REIT’s (Real Estate Investment Trusts), have been used for decades as a way for a corporate entity to invest in various real estate. The REIT structure is similar to the structure that mutual funds provide for investment in stocks, except with a REIT the investment is real estate. In 2007, the global real estate market represented more than $900 billion of equity capitalization and was continuing to grow, according to the National Association of Real Estate Investment Trusts (NAREIT). Many people may automatically think of REIT’s as being available in the US, England, Australia and Japan, but Latin America is starting to get in on the action.
Until recently only Brazil, Mexico and Argentina had offered investors the option of a REIT. The popular investment vehicle had curiously never before been offered in one of the most solid, stable, and transparent real estate markets in Latin America- but finally Uruguay proudly joins the list.
According to Patrick Archer from InvestBA, Uruguay’s first REIT recently raised US$60 million from both individuals and institutional investors. It was structured as a trust, and will now go after investing in some impressive commercial property. Initial investments include some prime office space in the capital city of Montevideo. This office space already has a good track record and solid long-term contracts in place.
REIT’s are a great way for the type of investor who may be more comfortable investing in mutual funds or stocks to get into the world of real estate while still maintaining a sense of liquidity. A REIT also offers investors with limited capital who would not otherwise be able to buy a hotel, a warehouse, a shopping center, or prime office buildings the chance to get in on these serious investments. REIT’s have been known to be fairly stable because solid investments with long-term leases are usually used. Some REIT’s are more aggressive, so make sure that you know what exactly is being held in the portfolio of your REIT.
Uruguay seems to be a perfect fit for a REIT. It is a country that has a long-standing tradition of observance for the law and respect for private property, which has never been jeopardized throughout any changes of government. This creates an ideal framework for solid real estate investment. It is also been granted the qualification of ‘investment grade’ by Duff and Phelps and IBCA. Investors have been clamoring to Uruguay for years because of its prime real estate and straightforward investing practices. With the combination of commercial options in historic Montevideo, gorgeously sprawling rural estate land, and the always-increasing prices of oceanfront real estate including that of the ultra-popular Punta del Este area, I foresee many other REIT’s in Uruguay following this lead of this first offering.
If you are an investor who only owns shares in US REIT’s, you are literally missing out on a whole world of opportunity. If what they say about real estate is true, that it’s all about location, location, location, why not expand your vision and go get in on the action by adding some of the best real estate in the entire world to your portfolio? Especially with the real estate atmosphere in the US the last few years, it makes more and more sense to diversify your portfolio to include international investments. As investors seek increased diversification, income and total return opportunities, the securitized international real estate market offers a compelling addition to investors’ portfolios.
You can contact Cathy Brown at email@example.com, say hi to her on Twitter at @LatinAmerExpats, or you can also find her through her Andean Expedition company website www.antuylucero.com.