The most common real estate investment vehicles in Portugal are (i) commercial companies (limited companies, private limited companies), (ii) real estate investment funds, (iii) and real estate investment companies.
The option for indirect acquisition of real estate property by acquiring shareholdings of their own investment vehicle is basically about the associated tax implications.
The acquisition of shareholdings from a commercial company is performed through the execution of a buy and sell agreement, through which the parties agree on the price and other conditions pertaining to the transfer of shareholdings, generally including obligations or conditions specifically related to an underlying real estate asset (for example, obtaining a licence as a condition for acquisition), and declarations and warranties in regards to shareholdings, to the vehicle, to the underlying real estate assets, to the vehicle’s tax position, and compliance with corresponding tax obligations.
Real estate investment funds (REIFs) are another type of real estate investment vehicle that have lately spread throughout the Portuguese market, a fact essentially due to the favourable tax system they have been benefitting from. REIFs are autonomous assets that belong - in a special pooling system - to a plurality of legal or natural persons, referred to as participants, that are not liable, in any case, for the participants’ debts or those of entities that secure their management according to law.
REIFs can develop the following real estate activities: (a) the acquisition of real estate for renting or other ways of onerous operation, (b) the acquisition of real estate for resale, (c) the acquisition of other property rights with regard to the corresponding economic operation, and (d) the development of real estate construction and renovation projects with regard to its onerous operation or resale.
Like most European countries had already implemented, the possibility of establishing real estate investment funds under a corporate body through the so-called ‘Real Estate Investment Companies’ (REICs) was introduced in the Portuguese legal system by Decree-Law No. 71/2010, of June 18.
REICs are joint investment institutions endowed as legal entities which may assume the form of a public limited company of variable or fixed capital, and whose real estate assets are held under property and managed - as trusts - by themselves or by an independent third-party entity contracted in the shareholders' exclusive interest. Their activity is subject to supervision by the Banco do Portugal [Bank of Portugal] and the CMVM [Portuguese Securities Market Commission]. Therefore, one of REICs’ main advantages lies in the possibility of being self-managed, allowing investors (REICs’ shareholders) to have a hands-on role in REICs’ operation.
In addition to these real estate investment vehicles, experts have emphasised the importance of creating REITs - Real Estate Investment Trusts. REITs are companies that exclusively focus in real estate assets, eventually acting as listed investment companies.
The CMVM considers REITs to be an important instrument for diversifying financing sources as well as stimulating and compete in the stock market, being favourable to the introduction of a suitable regulatory framework that provides the necessary guarantees to protect the market and investors.
The so-called SOCIMI (Limited Companies listed as Investment Real Estate Companies, or Sociedade Anónima Cotizada de Inversión en el Mercado Inmobiliario in Spanish) currently exist in several countries (including Spain) and, over here, they are a measure claimed by the real estate and financial industry for quite some time. Among the main advantages of this investment vehicle are transparency, simplification and security, in addition to long-term vision.
REITs have significant advantages, such as turning a real estate investment into a financial one, therefore being a good alternative to savings, and due to allowing liquidity to be transacted, a factor that often prevents people from investing in real estate.
The real estate industry estimates that the creation of REITs in Portugal would attract an investment of 10 to 15 million euros, since there is foreign capital that only invests in legal systems such as REITs. Creating this investment vehicle would only bring advantages to Portugal.
The team of the Real Estate Department of Belzuz Abogados, S.L.P. - Sucursal em Portugal is responsible for consulting, advising and monitoring Customers in negotiation and contracting, as well as in the constitution and monitoring of special vehicles for real estate investment. The Real Estate Department provides advice on real estate transactions, reports and due diligences, private contracting and real estate registration, real estate management and monitoring of real estate brokerage companies, including monitoring of condominiums and respective administrations and advice in the area of tourist developments and local accommodation.
Belzuz Abogados SLP
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