The Valencian government intends to prevent foreign vulture funds from establishing themselves on the market by enforcing its new right of first refusal…
Valencia’s government is fighting tooth and nail to prevent city property from being purchased by vulture funds.
Valencia’s Housing Department will use its newly legalised “right of first refusal” to purchase a two-storey building on Juan Llorens Street. GIM Inversions, the building’s owner, intends to sell the property for €573,000 to a company Eufi Hotels SL, registered in Altea, an arm of a Ukrainian investment fund.
The building, which has nine flats and two floors, will become a Valencia property as soon as government officials gain access to it and determine its true value. This action was made possible by the new right of first refusal law, which was enacted to prevent investors from acquiring real estate at a low cost, to eliminate speculation in the property market, and, finally, to build a stock that can be allocated to social housing.
The new Decree is also a useful tool in the fight against so-called vulture funds, which are widespread throughout Spain, including Valencia. A vulture fund is a type of hedge fund that invests in distressed securities, or debt that is considered to be very weak or in default. Profit is made by purchasing debt at a discount on the secondary market and then selling the debt for a higher price than the purchase price using a variety of methods. Debtors are typically companies, individuals, and, in some cases, countries. In the case of property purchases, the goal is typically to buy for next to nothing and then wait for the price to rise without investing.
Despite being voted on in parliament last July, the city’s Right of First Refusal was not widely publicised. It is undeniably a significant policy shift in Valencia’s efforts to limit further gentrification of the city centre. The decree was interpreted as a victory over vulture funds and the speculative economy. The government’s right is exercised only when a transaction is made between companies and the selling price is significantly lower than the market price.
The procedure’s mechanics are outlined in the Decree. The government will pay the price set by the seller in their initial offer and will have 60 days to intervene from the time it learns about the sale. To ensure that the government is aware of any proposed sales, the law requires Notaries to report these types of transactions.
The motivation for such a move is to expand the Valencian Community’s public housing stock, which currently falls far short of the population’s needs due to years of neglect and deterioration, say council officials. And this is a clever way of doing it; instead of building new properties, the government will purchase and renovate existing properties, which is an environmentally much more acceptable option in accordance with the Department of Housing’s Policies.
So far in 2020, the Housing Department has purchased 235 homes, and according to Cesar Jimenez, the regional secretary, this number could rise to 350 by the end of the year.
Using newly acquired power, the government can now, for the first time, gain access to properties in Valencia’s central areas and convert them to social housing, slowing the gentrification process. The recently mentioned Calle Turia building, which was sold to a French company to be converted into tourist flats, could be purchased by the government as well, though not yet. According to a statement from the Housing Department, the offer on that building has not yet been finalised, and until that happens, there is nothing that can be done legally.
© The Bat Of Valencia To Fight The Circling Vultures – TheValencian
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