 million. Clients should have mandatory bank guarantees provided by the developer to protect their stage payments from just this type of eventuality, but they don’t. That’s what happens when you deal with a company like Trampolin Hills Golf Resort.

On the asset side, the auditors found that all but the most illiquid assets have completely disappeared. Ferraris, executive cars, lorries, tractors, diggers, bulldozers, dump trucks and cranes, you name it. All gone. Even office fixtures and fittings like coffee machines, chairs, computers, and aircon units. All that’s left, it seems, are the assets the owners couldn’t remove, like the land and buildings. Everything else that belonged to Trampolín Hills Golf Resort has vanished, described in the report as “missing assets”.

Call those assets?

Trampolin Hills Golf Resort, Murcia

That just leaves some land and buildings in Barril de Arriba and Barril de Abajo of Campos del Río, where the urbanisation was supposed to be built, which the administrators have valued at 69 million Euros, plus some financial assets such as credits, valued at 12.5 million Euros. Total assets valued at 82 million Euros, giving a cash surplus of 17.5 million Euros if the company was liquidated at these values.

According to the regional newspaper La Verdad, this is good news for victims, as they may be able to get back all or part of their money if the company is liquidated.

But here’s the thing. Does anyone seriously believe that Trampolin Hills Golf Resort’s land is worth 69 million Euros? I certainly don’t. In the current market I doubt the land is worth a fraction of that, even if it had all building licences in place, which Trampolin Hills Golf Resort manifestly doesn’t. As the administrators say in their report, “this project, at the current time, and bearing in mind the insolvency of the company, is absolutely unviable,” whilst recommending the liquidation of the company to pay its debts.

Trampolin Hills Golf Resort reportedly sold 1,700 homes off-plan, many to British buyers, who paid a total of 53 million in deposits and stage payments, and now have nothing to show for their money. I doubt this report from the administrators puts gets them any closer to justice or getting their money back. Some Britons sold up in the UK and moved to Murcia to wait for their new homes at Trampolin Hills Golf Resort. Years later, they are still waiting, living in rental accommodation.

Beach and cliffs at Javea, North Costa Blanca

Costa Blanca, Murcia and Valencia property market report 2010

To say that right now is not the best of times for property sellers within the region I cover would be an understatement. 2009 has seen a massive change take place, not just within the holiday home property market but also within the mainly British expat market. I don’t think at the beginning of 2009 anyone had realised exactly how hard the recession was going to affect the property owners relying on an income from their Spanish homes.

Price Reductions – are they really at the right price?
Let us take a look first of all at the types of properties thousands of people bought during the boom as holiday homes or as investment properties to let out. At the time they bought, demand was higher than the supply, and developments were springing up all over regions such as Murcia and the Southern Costa Blanca. The majority of developers were greedy, building as many properties as they possibly could on limited land in locations being marketed as the next best thing.

As an example in the Southern Costa Blanca, in the Torrevieja area, a development of apartments was constructed on land surrounded by orange groves. The location is a 15 minute drive to the nearest beach, a 10 minute drive to the nearest town, a 10 minute drive to the nearest golf course and about a 40 minute drive to the nearest airport. The apartments are all exactly the same give or take a few square metres difference in garden size for the ground floor apartments or roof terraces on the top floor. Sections reserved for commercial units were allocated and built and buyers paid between €95,000 for a 2nd floor apartment to €145,000 for a ground or 3rd floor apartment with roof terrace / garden. At the time of construction, the developers were marketing the development as lying within an idyllic location away from the hustle and bustle of busy towns with amenities on hand and providing wonderful countryside views and even now, people trying to resell their properties are sticking to this line.

Today’s reality is a little different. The development is not finished, there are no shops, you need a car to get anywhere at all, the views (unless you have a roof terrace in which case you look over scores of roofs towards the sea) overlook a multitude of other identical apartment blocks.

That particular development is just one example. There are dozens of similar developments dotted around that now have For Sale signs instead of bougainvillea decorating their terraces. As an example of price drops, one vendor I know bought a top floor apartment with roof terrace at the development mentioned above for €135,000 which he is now trying to sell for €69,000 but he hasn’t had one viewing in 7 months. Even at that greatly reduced price, he is now competing with property in far better locations (on a completed golf course as opposed to near to) and with facilities just a few minutes walk away. So is his property a good buy at €69,000? Well actually no; a property is only ever worth what someone is willing to pay for it and if the price is not even attracting viewings what does that tell you?!

Mid range property
It is not just property at the lower end of the market that has been affected. Over the past few years, many buyers were young families moving to Spain in search of a better quality of life where their children could attend International or local schools, become bilingual and spend more time outside rather than in front of a TV or a computer! Substantial family homes were bought and parents found employment locally enabling them to maintain a comfortable standard of living. Towards the latter end of 2008 and throughout 2009, as jobs have diminished, those families have had no choice than to return to their home country. Some, unable to keep up their mortgage, have walked away from their property and left it to the bank and others have let their homes go at a loss.

As an example, a completely renovated 3 double bedroom, 2 bathroom detached family villa, not overlooked and with private pool and garage, within walking distance to the beach in Javea, in the Northern Costa Blanca, was recently sold for €265,000. The property was being marketed at €375,000 and 3 years ago would have sold for around €430,000. This example shows how much property – even in excellent locations – has come down.

Town houses in Valencia City

Top End Property
Whilst the top end of the market, in the main, has not suffered as acutely as the mid to lower level, there is no denying the fact that front line property or property lying on private land of 5000m2 or more has been greatly discounted. On offer today is a modern 4 bed 3 bath villa, 480m2 build on a 5,000m2 plot 10 minutes drive from the beach and just a 5 minute drive to a popular 18 hole golf course. The villa is surrounded by woodland making the location very private, has sea views and is on the market for €1.1m. Moving 15 minutes inland a finca style property is for sale for €885k. Built in 2003 on a plot of 17,000m2 providing total privacy, the finca has been built externally in traditional Spanish style, although it is totally modern on the inside. 5 bedrooms, 4 bathrooms and a tennis court are some of the features making this property extremely good value.

My point with all the above information is to demonstrate how cruel the market has become for sellers. It is not just a case of vendors having to ‘get real’ with their prices in order to sell, because as you can see with the example of the apartment, dropping a price by nearly 50% is being quite real. The problem for sellers today who own property in locations not deemed as prime, is finding that their homes are not even getting a look in as prices of property in superior locations have also plummeted.

Not only has the lack of work and demand for property fallen, but for British home owners in Spain the weak pound has meant that many surviving on their pensions are struggling to make ends meet as the cost of living for those converting sterling to Euros has risen significantly. For this region, the harsh reality of the current economic climate has driven an exodus of British home owners back to the UK or trying to sell, and this, as a result, has left literally hundreds of properties on the market.

However, since the region has become far better connected internationally, Spain is no longer reliant on the British purchaser. From Alicante airport, currently undergoing an expansion plan which will see passenger numbers increasing from 12.2 million to 20 million per year, there are now direct low-cost flights from Denmark, Germany, Italy, Slovakia, Belgium, Holland, Morocco, Iceland, Moscow, Poland, Sweden and Norway, and from Valencia to Italy, Germany, Norway, Belgium and the US. As a result of easier access to the area, buyers are now far more international and taking full advantage of the market situation.

So what has been happening to these properties in 2009 and what will happen to them in 2010? Well, the simple fact is that the good ones are selling, they have been selling for the last 6 months and they will continue to sell throughout 2010.

When I say the good ones, I am referring to property in good locations priced to sell. I read recently in the property press that it takes over a year to sell a property in Spain; well, if it is in a second rate location and not realistically priced, then yes, it probably would. However, I could give plenty of examples of property that has sold in the last 6 months, in under a month. The plain fact is that there are a lot of well priced, well located properties on the market right now and, perhaps contrary to what you might have heard, there are buyers buying them! With prices being slashed, buyers are getting far more value for their money in far superior locations.

Repossessions
I mentioned in my report for 2009 that the amount of resale property listings were increasing and that repossessions were also on the rise. This is very true; as I mentioned previously, there are thousands of resale properties on the market and repossessions in 2009 have sadly multiplied. I want to make something very clear regarding repossessions. It does not work in the same way as in other countries such as the UK. Repossessions in Spain are more often than not, more expensive than they would have been if they had been bought just before the banks came in to reclaim. The majority of repossessions are dealt with by the individual branch of the bank and often the property is sold to the first bid high enough to clear the debt on the property. However, this debt is NOT just the mortgage, it also involves all the legal costs and relevant taxes and notary fees – making the price to clear the debt higher than before the property was reclaimed. So, the word repossession does not necessarily mean you are going to find a bargain. The key to finding a bargain is getting there before the banks do.

And even though the Spanish Banks have once again become the largest Estate Agents in the country, they are still not yet prepared to offer the best value properties from their portfolios to members of the public. What they tend to be offering are properties in peripheral locations in mediocre condition, whereas the better properties are being held back in the hope that they will get a bigger return when the market improves. This happened in the last recession though it is doubtful whether they will be able to hold on to these properties for too much longer. As an example, a large Spanish bank has taken possession of a new development of luxury apartments in Central Valencia. Currently the bank is not taking any offers at this development, yet is offering up to 40% discounts on its low end property. Another bank was offering a 40% discount for the month of November only.

It’s not just the banks that are holding on to top properties, even some developers are remaining inflexible on prices on their more exclusive villas but they are offering discounts on less desirable properties. One developer I work with told me recently that until the surplus of resales is sold, new builds just can’t compete and until developers drop their prices on quality new build property, I completely agree with him. Why would you pay more for a brand new property when a second hand one, probably only a few years old is just as good if not better, there is no snagging to contend with and it will more than likely include most of the furniture?

The Murcian coastline is still unspoilt in places

Northern Costa Blanca – an area overlooked?
Focussing on the Costa Blanca for a moment, I would just like to explain how varied this region is. Many people perceive the region as being one area encompassing Benidorm and a mass of overdevelopment. Well yes, this is true, Benidorm does belong to the Costa Blanca and yes, there is a lot of overdevelopment in the SOUTHERN Costa Blanca. The same could be said for the Costa del Sol, where Torremolinos is the mass tourism resort and it is well reported how overdevelopment has affected the area. In Mallorca, Magalluf doesn’t exactly have the best reputation but the Island is also well known for it’s beautiful coves and exclusive residential areas. The Costa Blanca is no different in that respect. There are less appealing areas within the region, but the Northern Costa Blanca more than compensates for those. The region is quite mountainous, has a number of cosmopolitan towns dotted along the coast line each boasting their own marinas and traditional Spanish villages just 20 minutes from the coast remain untouched by large developments. In fact, after 4 years of campaigning, the village of Parcent in the stunning countryside of the Jalon Valley, has managed to beat off developers wanting to build a controversial new development of 1,800 homes. The Regional Government of Valencia has rejected the plans after objections from local residents and the forestry department and the story has been compared in the ‘El Pais’ newspaper as being a victory of David over Goliath.

Front line, exclusive properties in the Northern Costa Blanca are available at a fraction of the cost of a Marbella equivalent. For example currently for sale in one of the more exclusive residential areas of Javea is a front line detached villa with panoramic views over the bay towards Ibiza, 4 bedrooms, 4 bathrooms, heated pool, garage & work shops, built on 3 levels with internal lift, 2 floors are currently split into 2, 2 bedroom separate apartments and the property is on the market for €950,000. There is a recent bank valuation on the property of €1.8m. It does need updating, but these properties once updated, sell for around €2m. This is an excellent example of what a property in a truly prime location can be acquired for in the Northern Costa Blanca at the moment.

Conclusion
To summarise, I think that 2010 will continue to see well priced property selling, though I believe that within the first quarter, perhaps at a push through to the beginning of summer, the really distressed sales will begin to dry up. Once the distressed sales are repossessed, the majority will no be longer the excellent value they were.

For buyers, it means that you can find incredibly well priced property in fantastic locations if you have time, patience, knowledge of the area and the right contacts, but then that’s what I am here for.

For more information please contact:

Lisa Francis
E: lisa@thepropertyfinders.com
M: + 34 620 018 649
www.thepropertyfinders.com

Copyright Lisa Francis, The Property Finders (Costa Blanca, Valencia and Murcia)

Polaris World Golf resort in Murcia

Polaris World, Spain’s biggest developer of golf resorts, has 3 months to negotiate an “amicable” solution with its creditors after admitting that it has “temporary liquidity problems in some of its subsidiaries.”

If no agreement is reached in the 3 month period, Polaris World will be forced to seek court protection from its creditors, following in the footsteps of other big Spanish developers like Martinsa-Fadesa.

Back in the summer of 2009, when Polaris World was renegotiating its debts with its main banking creditors, it was reported to have debts of 900 million Euros. Today the company claims it “only” owes 100 million Euros.

But the company is also having to deal with demands for payment from its contractors. Polaris World hopes to use this 3 months period to “amicably resolve the debts it has with them.”

Polaris World is made up of more than 20 divisions developing residential golf resorts and offering associated services. According to the company all divisions are “up to date with payments, and hoping to go forward without being forced to seek court protection from creditors.”

But according to a recent article in the Spanish daily El Pais, up to 15 of Polaris World’s subsidiaries are in a state of insolvency. Among them the management companies of resorts Hacienda Verde, El Valle Golf, Hacienda Riquelme and Alhama Golf, and hotels Mar Menor, Golf Hotel y La Torre Polaris Hotel.

Polaris World has developed 5 golf resorts in Murcia since its launch in 2001, with 65% of sales reportedly to retired British investors.

The claimant, Juan Pedro Férez, signed a sales contract and paid Trampolin Hills 30,000 Euros in February 2006, having paid a deposit of 3,000 Euros to reserve his property in September 2005. He followed up with another 27,000 Euros of stage payments during 2007, expecting to pay the final 40,000 Euros at completion, no later than 20 months after signing the sales contract. But building work at Trampolin Hills has now ground to a halt, having never even begun on the property that Férez hoped he would now be living in.

Férez took the developer to court for breach of contract and won, and then won against the developer’s appeal. The developer must now pay up or declare bankruptcy.

Perez claims he was careful about his choice of development, and even went as far as to talk to the local planning office in the town hall about Trampolin Hills. He was told that the town hall was fully behind the development. It has since emerged that Trampolin Hills is plagued with planning irregularities.

Férez complains that once the problems started it was impossible to get a response from the developer, and not for lack of trying. That will sound familiar to many people with problems on new developments in Spain.

Polaris World Golf resort in Murcia

Polaris World, one of Spain’s biggest property developers, and one of the biggest in the world when it comes to residential golf resorts, is reported to be negotiating a debt-for-property swap with its bank creditors, according to articles in the Spanish press today.

Polaris World aims to reduce its financing costs to cope with the property market collapse and fall in tourism. Holiday home sales in Spain have been particularly badly hit by the credit crunch and the recession, creating a massive glut of newly built holiday homes.

Polaris World’s biggest creditors include Banco Popular and Banco de Valencia, and local savings banks Bancaja, CAM, and Cajamurcia. The company’s most recent loans total almost 900 million Euros, reports Murcia’s local paper La Verdad.

The Spanish business daily Cinco Días reports that the company’s creditors may take control of the majority of Polaris World residential complexes, leaving Polaris World with its apartment and hotel businesses. On the other hand, La Verdad reports that none of the company’s resorts are on the negotiating table, just some of its properties and its land bank.

Changing strategy

Spanish developer Polaris World is also changing its commercial strategy to cope with the property downturn and the decline in British demand. According to recent comments by Alfonso Jordán, managing director of the Polaris World hotel business, the company is refocusing its hotel and resorts business away from the UK and towards the local market in response to the fall in demand from British property investors and tourists.

Polaris World says it is investing 350 million Euros in its tourism business, which includes two 5-star hotels, 4 golf courses, and 200 tourist apartments, with a total of 500 rooms in Murcia under management.

Taking into account the change of strategy, Polaris World expects to achieve an occupancy rate of 60% this year.

It remains to be seen whether there is sufficient interest amongst Spanish holiday makers for the Polaris World product of golf resorts a long way from the beach. History would say not.

Furthermore, Spain has its own economic problems, with unemployment heading for 20%, and it is hard to imagine that Spanish tourists are in a position to rescue anyone.

El Castillo Golf Resort sales office

“WARNING! DON’T BUY AT EL CASTILLO GOLF RESORT (JUMILLA, SPAIN)” are the first words you read at a new website set up by a furious Briton called Alan Ablett who is fighting to get his deposit back from a developer who he says has not even started building his home.

“In Jan 20007 we put down a deposit on an apartment on the El Castillo Golf Resort (a deposit of almost 21,000€),” explains Ablett, originally from Hull, who moved to Spain with his wife 6 years ago. “ The property was supposed to be completed in Dec 2008 (this was supposed to be a development with 5 star hotel, 18 hole golf course, prestigious golf club, shopping centres, equestrian centres, paddle courts, gymnasiums etc) yet no building works have even begun yet due to the failure to secure building licences (only the show homes have been built).”

“There is no prospect of them getting building licences, and they have no intention of paying back deposits,” Ablett told Spanish Property Buff. “Apart from some show homes and the sales office they haven’t laid a brick.”

Ablett says he is in touch with around 20 other Britons who have bought off-plan and paid deposits, with nothing to show for their money.

Do a Google search on El Castillo Golf Resort and you will get numerous results, mainly of estate agents praising the resort and its surroundings.

“El Castillo is a superb golf resort situated on the outskirts of the wine-growing town of Jumilla, in the north east of the province of Murcia,” enthuses one agent’s website. “El Castillo Golf Resort is a luxury development located in the beautiful wine making region of Jumilla in the province of Murcia, Costa Calida,” says another. As usual, it is up to potential buyers to do their own research if they want to know the full story before they buy.

Town planning offices in San Javier and Fuente Alamo have been searched by the police, along with various private homes.

In an article entitled ‘Critical situation at Polaris World and its companies’ Vegamediapress.com claims that Polaris World cannot get banks to guarantee millions of Euros that it owes to municipal governments in Murcia for planning agreements.

The article reports that, amongst other debts, Polaris World still owes the town council of Torre Pacheco more than 4 million Euros for a planning agreement for the Mar Menor Golf Resort – the first Polaris World development in Murcia.

According to the article, Polaris World is looking for an extension on its debt payments, with company executives blaming a temporary lack of liquidity, rather than structural problems. The company is alleged to have offered its office buildings – already mortgaged – and the golf course at Hacienda Riquelme as collateral for an extension on its debts.

The article also claims that the company has been laying off staff, and that there is an “air of crisis” at the firm.

The developers accuse Greenpeace of unduly scaring buyers by publishing doctored photos showing the expected effects of rising sea levels on the La Manga strip. The pictures suggest that much of the La Manga strip will be under water if sea levels rise by 0.5 metres, which Greenpeace argues is an “optimistic and conservative” scenario if steps are not taken to head off global warming.

“Greenpeace has manipulated the expected rise, of half a meter, to create alarm,” says Jose Angel Abad, the lawyer representing the developers. “They have sunk the property market: nobody is buying, and everyone is trying to sell.” The developers are threatening to sue Greenpeace for hundreds of millions of Euros if Greenpeace does not agree to their demands for compensation.

Greenpeace argues that the developers are trying to blame Greenpeace for a collapse in the market brought about by their own speculative greed.

“This is unacceptable blackmail,” says Juan López de Uralde, managing director of Greenpeace in Spain. “They are trying to make Greenpeace pay the consequences for the damage they have wrought on La Manga. Be in no doubt that we will not be intimidated by this kind of despicable behaviour.”

Greenpeace originally published the photos in November 2007 in a book called Photoclima, showing the potentially devastating effects of global warming and rising sea levels on the Spanish coast. The flooding scenarios are based on a study by Spain’s ministry of the environment and the University of Castilla-La Mancha, involving several experts from the Intergovernmental Panel on Climate Change.

Along with the La Manga Strip of the Mar Menor, other Spanish coastal areas at risk of flooding from rising sea levels include the Ebro River Delta, Cabo de Gata in Almeria, and large parts of the Costa de la Luz.