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The foreign projects of SNS Property Finance are giving its nationalised parent bank the biggest headaches

The real estate portfolio of SNS Reaal was valued at €9 bn at the time of the banking and insurance group’s nationalization at end January this year, including €700 mln in provisions. SNS expected to write down between €1.4 bn and €2.1 bn. This estimate was based on valuations by Ernst & Young. Commissioned by the Dutch finance ministry, adviser Cushman & Wakefield put the value of the portfolio at €4.9-€ 5.6 bn, excluding potential losses on SNS’ own portfolio. The bulk of the portfolio relates to projects in the bank’s home country in the Netherlands but the foreign projects of SNS Property Finance are giving its parent the biggest headaches.

Here is an overview of the biggest foreign projects:

1. HafenCity Hamburg
In December last year, ING Real Estate Development withdrew from the Überseequartier project in Hamburg, a sign that all was not right between the Dutch partners involved in HafenCity, one of the biggest redevelopment projects in Europe. SNS Property Finance is financier of the project together with Gross & Partner. The value of the financing transaction is believed to be €900 mln. SNS’s share of the remaining debt is unknown. The Überseequartier was to be a flagship of Dutch architecture with 16 exceptional buildings designed by well-known architects such as Erik van Egeraat Associated Architects, Rem Koolhaas OMA, BDP and NPS. The total project comprises 272,000 m², including 400 apartments, 124,000 m² offices, 55,000 m² retail space,10,000 m² hotel, catering and leisure facilities and 3,600 parking spaces.

2. Spanish golf resort Mosa Trajectum
The best-known problem case in the SNS Property Finance dossier is the Spanish golf resort Mosa Trajectum. In January this year, Dutch project developer Ronald Ras told Dutch news broadcaster NOS that he had filed a €408 mln claim against SNS Reaal who he holds responsible for the failure of the Spanish golf resort. SNS told PropertyEU that Ras has been toying with a claim since November 2012, but that it failed to answer requests for further substantiation. SNS claims Ras must pay back €130 mln in loan arrears. When he failed to make the payment, SNS decided to publicly auction the project. After a bid failed to materialize, SNS became the owner of the project.

3. Homburg Canada
SNS helped Dutch entrepreneur Richard Homburg clean up the balance sheet of his listed Canadian property company by buying a 50% stake in Homburg Invest. The buyer was SNS Property Finance Limited Partnership. Under the deal, about C$ 60 mln in long-term debts and other obligations were removed from the balance sheet of Homburg Invest. The rescue bid did not have the desired result. SNS Property Finance was left with an estimated loss of €46 mln.

4. Belval Luxemburg
Dutch financial daily Het Financieele Dagblad has investigated the €340 mln financing of Belval in Luxemburg, a project owned by Dutch developer Cor van Erp of Multiplan, a company which earlier sparked company failures in the Netherlands with plans for new developments in Nieuwegein, a suburb of Utrecht. The current valuation of the Luxemburg project is believed to €150 mln. This development is one of the 14 real estate projects that the Dutch fraud office FIOD ECD is investigating. According to Dutch media reports, the fraud office suspects various crimes including money laundering, forgery and serious negligence by bank employees.

5. Océanis France
In France, a criminal investigation is underway into allegations of fraud in connection with holiday homes in the Océanis project which is now owned by SNS following an unredeemed loan of €60 mln by the developer. SNS runs the risk of allegations of being an accessory because it paid a fee to a fraudulent agency Apollonia. The French investigation is targeting the project developers, notaries and banks involved in the project. Hundreds of duped victims have talked to the media and two have committed suicide. The Océanis project is one of 14 projects that the bank has asked a forensic bureau to investigate.

6. La Cigüeña
La Cigüeña, a project involving 280 apartments, villas and studios on Costa de la Luz in the south of Spain, has changed from a holiday paradise into a nightmare for SNS since 2007. The promised sales of apartments and villas to private investors have failed to materialize. Of the 280 apartments, only a quarter are believed to have been sold. La Cigüeña was developed by Andalucia Project, a project development company set up by Dutch entrepreneur Cees Priem. This company collapsed at end-2007 after which SNS became the owner of the project.

7. Kaizersplatz-Galerie in Aachen
In Oktober 2012, German developers ECE and Strabag Real Estate reached agreement on a solution for Kaizersplatz-Galerie in Aachen involving a sum of €240 mln. The German developers acquired the shopping centre from Adalbertstrasse Development Company led by Dutch developers Pim Kaufman and Johan van den Bruele. They were unable to get the mall comprising 130 stores over 29,000 m² of retail space back on track. It is unclear whether SNS chalked up any losses to help the new developers get the project off the ground.

Here is an overview of the biggest Dutch projects:

1. Lips and The Wall, Utrecht
SNS Property Finance has a close relationship with developer Roger Lips. Lips set up a ‘collegial’ financing company with former employees of Bouwfonds Property Finance, the predecessor company of SNS PF. The venture failed, but Lips managed to pry €300 mln loose from the property financier. His biggest project was The Wall in Utrecht which was transferred to SNS in July last year. SNS had roughly €100 mln tied up in the report as of 2005 and a buyer has not emerged. SNS became owner of the real estate project after Lips Capital Group failed to meet its financing obligations. SNS has formed a joint venture with Reggeborgh (the investment vehicle of Dutch entrepreneur Dik Wessels) to manage and wind down SNS’s share in the 65,000 m² project.

2. TCN bankruptcy
Most of the 100 companies under the umbrella of Dutch project developer TCN have been declared bankrupt. The receiver has described the bankruptcy as ‘extremely complex’ and has so far failed to provide an overview of the creditors, including SNS, but given the size of the projects, the losses could be higher than in the Lips failure. SNS has asked several former TCN employees to manage nine of the projects financed by SNS Property Finance including the German retail parks Aachener Arkaden and Trade Mart Langenhagen, the Spanish retail park Les Mates, Dutch leisure centre ZEP in Middelburg, the Spaanse Kubus in Rotterdam, the redevelopment of the Achmea office in Apeldoorn, Arnhem Buiten, Drakennest in Amersfoort en O-Four in Groningen. De bank is bringing these projects into a separate company. To this end, TCN’s former CEO Arnoud van Raak has set up Arra Management.

3. Eurocommerce bankruptcy
SNS Property Finance has submitted a claim of €99 mln against the failed Dutch office developer Eurocommerce. SNS is not the biggest creditor, however: that title goes to Rabobank/Rabo Real Estate .

4. Fortress/New Babylon, The Hague
On the day that SNS Reaal was nationalised, the office section of the New Babylon station development in The Hague was festively opened by the city mayor Azias van Aartsen. That project has also fallen into the hands of SNS after the company failed to meet its financial obligations. Construction was scheduled to start in 2008 with completion set for 2011.
The project was acquired in 2002 by Dutch developer Erik de Vlieger (Imca, later Fortress) with no more than €1 mln in equity according to reports and €374 mln in financing from SNS Property Finance’s predecessor company Bouwfonds PF. Unlike the other three development projects listed above, New Babylon is a well-placed complex but the current market conditions are far from ideal. Three sections have already been sold: the car park, residential units and one office building. What remains is an office section and the shopping centre, the redevelopment of which has been delayed but will hopefully have sufficient tenants by the end of the year. The risks for SNS are put at around €100 mln. According to DTZ, New Babylon’s office complex comprises a total surface area of 43,800 m², of which 30,300 m² is already available. The section that was opened on 31 January, the day of the bank’s nationalization, comprises 12,000 m2 and is leased to law firm Pels Rijcken & Droogleever Fortuijn Advocaten en Notarissen. This section was acquired in 2010 by German open-ended fund manager Commerz Real Investmentgesellschaft. The shopping centre comprises 17,000 m² GLA and it is hoped that this will be opened in September 2013. Residential investor Amvest has acquired the 335 apartments. The car park has almost 1,000 parking spaces and is owned by carpark specialist Q Park.

5. Phanos bankruptcy
SNS is not the biggest loser in the collapse of developer Phanos, after Eurocommerce and TCN the biggest property debacle in the Netherlands last year. The biggest loser is ABN Amro, with a claim of €220 mln. The total debt pile comes to more than €400 mln, with SNS accounting for €80 mln. Phanos was the developer/ownre of the Hof van Saksen holiday park in the eastern part of the Netherlands. The company still has 400 ha in land positions, including a large site in Arnhem. The portfolio also includes various properties including the Kasteel Heemstede castle in Houten. The receives put the total proceeds at €100–200 mln, which would generate losses of €40-60 mln for SNS.

6. Post office Rotterdam
The (28.000 m²) historic former post office building on the Coolsingel in Rotterdam was sold at the peak of the market in 2007 for €42 mln to Delta and private equity investor Redevco which later stepped out of the project. SNS Property Finance is believed to have an extended financing with a 100% LTV. Since then it has emerged that the original plans for the redevelopment of the post office are not feasible. This means SNS will have to write down a significant chunk of the loan to facilitate a new plan.

7. Business Garden Hoofddorp
SNS Property Finance extended Dutch developer Hillgate a €62 mln mortgage to purchase the land for Business Garden Hoofddorp. However, Hillgate fell into receivership. Hillgate Properties teamed up with Kantorenhuis to develop the Renaissance Airport Hotel Schiphol. Kantorenhuis is now also been declared bankrupt. The hotel and office await both buyers and tenants.

8. Revest portfolio
In December 2012 SNS Property Finance laid a claim to the properties of Amsterdam businessman Jurriaan de Reijer. Valued at € 9.3 mln, the properties comprise 25 offices, 20 residential units, a school and a church. De Reijer told Dutch daily Het Financieele Dagblad that the claim was laid after loans for two luxury residential parks near a golf resort in France had reached maturity and that he was still in talks on extending the financing. De Reijer is the owner of Revist, a company registered in the Dutch Antilles. One of the subsidiary companies is Vondel Vastgoed which received negative publicity in early 2009 for having conducted property transactions with Hubert Möllenkamp, a former director of a Dutch housing corporation who has been charged with fraud.

9. Hessing Bloeyendael bankruptcy
SNS Property Finance injected €18 mln into the purchase and land and a marketing campaign for the first gated community in the Netherlands in De Bilt near Utrecht to be developed by family-owned company Hessing. Hessing has since been declared bankrupt and has sold its Rolls Royce showroom on the A2 motorway to a local competitor.

10. De Nieuwe Boompjes
The plans for the redevelopment of the former offices of the Dutch Central Bank (DNB) on the Maas river in Rotterdam are not progressing favourably. SNS Property Finance is the financier of the Hoog aan de Maas complex, the first design for which has been completed at the request of Johan Matser (now Synchroon) and Dutch developer Multi Vastgoed, part of Multi Corporation. Multi’s owner Hans Van Veggel is now 100% owner of the complex through his other Dutch development vehicle Cradle of Development. This is also viewed as a high-opportunity project under the right conditions.

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