specials | 2016-07-06
Explaining Can Rigalt - Why Barcelona has to pay €47m in penalty fees
Yet another controversy surrounds the club, this time bringing a harsh financial penalty
FC Barcelona has lost the arbitration case regarding the land in Can Rigalt sold in 2005 by the board of Joan Laporta, a decision that will cost the club €47 million. The ruling calls for a reversal of the operation carried out in 2005 and that 10,000 square meters of land there shall be recovered from "Inmobiliaria Mar," to which the Club had previously sold it.
Barça’s spokesperson, Josep Vives explained that “after not complying with certain requirements, the arbitration court ruled that the operation should be reversed, meaning that the club has to pay €47 million. €35.4 million obtained from the sale of the land in 2005, plus interests.” In return, the club will get back the 10.000 square meters involved in the deal. Asked what the consequences of this defeat can mean for the club, Vives stated that “the board has taken note of this decision and will manage the situation. This isn’t about finding the guilty party. The legal services and the financial area are studying the effects of this decision.”
Vives mentioned that according to the sale deal signed in June 2005 by Laporta’s board and that the income from the sale “allowed the club to finish that fiscal year with a profit of €35 million.” The spokesman also tried to shift blame for this to the former president by saying that “if in 2005 someone signed a contract then that person is responsible for the fulfillment of this contract.”
Can Rigalt (or Can Rigal) is an old rural manor, located in the Pubilla Casas neighborhood in L’Hospitalet de Llobregat. It was one of the great estates that owned most of the land in this current neighborhood, located around to the farm that gives it its name and containing other small farmsteads like Can Capella and Can'Oliveres. The extensive grounds surrounding the estate were mostly used for wine production.
The present building, dating from the eighteenth century, was built using walls of an earlier construction, probably of medieval origin, since one of the facades shows the date 1693. In 1728 Miquel Ricalt bought the property and then rebuilt it in 1741. Part of the adjoining lands were landscaped in Versailles style, with fruit trees, ponds and water fountains, partially preserved until the second half of the twentieth century. The estate was remodeled in 1837, according to the inscription on another façade. The building is part of the patrimony of the city of L’Hospitalet.
Throughout the nineteenth and twentieth centuries the property was reduced with successive segregations, for the construction of the cemetery of Sants, electrical station "La Canadiense " (currently FECSA-Endesa), the Hospital of the Red Cross and the school Puig i Gairalt. In 1976 the Metropolitan General Plan (PGM) qualified the land of Can Rigalt that remained unbuilt as gardens, and decided the creation of a metropolitan park in that area.
In July 1997, FC Barcelona, under the president at the time Josep Lluís Núñez, bought 60.750 square meters of land of Can Rigal, including the main farmhouse, from the City of L’Hospitalet for 250 million pesetas (€1.4 million). The club planned for a rehabilitation of the farm to make it home and school players, in substitution of the original Masia de Can Planes, and the construction of three football pitches, which would be used for training of the first team and youth football. In November 1997, after obtaining the license to start work from the City of L’Hospitalet de Llobregat, the club began work at Can Rigalt. But in February 1998, due to complaints from several neighborhood associations, the Catalan government blocked the requalification of the land for sporting use, considering it a green area, and the project was permanently paralyzed. Since then the farm has been abandoned, the subject of several robberies and vandalism acts.
In 2004, FC Barcelona, the City of L’Hospitalet de Llobregat and FECSA-Endesa, owners of the 150 000 square meters of land Can Rigalt, signed an agreement for the urban transformation of the area. The agreement provided for modifying the PGM to re-qualify part of the area as buildable land, on which 1000 homes would be built. In addition, it called for the transfer of the power station and the undergrounding of power lines, construction of the new General Hospital of L’Hospitalet and the creation of a metropolitan park of 10 hectares. Also, FC Barcelona agreed to give the farm to the local authorities to make it public facilities.
In 2005, Joan Laporta’s board sold 10.000 square meters of the land that the club owned in this area for €35.4 million, €5.8 million of which was to be used for the urbanization of the area and the re-qualification process that would make the land buildable, something that has not yet happened. Inmobiliaria Mar, the company that bought this land from the club has now demanded for a refund because they were never given the urbanized, buildable land that they acquired in 2005.
The requalification process was halted when the Catalan government said that it couldn’t authorize such a massive loss of green area. According to Mundo Deportivo, in order to make the government agree, Barça gifted the city of Gavà an area of 70.000 square feet of green land. This land had been bought by Núñez in 2000 for €3.1 million in the area of La Sentiu, around the Can Sopes farm in Gavà. The club was the only one of the owners of land in Can Rigalt that traded land in another area so that the re-qualification was allowed.
In December 2007 L’Hospitalet’s city hall decided that it had complied with all of the requirements that the government had made in order for the area to be repurposed and changed the PGM. After this decision was made though the financial crisis of 2008 followed and the Spanish construction bubble popped so the actual urbanization of the area and all the other measures required in order to make that land buildable were never done.
In 2012 Inmobiliaria Mar went to an arbitration court asking for a deadline to be set on the time they would get the urbanized land. The arbitration court decided that the deadline was June 30th 2014.
In the club’s financial statement of 2013-2014, in the section regarding this case, Barça defended itself by stating that the only obligations it had taken upon itself in this sale contract were “one of means and not result, demanding that the club do every act necessary to facilitate the reaction and approbation of the re-parceling of the land […]. Additionally the board and its consultants consider that the obligations set out in the arbitration decision for the club before that date are dependent on future developments whose accomplishment doesn’t only depend on the will of the club.” This was the reasoning behind the fact that for that exercise the club hadn’t provisioned any potential losses for this case.
When that date came and went without anything happening, the construction company filed a second case with the arbitration court, which has led to the current decision. In the financial statement of 2014-2015 Barça had provisioned €11 million for this case.
It is important to note that the actual loss for Barcelona won’t be €47 million, because the 10.000 square meters will be added to the club’s assets as a positive value and the club had already provisioned a part of the amount. The biggest hit will probably be for the club’s cash flow, but we will know more when the financial report for 2015-2016 is presented.
On Tuesday Joan Laporta published a statement on his Facebook account regarding this case. It said that “while I was president I had no knowledge of this arbitration,” adding that “the sale of land in Can Rigalt was treated with maximum transparency and efficiency. It was a very good operation for the interests of FC Barcelona.” He asked the current board to clarify when it had knowledge of this conflict and when the arbitration process started and what was the part of the contract that Barça didn’t comply with so that the contract was rescinded. He also demanded the publication of the complete verdict of the arbitration court so that all the club members have access to it.
Consulted by the El Món paper, various ex-members of Laporta’s board say that “it was a solid strong sale, notarized and charged. During our period no arbitration was started.” These former executives emphasize and state that" if there had been any strange movement to harm the buyer, a deception, a condition breached, any misdeed concealed it wouldn’t have finished this way. Barca would have been convicted for having damaged the buyer. "
"In the period 2005-2010, we weren’t asked for anything. We purely and simply sell the piece of land,” they conclude.
On her own Twitter account, Maria Elena Fort, former Laporta board member, also explained her version of events: “The board of 2003 managed to get a re-qualification of the land increasing its worth to €100 million. A third of the land is sold, with the condition that they be given to the buyer completely urbanized, but without a deadline. A number of circumstances make the urbanization (which doesn’t depend on the club) not happen. Until 2010 the buyer understands the efforts the club has made to fix the situation. I suppose that with the board of 2010 they were also looking for solutions, but it’s obvious that in six years no solution was found. So first they ask the court for a deadline and then they ask for the dissolution of the contract. And they win.”
Speaking to the radio station Rac1, Susana Monje, the club’s current economic vice-president said that “we’re currently still looking into the impact this will have, but regardless of that this amount will come out of the 2015-2016 budget that we are now closing.”
Monje doesn’t know “what the exact impact will be. We’ll see how the accounting looks.” She also added “We didn’t have to provision the exact €47 million amount because there is a piece of land that returns to Barça’s patrimony and you have to consider its value. In the end, it will have an impact. We don’t know if it will be in the exploitation cost or if it will also have to come out of the club’s own funds. We still can’t know the final amount.” Regardless, she was sure that “we will still have a profit at the end of this year.”
She assured that the news of this decision “was a very unpleasant surprised. It stems from a badly written contract which was signed on June 27th 2005 and the repercussions of that bad contract are being felt now. We are being asked to pay €12 million in interests. It’s not just the value of the lands, but also 3%/year in interests.”
The vice-president wanted to clarify that “the contract didn’t state any obligation to give the lands before 2012. It had a flaw: there was no deadline for handing over the land. It doesn’t state when that’s supposed to happen.” Monje also added: “If the contract had set a date in 2012 then the auditing company wouldn’t have allowed the money received for the land to be part of the club’s profit until the land had been given to the buyer. It’s a very strange clause. It’s not usual. And this was the reason. If they had set a deadline, they couldn’t have counted this income into the profit in 2005.”
She continued: “Barça can’t give this land as fully urbanized, because that doesn’t depend on Barça. That’s the second great mistake of the contract. This depends on the public administrations that do the requalification. It depends on FECSA and on the management of a Compensation Board where Barça is a minority member, because it only has 30%. […] It wasn’t in Barça’s hands, it was in the hands of the public administration.”
Monje added that “the decision cannot be appealed, in principle, according to the jurists, but if there are reasons for it to be challenged it could be challenged to try and nullify it. We are evaluating this, because an arbitration decision of this kind cannot be appealed.”
“We’ll see what the solutions are. I suppose we’ll enter into a dialogue with the construction company and see what all the club’s options are,” she concluded.
On Tuesday, the club’s former economic vice-president, Xavier Sala i Martín explained to Rac1 that during that 2005, “Jordi Moix was one of the people responsible for the negotiation and the sale of the land,” even accusing him of wanting to sell it to a company that belonged to “his friends.”
Jordi Moix reacted to this by saying that he did participate “in the first part, but the final negotiation and the sale was done when I was no longer at the club, in the end of June.” Moix also admitted that the work on Espai Barça might be postponed following this decision because it’s possible that the board won’t be able to get the club’s debt lower than €200 million before the work is supposed to start in the summer of 2017.
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FC Barcelona, Manifest Blaugrana, Mundo Deportivo, El Món, Rac1, Wikipedia
WRITTEN BY: Diana Uzum
Barcelona fan since the days of Kluivert and Rivaldo. Been here for the good, the bad and the ugly.