segunda-feira, 12 de agosto de 2013

Efeitos e Origens da Crise Financeira. A "Bolha" Especulativa Imobiliária em Espanha. Os "Castelos de Areia" de Francisco Hernando em Seseña.

Monument to folly: a statue of developer Francisco Hernando's parents greets passersby to his struggling Seseña complex.

 Property in Spain: Castles in the sand
Born into extreme poverty, Francisco Hernando rose from Madrid sewer-cleaner to property tycoon, surfing the wave of Spain’s economic miracle. So why has his dream of building a city in the desert ground to a halt? Alfonso Daniels uncovers a story of ambition, red tape and a whiff of dubious practices.

The black 4 x 4 brakes suddenly at a busy roundabout and a 63-year-old man in an elegant suit jumps out, followed closely by his bodyguard, gesturing at me to follow. 'Are you allowed to stop here?’ I ask, trying to avoid the traffic. 'Why not?’ Francisco Hernando says. 'This is my city, everything you see here is mine.’ He laughs and climbs up the slope of the roundabout to the huge stone statue of his parents holding hands that he wanted to show me.
We are in the desert half an hour’s drive south of Madrid at the entrance to Seseña, an endless jumble of apartment blocks stranded between two motorways and opposite a tyre dump – a £4.7 billion investment, the largest residential complex undertaken by a single developer in Europe.
Francisco Hernando has come a long way. Nicknamed 'El Pocero’ (Mr Drains), he used to make a living clearing sewers. He never went to school (he still has trouble reading and writing), and took his first proper shower at the age of 22 when he moved out of the shack he had been sharing with his wife into a flat. But now, he says, 'I’ve built eight cities, and I have six more in mind. I’m like a painter, I love creating things.’
Hernando’s fortune, amassed largely from property development, is estimated at £1.5 billion. He owns the same model of private jet as Bill Gates and Steven Spielberg, and has ordered a £47 million megayacht to replace his current one, which is itself larger than the King of Spain’s. He recently financed the film Manolete, based on a celebrated bullfighter, starring Adrien Brody and Penélope Cruz, which will be out in Spain this month.
Despite his success, Hernando remembers growing up in hunger-stricken post-war Spain as if it were yesterday. He lived in a tin-roofed shack in Vallecas, a working-class quarter of Madrid. 'We were always hungry,’ he says. 'I had to rummage for food in the rubbish dump like the other children.
I ate banana skins and cheese crusts from the bins outside the houses of the rich.’ To feed his five children, his father hunted rabbits at the gates of Franco’s El Pardo palace; had he been caught he would have been beaten by the Guardis Civil.
Hernando set up his first business aged eight, selling water to neighbours from a nearby well, which he carried in jugs using a small wooden cart he had built himself, until he saved enough to buy a donkey. In his early teens he began taking water to construction workers, then worked in the sewers, following in the footsteps of his father and grandfather. 'Many of us died. The rats were our best friends – if we found them, we knew it was safe.
I used to climb down dozens of metres under buildings to unblock sewers. Five others had to hold me because once you’ve cleared it you don’t have time to run – you’re washed away with the shit.’
He excelled at his job, and after four years began hiring other sewage workers, dedicating his time to construction. His break came at 21, when a cousin of the captain of Franco’s yacht hired him to oversee his first construction project, the start of a career temporarily cut short by a year and a half of compulsory military service. When he returned, he married his wife, María Audena, who worked as a seamstress. They moved into a shack next to his parents’, and he started again in construction.
About that time Madrid’s new food market, Mercamadrid, was completed. Seeing that retailers were having trouble transporting the goods they bought from the distribution centre, Hernando sensed an opportunity. He used his life savings to buy a truck; a few months later he bought another, then another, until he owned a fleet of 40 trucks. He then began buying cement plants (until then every cement plant in Spain had been owned by a multinational firm), investing later in property developments across Madrid, riding the wave of Spain’s 'economic miracle’ in the 1980s and 1990s.
In 2002 he began building a dormitory city at Seseña, a place where young working-class couples could buy spacious, affordable apartments – something unavailable to him when he was young. He named the vast complex after himself – Residencial Francisco Hernando – and dedicated it to his parents (hence the statue). At the grand opening two years ago, which included a rock concert attended by 5,000 people, he was accompanied by his elderly mother, Filomena, who lives in a house in the same area, built – of course – by Hernando. (Three of his four brothers work for him; his eldest brother, Pedro, owns a construction firm specialising in clearing land and is involved in the expansion of Madrid airport.)
'I came here six years ago with my children [Audena, 40, a housewife; Paco, 38, Hernando’s right-hand man; Eduardo, 35, his assistant; and Mónica, 33, a lawyer who also works for her father]. It was pouring. We stood in front of this barren land and I told them that I’d build a city here. They stared at each other and then looked at me in disbelief. But look around you, it’s real now,’ he says, gazing at the dozens of rather soulless seven-storey apartment blocks separated by wide tree-lined avenues, amid a forest of cranes.
But construction at Seseña has now virtually stopped, the result of a long dispute with the local mayor, who refuses to grant further building licences until the infrastructure is complete. The situation is made worse by the economic crisis, with some experts warning that unemployment in Spain could reach 30 per cent by the end of this year.
Critics infer that the problems arise from the development’s location in the middle of a desert in a drought-prone country. But Hernando brushes this aside. 'There’s no water here? That’s a joke. Washington was built on a swamp and Las Vegas is in the middle of the desert.’ So far, more than a third of the 13,500 apartments have been completed and of those only half have been sold, in a city that will house an estimated 40,000 people when finished. Each block of flats has its own large pool, and the complex includes a sparkling athletics stadium for the use of residents and a park (named after Hernando’s wife) with a lake, an artificial geyser and a beach.
But as he speaks I see a cloud of dust gathering in the distance, drifting through eerily empty streets past temporary brickwork that should be shopfronts. Dozens of yellow cranes stand abandoned in a nearby field. Hernando has not sold a property here for months and, days after speaking to me, he decided temporarily to halt construction until the economy recovers. Since our meeting last year he has been forced to hand over 2,000 apartments to the banks at the surveyor’s valuation price – his venture symbolising for The Economist the rise and fall of the Spanish housing market. In the past decade, some 700,000 houses have been built every year, more than in Britain, France and Germany put together. Nearly a million remain unsold according to Tinsa, a leading Spanish valuation company, following the burst of the housing bubble.
Julio Rodriguez López, a senior economist at Carlos III University in Madrid, says that many of the problems derive from Spain’s anarchic construction boom, fuelled mostly by speculation, with no proper urban planning or concern over whether newcomers would find jobs. 'Everyone wanted to participate in the party. The central government delegated its powers during the transition to democracy [in the 1970s], and regional authorities have failed to oversee the local mayors’ offices, happy to get money from developers through taxes.’
The first victims were estate agents. Then came the property developers, including Martinsa-Fadesa, which collapsed last July, the largest bankruptcy in Spanish history. It is now common to find half-finished developments without water and electricity, especially along the Costas (hundreds of British retirees have no property to show for their down-payments). 'The housing crash will last four to five years. I may fall; bigger fish have disappeared before me,’ Hernando predicts, though his expression immediately hardens and he emphasises that of course he will survive, and of course he will complete the development eventually.
Adding to the economic problems, Hernando has been accused of cutting deals with mayors and influential political friends to secure construction licences – a process that can take years due to Spain’s notoriously inefficient regional authorities. (A major developer in Andalusia, who preferred not to be named for fear of reprisals, told me that when he applied for a permit, the planning official of a big city told him that he would first have to buy a 4 x 4 for the mayor’s wife.)
In Seseña they claim Hernando persuaded the former mayor José Luis Martín to approve his development six years ago, reclassifying nearly 200 hectares of land from farm to urban usage, while ignoring reports from the regional authorities. These reports called for an environmental impact study to be carried out and raised 18 objections to the infrastructure plan that had been presented, including serious doubts regarding transport and water supplies. Last July the public prosecutor’s office formally accused Martín of lying after telling the local assembly that the reports received from the authorities were 'favourable’ and that an environmental impact study had been received (this was not the case), prompting the assembly to approve the project.
More damningly, there have also been questions about thousands of pounds the former mayor allegedly pocketed during that same period, an amount Martín claims to have won on the lottery. Hernando says maybe he did win the lottery, and denies having offered any bribes, pointing to the fact that the prosecutor’s office decided not to investigate him.
A senior member of the prosecutor’s office confirmed to me on condition of anonymity that Hernando is not under investigation but that the judge will now have to figure out where Martín’s money came from. Few believe that this will happen given that Spain’s regional courts have fewer resources to investigate alleged crimes than those available to the prosecutor.
It is Martín’s successor, the Communist Manuel Fuentes, the mayor since 2003, who is digging in his heels over the issue of construction licences. The wrangling has been going on for nearly five years, with both sides accusing the other of incompetency and obstruction. Fuentes admits that Spanish bureaucracy is exceptionally slow and that final permits will probably take three more years, but emphasises that this is not his fault.
Fuentes agrees to speak to me reluctantly, since Hernando has filed more than a dozen defamation lawsuits against him. He says he granted the initial licences and ensured that the flats already sold have basic amenities, since the project had been approved by the previous administration, but now accuses Hernando of trying to force his hand to act more quickly. 'It’s been hell,’ Fuentes says. 'His strategy was, the more people living here the greater the pressure on us to complete the public works required until, at the end of 2005, we said enough is enough.’ Fuentes blames Hernando for piling on pressure by calling for his resignation and criticising him personally through a local paper he owned, while his workers organised demonstrations in front of the mayor’s office. He also complains of receiving threatening anonymous phone calls.
Hernando denies any involvement in all this, and accuses the mayor of unnecessarily prolonging and overcharging him for the provision of the infrastructure. In the case of water access, for example, this has to be completed by a company hired and paid for by the mayor’s office which, in turn, charges Hernando for some 80 per cent of the total cost. Fuentes maintains that no one is being overcharged and that the problem is Hernando’s. And so on.
'The mayor is making my life impossible, he’s delaying everything,’ Hernando exclaims furiously. 'I’ve already had to fire 16,000 workers and I’ll have to fire the rest if I don’t get more licences. The real problem is that in Spain success breeds envy.’ His anger recently spilt over when he was filmed chasing a German cameraman with a stick.
This is not the first time that Hernando has been accused of resorting to pressure tactics. The mayor of Villaviciosa de Odón in Madrid, Felipe Sanz, complained to me that he was also criticised in another Hernando-owned paper after refusing a similarly massive project in the early 1990s: 'He started building a similar development to Seseña and then requested a licence. When I refused, he pressured me for three years through his paper.’
According to Alejandra Ramón, a journalist who published a highly critical book on Hernando entitled El Pocero de Seseña ('Seseña’s Mr Drains’), 'He’s like a bull: when he has a project he’ll ram anyone trying to stop him. What he’s building in Seseña is of good quality, no one questions that, but you need to follow the rules.’
The negative attitude towards Hernando is widespread among the Spanish press, which 'discovered’ him a couple of years ago when more and more people noticed his complex in Seseña as they sped past it on the motorway. Journalists commonly refer to it as a 'ghost town’; Hernando has reacted by granting almost no interviews. A recent one ended up in a shouting match when he called the journalist a liar.
I spoke to people living in the development, all of whom said they liked their flats very much (they are indeed spacious and modern) and blamed the press for discouraging people from moving there. To improve his image, Hernando has finally decided to call in the big guns, and last month he hired as his PR the eminent journalist Alfredo Urdaci.
Even Hernando’s critics admit that his homes are well-built, and they attract a certain degree of admiration among the Spanish, many of whom regard him as a rather controversial – though hugely entertaining – character. But this feeling is not shared among fellow tycoons, who are not amused by his lack of cultural finesse. This was made clear when he was blocked from taking over Puerto Portals in Majorca, one of the most exclusive yacht clubs in the Mediterranean. Formerly friendly politicians such as the current Socialist parliament president, José Bono, have also lately turned against him, apparently fearful of his reputation. On the other hand, some developers openly admire him for creating a property empire in the face of endless bureaucratic obstacles.
Hernando now features constantly in gossip magazines and on television programmes, which relish his rough manners and extravagant tastes, showing him sailing on his yacht, and obsessively recalling his age-old friendship with the legendary bullfighter Ortega Cano, with whom he used to steal lettuces and tomatoes from groves along Madrid’s Manzanares river when they were child­ren. Two years ago Hernando offered his private jet to Cano’s wife, the singer Rocío Jurado, who was being treated for cancer in Houston, so that she could fly home to die in Spain.
Despite his fame, Hernando appears rather stiff in television and radio interviews, an altogether different man to the one now driving me around the building site in his car, relaxed and at ease while overseeing even the smallest detail. As we approach a group of workers he lowers the window. 'Have you dug the trench yet?’ he asks one of them. A few moments later he turns around, grabs his mobile and tells a supervisor in a loud commanding voice, 'Andrés, I’m in block 7, come here right away!’ Then, 'What the hell, get the f*** out of here!’ he roars at another worker blocking the way with a small digger as we try to turn right. But his expression softens when he sees a bulldozer parked next to a lamppost. 'Look at that, it’s the latest in technology; it digs and crushes rock faster than anything you’ve seen before. The lampposts are of top design – write that down,’ he says proudly.
Hernando’s workers and even his lawyer seem somewhat diminished by his presence, as if fearful of his renowned short temper, but they appear to genuinely respect him for his clear love of and dedication to the job, despite being yelled at from time to time. They feel that, if Hernando accepts you, he will protect and care for you at all costs, while demanding unequivocal loyalty in return – his suppliers are paid in cash, for example, something almost unheard of in Spain. And he is widely recognised for offering his workers wages which, he says, start at £1,650 a month after tax – more than three times the minimum wage. He shoves payroll papers over to me that appear to back his claim.
His phone rings – he needs to go back home and offers to take me to meet his wife. Trailed by a Mercedes packed with bodyguards, we pass the spot where his son Francisco was almost kidnapped last April, ambushed as he was driving from the office located a few miles away from Seseña. The kidnappers had built a hiding place in the cellar of a rented house in a Madrid suburb where they planned to hold Francisco and ask for a €30 million ransom in exchange for his release. They did not expect him to fight back. As they prepared to shove him into the boot of a BMW, Francisco tried to run away and was bludgeoned by one of the attackers with the butt of a gun, causing a deep cut in his skull. The gang fled and a few weeks later successfully kidnapped another businessman, but the police later freed him and arrested nine alleged gang members. The alleged ringleader is a cousin of Spain’s conservative opposition leader, Mariano Rajoy. There has been no trial yet.
Hernando’s home is a classic 1980s-looking brick two-storey house in the exclusive Madrid neighbourhood of Boadilla del Campo, another of his developments. As we enter through the garden his wife, María Audena, appears, dressed in a casual long denim skirt, slippers and a buttoned jersey, followed by the two children of their eldest daughter shouting, 'Grandpa, grandpa!’
Hernando shows me the garden, swimming-pool and heliport. He says proudly that he walks around the garden for an hour after waking up at six every morning, never drinks alcohol or smokes, and goes to work until nightfall even at weekends. 'I’m in love with my wife,’ he adds, making her smile, as we go back into the house.
We sit at the kitchen table eating serrano ham and canned cockles. 'I live in the kitchen,’ he says and turns to his wife: 'Prepare him a ham sandwich and a Coke for the trip.’ He talks about building a multi-million-pound private airport in Madrid, and turning his 125cc motorcycle racing team into a full-powered MotoGP team with the help of his long-time friend the former world champion Angel Nieto. The launch takes place a few days later.
Only as I am about to leave does he tell me that he has decided to leave Spain, tired of its bureau­cracy and of waiting for the economy to improve, and will move to Equatorial Guinea. This former Spanish colony in Central Africa, a major sponsor of his MotoGP team, is enjoying a boom thanks to the large oil and gas deposits discovered there in the 1990s. The aim is to create a sub-Saharan equivalent to Kuwait, despite the country’s position in the corruption watchdog Transparency International’s top-10 list of corrupt states.
In December Hernando travelled there in his private jet to meet President Teodoro Obiang ('a very nice and hard-working man,’ he insists) and signed a five-year contract for an initial £1 billion to create a jointly owned company with the state. The purpose is to build 38,000 homes starting at the end of February, as well as construction plants and even football stadiums to host the 2012 African Cup of Nations, which Equatorial Guinea is hosting with its neighbour Gabon. His aim is to extend this agreement to 20 years – anyone wanting to do business in Equatorial Guinea in the future would first have to go through this new company.
'I’ll spend 20 days of every month there,’ he says. 'We’re packing all the machinery, cranes and every­thing to go there and build apartments. We’ll also build factories to provide bricks, concrete… There’s zero risk, the government has the money thanks to oil and they called me because they need homes and I know how to build them,’ he says, emphasising that this will be the last major project of his life. 'My country needs me. All materials will be Spanish, even the bricks and concrete. I’m taking my army with me, some 6,000 workers. We’ll hire two or three planes to ferry them back and forth.’ He says that he does not wish to take advantage of the low local salaries and often miserable living conditions. 'I’ll go anywhere they allow me to work. I’ll continue doing things until my body won’t take it any longer, you’ll see.’

 Across Spain there are a million vacant dwellings like those at Seseña and myriad white elephants like the airport at Ciudad Real, and that's the core of the crisis facing the country.

Today Seseña again finds itself determining Spain’s survival, this time laying seige to its economy in a battle no less grave in its potential to cripple this proud nation.

What If You (Mostly) Built A Ridiculously Ambitious City And Nobody Came?

No planes fly into this airport, no visitors visit the visitors' centre and, up the road, few people live in what was supposed to be a new city left unfinished by a developer called the Drain Man. This is the backdrop for the Spanish economic rescue being dreamed up in the European Central Bank.

UNTIL the recent years of Spain's economic catastrophe, Spaniards mostly knew Seseña as the scene of a decisive battle in the country's brutal civil war of 1936-39, during which the Molotov cocktail first found deployment in modern combat.
The Battle of Seseña came early in that conflict, but it defined its eventual outcome. With aid from Hitler and Mussolini, Franco's forces had quickly taken key towns on the central Spanish plain, including Seseña, and were poised to take Madrid just 40km north. Franco's men encountered Republican forces here, repelled them and pushed on to lay brutal seige to the capital for three years.
The more things change, the more they stay the same.
Today, Seseña again finds itself determining Spain's survival, this time laying seige to its economy in a battle no less grave in its potential to cripple this proud nation.
For a symbol of all that ails Spain — and Europe too — look no further than the Residencial Francisco Hernando Seseña. This folly has it all: excess, waste, hubris, misery and scandal.
In 2002, the first sods were turned at Seseña, on what was the biggest residential complex ever undertaken by a private developer in Europe. It was essentially a EUR9 billion bank-financed plan to construct a new city, a working-class utopia of 14,000 large, affordable apartments piled into 280 blocks.
The developer was Francisco Hernando, better known to Spaniards as El Pocero, or The Drain Man. That's the polite nickname many have for Hernando. Barely literate and from a dirt-poor family, he got his start — and a less flattering moniker — unblocking sewers. He likes to tell journalists that he didn't have a proper shower until he was 22, which perhaps explains the smell that surrounds Seseña.
Hernando's company Onde 2000 would complete barely a third of the promised apartments — though his builders have managed to finish the pompous statues of his clan still sprinkled around the complex, some now daubed with unflattering graffiti.
There is no feature of Residencial Francisco Hernando that demolition wouldn't fix.
Today, four years of a crisis on, the apartment blocks are nothing but squat brown chunks of brick punctuating a massive abandoned construction site. Tumbleweeds somersault down broad avenues named, as if like a cruel joke, after famous artists, which run into dead ends. The promised swimming pools are dry, the sporting fields browned over in the baking 40-degree summer heat.
The towers where a few apartments were completed are forlornly plastered with 'for sale' signs or, even more pathetically, with 'for rent' signs. Planned shops and supermarkets are shuttered. Even the real estate agents are boarded up.

As for Hernando, the last Seseña residents heard of the 70-year-old Señor Sewers, he had re-launched in the West African dictatorship of Equatorial Guinea, the former Spanish colony regarded as the one of the world's most corrupt nations.
It's not just at Seseña where vanity and hubris ended in tears and white elephants. A few hours' drive further south, the city of Ciudad Real boasts a EUR1 billion airport that doesn't have planes. Built before the crisis, it opened midst much fanfare in 2008 as the economy began to collapse, only to close this year when the handful of flights stopped flying there.
Its fate was that it was financed and owned by Caja Castilla La Mancha — one of the first of the Spanish savings banks to collapse in 2009 — and built in a town populated by overreaching city fathers with close developer friends, and all anxious for their share.
Today, the management company of the Aeropuerto Don Quijote — no windmill-tilting irony intended — is in receivership.
Across Spain there are a million vacant dwellings like those at Seseña and myriad white elephants like the airport at Ciudad Real, and that's the core of the crisis facing the country. Financially, there's a double whammy effect evident in Seseña. The project was bank-financed and begun in the very years, over 2003-04, that the market began to peak. The project was in trouble even before Spain's property market began collapsing, and then it got worse. A few apartments were sold, mostly with 100 per cent mortgages, but today they are notionally worth 50 to 75 per cent less than what punters paid for them — notionally, because there is no market to sell into. With unemployment here at around 50 per cent, residents who can't meet pre-crisis mortgage terms, or any terms at all, are being evicted.
Today, some 100 to 150 billion euros are being earmarked to bail out Spain's banks, but even this may not be enough. The central Banco de España measures Spaniards' private debt at more than one trillion euros, with mortgages accounting for about 60 per cent of that. And few banks have written down their bad debt portfolios to fully account for what has been, on average, a halving of property values since 2008.
Last month, as the Olympic Games were staged in London, I wandered down one of the main streets of Residencial Francisco Hernando, and through the wasteland that is the Ciudad Real airport.
In Seseña, the occasional Spanish flag hung patriotically from one of the buildings, and at one second-floor apartment a man who later identified himself as "Jose" appeared on his balcony and called down, surprised to see another human being in the neighbourhood. He was bare-chested and trying to catch a breeze amidst the heat, he said, explaining that his air conditioning wasn't working because the electricity grid was down. When he learned he was talking to media, his wife appeared alongside him and pleaded with us to "expose all the corruption in our country".
At Ciudad Real, the sprawling airport complex has rusting passenger air bridges that connect to nowhere, an empty and locked terminal and a runway that was built to handle the world's biggest planes now closed to traffic, except that of scurrying rabbits. The only jobs evident are that of an occasional cleaner pushing a bucket, and a hyper-sensitive security guard shooing onlookers from public access roads.
The World Bank recently declared Europe to be a "lifestyle superpower, with arguably the highest quality of life in human history". Perhaps it was referring to Paris's chic sixth arrondissement. Had these wise sages expended some shoe leather on visiting Seseña and Ciudad Real, their conclusions might have been decidedly different.
And rather closer to the reality of today's Europe, as it begins the difficult rise from its mire.

Welcome to Spain's property nightmare; the Residencial Francisco Hernando at Seseña.

No flights today, or tomorrow either; Ciudad Real's abandoned Aeropuerto Don Quijote.

Apartments for sale — but where are the buyers? A real estate broker in Seseña.

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