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Monument to folly: a statue of developer Francisco
Hernando's parents greets passersby to his struggling Seseña complex.
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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.
By Alfonso Daniels. Photographs by Lorena Ros 7:00AM GMT 19
Feb 2009/ http://www.telegraph.co.uk/property/internationalproperty/4640857/Property-in-Spain-Castles-in-the-sand.html
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?
By Eric EllisSeptember 19, 2012 / http://www.theglobalmail.org/feature/what-if-you-mostly-built-a-ridiculously-ambitious-city-and-nobody-came/382/
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.
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Welcome to Spain's property nightmare; the Residencial
Francisco Hernando at Seseña.
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No flights today, or tomorrow either; Ciudad Real's
abandoned Aeropuerto Don Quijote.
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Apartments for sale — but where are the buyers? A real
estate broker in Seseña.
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