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Property crash fear as Spanish companynosedives

Fears of a property meltdown in Spain were renewed yesterday after shares in the country's second-biggest real estate firm, Colonial, were suspended after the company lost 40pc of its value in two days.

The country's market regulator, the CNMV, was yesterday demanding information from the company to understand what had caused the dramatic €1.5bn share price drop last week.

It also emerged that the company's second-biggest investor, a family-owned firm whose board representatives were among those who stepped down, had begun selling down its stake in the stricken firm.

It was unclear how much it sold and whether the sales occurred before December 27 and 28, when the company's shares went into free-fall.

The meltdown spurred fears that the slowdown in the Spanish property market, the driver of its economic boom over the last decade, would hasten.

Last month G-14, the lobbying group recently established by the Spanish property companies, predicted further house price falls in 2008 and the elimination of up to 400,000 jobs over the next two years.

Colonial yesterday sold €310m worth of assets, deals that it says were not emergency money-raising moves but simply part of the normal management of its portfolio.


An air of panic surrounded the company as the sales followed so closely on the resignations of former chairman Luis Portillo and nine other members of the 19-strong board last week.

Speculation spread that Mr Portillo was also looking to sell his 41pc stake in the company.

With its shares frozen yesterday Colonial was worth €3bn, about one-third of the €8.9bn debt pile that Mr Portillo loaded on to the company in the last two years.

The CNMV yesterday requested that the company's top executives clarify whether any holdings they have in the company through complex derivative positions could have led to the sell-off.

The turnaround of fortunes for the company has been almost as dramatic as its rise.

Mr Portillo, dubbed in one of many recent laudatory profiles as "The New King Midas" of Spain's once-hot property sector, transformed his relatively obscure company Inmocaral into the second-biggest in the country through a series of rapid fire deals, none bigger than the purchase in 2006 of Colonial, a company that was three times its size.

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