At the end of April, the call for a “sale tender” was published for a 18,106 mt² lot on Calle Centenario and Gran Avenida, on the border of the communes of San Miguel and Santiago, next to the Víctor Jara Intercommunal Park. That land was the former San Diego Station, owned by the State Railway Company (EFE). The area has mixed land use and allows the construction of residences, shops and parking lots. The fiscal value of the property is 48,052 UF, almost US$2 million. But, consultants that work with large real estate players informed CIPER that the commercial value of the land ranges between US$17 million and US$20 million, due to the fact that it is located in the heart of the emerging Franklin residential neighborhood and in the vicinity of the sought-after El Llano neighborhood. .

To manage the sale, EFE hired GPS Property Solutions S.A., a company that –according to market values– could charge a commission of 1% to 2% of the price involved in the transaction. Considering only the lower amounts (a price of US$17 million and a commission of 1%), the real estate manager could be left with about $127 million (at current exchange rates). Neither EFE nor GPS informed CIPER of the values ​​involved in the sales advisory contract.

EFE directly selected GPS Property Solutions, without public bidding, to hand over management of the business. If this caused noise among the officials of the public company, the alarms of a possible conflict of interest ended up going off because one of the members of the EFE board of directors is, at the same time, a member of the board of directors of the company that benefited from this deal. direct: Joaquín Brahm Barril, who is also the father of the general manager of GPS Property (Joaquín Brahm Rivas) and ex-brother-in-law of one of the founders of this company (Pedro Pablo Rivas).

EFE and GPS Property assured CIPER that there is no conflict of interest because the state company's board of directors was informed of this relationship. In addition, they indicated that in this case there are no prohibitions to enter into contracts between related parties, because both are public limited companies.

The task of GPS Property is to get the best offer in the real estate market to develop the construction of a housing project for Social Integration in the former San Diego Station. This initiative is promoted by the Ministry of Housing and Urban Planning (Minvu) in agreement with EFE since the end of 2020.

Whoever wins the tender must build between 700 and 1,000 apartments and deliver -as a form of payment- 30% of these homes to EFE. In this way, depending on the volume of the project, the public company will be left with a number of departments ranging from 100 to 300 units. The EFE apartments will be made available to the Minvu to be occupied by beneficiaries of the DS52 rental subsidy. The Minvu committed to financing these subsidies or their equivalents for 40 years. EFE will receive the rental payment for these departments.

The tender is the kickoff to one of the government's most ambitious housing Social Integration projects, which seeks to generate housing solutions for more than 80,000 families, based on public-private collaboration.

REAL ESTATE ENTREPRENEUR

GPS Global Property Solutions, known as GPS Property, is a real estate manager that was founded in 2007 by Alejandro Reitze, Pedro Pablo Rivas, Francisco Rojas and Lorena Tapia, all former executives of the international manager Colliers.

Starting in 2013, the company added three strategic names to its board of directors: Oliver Alexander Flögel, former manager of Telefónica; Jorge A. Lesser, director of EuroAmerica and Esval, and the renowned real estate businessman, partner of Lo Campino and former director of Parque Arauco, Joaquín Brahm Barril.

The arrival of Brahm Barril, who is vice president of the Association of Real Estate Developers of Chile, was highlighted in El Mercurio by the then general manager of GPS Property, Lorena Tapia: "Brahm provides us with the know-how for the evaluation of housing development projects.

Joaquín Brahm Barril was treasurer of the UDI, and comes from a family related to politics. He is the brother of the president of the Constitutional Court, María Luisa Brahm, who was an adviser to Sebastián Piñera in his first government. And his brother Jaime Brahm was mayor of the Los Lagos Region in the same administration. At that time Joaquín Brahm Barril was president of the EFE board of directors.

On May 10, 2018, in the second term of Sebastián Piñera, he returned to the corporate governance of EFE, where he is a member of the Audit Committee together with the directors Cristián Solís de Ovando Lavín, Pedro Pablo Errázuriz and Cristián Andrés Ureta, according to It is recorded in the company's reports. In 2020, he assumed the presidency of an area of ​​the board of which there was no record in previous reports: the Real Estate Committee, where real estate policies are analyzed and proposed to the EFE board of directors. This committee also includes the president of EFE, Pedro Pablo Errázuriz; the general manager, Patricio Pérez, and the Commercial and Corporate Business Manager, Cristóbal Montecino. In the official records of EFE there is no information that Joaquín Brahm has left his position in the Real Estate Committee during 2020.

In April 2018, GPS Property S.A. it was preparing its passage to a new stage with investment abroad. For that, he added to his ranks another member of the Brahm family, the engineer Joaquín Brahm Rivas, one of the five sons of Joaquín Brahm Barril. The new hire came directly from the LarrainVial stockbroker, where he held the position of Finance Manager.

Joaquín Brahm Rivas is also a partner of four of GPS Property's controllers –among them his uncle Pedro Pablo Rivas– in Asesoría e Inversiones GPS Property Limitada.

The director of GPS Property, Lorena Tapia, carries out the tender for the land of the former San Diego Station. When asked about the relationship with the Brahm family, she pointed out that the charges of father and son were duly reported. Faced with the possibility of a conflict of interest, he replied: "It does not seem to us, since it is an advisory service for a public process, where the information is available to whomever it deems appropriate." CIPER requested the coordinates or access to said public information, but received no response.

AGREEMENT BETWEEN LIMITED COMPANIES

The hiring of GPS Property to carry out the tender is the result of an agreement between Minvu and EFE published in January 2021 (exempt resolution No. 58< /u>), in which it is defined that Ferrocarriles del Estado will be in charge of choosing the company that will carry out the bidding and the Minvu will be in charge of the design guidelines of the housing project.

EFE explained to CIPER that they opted to outsource the real estate advisory service, among other objectives, to have "more transparency." They did so, they indicated in the state company, through a process they call "quotation request", for which they would have invited a series of companies in the real estate market to participate: Colliers, Alaluf, JLL, GPS Property, AGS Visión Inmobiliaria , Engel & Volkers and CBRE.

According to Ferrocarriles del Estado, only three responded with proposals: GPS Property, Alaluf and AGS Visión Inmobiliaria. CIPER consulted part of the companies named by EFE and at least one of them indicates that it did not know of, nor does it have support for, any call to be part of the process.

The state company reported that the contract would have been signed at the end of 2020, after "defining the contracting of GPS Property services, as it is the most convenient offer."

Lorena Tapia, director of GPS Property, recalls that they were "invited to submit a Bid Proposal together with other brokers and real estate advisors, being selected to advise them in the process." CIPER consulted the total cost of the service that GPS Property S.A. must deliver, but the company indicated that these data "are within the confidentiality framework signed with EFE."

EFE pointed out that on November 19 of last year its Internal Comptroller's Office approved and presented to the board of directors of the state company a declaration of conflict of interest for the relationship between GPS and Joaquín Brahm Barril. The latter also "presented the conflict of interest declaration forms that are required in EFE's contracting processes" and later "abstained from intervening in this operation."

According to the state company, "there is no potential future conflict in the Public Tender entrusted to GPS", since the role of this company is framed in advising and disseminating the process and the "evaluation and adjudication of the proposals will be carried out by EFE ”. But, the director of GPS Property herself pointed out to CIPER that within its functions there are "technical visits, reception and analysis of offers".

Despite the fact that the State Railway Company indicated that the procedure used for this operation was a "quotation request", this figure does not even appear in the Procurement Manual (2012) published in the Regulatory Framework of EFE Trenes , nor in the Operations Manual (2018) published in the Tren Central regulatory framework.

The figure that is most assimilated and includes requesting quotes is the "Private Tender", an exceptional option, which requires well-founded, urgent or unforeseen reasons to be authorized. When asked about it, from EFE they insisted that the figure used was a "quotation request", but they did not send the Operations Manual that includes said contracting modality.

EFE has other land tenders underway, but this is the only one in which the management was handed over to a private company. In 2021, the state company has ten public tenders for the sale, lease or exchange of land. One of them is a property in Talca of 15,552 mt², which is also being tendered for exchange and where there is feasibility for Social Integration projects with rental subsidy. According to the state company, in this case it is a smaller piece of land and in a more limited market, which does not make it necessary to hire external services, unlike the exchange of the former San Diego Station.

OUTSIDE THE REACH OF THE COMPTROLLER'S OFFICE?

Some public companies, because they are public limited companies, consider that the regulations that prohibit public bodies from having contracts with related companies and that do not must be submitted to the prior control of the Comptroller's Office. This has been stated, for example, by Codelco and Metro.

In the case of the link between GPS Property and EFE, the latter states that it is an agreement between public limited companies, which are allowed to enter into agreements with related parties in a regulated manner. They add that they complied with their internal regulations by declaring conflicts of interest from the beginning, reporting them to the Internal Comptroller's Office and having the unanimous approval of their board of directors.

But, the Comptroller General of the Republic has indicated in various reports and opinions that State companies, even if they are corporations, are not authorized to sign contracts with interested parties, except with prior authorization from the Comptroller and the Chamber of Deputies and Deputies. This was determined by the control body this year when approving the creation of the Data Observatory Foundation, which in its statutes allowed contracts between related parties. According to the Comptroller's resolution, this "does not agree" with what is stated in Law No. 19,886 "which is applicable to all State entities and which prohibits, as a general rule, said contracts and authorizes them exceptionally."

The opinion of the Comptroller's Office, dated February of this year, on the performance of an audit of Metro's administrative contracts to investigate conflicts of interest between related parties is along the same lines.

In 2017, after the issuance of a Comptroller's report, which investigated the contracts between Codelco and related companies (2013-2015), the comptroller Jorge Bermúdez explained before the Mining and Energy commission of the Lower House that the state company must be governed by the articles of the Public Procurement Law that prohibit contracts between related entities, with exceptions. Codelco took its case to court.

Enrique Rajevic, lawyer and administrative law academic at the Alberto Hurtado University, points out that “it is difficult to give an opinion without studying all the background information, but in a case like this, article 4 of Law 19,886, paragraphs 6 and following, which indicate that a contract with related parties requires that exceptional circumstances justify it, that they adjust to conditions of equity (according to the market) and that the approval by reasoned resolution be communicated to the Comptroller General of the Republic and to the Chamber of Deputies ”.

CIPER consulted the State Railway Company, if it had sent the background of the contract with GPS Property S.A. to the Comptroller's Office or to the Chamber. The company responded that "it is not subject to prior examination of the legality of its actions by the Comptroller General of the Republic, nor should it report this type of contracting to the Chamber of Deputies."

The Comptroller General of the Republic declined to refer to the case, pending a formal complaint.

LEASES FOR 40 YEARS

CIPER contacted three real estate agents to find out the commercial value of the land in the San Miguel area. In the first place, they pointed out that Franklin is on the way to becoming a new real estate center and that EFE's land has been observed by various investors for a few years. Land prices in that area, they indicated, are between 23 UF to 27 UF per mt². According to these values, a property like EFE's, which has 18,106 mt², would be equivalent to 416 thousand UF or 488 thousand UF, about US$17 million to US$20 million.

Regarding the rental values ​​in the same area, according to the UC Institute of Urban and Territorial Studies, in the adjoining El Llano neighborhood of San Miguel, the rental offer price is 13 UF per month on average, reaching a maximum of 14 UF per month. Just over $385 thousand per month.

In the case of the agreement between Minvu and EFE, between 700 and a thousand apartments could be built on the land of the former San Diego Station, depending on the proposal of whoever wins the tender. This means that EFE will receive between 100 and 300 apartments, which would have guaranteed a rental payment for 40 years, through subsidies for individuals or family groups that require a housing solution. The total ceiling of this subsidy is 170 UF, which can be distributed over a period of eight years, with a minimum required savings of 4 UF to apply. This subsidy can cover up to 80% of rents that do not exceed 13 UF per month.

If the apartments for the Social Integration project were leased at their maximum capacity, EFE could receive between 1,300 and 3,900 UF per month, from $38 million to $115 million, depending on the number of apartments built.

CIPER consulted the Minvu if in that portfolio they were aware of the conflict of interest between GPS Property and the state company: "We clarify that the Ministry of Housing and Urban Development had no interference in the decision of the State Railway Company, EFE , owner of the land, to contract GPS in its bidding process”, was the response.

The bidding process is ongoing and GPS Property continually highlights the articles that are published in El Mercurio regarding this mega project of social integration. And according to its latest update in that medium, a dozen interested parties have bought the bidding rules. Proposals will be received until July 21, 2021.