EUROPE NEWS: Antic climax

Benson Elliot Capital Management has taken on a “milestone” debt transaction in Spain by forward-purchasing a major office development in Barcelona, to which Morgan Stanley Real Estate Investing (MSREI) has handed back the keys.

The London-based pan-European firm has agreed with Spanish bank Banco Sabadell to buy the €80 million Antic Cami de Valencia site. The investment has been made on behalf of Benson Elliot Real Estate Partners III, which closed on more than €500 million in equity commitments in 2009.

MSREI and partner Grupo Lar original purchased the site in 2007, but the pair defaulted on a loan from Banco Sabadell in 2009. The Spanish bank, which has an arrangement similar to that of other banks like Royal Bank of Scotland, effectively transferred the asset to its in-house development and construction subsidiary, Solvia.

In a statement, Benson Elliot and its partner in the deal, Urban Input, said they negotiated directly with Banco Sabadell and Solvia to restructure the bank’s position and move the project forward. Under the terms of the deal, the Benson Elliot-led joint venture will acquire the completed buildings from Solvia in early 2013, with financing for the purchase provided by the bank.

The Antic Cami de Valencia site has permits for three buildings totaling 20,000 square metres of office space in a huge modern business district of the city called 22@. Upon completion, the project is expected to be Barcelona’s only major office delivery in 2012 and 2013, particularly as there is a wholesale inability for most developments to secure funding right now.

“Catalonia has been resilient throughout the recent crisis, led by Barcelona’s position as a key European business hub,” said Marc Mogull, managing partner at Benson Elliot. “When markets stabilise, Barcelona will face a shortage of truly prime office space, a shortage that Antic Cami de Valencia can at least start to fill.” 

In general, many opportunity funds have been disappointed with the lack of distressed real estate sales by Spain’s banks, which so far have not been forced to sell assets cheaply. In that way, Benson Elliot’s agreement could be a sign of how early deals might work in the country.