Emphyteutic lease

The Catalan Generalitat has been using Enron-like accounting to accumulate hidden liabilities.

A new one for me, and one that may not be particularly good news to those who purchased €700M of Catalan debt last week. Accounting rules are designed among other things to avoid the use of off-balance-sheet vehicles to give a false picture of an institution’s financials. The auditors in this case say that the Generalitat has €1.5B of hidden debt, accumulated on the acquisition of considerable quantities of town centre real estate via what Black calls “a lease for a term of years with a right to prolong indefinitely; practically equivalent to an alienation.” So the technique is pure Enron, although the damage at this stage sounds rather less dramatic. However, I know bugger all about this, so maybe Rab at From Catalonia to Caledonia will tell us what it all means. And while we’re on the tricky issue of politicians and palaces, maybe too we’ll one day get to the bottom of the alleged relationship between property puffers Cushman & Wakefield and the Barcelona authorities.

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Comments

  1. Cushman & Wakefield are conmen. In collusion with Barceloan Council they have built up considerable commercial property interests in Barcelona and their “independent” property market reports are simply a way of trying to reduce an overpriced liability.

  2. The same point has been made before: http://oreneta.com/kalebeul/2008/06/09/how-regional-language-policy-in-spain-is-pissing-off-foreign-investors/#comment-143878. Since they obviously know how to use the internet, it would be interesting to hear from Cushman&Wakefield as to their methodology ;o). Or some justification from newspapers that publish their conclusions. La Vanguardia is part of the Generalitat and the council’s mega-chaebol, so that’s clear enough, but I think even El Mundo publish this kind of crap. Are they stupid or is there some advertising or other kickback?

  3. The problem is that the Iberian press, completely out of their element when dealing with anything that is not the centuries old bickering that passes for political activity in this country, instead just laps up some foreigner’s version of anything (being almost everything) that falls outside their range of expertise.

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