REAL ESTATE FUNDS:
Definition, risk, and offer
What is an “investment fund”? Before looking at the specific case of real estate funds, the reader should know that an investment fund, in general terms, is a cluster of assets that have been purchased with the savings of a group of investors, due to which reason each one is a proportional owner of the assets acquired.
And a “real estate fund”? More specifically, a real estate fund is that which uses the savings of investors to purchase and lease properties, and pay all returns with the flow of the leases. Nevertheless, real estate funds can also sells the assets they have acquired to pay increases in the surplus value, which will partially constitute the return for investors.
Nature of risk of a real estate fund: The common perception is that these funds are profitable and sure “because the price of real estate properties always increases”; but this is not entirely true, since as the reader has been able to appreciate in previous months, the price of real estate properties can also diminish before certain circumstances.
Also, since the flow of income for investors of a real estate fund is backed with the flow of leases for that fund, which derives in risks of another type:
- Risk of concentration of properties: This is when the fund invests in real estate properties of a few economic sectors, that if obliged to stop leasing, would consequently affect the flow for investors.
- Risk of concentration of lessees: That is, the same person or entity leases a very large percentage of properties.
- Risk of clearing: This consists in that once lessees stop leasing, it is very difficult to find tenants.
- Risk of liquidity of participation: These participations should be bought or sold through the stock market, but how easy or hard it will be to sell them, will depend on market conditions, due to which reason, this cannot be guaranteed.
Offer of real estate funds in Costa Rica: Hereinafter, web pages that offer this type of funds in Costa Rica, but readers must remember their obligation of fully understanding what that instrument consists in; we therefore encourage them to carefully read the prospect issued by real estate funds.
www.aldesa.com
www.bancobcr.com
www.bancocuscatlan.com/costarica
www.improsa.com/safi/safi_costarica/index.html
www.interbolsa.fi.cr/index.aspx
www.popularsafi.com
www.grupoacobo.com
Costa Rican Free Zones
AG Abogados takes full advantage of its diverse human resource department and has formed a work team focused in the complete assistance to companies located in Costa Rica Free Zones, either with operation or in initial establishment.
Options for your investment?
In accordance with the current legislation in Costa Rica and the new provisions that have extended the benefits and effectiveness of the investment regimes, there are many options, all with excellent competitive advantages. These apply whether or not your company is established under the Free Zone Regime or under the Active Perfecting Regime.
We can define free zones as primary extraterritorial zones of custom and fiscal operations. These are established in the country to carry out economic operations based on the importation of inputs and raw materials, the manufacturing and assembly of products, the marketing and commercialization of products, and the development of exportation services. Companies established under the free zone regime benefit from the exemption of several types of taxes, among which are:
- On the importation of raw materials and components and parts, packing and bottling materials.
- On the importation of machinery and equipment, accessories and spare parts, importation of fuel, oil and lubricants required for the operation of these companies.
- On the importation of automotive vehicles necessary for their operation, production, administration, and transportation.
- For a ten-year period, beginning with the beginning of operations, they are exempt from the payment of taxes over capital and net assets. In addition they are also exempt from the payment of territorial and real estate transference taxes, payment of sales and consumer taxes over the purchases of goods and services, and all other taxes to profits
Alternatively, the active perfecting regime is the customs system that permits the receipt of merchandise in the domestic customs territory, with suspension of all types of taxes under the rendering of a guarantee. This merchandise should be re-exported, within the terms determined by the regulations – at least 6 months for some merchandise and 5 years for others - after being subjected to a process of transformation, repair, reconstruction, set-up, assembly, or being incorporated in ensembles, machinery, transportation equipment in general or appliances of greater technological and functional complexity or used for other analogous purposes.
Among the benefits of this regime is the entry of merchandise exempt from taxes, such as:
- Raw materials, primary forms, even mixed, semi-manufactured products, merchandise designated for administrative activities (desks, computers, office supplies, for example), as well as labels, or similar items incorporated into the re-exportation product.
- Chemical and other substances considered necessary in the quantity and quality used in the process, even if they are consumed or disappear without being incorporated into the final product, with the exception of fuel.
- Machinery, equipment, components, parts, accessories and spare parts that are a direct part of the productive process, related matters, mechanical, electrical, measurement, verification or research machinery
Services we offer:
We know that the process of establishing a company needs interdisciplinary assistance, requiring accountants, lawyers, and administrators, and that frequent restructuring of the team can cause companies to lose direction, thus stopping production and the generation of profits, which is essentially the reason why they were created.
AG Abogados is conscious of this need and has formed a work team that satisfies all of these entrepreneurial and business requirements so that companies may increase production and not lose valuable time in the start up process. Our team, along with our outsourcing department is ready to provide complete administrative and professional assistance in the establishment and operation of Free Zone companies in Costa Rica. We have successfully helped a large number of companies with excellent results over the years.
