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Explained: Who are Blackstone and what do they want with Denmark’s rental properties?

Explained: Who are Blackstone and what do they want with Denmark's rental properties?
Photo: Thomas Lekfeldt/Ritzau Scanpix
Why is the American firm so interested in rental housing in Copenhagen and why are Denmark’s housing regulations encouraging them?

Blackstone is an American equity fund that is among the largest in the world with assets of approximately $3,600 billion.

The company was founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman.

Schwarzman is currently chairman of Blackstone’s board of directors. He has a fortune of over $90 billion and is on Forbes list of the 100 richest people in the world. The billionaire has been voted by Bloomberg financial media several times to be among the 50 most influential people in the world.

Headquartered in New York City, Blackstone has offices all over the world, including in London, Paris, Dublin, Sydney, Tokyo, Hong Kong, Singapore and Beijing.

In addition to real estate investments, the equity firm has invested heavily in companies including, Hilton Worldwide, Merlin Entertainments Group, Performance Food Group and EQ Office.

Section 5, part 2 of Denmark’s Housing Regulations Act (boligreguleringsloven) – now often termed the ‘Blackstone Paragraph’ has become the focus criticism of all landlords – not just big companies like Blackstone — who make money by renovating older properties and raising rents.

The clause allows landlords to significantly raise rents if they spend around 250,000 kroner renovating housing after a previous tenant has moved out.

As such, the landlord can effectively move their rental property out of restrictive housing regulations so that it becomes encompassed by freer rules. This means that the home can then be rented out according to the value of the property, which in most cases is significantly higher than the previous, cost-determined rent.

However, this option does not exist for apartments in properties with six or fewer homes, as they are covered by a different section of the Housing Regulations Act.

Kereby announced on Tuesday that it is to limit how much it will cost to live homes it has renovated according to section 5.2.

Typically, the limit will be at 1,650 kroner square metre per, meaning a 90-square-metre apartment would cost around 12,375 kroner per month.

However, some cheaper apartments cost only 750 kroner per square meter. That applies primarily to apartments that were renovated a long time ago or are in less popular locations.

Although the company has now promised to lower rents in some homes, DR has reported that Kereby, Blackstone’s Danish arm, is involved in a number of disputes over rent that are being processed the Rent Appeals Board (Huslejenævnet) in Copenhagen.

The boards resolve disputes between tenants and landlords, and the broadcaster has previously reported that the company loses many of the cases that go to the appeals board.

LLO regional director Claus Højte told Politiken that he saw Blackstone's surprising move as “on initial impressions, beautiful and an example to others in the industry”.

But he also stressed that tenants who have received offers of cheaper rent should be cautious.

“Right now we have 51 cases against Kereby/Blackstone with the Rent Appeals Board [Danish: Huslejenævnet, ed.], and in several of them they have wanted to settle on lower rents, but we think their offers are still too high,” Højte said.

“If you as a tenant say yes to the rent that Kereby/Blackstone is offering now, you might be prevented from getting an even lower rent,” he explained.

In addition to modifications to its rental prices, Kereby has also said it will make other changes, including training and development of its employees to ensure good customer service for tenants.

Sources: Politiken, DR, Reuters, Wikipedia, Blackstone, Bloomberg, Forbes.

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