Having grown weary of reality in America (after becoming the biggest landlord in the land of the free to borrow cheaply, Wall Street moved into the distressed property purchase ponzi in Spain and, surprise, the Spanish are not happy with their new slumlords. After Madrid’s local government sold 5,000 rent-controlled apartments to Goldman and Blackstone, having told tenants their rental conditions would remain the same, dozens of people have received demands for higher rent, been told their rents will increase dramatically, been threatened with eviction or moved out to escape the insecurity as old contracts expire.
As Reuters reports,
Last year Madrid’s city and regional governments sold almost 5,000 rent-controlled flats to private equity investors including Goldman Sachs and Blackstone. At the time, the tenants were told their rental conditions would remain the same.
But as old contracts expire, dozens of people have received demands for higher rent, been told their rents will increase dramatically, been threatened with eviction or moved out to escape the insecurity. Thousands of Spain’s poor now depend for their homes on the generosity of private equity.
In the buildings sold to the funds, Reuters has spoken to more than 40 households who face similar difficulties. They include some of Madrid’s most vulnerable people: an unemployed single mother of five with a severely disabled daughter, for example, and an HIV patient with one lung. Both faced evictions that were temporarily halted at the last minute.
There is no suggestion the buyers have acted illegally. Having bought around 15 percent of Madrid’s publicly held social housing, the new owners are simply exercising their right to charge commercial rents once reduced rents that tenants have paid expire.
However, Socialist councillors in Madrid have launched lawsuits directed at the state bodies that sold the rent-controlled homes, and tenants meet weekly to organize street protests. Evictions ordered and postponed by the new owners are an increasingly common sight in Spain’s media.
For the private equity firms that bought the flats, the deal was good business. For tenants, less so.
The public-sector real estate workout is creating winners and losers. Spain needs new investment to put a floor under its property market – a necessary condition for a broader recovery – and at the same time its social safety net needs funds. Economist Miguel Hernandez said foreign investors play an important role by providing cash to public institutions.
“These funds may appear to be acting like vultures, but they are also helping the system, because the administrations had very few options to get the cash they needed,” said Hernandez, professor at IE Business School.
Six sources involved in the bidding process told Reuters that bidders knew the straitened circumstances of the tenants. The funds that entered final bidding – nine in all – were given detailed information. The sale terms, seen by Reuters, show the regional government stressed that the new owners must honor all the tenants’ rights and obligations.
Goldman went for the Madrid homes after a successful pair of similar deals in Germany, a person familiar with the matter said. Goldman looked at the profiles of the tenants and considered whether the properties were “under-managed from a yield perspective” and whether new ownership could “improve rents.
See how this game works? Financial oligarchs always get access to free money from Central Banks, as well as discounts during privatizations, and then turn around and demand the plebs pay the market rate.
Unemployed hairdresser and mother-of-three Yasmin Rubiano lives in a flat now owned by Goldman and Azora. Rubiano said she stopped getting a printed rent bill once her reduced rent of 50 euros per month ended in December, but got no word from the new owners.
In January she started to receive monthly text messages from her bank, which she showed a reporter, advising that it had received a demand for 498.18 euros. She has been paying 100 euros a month to show goodwill, but cannot pay more. In March, Rubiano said, she received a letter from Encasa Cibeles demanding full payment or threatening legal action.
On Aug. 6, the 20 tenants in Arriba’s block signed new contracts with Fidere, some of them seen by Reuters, which stipulate a rise of more than 40 percent in rent over three years. Blackstone referred inquiries to Fidere.
Some local politicians say IVIMA acted illegally by selling the flats cheap. IVIMA Director Ana Gomendio declined to comment.
Wolves will always eat sheep, and until the sheep decide enough is enough, the wolves will continue to feast.