Spain's Colonial Gets €500 Million in Investments

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Investors from Spain, Andorra and Peru are planning to commit €500 million ($683 million) into bank-owned Spanish property developer Colonial, as they look to benefit from a recovering property market.  

The family-owned company controlled by the chairman of Spanish builder OHL, Villar Mir group, will invest €300 million in Colonial, according to Reuters. It will be joined by Peru-based Grupo Santo Domingo with €100 million and Andorran company Amura Capital with €100 million, if approved at a shareholder meeting later this month. 

Trading for Colonial share reopened after a suspension, Reuters reports. The shares are owned by banks, following the property market crash in 2008. 

Last December, the National Statistics Institute reported the first increase in home prices in Spain since 2010. 

Several banks have sold their property management businesses to benefit from foreign investor interest hunting for property deals. In November, Spain's Banco Popular sold its unit to Kennedy Wilson and Varde Partners in a deal reportedly worth €800 million. 

In order for the investors to come on board, Colonial must meet certain conditions.

It must renegotiate a €1.759 billion syndicated loan due in December this year, as well as agree to not reduce its stake in French property investment firm Societe Fonciere Lyonnaise (SFL) to below 20 percent from its current level of 53.5 percent.

Other conditions call for Colonial to reduce to at most 20 percent its stake in Asentia, the unit created three years ago to keep real estate assets that have lost the majority of their value, as well as reducing capital by cutting the value of its shares. 

Finally, Colonial will offer current shareholders a capital increase of up to €1 billion, and offer the conversion of  €500 million of bank loans into equity, Reuters reports.