WORLD PROPERTY CHANNEL ®

Torre Lugano

In Benidorm, located in the eastern region of Valencia, Torre Lugano, Spain's tallest residential tower at 420 feet, is the poster boy today for everything that went wrong with the country's commercial and residential real estate markets.

Those markets are ready to implode, according to sources polled by The Wall Street Journal.

Planned and promoted during the boom years leading up to 2007, Torre Lugano attracted buyers from around the globe with glossy brochures promising a luxury building with a glass-walled elevator and sweeping views of this Mediterranean resort's turquoise waters.

The reality is very different, the WSJ reports. The garage floods, windows are drafty and backed-up toilets flood apartments with sewage. The glass elevator never materialized.

Residents, some recently forced to shower in a communal rest room because the plumbing on their floors failed, are suing the developers for €28.2 million ($36.4 million), citing "construction defects."

The project is a joint venture between Acciona SA, one of Spain's biggest builders, and Caja de Ahorros de Valencia, Castellón y Alicante, or Bancaja, the biggest lender in Valencia.

Bancaja is now in the midst of a seven-way merger with other regional savings banks amid the reordering of the troubled sector.

Some 1.5 million unfinished, unsold or unwanted residential units stand scattered across the country, products of a still-deflating housing bubble that threatens to undermine Spain's broader economy for years to come, according to the WSJ.

"It is the hangover after an epic fiesta, a period Spaniards now refer to as 'cuando pensábamos que éramos ricos'--"when we thought we were rich,' " the newspaper reports.

Construction problems started as early as 2006, when developers informed buyers that builders wouldn't meet the initial deadline for completion, mostly because the construction boom had led to a shortage of labor and materials.

To encourage some to stick with the purchase, developers offered kitchen furnishings on the house, according to residents.



During the final year of the building's construction, the global downturn began to hit Spain hard. Some of the buyers who had agreed to wait on the building decided to drop out. More than a third of the tower went unsold, the WSJ reports.

That's when residents say they noticed builders beginning to cut corners. Instead of aluminum railings and fixtures in outdoor areas, where the salt air and moisture corrodes other metals quickly, builders fastened cheaper iron, now rusted. A polished facade that was supposed to look like marble is instead rough concrete painted white.

When residents finally moved in, they say, further defects became apparent. A faulty central fire alarm is now disconnected, having triggered itself erroneously dozens of times in a single day.

A retaining wall and staircase alongside the swimming pool is roped off because part of the wall has buckled and recently began leaking water.

Some apartments go days without water because of defective pumps. Hollow plaster walls lack the sound-proofing that was advertised, allowing residents to hear conversations, arguments and creaking beds in neighboring apartments.

They are suing the developers, Acciona and Bancaja, and others involved in the project, in a regional court in Valencia for "construction defects" of €28.2 million.

They say that's the difference in value between what they allege the building would have been worth had it been built as promised, and what it is now appraised at.

 

---