Fidelidade Will Increase Rents to Market Value With Some Exceptions

18 April 2018

The president of Fidelidade, Jorge Magalhães Correia, told deputies this Wednesday that Fidelidade will increase its tenants’ rents to market value, using indexes published by the INE as a reference. The company did, however, open the door to some possible exceptions. Extenuating circumstances such as effort rates, income levels and situations of vulnerability will all be taken into account.

Rents are normally updated, depending on inflation and the local real estate market when two, three and five-year contracts are renewed, he stated. However, there will be cases where the rents will remain unchanged or will be increased to a level still below market value, and the increases will be evaluated on a case by case basis, Mr Magalhães Correia explained. The company will factor its tenants’ effort rates and whether situations of vulnerability, such as the existence of diseases, exist.

The insurer owns 823 homes covered by the urban rental program, 423 of which have contracts that fall under the new law. Mr Magalhães Correia emphasised at Wednesday’s hearing that Fidelidade is complying with the law and will remain attentive to situations of social fragility.

Nevertheless, the executive stated that the insurer would not alter its strategy of selling real estate to reduce its exposure to the real estate sector. He stressed, however, that: “We are interested in continuing to be a benchmark investor in the real estate sector in Portugal.”

Mr Magalhães Correia’s presence at the hearing in Parliament was requested after a group of the residents at Santo António de Cavaleiros in Loures were caught by surprise with significant increases to their rents. Some of the tenants believed that they were being evicted. Fidelidade’s president explained to the federal deputies that the situation is under review and that, of a total of seven cases that were analysed, three contracts were renewed without an associated increase in rent.

Fidelidade, Caixa’s former insurance arm which has been controlled by China’s Fosun since 2013, clarified that the need to sell real estate is related to a January 2016 community law that penalises the real estate investments of insurers. Fidelidade must reduce its exposure to real estate from 14% to 10% and so it has to sell properties, he explained. The insurer’s real estate portfolio is expected to fall to 1.5 billion euros.

Fidelidade has 276 buildings for sale and has received four binding proposals. No deadline has been established to complete the sale.

Original Story: Expresso – Anabela Campos

Translation: Richard Turner