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The recent news that the Spanish developer Llanera is going to be closed down after failing to emerge sustainably rom bankruptcy proceedings is reported to have sent a shiver down the spines of many Spanish developers, as it shows that the banks are now making the tough decisions as to which developers to keep alive, and which ones to kill off. Many developers have been kept on life support, but it looks like banks are getting closer to pulling the plug….
From now on banks are “going to decide which developers to save, and which ones not to,” said Javier Kindelan, from CB Richard Ellis, quoted in the Spanish press.
Mikel Echavarren, head of the property consultancy Irea, and a bit of a maverick in the Spanish real estate sector because he never sugarcoats the bad news, forecasts that all developers will go the way of Llanera unless 1) they have a stream of rental incomes to pay the bills, 2) they have finished developments with a sales value in excess of any debts, or 3) they can count on the support of a bank to keep them alive.
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1) they have a stream of rental incomes to pay the bills,
I feel the stream/yield will be not enough to pay even the social security cost. What chance of paying the interest.
2) they have finished developments with a sales value in excess of any debts, or
They need funds to finish the developments. Sales value in excess is the issue. One cannot comment without having the managements accounts of each company.
3) they can count on the support of a bank to keep them alive.
On what grounds can the Bank support them, will the banks have enough liquidity to finance them ? as the end game is decades away. At some stage they have to think how much good money can be thrown after bad .
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