Tag Archives: Mediterrania-Saïdia

Le Jardin de Fleur (Saïdia) III

Recent article appeared in Diarmaid Condon’s celebrated site: http://www.diarmaidcondon.com
Diarmaid Condon is Ireland’s foremost Independent Property Consultant and journalist. He has been in the industry since 1995 and, in that time, has been a strong advocate for improved legal protection in the sector.

Newsletter Mar 2007 Web-1.jpgProperty Logic – Moroccan Developer

This piece of advice on the Moroccan market was very kindly written by Jorge Garcia Larios who is a property expert based in Melilla, a Spanish enclave in Morocco. It deals with the topic of developers that are experiencing financial difficulties but still maintain assets in the Kingdom of Morocco. The assets in question are usually in the form of land as most developers of unbuilt projects, at this stage, have little or no money.

One such developer is/was Property Logic Maroc S.A.R.L a subsidiary of Property Logic (Spain) based near Marbella in the Costa del Sol. The company’s flagship development, called Le Jardin de Fleur, was to be composed of Tourist Apartments and Villas over various plots of land at the Macro Resort “Mediterrania-Saïdia”

Property Logic stopped building some time ago and have ever since been seeking finance to continue the works. The result of this sequence of events has left scores of derelict shells of what were to be luxury apartments and villas full of rats and weeds. It appears to be totally beyond repair at this stage.

To give Property Logic some credit, by comparison to other developers in the region they have been reasonable at keeping up communications with their clients. Unfortunately most of these communications refer to the possibility of raising further funding to complete the project. This funding has always been ‘just around the corner’ but it has never materialised. The willingness to communicate is, however, more than has been shown by other developers in difficulty in coastal Morocco.

From 2004 to 2007, like many other areas, off plan purchases in tourist regions of Morocco experienced a huge boom. Many people came in contact with Property Logic’s high visibility marketing campaigns and it consequently attracted a lot of purchasers. The developer even persuaded some UK based Premier League footballers to invest in the resort. This obviously played very well in UK and Irish media outlets, succeeding in attracting even more buyers. Unfortunately nobody who bought has had deposits refunded, which amount to around 40% of the original property sales price.

Property Logic Payment Structure

Clients reserved their properties with a token deposit which was followed by around 20% of the total cost. Over what was to be the initial construction stage a further 20% was requested at which stage came the signing of a private contract loosely translated from French as “a promise to sell”. Under Moroccan Property Law all these contracts have now expired and, as they were written to favour the developer, they are not robust enough to offer their holders any protection in law. Essentially, the beneficiary names don’t appear officially anywhere in Morocco. There is no legal reference to them so the Moroccan authorities know nothing about them, despite their having parted with significant amounts of money and now having nothing to show for it.

What can clients do?

There are essentially two things you can do. Be passive or be active.

The First Option – Do Nothing and hope Property Logic delivers

The passive route is to wait and hope that Property Logic obtains long promised funding. This is highly unlikely but the building licence has now also expired so the developer would now need to re-apply for a new one. Property Logic also has a good deal of creditors with liens on the company assets who will need to be dealt with before any building is contemplated. To clear the creditor list Property Logic will require the ‘main levé’ from its creditors (literally translated as ‘hands up’ or ‘surrender’ from French. This is a legal document enabling the developer to clear the creditor list. It involves all creditors signing away their legal rights. No strong creditors will do this unless they are happy with the negotiated settlement. Those without rights will be left out in the shuffle, relying totally on Property Logic’s goodwill.

Another matter of concern is that it has been mooted that the company is not held in high esteem by Moroccan Authorities. It is widely considered that the Moroccan government is anxious to see the back of the company and others like them. This makes the possibility of obtaining a new build licence very slim indeed.

Second Option – Become a Creditor of Property Logic

The second and more active option open to clients is that, if they are not already official creditors they should consider very seriously becoming one. Why should a client go to the bother of doing this? As stated previously, contracts with Property Logic are now pretty much worthless. It is almost inevitable that Property Logic will eventually drop out of the equation and whoever takes over will no choice but to deal with the creditor list. Those who are not officially listed as creditors will simply be forgotten about. It’s not an ideal scenario for many clients as it involves reliving the nightmare of the investment and it is obviously going to involve extra expense.

We will deal with the process of becoming a creditor of Property Logic (or any other developer for that matter) in a later article.

Jorge Larios can be contacted at saidia@gmx.es.

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Le Jardins de Moulouya

Le Jardin de Moulouya

Le Jardin de Moulouya is a “social” housing complex located in Saïdia town, only one kilometer from the beach. This is a very clear example of the mechanics of the original Plan Azur 2010 infrastructures program from the Moroccan government; it required the master developer of the Mediterrania-Saïdia macro complex to contribute to the overall development of the region in return for the very favorable conditions they were awarded the main project. Spanish developer Fadesa started building works around 2006 and it attracted considerable interest from the Moroccan expatriate community parallel to local applicants with lower level income. There was also interest from mainstream International investors who saw a good opportunity for a fast return as prices were extremely low. Since then Fadesa was taken over by another Spanish developer, Martinsa at the time of the Spanish property crash and which inevitably lead to bankruptcy in 2008 with their Moroccan holdings gradually taken over by Addoha/Excelia.

Will you ever get a Mortgage?

Getting a mortgage in Morocco has never been easy for foreigners whether they were residents or not. As in many other areas the cultural gap always seems to creep up. Must be this innate Moroccan ability to charm birds off tress but even in the best of times (2005-2007) the hour of truth always imposed itself and all the previous promises from banks, developers and agents alike went from the original ne pas de problèmes  to a straight non. Many investors thought that when they got their letters of intent from their bank that was it but alas this is another world and paper doesn’t necessarily hold water (o promises) here. Ask the many distressed developers who attained fantastic promises of finance in writing with the honest intention of perhaps also making it extensive to their clients and see, just see how it all came to nothing.

For this modest writer there has never been a credit crunch for private individuals in Morocco simply because there has never been credit! At least my long and personal experience says so. Put it this way, banks or any other institution for that matter are not really there to help (and then help themselves in a macroeconomic way), the whole scene works how can I say, in a more… micro way.

This has been real life for me but let’s see how Bloomberg, obviously more concerned about the really big boys, described Morocco’s so called “credit crunch”. So… if Bloomberg says so it must be true. I have to be honest I never got near these players so I couldn’t say, but have my doubts though. In an article that appeared in January 2013 but probably still applies today (September 2013). The first very surprising paragraph bluntly tells us that Morocco’s drive to emulate Dubai’s by turning itself into a playground for rich Europeans was halted due to the lack of investment in the luxury resorts as from the beginning of the global financial crisis as “cash strapped” banks (my inverted commas – I know I’m a tough nut) were hit. This is partially true, Morocco’s Plans Azurs; that is government tourist development and infrastructure plans, had that aim but making comparisons with Dubai and putting the spotlight on the banks is going a bit too far. More to do with the aforementioned financial crisis and how it affected everybody I would say.

The figures are there, the country’s tourist visits climbed to 9.3MM in 2011, very close to the projected 10MM under Plan Azur 2010 but, and here is the but… 83% of those visitors were from Europe who were specially hit by recession in their own countries immediately after that. In any case, I’m pretty sure that the bulk of the aforementioned tourists were that, tourists per se and not necessarily international investors or individual buyers. I am pretty sure that the buyers stopped coming around 2008/9.

Nonetheless, Bloomberg did confirm that homebuyers and companies grew at the lowest pace in a decade last year (2011) through to November according to Central Bank data in September (2012). But grew nonetheless which is shocking but what Bloomberg doesn’t say is who these homebuyers and companies are whether domestic or international. They add that due to this, said Central Bank allowed its supervised banks to reduce reserves to increase liquidity or money in circulation, which in itself is a contradiction in balance sheet terms.

Morocco, like Dubai (here we go again) was in the midst of a major tourist expansion when the global financial crisis stuck, causing investment to tumble, affecting property developers with banks and investors increasing their Real Estate debt. Big boy developer finance apparently surged in the two years before the market stalled in 2009 and with much of the debt maturing this year (2013) it will initiatively lead to the usual vicious circle of distressed property offloads a la southern European  and bank balance sheets full of nasty bad and doubtful debts. Bloomberg innocently calls this outcome “property sales”. You bet…

So here we appear to have a certain overexposure to commercial real estate mainly tourism-related which will limit bank advances in 2013 coupled with the fact that the Moroccan market isn’t mature enough to recover all these projects which in themselves are too big and ambitious to be completed by Moroccan players. And… there is no EU to come to the rescue.

Mortgages peaked at 57% in the first 11 months of 2007 and lending to developers jumped almost six-fold in that period (I must have lived in a different planet – how scary) but according to Central Bank data and like in Dubai (uugggg) projects stalled in the midst of the great US housing slump and the subsequent ignition of the global crisis.

Here is another one: The Arab spring caused mayhem in a number of North African countries but thankfully left Morocco aside but nevertheless the country paid a certain price with economic growth slowing to 2.9% in 2012 as compared with 4.9% in 2011. In addition to this we had Morocco’s chronic decease, droughts, which caused agricultural output to drop by 8.4% in the third quarter of 2012 which obviously had an effect on the country’s trade deficit, down 11.9% in November.

Like in those economies once highly dependent in Property and Tourism such as those of southern Europe we apparently have a situation of overexposed banks in the real estate sector whose priority in to complete those projects they are already involved in and forget everything else. Unfortunately for the banks those Projects were mainly targeted to foreigners that have simply stopped investing.

The Plan Azur 2010 provided for the building of six mega-resorts together with the infrastructure around them. The crisis prompted foreign investors to look for an exit halting further development. Amongst those projects was Mediterrania-Saïdia, the only one by the Med, as the rest were planned for the shores of the Atlantic. What should really have been the playground of the jet setting rich shuttling to its 800+ berth marina from relatively nearby Marbella has become semi deserted with only 3 of its 9 luxury hotels operating and that in turn are now relegated to cater for Spaniards from the enclave of Melilla a few kilometers away on super budget weekends all in.

The Central bank also say some, for me, very puzzling things. Like for example that private sector lending increased (yes increased) by 2.8% the lowest rate since 2002 when it was 1% with loans for housing rising 6.8% for the eleven months through November again the smallest increase since 2002. The reserve ratio of banks was thus cut from 4% to 2% to counteract “liquidity shortage”. Almost needless to say, banks now have a very selective (if at all) approach to request for funding.

In its heyday mortgage rates ranged from 5.5% to 6.75% whilst developers offered finance at rates ranging from 6.21% to 7.75%. However I have met very few foreign clients that have obtained finance from banks, promises yes, finance no, and certainly none that have got it from developers.

Obviously developers as at today (2013) have totally rationalized their approach to building mostly to pay off or restructure their loans as they mature. The general bottom line is to offload their assets before they get in even more trouble.

Another thing altogether is the incentives offered by the Moroccan Government to encourage the building of low cost subsidized housing in a nation of 32MM people. FOGARIM is a state fund that guaranteed mortgages as long as 25 years for low-income workers. The loans cover as much a 100% of the purchase price applied to homes that don’t exceed 200,000 Dirham.

Spanish developer Fadesa, the original Fadesa that is, who were awarded for a song the Mediterrania-Saïdia Plan Azur project by the government in 2003 was also asked in return to contribute to the building of social housing as well as the improvement of general infrastructure and even a clinic in Saïdia town. Le Jardins de Moulouya a complex of over 22 hectares and only 1Km from the beach were thus built under this umbrella. This idea was quickly picked up by the relative higher earning Moroccan expatriate workers in Europe who saw it as an investment opportunity. The idea was good and well intentioned but like many other things it may not have achieved its aim.

Coming back to the King backed Plan Azur 2010 which came under the wing of Vision 2010 tourism strategy originally sought to more than double the number of visitor beds to 230,000 up to 2010 only achieved under half that amount when the crisis started in 2008 starving the market of takers. Needless to say the six mega resorts under the plan suffered the consequences of this scenario with about half now being built. We are now in a position where the government has to reset the Vision and make it 2020 to meet the goal.

Property owners in some parts of the kingdom including Marrakech are facing the value of their properties, many in semi deserted resorts with relative unused golf courses going down in price with villas now at 50 or even 70% of their original “happy days” price. Some homes in the centre of “can’t go wrong” Marrakech that were priced at 20,000 Dirham per square metre can now be bought for about 12,000 or even as low as 8,000 Dirham per square metre.

However, the Taghazout Plan Azur Atlantic coast project has now been restarted under the new Plan Azur 2020 with a new goal to double tourists by that year according to the government. It remains to be seen how the present signs of recovery in Europe, Morocco’s main source of visitors, will affect the revival of the Kingdom’s tourist industry since France, Spain and Italy provided the bulk of pre-crisis visitors and potential investors.

The customers have changed, there are fewer foreigners buying but this is cyclical and one would hope the trend will change, say some experts in Morocco but… Will it ever be the same again?

The bulk of this piece is taken with permission from the Bloomberg article of January 2013 with my own comments thrown in, mainly to balance up some data typically offered by foreign journalist from their Kuwait desks.

I cannot offer a firm conclusion of how things will evolve with the Moroccan tourist and real estate market because I am still not sure even that I try to get as much information as I can. To offer a firm forecast would be misleading and commentators should know better. One hope is Europe’s recovery in the next few years but I would tend to think that people have learnt their lesson by now. It will be stupid to hope for the riches of the good years but this goes for Europe too.

JL (Melilla)

Morocco Tourism Logo

Morocco Tourism Logo

King Mohammed VI has always been well aware of his country’s tourist potential. The Plan Azur 2010 and it’s follow up Plan Azur 2020 is a clear exponent of his dedication to the cause. We have seen considerable success and a vast improvement in general infrastructure around the major macro projects planned for the Atlantic and Mediterranean Coast. One such project is “Mediterrania-Saïdia” all 7MM Square Kilometres of it. Unfortunately the Global Financial Crisis and the unsettling events in the Arab World have slowed down its development. Nevertheless the announced improvement in the economy coupled with Morocco’s solid stability within the Arab World should shed some light into such wonderful prospects. For this blogger, he would like to see some further movements around the Al Hoceima area where the beaches and the environments are ripe for development. We have already seen the building of an excellent road from Nador/Saïdia (part of the Plan Azur) and its port and airport are a stone’s throw from the Southern Coast of Spain and of course, the Costa del Sol.

Mar Chica Med

Mar Chica Med

The macro project to be developed around the shores of Mar Chica in the Nador Province of North East Morocco. It is expected for the project to be finished and operating by 2025. The question we all ask is… Is this going to be another Mediterrania Saïdia? In any case it is designed to raise the level of prosperity in the area and counterbalance the differences with the neighbouring Spanish Enclave of Melilla, just a few Kilometres to the north. At present, crisis notwithstanding, the Spanish city still provides a lifeline to it’s long suffering hinterland.