Spain Hunting Lodge Overrun by Deer a Parable of Bust
Spanish developer Luis Gonzalez Chozas used to boast of the nobility of the horses at his 600-hectare (1,480-acre) hunting estate in the lee of the San Pedro Hills, one of the best for boar and deer in the region.
Now, just two years after he lost the property to the bank, wild sheep roam at will and with no hunting, the deer population has multiplied more than fivefold, said Fabian Vinagre, the caretaker of the estate near the Spanish city of Caceres 305 kilometers (190 miles) west of Madrid. Visitors are rare these days, hosted by Sareb, Spain’s bad bank, which is trying to sell the property before the animals complete their takeover.
The story of the farm, called Herb-of-Grace and the Moor, describes the arc of a property boom and bust that saw Spain have the fastest growth since its return to democracy in 1978, and then drove the country to take a 41 billion-euro ($56 billion) bailout for its banks amid a five-year economic slump. The property is one of at least 40 country estates Sareb has taken over from lenders, and is among 200,000 assets linked to real estate worth 50.4 billion euros it must dispose of within 15 years to repair the economy.
“We’re well aware that these properties can degrade rapidly so we want to return them to productive use as quickly as possible,” said Alvaro Escribano, Sareb’s land planning manager. “For every moment that this land stays in our hands it loses value.”
Sareb is on a mission to sell soured property assets that it absorbed from eight lenders including the Bankia group that took state aid as the government cleaned up its banking system with European bailout funds. Investor interest in real estate is growing as Sareb’s efforts to offload shopping malls, residential housing, office buildings and loans to developers help set reference prices for sales, said Sergio Amelio, head of operations in Madrid at HipoGes, a distressed asset management company that administers 2.3 billion euros.
The halls of the lodge where scores of hunting trophies once hung have been stripped bare and the only sign that stables for 15 purebred horses were in use is a pile of rice husks that served as bedding. Ceramic tiles at the foot of the stairs leading to the property’s main three-bedroomed accommodation carry the date when Herb-of-Grace and the Moor was built in 2002 before Spanish lending for real estate climbed almost eightfold to a 325 billion-euro peak in 2009.
The resulting bust put 1.3 million in the industry out of work between 2008 and 2012 as the number of building companies seeking creditor protection jumped to 2,349 per year from 1,064, according to public works ministry data. The crash forced Spain to nationalize four lenders including Bankia, whose 22.4 billion-euro state bailout left shareholders all but wiped out.
In 2011, Gonzalez Chozas, managing director of property developer Construcciones Mego, which was active in the regions of Andalucia and Extremadura, was forced to turn over the farm to Liberbank (LBK), a former lender that took 124 million euros of state aid. The estate was among 2.9 billion euros of real estate-linked assets Liberbank then passed to Sareb in February.
A tour last month of the property revealed the toll that lack of use is taking on its buildings even as game and other wild animals proliferate in this corner of Extremadura, a sparsely-populated province bordering Portugal. The owner’s home is devoid of furniture and light fittings and damp stains the walls of an Andalusia-styled arched patio where he once entertained visitors to the estate and horse stud.
It’s all a far cry from the picture painted by Gonzalez Chozas in a 2011 interview with the magazine of the Extremaduran Association of Pure-Blood Spanish Horse Breeders in which he praised the “nobility” of his horses and the “strength in the kidneys” they needed for rides into the hills. Tiles bearing the emblem of his stud, the letter ‘G’ enclosed in the outline of a holm oak, still adorn the entrance to the property.
Gonzalez Chozas declined to respond to phone calls and an e-mail to his offices in Plasencia, Spain, requesting comment.
Sareb has valued the farm at 3.7 million euros compared with a price-tag of 5 million euros about three years ago, before it was taken on by Liberbank, a lender formed from the merger of three savings banks including Caja de Extremadura.
The estimate takes into account that the new owner may need to spend as much as 500,000 euros to restore the property, said Escribano. About nine investors have shown interest in the property, he said.
The bad bank is counting on wealthy investors from Spain and abroad as it puts its “Harvest” portfolio of country estates on sale as part of wider efforts to sell real estate passed to it by struggling banks. The 6,000 hectares on offer in the portfolio account for 60 percent of the total amount of rural land that was passed to the bad bank, said Escribano.
“The high bourgeoisie of Spain has traditionally seen this kind of property as very highly valued, but that had an emotional element,” he said, referring to the hunting estates.
Other assets include a rabbit farm in Cuenca province, land in Madrid province suitable for raising merino sheep and an estate with a 1,123 square-meter (12,100 square-foot) country house with swimming pool and groves of olives, vines and almonds in Valencia.
Investors are starting to look with increasing interest at hunting estates in Spain, said Charlotte Rodriguez, country, sporting, equine and wine estate specialist at Lucas Fox, a Barcelona-based property broker.
“Spain has all this land and the access is so good,” she said in a phone interview. “People have the impression that Spanish land is very cheap, but that’s not necessarily the case -- there is still plenty of money around.”
Potential buyers for country estates are coming from countries including France, the U.S., India, China and Norway, said Rodriguez, who has spent the last two years building a portfolio of rural assets including castles and working farms as well as hunting lodges.
One of the properties on her books is an estate in the Sierra Morena mountains in Cordoba province that was previously owned by Luis Portillo, the former Chairman of Inmobiliaria Colonial SA (COL), who had to hand over about 25 percent of the property developer to banks in 2008 to repay debt.
“I have a group of American bankers that have asked to find them something over here,” said Rodriguez. “We’re getting a lot of interest from investors from the financial community. They’re all numbers guys and at lot of them are looking to see what return they can get.”
Sareb’s sell-off is part of the process of Spain’s recovery from a five-year slump that caused property prices to plunge more than 30 percent and drove default rates on loans for real estate activity as high as 31 percent.
The government says the economy is now growing after shrinking for nine quarters in a row. Its treasury on Oct. 15 sold 12-month bills at the lowest yield since April 2010 when Greece asked for the first European sovereign bailout. Sareb unloaded a stake in a grouping of 1,000 homes in August in its first asset sale and the La Caixa banking group last month sold its real estate arm Servihabitat to TPG Special Situations Partners.
Even so, Spain’s property market slump is still deep. House sales fell 15 percent in August from a year earlier and home-mortgage approvals fell an annual 43 percent in July, according to Spain’s National Statistics Institute. Fitch Ratings said today the non-performing loan ratio for mortgages increased to 5.2 percent from 4.1 percent last quarter.
“Herb-of-Grace and the Moor Farm” was registered in the name of Construcciones Mego, Plasencia. Mego sought protection from creditors in December 2012, according to Spain’s government gazette.
The land with its plentiful supply of acorns could be put to use raising pigs and the new owner could harvest cork from his oaks every nine years, said the caretaker Vinagre. Potential tuberculosis infection in the large deer herds that share the land would make cattle farming a trickier option, he said.
In the past two years, several potential buyers have been to look at the property, including a bullfighter and a landowner with estates in Argentina, said Vinagre.
In his opinion, anyone looking to buy the estate must first and foremost love the countryside and Spain’s hunting culture, he said. He said he has just been enjoying his front-row view of one of the great spectacles of the Spanish countryside: the annual deer rut when antlered stags fight each other for the attentions of does during the September mating season.
At its peak under the ownership of Gonzalez Chozas, the farm was one of the best hunting estates in Extremadura, said Antonio Pavon Jaraiz, who runs Monteros de Sopetran, a firm that organizes deer and boar hunts in the region.
“It was a very well-cared for farm with magnificent hunting,” said Pavon Jaraiz in a phone interview. “It’s not the sort of property you buy for an investment return -- you buy it for the pleasure of owning it.”
As for Gonzalez Chozas, he has tried moving to new pastures. Mego is now seeking property development opportunities in Peru where he sees an “immense future,” he told Emprendedores TV, an Internet business interviews channel in the country, last year.
To contact the reporter on this story: Charles Penty in Madrid at firstname.lastname@example.org