Spain's biggest property firm said on Friday that it lost €738m last year, the biggest loss in its 90-year history, as the value of its holdings dived following the collapse of the real estate markets in Spain and the UK.The purchase of HSBC's tower in Canary Wharf - the biggest property deal in British history - has helped sink its Spanish buyer, Metrovacesa.Owners of the beleaguered building company, the Sanahuja family, will hand control of the company to its creditor banks, including Santander, swapping a 55% stake in exchange for cancelling €2.1bn (£1.9bn) of debt claims.The purchase of the 42-storey tower in London's Docklands is seen as the peak of the real estate boom for Spanish businesses, which saw a succession of firms launch themselves into an unprecedented debt-fuelled expansion spree. At the peak of the market, 800,000 homes a year were being built in Spain - more than France, Germany and Britain put together.The Madrid-based Metrovacesa bought the 100,000 sq metre tower in Canary Wharf for £1.09bn in May 2007, financed with a £810m loan that it could not pay off or refinance as credit markets tightened.
Like buyout firms such as Baugur, which have also found themselves in trouble, Metrovacesa counted on rising values and cheap debt. The recession, however, has seen valuations go into reverse, while the credit crunch has dried up funds.
The Spanish company sold the tower - 8 Canada Square - back to HSBC last December for £838m, leading to a £250m gain for HSBC and a loss for Metrovacesa.
The real estate collapse has exacerbated Spain's plunge into recession because the sector accounts, directly and indirectly, for about a quarter of the economy. Thousands of firms are going bust and even top football clubs such as Valencia can no longer afford to pay their star players.The former Valencia chairman and real estate entrepreneur Juan Soler raised the club's debt to more than €400m and started building a new stadium before it had sold the land occupied by its current Mestalla stadium, which it has still not managed to do because of plunging property prices and the credit crunch. Work on the new stadium has stalled while the club rushes to get a new financing deal with new lenders. A local savings bank, Bancaja, has already cut off credit.London's commercial property prices have fallen 27% since the credit crunch hit. The latest blow to Canary Wharf came late last month when Morgan Stanley quit its lease of six floors of office space 10 years earlier than planned.
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