Spanish subsidiary too exposed to development-related services
King Sturge’s Spanish arm Is to go into administration.
King Sturge last week applied to the Spanish courts to allow King Sturge Espana, of which it owns a 75% stake, to enter into administration proceedings.
It is expected to appoint an administrator by the new year.
The decision came in the same week that general manager Sergio Martinez, who owns the remaining 25%, left the company. He has been replaced with Lucio Gomez.
The administration comes more than 16 years after the firm first entered Spain as King & Co with an office in Barcelona.
King Sturge Espana employed about 185 staff a year ago but, since then, redundancies have cut the head count to 105 across offices in Barcelona, Madrid, Valencia, Zaragoza, Seville and Reus.
Elsewhere in Spain, Knight Frank also shed 50 jobs this year.
Richard Batten, joint senior partner at King Sturge, said the firm had relied too heavily on fees from development-related services such as project management and agency on completed developments.
Turnover at the Spanish subsidiary fell to just €2.7m (£2.4m) for the six months to October, compared with €18m (£16.1m) a year over the previous three years.
In addition, the firm has bank debts that are due to be repaid. Batten declined to state how much was owed, and to whom, but said: ‘There are ongoing discussions with these banks and we are trying to arrive at a solution going forward.’
It is understood a cash injection of about €3m (£2.7m) would have been needed to keep the business going but the shareholders could not reach an agreement.
Batten said: ‘This route is in the best interests of existing staff and clients and gives the greatest opportunity for elements of the business to continue trading.
‘This is an extremely unfortunate outcome forced upon us by a rapid deterioration in market conditions.’
Spain has been among Europe’s worst-affected markets in the global downturn. Data from the Economist Intelligence Unit shows Spain’s GDP growth should fall to 0.6% in 2009 from an average of 2.9% between 2003 and 2007.
‘A construction glut has also led to saturated markets across Spain’s property sectors,’ said Batten.
‘Spain has a huge construction programme, which has made it suffer from oversupply.’
More on Spain’s woes at www.propertyweek.com/globalcostacrunch