At the dawn of the twenty-first century, Spain was flying high. After extensive economic liberalization and adoption of the euro in the late 1990s, all indicators pointed up. Spain boasted the highest use of cement in the European Union, fifth worldwide, as close to a million houses were built in 2006 alone — more than France, Germany and Italy combined. Many were convinced that prosperity was here to stay.

But the boom was built on an asset bubble, where skyrocketing housing prices and unprecedented amounts of credit for developers and homeowners — and thus vast indebtedness — created the perfect storm. While more than six million new homes were built and house prices increased by over 200 percent from 1996 to 2007, in the years since then Spain has seen millions of vacant properties accumulate, housing production at a standstill, price declines of over 65 percent from their peak, and hundreds of thousands of home repossessions.

With an economy highly dependent on real estate, the bust of Spain’s housing bubble spelled the end of the so-called ‘Spanish miracle’. Nevertheless the government didn’t easily accept this: the Zapatero Socialist party first denied the crisis, only to follow up with a Keynesian scramble to counteract the economy’s demise. Yet it soon became clear that more severe medicine was needed.

Rescuing Spain’s financial system

An extensive rescue and restructuring of the debt-ridden Spanish financial system was started by the Socialists and finished by the incoming conservative Popular Party government in 2011. Upon securing 100 billion euros in European loans to bail out financial entities, the Popular Party dutifully implemented the Troika’s austerity measures, increasing value-added tax, a form of consumption tax, (IVA) to 21 percent and slashing public spending in health, education and other sectors.

The Spanish government also created the so-called “bad bank”, the Sareb, a public-private corporation that has absorbed toxic real estate assets, both housing and debt. The Sareb’s role is to minimize financial risks to the state by disposing of these assets as profitably as possible. The institution has an imperative to deleverage all of its assets within 15 years as part of Spain’s bailout agreement with the European Union.

The most prominent stories about Spain in recent years have been around dispossession — hundreds of thousands of families foreclosed and evicted from their homes, millions of people unemployed — resistance, indignation and more recently with the municipal elections, hope. Here we want to tell the story of a more insidious and little reported process that is now starting to rear its head: the entrance into Spain of private investment funds aiming to profit from a new speculative real estate cycle.

In 2012, the multimillionaire businessman Donald Trump stated it loud and clear: “Spain is sick and it’s time to take advantage of it.” This is what hundreds of funds and other investment vehicles are doing as they bet on the Spanish real estate sector: since 2013, 190 new players have been registered, buying buildings, mortgages, real-estate subsidiaries, assets or public housing estates. Last year these investments totaled over 23 billion euros, 330 percent more than 2013.

Foreign investors are looking for “a way to profit from the structural shift in Spain’s housing market,” and the potion, according to Mato Carlos Sanchez, economist and coordinator of economic justice organization Attac Madrid, is “to pressure most when trying to get the purchase price down and, in that way, reap short-term profitability.”

The rush of new investment is starting to rebuild the link between housing and finance in Spain, centralizing ownership in the hands of transnational investment funds. However, it’s important not to lose sight the role that the state has played in this restructuring process by creating the Sareb to dispose of toxic real estate assets in bulk and making regulations and tax regimes more flexible for real estate investors such as Blackstone.

Spain, meet Blackstone and co.

The spectacular boom and bust in Spain, together with the state interventions in the wake of the crisis, have therefore created attractive opportunities for investors. Blackstone, the world’s largest private equity player in real estate investments, has embarked on a buying spree in Spain, among other distressed real estate markets around the world (including the US).

In July 2014, Blackstone won a bidding war for a defaulted mortgage portfolio from the nationalized bank Cataluyna Caixa, beating out competing global investment companies like Goldman Sachs, Oaktree Capital Group, Lone Star Funds and Apollo Global Management. Blackstone received a discount of over 40 percent for the purchase of 94,000 non-performing mortgage loans, reportedly paying 3.6 billion euros for a portfolio valued at 6.5 billion, 572 million of which was covered by the state.

Also in 2014, the company, in partnership with Magic Real Estate, spent 40 million euros to acquire Caixa’s real estate asset management platform, CatalunyaCaixa Inmobiliari, which manages and sells real estate and property loans in project development and construction. This portfolio consists of failed loans taken out by developers during the boom years.

Blackstone’s wager on the real estate sector is thus extensive and varied: mortgages, real estate subsidiaries, 600 social housing units from the Sareb and even the purchase of eighteen public housing developments from the Madrid Municipal Housing and Land Company (la Empresa Municipal de Vivienda y Suelo, EMVS), arm-in-arm with its Spanish partner Magic Real Estate.

At Blackstone’s side, other funds that have landed in the country include Cerberus (taking Bankia’s real estate agency for 90 million euros), Texas Pacific Group (fattening their portfolio with more than 30,000 properties and credits from the Sareb), Azora (operating 689 public housing units in Barcelona), Goldman Sachs (buying 3,000 low-income apartments from Madrid’s regional government) and Lone Star (buying up land).

At a meeting of international funds held in Madrid in 2014, Spain’s rental market was seen as a major business opportunity, with Luis Lazaro of Magic Real Estate acknowledging that legislative changes making it easier for landlords to evict tenants and allowing the transfer of social housing to real estate investment funds make Spain favorable for international investors.

Profiting off people’s lives

Only finding out through the media that Blackstone will have the keys to their lives, mortgage holders who contracted a mortgage with Caixa during the housing boom, and who are now no longer able to pay, breathe with uncertainty. Unlike the US and other countries, in Spain foreclosure does not wipe out mortgage debt; mortgage holders remain liable for the debt, which is also excluded from bankruptcy filing (similar to student loans in the US).

While some mortgage-affected people have secured a verbal agreement with Caixa for debt forgiveness in exchange for relinquishing their home (dación en pago), they do not know if the vulture fund will respect such agreements. For now, according to Carlos Macias, a spokesperson for the housing rights Platform for Mortgage Affected People (PAH) in Barcelona, the funds told the PAH in an informal meeting: “The aim is to do business with flats and, therefore, remove the debtors quickly and without considering providing people with social rent [a rent set at maximum 30 percent of a household’s income].”

In Manresa, a city close to Barcelona, Mohammed negotiated a contract with Caixa to partially forgive his mortgage debt in exchange for his home, but feared that the agreement would be a worthless scrap of paper if he didn’t sign it soon. The only certainty came with strings attached: Caixa offered a so-called “waiting agreement” where the entity pledged to stop demanding debt repayment from mortgage-affected people until the sale to Blackstone and BBVA was finalized, with the condition they “do not initiate any type of direct or indirect action against the bank.”

Since the sale was finalized a few months ago, Blackstone has made offers to pay some families 2,000 euros on the condition that they abandon their home and stop asking for social rent. While these are clearly tactics to control the population, to ensure people follow Blackstone’s rules, such practices also hint at a potential vulnerability for Blackstone. Accustomed to carrying out their business with little public interference, the company may be apprehensive about how strongly social movements that have arisen in response to Spain’s foreclosure crisis, most importantly the PAH, might affect their bottom line.

If the US fund is able to recover part of the debt from the Caixa portfolio and put the properties up for sale, the business is mouth-watering. Blackstone has extensive experience in asset management in the United States, most recently acquiring nearly 50,000 foreclosed homes, converting them to rental use, and securitizing the rental income.

The company has also found another way to boost profits: by paying less tax. It is one of 340 multinationals that sealed secret agreements with Luxembourg, a recognized tax haven, to benefit from the country’s very low tax rates. In fact, one of the businessmen occupying positions in various subsidiaries of Blackstone, Jean-François Pascal Emmanuel Bossy, has companies based in Luxembourg and had others in the Cayman Islands. Blackstone is thus using old and new strategies to extract rent from devalued assets and from people, so as to boost its portfolio and profits across the world.

Organizing against investment funds

Blackstone and other companies’ global reach represents both a challenge to movements for justice on the ground and a rallying point. What is clear is that Spain is not alone: large investors have set their sights on other real estate markets exposed to severe downturns due to the global financial crisis, including the US and Ireland. For global investment companies, the dispossession of millions of homeowners has become an opportunity — facilitated by the state — to assemble property portfolios at a discount, leading in to a new wave of financial expropriation.

Thus begins a new chapter in the relationship between finance and real estate: we have a deep understanding of how this relationship precipitates urban and economic crises; our present task is to grasp how it is recomposed in the wake of such crises, and how urban space is reshaped as it is mobilized to capture financial rents.

It will take time to appreciate the impact Blackstone and other investment companies will have in Spain. The current fear is that rents and evictions will increase, but it is unlikely that this will happen uniformly in urban space. Rather, we may see heightened socio-spatial polarization as investors develop differential strategies for housing assets purchased in bulk, perhaps dumping less valuable properties on the peripheries and upgrading those in the center, as we saw when private equity firms purchased social housing companies in Berlin after its mid-1990s fiscal crisis.

In the US, Blackstone and other investors have bypassed historically poor and oppressed communities altogether, as institutional capital is instead largely going toward purchases of foreclosed homes in middle class suburbs. The way that post-crisis financialization restructures the urban landscape is thus complex, contingent on previous rounds of development, state intervention and dynamically evolving investment strategies.

This, of course, does not rule out the possibility of social transformation. Indeed, the parallels between Blackstone’s business model in Spain and the US is fostering a relationship between the PAH and the Right to the City alliance, a network of US social, racial and housing justice organizations. This has resulted in several transnational actions, the first one in February, where the PAH and the Right to the City organized a simultaneous protest against Blackstone in New York, San Francisco and El Prat de Llobregat (Barcelona). At the latter, several jumped the fence and plastered the entrance with green stickers to warn that they won’t just sit passively in the face of one of the world’s leading investment groups. More international actions have followed, in March and just now in October.

Activists in the US and elsewhere are eager to learn from the success of the PAH in building a unified national movement to defend the right to housing, while activists in both places are conscious of the imperative to construct an international alliance to more effectively contest the localized impacts of global investment companies. The growth of activism connecting distinct places with shared exposure to global processes like financialization reminds us that as investors assemble property portfolios, they are also drawing together the power of the people to struggle against new waves of financial dispossession.

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This article is a collaborative translation by Melissa García and Desiree Fields of a piece originally written by Marc Font and Gemma Garcia in Catalan and published in La Directa, a self-managed communication media for social change founded in 2006. It is in this spirit that García and Fields translated the original piece into English, adding further background and analysis to the original content for readers not familiar with the crisis in Spain.