In Costa Rica new investment funds for development projects are a good alternative to remedy the serious deficiencies in public infrastructure affecting the country.
From a report by Fitch Ratings Central America:
Fitch Ratings - San Jose - (August 24, 2016): The rules on investment funds in Costa Rica incorporate the concept of Investment Funds for Development Projects (FDP) as an alternative to expand financing options (via placement of shares from an FDP).This type of fund can be used in public and private infrastructure projects, as well as in real estate developments (whether they are residential or commercial ones), among other projects.
Through a real estate development fund, $40 million will be raised from the local market to build an office building for the four superintendencies of financial markets.
The state run BN Funds is the manager of Fondo de Inversión de Desarrollo Inmobiliario de Infraestructura Pública -1, created by the Central Bank of Costa Rica to attract the necessary funds to construct a building to house the offices of the regulators of pensions, insurance, securities and financial institutions.
Initial expectations for the placement of shares in real estate funds worth $2 million was far surpassed, with a total of $9 million in the first year.
Laprensa.com.ni reports that "... the success of the FII is based on the fact that these pay a better percentage for the investment (from 6.5 to 8 percent a year), much more than is usually paid by the financial system on savings, but also offers fewer levels of risk for investors.
In the first five months of supply, real estate investment funds sold $3.4 million in shares with a minimum participation of $5000.
The attractive interest rates offered and "the existence of a secondary market that allows the recovery of the investment when required, have made this an attractive investment instrument", reported Laprensa.com.ni.
The crisis of 2008 halted the development of the ambitious project in the Gulf of Papagayo tourist hub, and solutions are being sought to maintain it.
The project is owned by Monte del Barco Real Estate Fund, administered by Aldesa Investment Funds.
There is need to resolve the financial situation of the project in order to continue with its development, so solutions have emerged such as the purchase of lots by the same investors in the Fund, which so far has not been successful, and the transfer of part the land to a group of providers in exchange for building the basic infrastructure so as to enable the project to continue.
Despite the international financial crisis, assets have grown by 8% in 2010 and the number of investors increased 10% to 33.432 customer accounts.
Among other options, stock funds won over many investors reappearing as an investment option with over 200 investors. Also open Growth Funds increased 12%, Megafunds with an 11% increase and Money Markets with 12%.
The decrease in the minimum asset level in Real Estate Funds to $5m encourages the undertaking of smaller real estate development projects.
The measure adopted by the Superintendence of the Stock Market hopes to adapt the rules to the current financial and economic crisis to promote investment, especially in the construction sector.
Article 75 of the General Regulation of Administrative Agencies and Investment Funds currently says the following: "Net minimum assets - the property investment funds should have a net minimum assets of $5 million or the equivalent in Costa Rican Colones at the exchange rate used by the Central Bank of Costa Rica. This net assets is applicable for all new funds that are set up.:
The Real Estate Development Funds have recorded an increase in their net assets of 539% from January to first half of September.
The number of investors has increased by 270%. This important increase is due to greater familiarity with the Funds in the market, according to various companies (called Safi in Spanish) that manage the Funds.
Changes in the regulations that govern Costa Rican investment funds have received a mixed reaction.
According to the financial markets regulator, Sugeval, the aim of the changes is to clarify various aspects of the existing rules, which date from 2006, on the basis of practical experience.
The changes include new rules on the certification of fund managers, the updating of prospectuses, and a broadening of the scope of real-estate funds.
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