Spain's herd of white elephants threatens to wreak havoc
THE BOTTOM LINE:GUESTS ARRIVING at Santander Financial City, the head office of Spain’s and the euro zone’s biggest bank, are met by two-foot-high robotic butlers. You type in your name on a computer and you follow a robot to your meeting. The 400-acre compound, 18km outside Madrid, is home to a golf course, lakes and olive groves. AIB Bankcentre it is not.
It sounds like an act of folly, an example of the overconfidence that gripped European banks. But the robots and indeed the complex outside Madrid are nothing of the kind. Santander was one of seven Spanish lenders to pass stress-tests last week undertaken to show that the country’s €100 billion banking bailout agreed in July was more than enough.
Santander – unlike its home country – does not appear to be in financial difficulty, mainly because it has spread its risk internationally; Spain accounts for just 20 per cent of profits.
In fact, Santander has been strong enough to take advantage of weaknesses elsewhere; it bought AIB’s Bank Zachodni WBK in Poland, the Irish bank’s “jewel in the crown”, in 2010.
While given a clean bill of health last week, Santander has not rested on its laurels. The bank floated its Mexican business last month, raising $4 billion (€3.2 billion) in the world’s third-largest stock-market sale this year. The spoils went to bolster the parent in Spain to keep the robotic butlers running at full power.
The real act of folly associated with the Santander compound was in the decision of Irish investor Derek Quinlan to buy the complex with British investor Glen Maud.
Quinlan, as he did on so many property deals during the heady days of the Noughties, bought the complex for an eye-watering €1.9 billion with vast amounts of bank debt.
A syndicate of banks hold the senior loans, while Abu Dhabi’s sovereign wealth fund, Aabar, bought the mezzanine debt and loans on Quinlan’s equity from Royal Bank of Scotland in 2011 for more than €200 million.
Aabar is now seeking to seize control of the investment through the Dutch courts.
Santander pays more than €90 million a year in rent which services the interest on the senior debt. The other debt is another matter.
Quinlan’s plan was to sell the property on or refinance the debt but that fell apart as the deal closed a day before Lehman Brothers failed in 2008 and bank liquidity evaporated.