Latest News
FT report: Financial Times reports on Sotogrande.
Written by Copyright The Financial Times Limited 2008
Thursday, 16 October 2008 15:36
Sotogrande is model for investors
By Mark Mulligan
Published: October 15 2008 03:00 | Last updated: October 15 2008 03:00
Spain's Mediterranean coast, birthplace of the "sun, sea and sangria" package holiday model, is today synonymous with the collapse in the country's residential housing market.
From Catalonia's Costa Brava to the Straits of Gibraltar, hundreds of thousands of unsold holiday apartments and half-built estates grimly testify to years of excessive lending, local government corruption and poor town planning.
However, not all developers are locked in rescue talks with financiers, just as not all coastal projects are destined to fail. Sotogrande, a favoured retreat of Europe's elite, has been around long enough to weather several storms in markets.
Situated close to the southern tip of Spain, Sotogrande has become a byword for exclusivity and discretion, and includes among its residents oil sheikhs, UK and US hedge fund managers, European chief executives, and professional golfers.
According to its current managers, the 2000-hectare residential, marina (below) and golfing community is well positioned to ride out current turbulence, despite a 40 per cent year-on-year drop in plot and villa sales, and falling demand at the hotels and golf courses. The company last month reported a 77 per cent fall in first-half profits.
"What differentiates us is that we have no debt," says Borja Goday, project manager. This, along with income from urban services and the resort's golf clubs and hotels, has buttressed the company against the downturn.
More recently, the brand has been exported: there is now a Sotogrande resort in the Dominican Republic, and the company also has projects in Mexico and Italy. In Spain, there are plans for a marina near Valencia.
Back at the original site, Sotogrande is developing a sixth golf course and residential subdivision in what will be the final phase of a project started 45 years ago by US investor Joseph McMicking.
He chose the site after scouring the region in search of somewhere to retire and invest. Land then was worth a tiny fraction of the €240 a square metre charged today. Villas in the latest phase are on the market at between €500,000 and €1.4m, while the cost of a marina apartment ranges between €400,000 and €1.5m.
What started life as a secluded development has expanded into a community, with an international school and global golf and polo facilities. Valderrama, the resort's separately-owned golf club, is the only continental European course to have hosted the Ryder Cup in 1997.
NH Hotels, the Spanish chain, took full control of Sotogrande in 2006, and plans to refloat it on the Madrid stock exchange.
In the meantime, it has become a model for investors with enough cash and patience to move beyond the high-density, low-quality housing model often blamed for blighting the Spanish coastline.
Single Home, a family-controlled developer, has just launched a residential resort near Estepona that is set to compete for the custom of wealthy Europeans.
The centrepiece of the 220-hectare development, called Finca Cortesín, is a five-star hotel and spa, and an 18-hole golf course, which has been picked to host the 2009 Volvo World Match Play Championship, normally held at Wentworth, near London.
More than 30,000 sq m of gardens have been set aside for 16 luxury villas.
Planned total investment is €620m; of the €196m already invested, €9m was spent on burying transmission lines. According to Javier López, chief executive of Single Home, high-end developments with this sort of detail will resist the downturn better than most.
"Of course, the crash has come at a bad time for us," he says. "But the value we've already added to the land is our security against the tough times ahead."
Copyright The Financial Times Limited 2008
