• Key figures
  • Who does what?
  • Value proposition to the private partners
  • Legal models of partnership
  • Segmentation of tenants and housing units
  • Procedures
  • Disclaimer
  • Key figures

    -    7,000 housing units
    -    107 buildings
    -    621,000 m2 of gross construction area (mixed uses)
    -    867,000 m2 of land
    -    708 M€ of total private investment
    -    Locations can be subdivided into operations (or aggregated) to match investor requirements for scale. Operations can be sized from 3M€ to 300M€
    -    Pilot operations are expected to start in the last quarter of 2016 (announcement of public tenders), as potential partners show their interest on bidding for the public tender.

    Who does what?

    The private partner (concessionaire / owner of the surface rights)

    -    Designs the buildings and local amenities (projects)
    -    Builds/rehabilitates according to the approved projects
    -    Manages operations, maintenance and regular conservation works
    -    Manages the relationship with the tenants
    -    Collects the rents

    The public partner (Lisbon Municipality)

    -    Provides municipal land/buildings for construction/rehabilitation for affordable housing
    -    Finances the structural urbanization works
    -    Establishes the basic quality standards for the construction, maintenance, conservation works and customer service
    -    Promotes the required public tenders and procedures to select the private partners
    -    Provides research on potential housing demand
    -    Organizes the demand of tenants based on a lottery procedure, after admission of the respective candidates based on their middle-class income thresholds
    -    Promotes risk minimization (eliminates uncertainty and spending time on obtaining construction permits, attractive locations,…)
    -    Promotes institutional initiatives to encourage the availability of financial conditions for investment in affordable housing
    -    Ongoing partnership contract control/audit

    The tenants

    -    Sign a lease contract with the private partner
    -    Pay the rents
    -    Use the building and facilities according to the law and building regulations

    Value proposition to the private partners

    -    Better profitability than equivalent institutional investors can get for low risk, long-term stable income.
    -    Long term contracts: 35 to 50 years.
    -    The private partner can trade his contract position.
    -    Land investment is not required (use of municipal real properties: plots to build or buildings to renovate).
    -    A share of the gross construction area of each operation becomes the property of the private partner to ensure the required economic feasibility of each operation and the contracted IRR
    -    The ownership of autonomous plot(s) should be transferred to the private partner at an early stage of the operation (just after the construction works are concluded and the respective housing units are rented).
    -    The plots/buildings for affordable housing will return to the Municipality at the end of the partnership contract (35-50 years).
    -    Rents annually updated by the Portuguese Consumer Price Index (ICP), without housing, published by EUROSTAT.
    -    The affordable housing operations are at 15 locations in Lisbon, well served by public transport, local commerce, public facilities and green areas.
    -    Locations can be subdivided into projects/operations (or aggregated) to match investor requirements for scale. Operations can be sized from 3M€ to 300M€.
    -    Mix of rent prices: market prices for non-residential units and mix of housing affordable rents.
    -    Potential demand for affordable housing in Lisbon (estimated >25,000 households for 2016-2019) i.e. about 5 times the planned supply under this program.
    -    Value-Added Tax (VAT) at 6% may be applicable under certain conditions (see legal models).
    -    Demand from tenants with middle-income thresholds, mixed age portfolio.
    -    The private partner is responsible for the usual business risks (construction, infrastructure availability and demand), except the land provision.
    -    The Municipality minimizes risk (eliminating uncertainty and time spent obtaining construction permits,  attractive locations…). Building permits or the respective preliminary feasibility agreement, are issued to the selected private partner/successful bidder at the same time as the adjudication of the partnership contract.

    Legal models of partnership

    Concession of public works model

    -    This is a standard legal contract, regulated by Public Procurement Laws (National and European) and by contract
    -    The land and buildings involved in the operation are owned by the Municipality during the partnership, although the investment in the respective works is private
    -    VAT at 6%
    -    No permits required for the construction works, beyond compliance with urban planning regulations
    -    After the construction works are completed and all the housing units rented, both by the private partner, the Municipality will transfer the property of some plots, which may correspond to around 30% of the gross construction area, by way of payment to the Private Partner, to ensure the economic feasibility of the operation.

    Surface rights model

    -    Right to use the land with a contract that regulates the partnership, with equivalent conditions to those of the Concession of Public Works model
    -    Buildings are financed and owned by the private partner, while the land is owned by the Municipality. Buildings can be used as a guarantee for a bank loan to finance the private investment in the respective operation.
    -    By the end of the partnership contract the buildings become the property of the Municipality
    -    Default VAT at 23%; under certain conditions VAT is at 6% (urban rehabilitation works/areas, under the regulation for social housing at controlled costs).
    -    Permits are required for the construction works besides compliance with urban planning regulations.
    -    After the construction works are completed and all the housing units rented, both by the private partner, the Municipality will transfer the property of some plots, which may correspond to around 30% of the gross construction area, by way of payment to the Private Partner, to ensure the economic feasibility of the operation.

    Segmentation of tenants and housing units

    Standard units

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    Affordable rent reference values

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    Potential demand for affordable rent

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    Procedures

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    Disclaimer

    -    The key points of the presented business models are subject to adjustments that are deemed necessary in each project, in order to ensure their economic and financial viability. Therefore, the award will include a possible negotiation with the interested parties/bidders. The negotiations will also consider possible factors for risk minimization.
    -    If there are economic and financial advantages, the concession and surface rights models presented may be combined in a mixed model.
    -    The indicated percentages of the IRR are merely estimates and are not legally or contractually binding.