Cash problems threaten Barcelona retail scheme

News

Rachel Frampton

02 December 1999

The future of Barcelona’s Diagonal Mar project hangs in the balance after the US-owned developer Kepro filed for protection from its creditors. Georgina Power reports.

The proposed 89,600 m2 Diagonal Mar shopping centre has created “serious liquidity problems” for developer Kepro, a Spanish subsidiary of the US insurance company Kemper. The developer filed for protection from its creditors at the end of November.

The scheme ran into financial problems last year when Zurich Insurance acquired Kemper. The final consolidation of the two companies will only become effective this month, but as early as last spring, Zurich made it clear that it was not prepared to continue funding the development. It appointed Bankers Trust to raise Ptas 6.3bn of equity and Ptas 18bn of debt funding to bring the scheme forward. These efforts to fund the scheme have so far proved unfruitful.

Kepro, which also has a number of residential schemes, has declared a consolidated debt of Ptas 53bn, and assets of Ptas 60bn. Its biggest creditor, to the tune of around Ptas 30bn, is Kemper. A Zurich spokeswoman confirmed that the Swiss insurer’s eyes were set on Kemper’s asset management and life assurance interests, rather than its property portfolio. The Spanish Instituto Municipal de Promocion Urbanistica is also a large creditor, owed nearly Ptas 8bn, while Banco Zaragozano was reported in November to be selling a Ptas 1.5bn loan granted to Kepro, secured on part of the site.

Diagonal Mar, on former industrial land reclaimed during the 1992 Barcelona Olympics, has a checkered history. The plans have already been toned down from the original concept, which was for a Chicago-style lakeside development with 259,000 m2 of offices. The first phase, including 60,000 m2 of offices and retail, had been due to come on stream early this year.

Two anchor tenants have been lined up for the revised shopping centre project, Alcampo, the Spanish operation of French hypermarket chain Auchan, and American Movie Classics Entertainment, which plans a multi-screen cinema. One drawback for potential investors, however, is the 53,000 m2 Barcelona Gloriès regional shopping centre nearby, which opened last year.

Although Diagonal Mar has planning consent, the Barcelona authorities have become increasingly concerned about the amount of new retail development in and around the city, and the local town hall is pushing for more subsidised housing on the seafront site.

The future of Barcelona’s Diagonal Mar project hangs in the balance after the US-owned developer Kepro filed for protection from its creditors. Georgina Power reports. The proposed 89,600 m2 Diagonal Mar shopping centre has created “serious liquidity problems” for developer Kepro, a Spanish subsidiary of the US insurance company Kemper. The developer filed for protection from its creditors at the end of November. The scheme ran into financial problems last year when Zurich Insurance acquired Kemper. The final consolidation of the two companies will only become effective this month, but as early as last spring, Zurich made it clear that it was not prepared to continue funding the development. It appointed Bankers Trust to raise Ptas 6.3bn of equity and Ptas 18bn of debt funding to bring the scheme forward. These efforts to fund the scheme have so far proved unfruitful. Kepro, which also has a number of residential schemes, has declared a consolidated debt of Ptas 53bn, and assets of Ptas 60bn. Its biggest creditor, to the tune of around Ptas 30bn, is Kemper. A Zurich spokeswoman confirmed that the Swiss insurer’s eyes were set on Kemper’s asset management and life assurance interests, rather than its property portfolio. The Spanish Instituto Municipal de Promocion Urbanistica is also a large creditor, owed nearly Ptas 8bn, while Banco Zaragozano was reported in November to be selling a Ptas 1.5bn loan granted to Kepro, secured on part of the site. Diagonal Mar, on former industrial land reclaimed during the 1992 Barcelona Olympics, has a checkered history. The plans have already been toned down from the original concept, which was for a Chicago-style lakeside development with 259,000 m2 of offices. The first phase, including 60,000 m2 of offices and retail, had been due to come on stream early this year. Two anchor tenants have been lined up for the revised shopping centre project, Alcampo, the Spanish operation of French hypermarket chain Auchan, and American Movie Classics Entertainment, which plans a multi-screen cinema. One drawback for potential investors, however, is the 53,000 m2 Barcelona Gloriès regional shopping centre nearby, which opened last year. Although Diagonal Mar has planning consent, the Barcelona authorities have become increasingly concerned about the amount of new retail development in and around the city, and the local town hall is pushing for more subsidised housing on the seafront site.