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Tuesday, 28 June 2011 03:33

Brazil launched legislation back in 1993 allowing "Fundo de Investimento Imobiliario" (FII) which can listed on the stock market if they have at least 50 investors. The break-through came in 2006, since when they have been tax free for individuals (though not companies), subject to a 10% on share ownership by any one person.  At least 95% of net operating income and capital gains must be distributed to unit holders on at least a semi-annual basis, and it must be derived directly from real estate (other income is subject to taxes). Alas, they cannot leverage debt (must be all equity funded), and pre-existing companies cannot coonvert into FIIs (hold more than 25% of the shares), which in practice are big barriers to entry, and means most are small players with only a handful of buildings. They must also be created and managed by approved financial institutions, though (partly as a result) do not need a minimum capital. Like trusts, FIIs are not a legal entities but rather contractual arrangements made between investors and a fund manager. They are closed-end though can be of indefinite duration.

Last Updated on Wednesday, 27 July 2011 09:25