Colonial, Metrovacesa pull out of mall deal
September 7th, 2008 | by admin |By Sarah Morris
MADRID, Sept 6 (Reuters) - Debt-laiden Spanish propertycompanies Colonial (COL.MC: Quote, Profile, Research, Stock Buzz) and Metrovacesa (MVC.MC: Quote, Profile, Research, Stock Buzz) have pulledout of a project to develop the largest mall in Spain, due to adifficult market, Metrovacesa said on Saturday.
Riofisa, a Colonial subsidiary which specialises in shoppingcentre developments, set up a 50-50 joint venture withMetrovacesa to buy 150,000 square metres of land in Madrid for238 million euros ($340.4 million).
However, ailing Colonial — which has debts of around 8.9billion euros — told Metrovacesa it had decided not to go aheadwith the purchase of the land for which the pair had alreadypaid 10 percent, a Metrovacesa spokeswoman said.
“They (Colonial) decided to exit the project and we decidedit wasn’t the best moment to look for another partner,” shesaid, confirming a report in Spanish paper La Gaceta de losNegocios on Saturday.
Property companies in Spain, which enjoyed a golden decade,are now struggling with the end of a domestic real estate boomand the global credit crunch, which is making debt moreexpensive and harder to secure.
On Friday, a source familiar with Colonial’s debt situationtold Reuters the firm was due to meet creditors and shareholdersnext week to reach an 8.9 billion euro refinancing deal aimed atsaving the company from bankruptcy.
Market watchers are speculating whether Colonial will beSpain’s next property casualty, going the way of the sector’sbiggest firm Martinsa Fadesa (MFAD.MC: Quote, Profile, Research, Stock Buzz), which went intoadministration in July.
Metrovacesa had net debt of 7.14 billion euros at the end ofJune. According to sources close to the situation cited byGaceta, Metrovacesa has until November to refinance debt of 1.02billion euros.
