Date Published: 20/09/2010

Paramount Murcia, Samper warns this will take time and banks haggle over value of Alhama land

Paramount Theme Park ,Murcia, Spain

2010-09-21

Paramount Murcia, Samper warns this will take time and banks haggle over value of Alhama land Speculation continues as to the location of the future Paramount theme park in Murcia, with reports surfacing in the media this week to indicate that although some fairly serious negotiations are underway in the Alhama area, that Jesus Samper is putting a dampener on the speculators by urging patience and warning that the project still has a long way to go before a possible theme park becomes a theme park in construction.

He is being hounded mercilessly by the Spanish press for information, as the destination of this park will undoubtedly create a huge economic stimulus in the area selected and have inevitable knock-on effects on nearby property values, the main reason for the tight-lipped silence.
Samper told reporters at the weekend, " You have to be patient. We are taking the first steps to make the region a major leisure destination. We are still in a very early phase, " he said, confirming only that before any announcements are made that Santa Monica Capital and the Regional government of Murcia will prepare a master plan to assess in detail the requirements of the project, carry out a full financial study and ensure that the land is secured.

It has now emerged that although Paramount Licensing have offered the license to Samper for the construction of the park, that the company now has a year in which to present the full and final project for approval and rubber stamping by Paramount Licensing, before the license is granted .
Purchase contracts drawn up for the acquisition of the land will be dependent on the project receiving the official license, so although all the cards will be stacked up ready for the project to roll, nothing is absolutely definate until the approval of Paramount Licensing has been confirmed.
So although some of our mayors are desperate to be the location for this project, the final yes or no for the location, and partners involved in the financial structuring of this project will lie with Paramount Licensing.

Its exactly as Pedro Cruz, the Minister for culture said last week, this will be a complicated and delicate process which will take some time to prepare, and undoubtedly there will be many twists and turns as the rollercoaster contorts itself through the ride and we whizz down to the finale.

Acquisition of the land is going to be one of the biggest stumbling blocks, rumours surfacing that although the banks who form the IRM Group (Inversión Resort Mediterráneo) are determined to offload the land ceded to them by Polaris World at the Condado de Alhama 2 location, they are asking more than Santa Monica is willing to pay. The group are apparently offering the land at 60 euros per square metre, which is what they say it cost them to buy, a good price for land which already has licences and infrastructure in place for construction, well below the market rate.
This will set the price for the land at around 360 million euros, if the quantity of 6 million square metres is the correct quantity required as originally indicated.

This price though, it seems, is far more than the investors had in mind, and with municipalities falling over themselves to offer suitable land, the banks may have to accept alternatives to the direct sale which would undoubtedly benefit their asset sheets the most.
Holding the majority of good cards in their hands, the investors are far more likely to be looking for the land to form part of the overall investment into this project by the partners involved, and with the IRM Group comprising the powerful Caja Mediterráneo, Bancaja, Banco de Valencia and Banco Popular, Santa Monica will undoubtedly be looking for more active participation from its investors.
Cajamurcia, who own 7% of the land are not part of the IRM group, as they always held back from loaning too much money to Polaris World, and faced less exposure when the construction business hit solvency difficulties earlier this year.

There are hints being dropped that the banks may consider some form of agreement in which other adjoining lands they hold can be reclassified with a building classification which will enable them to realise a good profit on their investments as undoubtedly nearby properties will be attractive investment properties for the rentals market, but as Samper says, were still in the early stages and there is a long way to go yet.

Meanwhile there are no indications of any further partners entering the project consortium, the only comments being that there are those with the " desire to do so, " but until more details are known, are unwilling to make a public commitment, and that with many theme parks performing below expectations, the financing for this project may be more difficult to obtain than many would like it to be.
There are several figures being quoted for the project, with the figure 3000 million quoted in more than one report.

We had a quick look at the Disneyland Paris stats to see what that cost to build, and found an interesting article on the Walt Disney site which you might like to read. This talks about the Disneyland Paris site costing 22 billion French francs to build, and the park occupying 2,000 hectares.
The current talk is for this project to occupy 600 hectares ( 1 hecatare is 10,000 square metres.).

Its quite an interesting read as it reveals some of the problems that this site could hold, and which will undoubtedly influence the decisions of investors when looking at it as a potential business opportunity.

History of Disneyland Paris.

In the beginning...
Following on from the success of the DisneyLand theme park in Anaheim, plans to build a European version first started around 1975, nine years after Walt Disney died. Initially Britain, Italy, Spain and France were all considered as possible locations, though Britain and Italy were quickly dropped from the list of potential sites because they both lacked a suitably large expanse of flat land.
The most likely site was thought to be in the Alicante area of Spain, which had a similar climate to that in Florida for a large part of the year, however the area was also beset by the notorious Mistral winds.
Eventually the French location won, and a site was duly investigated at Marne-la-Vallee, partly because of its close proximity to Paris, and also its central positioning within western europe. A factor that was though to be crucial to the parks future success if it was to attract sufficient visitors. The proposed location put the park within 4-hours drive for around 68 million people, and 2 hours flight for a further 300 million or so.
Michael Eisner signed the first letter of agreement with the French Socialist government in December 1985, and started to draw up the finantial contracts during the following spring. Robert Fitzpatrick, a key organiser of the 1984 Los Angeles Olympics was appointed as the Euro Disney President, and the park slowly started to take shape, with construction starting on the 2,000 hectare site in August 1988.
In December 1990, Espace Euro Disney (an information centre) was opened to the public to show what Disney were constructing. This was followed by the opening of the casting centre on 1st September 1991 in order to start recruiting the hundreds of Cast Members that would ultimitely operate the parks many attractions.
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Opening Day...
Euro Disney first opened to employees, for testing during late March 1992, during which time the main sponsors and their families were invited to visit the new park. The formal press preview day was held on April 11th 1992, and the park finally opened to visitors on April 12th 1992.
The opening day crowds, expected to number up to 500,000 visitors, failed to materialise, however, and at close of the first day barely 50,000 people had passed through the gates. This may have been partly due protests from French locals who feared their culture would be damaged by Euro Disney, but whatever the cause the low initial attendance was very disapointing for the Disney company.
The first phase of development (the theme park, hotel complex and golf course) had gone massively over budget, and had eventually cost 22 billion French Francs to complete. Over the next few months attendance figures failed to improve much, and by May the park was only attracting something like 25,000 visitors a day, instead of the predicted 60,000. Combined with the admission that only 3 in every 10 visitors were native French, the Euro Disney company stock price started a slow downward spiral, rapidly losing almost a third of its value.
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Crisis looms...
By August 1992 estimates of annual attendance figures were being drastically cut from 11 million to just over 9 million. EuroDisneys misfortunes were further compounded in late 1992 when a European recession caused property prices to drop sharply, and the massive interest payments on the startup loans taken out by EuroDisney forced the company into serious financial difficulties. The situation was worsened by the fact that the cheap dollar was persuading more and more people to forego Europe in favour of holidays in Florida at Walt Disney World.
EuroDisney was also over-populated with hotels, especially for a park that can be reasonably well explored within a full day. Coupled with high prices for food and souvenirs, the EuroDisney company started to close hotels during the winter months.
A brave face was put on the first anniversary of the parks opening, and Sleeping Beautys Castle was decorated as a giant birthday cake to celebrate the occasion, however further problems were just around the corner.
In summer 1993 the new Indiana Jones roller-coaster ride opened, but disaster struck just a few weeks after opening when the emergency brakes locked on during a ride, causing some guest injuries. As a result the ride was temporarily shut down for investigations.
By the start of 1994, with the company in serious financial difficulties, and rumours circulating the the park was on the verge of bankrupcy a series of emergency crisis talks were held between the banks and backers.
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Rescue...
Everything came to a head during March 1994 when Team Disney offered the banks an ultimatum, that Disney would provide sufficient capital investment for the park to continue to operate until the end of the month, but unless the banks agreed to restructure the $1bn debt that the parks construction and operation had run up, the Walt Disney company would close the park, and walk away from the whole European venture, leaving the banks with a bankrupt theme park and a massive expanse of virtually worthless real estate.
EuroDisney then forced the banks hand by calling the annual stock-holder meeting for March 15th. Faced with no alternative other than to announce to the stock holders that the park was about to close the banks started looking for ways to refinance and restructure the massive debts. Then to further increase the pressure on the banks, Michael Eisner, Disneys CEO went public shortly before the stock-holder meeting and announced that Disney were planning to pull the plug on the venture at the end of March 1994 unless the banks were prepared to restructure the loans.
Finally on March 14th, just before the annual meeting the banks capitulated, and agreed to Disneys demands, effectively writing off virtually all of the next two years worth of interest payments, and a three year postponement of further loan repayments. In return the Walt Disney Company wrote off $210m in unpaid bills for services, and paid $540m for a 49% stake in the estimated value of the park, as well as restructuring its own loan arrangements for the $210m worth of rides at the new park.
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The tide turns...
By August of 1994 the park was starting to find its feet at last, and all of the parks hotels were fully booked during the peak holiday season.
In October 1994 the parks name was officially changed from EuroDisney to "Disneyland Paris", in order to more closely link the park with the romantic city of Paris, and to disassociate itself with the poor reputation that has become linked with the phrase "Euro Disney".
The end of year figures for 1994 showed encouraging signs as the previous years UKP 650 million loss was reduced to around 200 million, despite a 10% fall in attendance caused by bad publicity over the earlier financial problems.
By the end of March 1995 top Walt Disney executives were predicting that DisneyLand Paris may break-even by the end of 1995.
Helped by the opening of Space Mountain on June 1st 1995 in August 1995 Disneyland Paris and the Euro Disney resort complex announce a 22m GBP profit, followed by the first annual operating profit announced in November 1995.