Up until recently, Pablo La Parra of the Marea Granate Nueva York group, was unknown to the world’s largest private equity real estate franchise. However, that changed when he led a protest outside the offices of The Blackstone Group in New York last month.
It was a peaceful, modest gathering of Spanish-speaking people that form a branch of Plataforma de Afectados por la Hipoteca (PAH) (Platform for People Affected by Mortgages), a Spanish grassroots organization that takes direct action to stop evictions and campaigns for housing rights.
The protest was held one Wednesday and dissipated after a while, but this event is not to be ignored for it bodes something much bigger and impactful. Indeed, the wider group has the potential to inflict some damage not only on Blackstone but also on other private equity firms that are owners of residential mortgages and rentals in Spain.
There has already been some public relations fallout. This pressure group, which started in 2009 when Spain bailed out its banks since when 200,000 people have been evicted from homes for failing to pay mortgages, the PAH has become adroit at using social media to highlight its causes and has received coverage in newspapers and on television channels. It flagged up with media the protests in New York and simultaneous ones in San Francisco, Madrid and Barcelona to good effect. A week later, it was on Al Jazeera. What is now clear is this is far from the end. It is planning to expand and agitate with more “action” in the coming weeks and even become more international than before. In other words, it will be visible in more countries and with more people on the streets. “This is just going to escalate,” said one member of the group to PERE.
There are some people in the organization that have broken out of PAH and become bigger on the political stage. Ada Colau, for instance, was one of the founding members of the PAH, acting as its spokesperson until May 2014. Then he became a spokesperson and potential mayoral candidate for citizen platform Guanyem Barcelona (Let’s Win Back Barcelona).
It also claims to have had success. Non-violent and apolitical, people in that organization promise the kind of opposition private equity firms are going to be facing is the kind of opposition it will not have faced anywhere else in the world. It is on the streets, it does occupy banks, it claims to have 80 percent public support, have social media on pat, and claim to have stopped thousands of evictions, even renegotiating with the Spanish government some of the buildings it occupied to be dedicated to social housing. “We are on the streets blocking offices and not letting people work,” said one person.
But what does it really want from Blackstone? It seems that for one thing it wants to torpedo or at least cause the firm to re-think a deal yet to complete, which is the taking over a portfolio of loans from Catalunya Caixa. Clearly, all the action seen so far is designed to get a seat at the negotiating table. It also wants firms like Blackstone to not raise rents or costs for tenants.
Blackstone, for its part, says while it owns 5,000 rental units, it has asked only 11 tenants (less than 0.25 percent) to leave homes and that was only after extensive negotiation. It is also spending capital on the properties and hiring people in Spain with a focus on improving the properties for tenants. “We are spending capital on the properties and hiring people in Spain with a focus on improving the experience of our tenants through improving the properties and services. We are not increasing rents to force people out of their homes. This is another totally false allegation,” said Peter Rose, director of public affairs.
However, PAH isn’t buying it. Whether facts or not, it seems to believe this is a ruse. “The law says you cannot increase right away the rentals, so what they are doing is with the community expenses, and that is going to triple them on you”. Or, in cases where there was no maintenance because they were social housing complexes and the government was paying, PAH suspects Blackstone will make them pay. “This can be 100 to 200 euros in addition to you having a low income and if you don’t pay then you get evicted.”
Well, Blackstone is surely more interested in selling homes at a profit than forcing people out and our bet is that it, and other investors like it, will prefer to let the facts do the talking and win the information battle.
How this will play out is hard to predict, but one thing is for sure: the situation reminds the private equity real estate industry at large that the phrase “vulture fund” still exists.