REAL ESTATE INVESTMENT FUNDS
Real estate investment funds make it possible to transform real estate investments, which by their nature take longer than investments in securities, into shares of financial assets that generate liquidity without the investor having to acquire a property directly. This type of funds, given its ability to preserve and increase value over time, represents an interesting alternative to traditional investments, especially in those market phases in which the progressive reduction of interest rates makes it attractive to invest in properties.
The minimum duration of these particular types of financial investment is 10 years while the maximum can reach 30 years. The expiry date also marks the time when the assets will be distributed. Usually there is also a target return that is then distributed through coupon payments, where applicable.
Real estate funds are created with a pre-established initial endowment of assets, variable due to the normal changes in value associated with the appreciation/depreciation of assets. These assets are divided into a predetermined number of quotas.
The first phase of the establishment of a real estate fund starts with its subscription. The objective of the fund is in fact to collect a certain amount of money from its subscribers (investors who may be Retail, Institutional and/or Qualified), money which will then be used for portfolio management. In closed-end funds, subscriptions are open until this amount is reached; once the necessary capital is reached, subscriptions are closed.
There is then a second phase, in which, once the money has been raised, the fund selects the properties to acquire. The properties are selected according to the management lines of the fund: some funds privilege residential and office buildings, other commercial properties (commercial centres and galleries in particular), others areas to be built or complexes to be restructured. Quotes may only be subscribed, within the limits of the fund’s availability, during the offer phase and redemption normally takes place only when they expire, while it remains possible to buy or sell them on a regulated market if they are traded there.
The listing on a regulated market is provided for and regulated by the laws of the various jurisdictions and ensures that the capital is more liquidable. Investors may then return in possession of the capital invested, plus any capital gains or penalized by the market discount, i.e. the difference that exists at a given time between the market price and the asset value of the quota.