Crédito: PixabayFibra model arrives in Peru to drive real estate
Although recent in the country, the medium already proves to be an attractive alternative for real estate industry investors and p
August 15, 2019Real Estate
An important tool for the evolution of the real estate market for allowing investments with funds raised through the capital market, the figure of the Fideicomiso de Titulización para Inversion en Renta de Bienes Raíces (Fibra) arrived in Peru recently and has already attained good results.
With a diversified portfolio – comprised of industrial assets, shopping malls, hotels and offices – Fibra Prime became the first Peruvian fibra. In its Initial Public Offering (IPO) on the Lima Stock Exchange (BVL), held in December 2018, it exceeded expectations and raised $22.5 million – through more than 140 investors, including individuals, and institutional investors.
Then, in June this year, it raised $26.5 million, and further funding and contribution execution rounds are planned for the coming months. “We will make an absorption of $25 million in November and a funded acquisition of $10 million. With this, the [Fibra Prime] assets are expected to end the year at $85 million,” says founder Ignacio Mariátegui. By 2020, the group plans to add $150 million in real estate assets, totaling $220 million.
In Mexico, although the first fibra IPO on the Mexican Stock Exchange (BMV) was only held in 2011, 176.5 million pesos (equivalent to $9 million) have already been raised, according to the Mexican Association of Real Estate Investment Funds (Amefibra).
“Many lessons have been learned. We experienced an intense exchange of information with the Mexicans, which enabled us to bring the best practices of that country, such as technical committee autonomy and high standards of corporate governance, transparency and information [...]. We implemented many of the things that worked, and learned from those that did not go so well, but that can be improved in Peru,” noted Mariátegui.
Support from the responsible bodies was also essential for the roll out of the first Peruvian fibra. “We started working with BBVA in January 2017. In 2017 and 2018, we had the support of all regulators, of the Securities Market Superintendency (SMV), of the Ministry of Economy and Finance, and [the staff of the] Lima Stock Exchange,” he said.
One of the new measures concerns the amount withheld from Income Tax (IR), set at 5 percent of the gross income applicable to real estate leases or use concessions. Previously, this percentage used to be calculated on net income and, although taxed, the amount is much lower compared to other forms of real estate investment, with rates reaching more than 29 percent, points out the EY Perú consultancy firm in an analysis of the prospects for this market in 2019.
“This is obviously a rule that can still be refined. However, as it stands today, we consider it very good,” says Mariátegui. He says there are fibras that aspire to operate in other markets, which is complex under the current legislation.
“We have spoken with the main players and understand that fibras will play an important role in the development of the local industry,” explains Leonardo Di Mauro, head of GRI Club Real Estate for Latin America.
The conference will also be an opportunity to analyze solutions for the main challenges fibras face on the Peruvian capital market and to clarify key points such as, as Mariátegui cites, the effects of debt, hedging, and exchange rate fluctuations for these media.
To drive this industry, “the possible incorporation of the AFPs [Administrators of Fondos de Pensiones, in Spanish] will be critical, as this will add volume and, thus, liquidity [to the trusts],” says the founder of Fibra Prime.
The first edition of Peru GRI is scheduled for August 20 and 21, in Lima, and will bring together around 100 real estate leaders from the Andean region. Go to the event’s website for more information.
With a diversified portfolio – comprised of industrial assets, shopping malls, hotels and offices – Fibra Prime became the first Peruvian fibra. In its Initial Public Offering (IPO) on the Lima Stock Exchange (BVL), held in December 2018, it exceeded expectations and raised $22.5 million – through more than 140 investors, including individuals, and institutional investors.
Then, in June this year, it raised $26.5 million, and further funding and contribution execution rounds are planned for the coming months. “We will make an absorption of $25 million in November and a funded acquisition of $10 million. With this, the [Fibra Prime] assets are expected to end the year at $85 million,” says founder Ignacio Mariátegui. By 2020, the group plans to add $150 million in real estate assets, totaling $220 million.
Mexican inspiration
Peru is moving towards replicating Mexico’s successful fibra model, which has been making progress in the institutionalization of the capital market and has become a benchmark for its neighbors in the tropicalization of the American Reit model, which has reached more than 225 funds and is worth $1 trillion. Approved in Peru in December 2016, the act that promotes capital market development (No. 20532) came into force on January 1, 2017.In Mexico, although the first fibra IPO on the Mexican Stock Exchange (BMV) was only held in 2011, 176.5 million pesos (equivalent to $9 million) have already been raised, according to the Mexican Association of Real Estate Investment Funds (Amefibra).
“Many lessons have been learned. We experienced an intense exchange of information with the Mexicans, which enabled us to bring the best practices of that country, such as technical committee autonomy and high standards of corporate governance, transparency and information [...]. We implemented many of the things that worked, and learned from those that did not go so well, but that can be improved in Peru,” noted Mariátegui.
Support from the responsible bodies was also essential for the roll out of the first Peruvian fibra. “We started working with BBVA in January 2017. In 2017 and 2018, we had the support of all regulators, of the Securities Market Superintendency (SMV), of the Ministry of Economy and Finance, and [the staff of the] Lima Stock Exchange,” he said.
Legal adjustments
At another point relevant to the progress of this market in Peru, in August 2018, the country’s Executive enacted a decree (No. 1371) that amends the new rules and legislative decree No. 1188, with the aim of improving the applicable preferential tax treatment and the profitability of Fideicomiso de Titulización para Inversión en Renta de Bienes Raíces and Fondo de Inversión en Renta de Bienes Inmuebles (Firbi) – another possible investment model in the industry.One of the new measures concerns the amount withheld from Income Tax (IR), set at 5 percent of the gross income applicable to real estate leases or use concessions. Previously, this percentage used to be calculated on net income and, although taxed, the amount is much lower compared to other forms of real estate investment, with rates reaching more than 29 percent, points out the EY Perú consultancy firm in an analysis of the prospects for this market in 2019.
“This is obviously a rule that can still be refined. However, as it stands today, we consider it very good,” says Mariátegui. He says there are fibras that aspire to operate in other markets, which is complex under the current legislation.
Peru GRI 2019
The progress of fibras in Peru is of great importance to the country’s real estate industry, which has prompted the first edition of Peru GRI to open with a panel on the participation of these media in driving the real estate market.“We have spoken with the main players and understand that fibras will play an important role in the development of the local industry,” explains Leonardo Di Mauro, head of GRI Club Real Estate for Latin America.
The conference will also be an opportunity to analyze solutions for the main challenges fibras face on the Peruvian capital market and to clarify key points such as, as Mariátegui cites, the effects of debt, hedging, and exchange rate fluctuations for these media.
To drive this industry, “the possible incorporation of the AFPs [Administrators of Fondos de Pensiones, in Spanish] will be critical, as this will add volume and, thus, liquidity [to the trusts],” says the founder of Fibra Prime.
The first edition of Peru GRI is scheduled for August 20 and 21, in Lima, and will bring together around 100 real estate leaders from the Andean region. Go to the event’s website for more information.
