Real Estate Investment Trusts in Chile - Fondo de Inversion Inmobiliario - FII
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Real Estate Investment Trusts in Chile come from Law No. 18,815 on Investment Funds published in the Official Gazette on July 29, 1989 as amended and by administrative regulations contained in Decree No. 864 published on February 23, 1990. They are known under the Spanish name Fondos de Inversion Inmobiliario (Real Estate Investment Fund) or FII.
Legal Requirements of Real Estate Investment Trusts in Chile
A Chilean FII may be public or private. They are unincorporated enties. When public, it must be managed by a corporation, sociedad anonima, registered in Chile. The Chilean Securities Commission - Superintencia de Valores y Seguros - SVS - must approve the FII rules.
There is no legal requirement as to initial capital, but within a year of formation it's supposed to have at least an amount of the equivalent of about three hundred fifty thousand US dollars.
Private Fondos de Inversion Inmobiliario in Chile must have under fifty shareholders. Listed FIIs must have at least fifty shareholders within six months, or at least one institutional investors.
A FII cannot hold investments in another FII managed by the same entity. Liabilities may not exceed fifty percent of assets.
They are not subject to either index or capital gains taxes.
Initially they were allowed to invest only in urban real estate located in Chile, marketable mortgage notes, and a specially regulated type of real estate corporation. In 1994 an amendment allowed them to invest in other types of real estate corporations, which can invest in real estate outside Chile.
A FII cannot own shares in another FII which is managed by the same entity. Their debt is limited to 50% of assets.
Low Profit Distribution Hallmark of Chile Fondos de Inversion Inmobiliario - FII
At least 30% of the FII in Chile's income must be distributed to their shareholders, thirty days after the annual meeting. This is extremely low. The usual amount is the 90% established in the REIT law of the United States. Unless the return of an FII is suspiciously high, I don't see any reason for foreign investors to put their money into a Chilean Fondo de Inversion Inmobiliario. You'd get a highest rate of distribution from REITs in every other country I'm aware of.
A new amendment prohibits them from direct investment in real estate, which seems to go against the whole REIT concept.
Anyway, there seems to be no publicly listed FIIs in Chile.
There is no provision under Chilean law for a real estate company to convert to REIT status.
I'd love to recommend Real Estate Investment Trusts in Chile but not until they increase the amount of profits they distribute to shareholders.
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