How to set up a FIBRA

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How to set up a Real Estate FIBRA

 

Articles 187 and 188 of the Income Tax Act specify the requirements for creating a real estate FIBRA. The following must outstanding, among others:

 

  • At least ten investors, being not related parties and that none of them, individually, own more than 20% of all certificates. Assuming that all law requirements are met.
  • Mercantile societies or real estate trusts must have at least 70% of their assets invested in real estate.
  • Should be dedicated to the acquisition or construction of real estate intended for leasing.
  • FIBRAs allow the real estate contributor the financing of real estate assets by issuing Stock Market certificates through public offering, in their distribution to the large investing public.
  • Distribution among the holders at least 95% of the fiscal results in the previous year.
  • Built or acquired Real Estate must be used for leasing and not disposed off (sell) within four years of the completion of construction or its acquisition.
  • Hold high standards of corporate governance, as indicates information from the BMV.

Due to fiscal stimuli, FIBRAs are regulated by the Income Tax Law (art. 187 and 188).

Other priorities to consider:

  • The administration manager´s should have a track record in operating existing properties of at least three years with individualized and audited information in order to demostrate his experience and and the properties financial performance that reflect efficient management and operation.
  • Structural experts certification degree.
  • The Opinion on the status of leases, especially with concentration risk.
  • Properties annual commercial valuation.
  • Properties Legal status: levies, litigation, among others.
  • Description of the destination of funds.
  • Leverage policies, related parties, property eligibility criteria, divestment, etc.

 

Certainly, the most attractive for FIBRAs investors is the adequate diversification offer; the conflicts of interests free professional administration, and the prospecting for future financial growth.