Equity Projects
What are they?
In equity projects, investors become partners of the real estate developer, sharing both the risks and benefits of the project. Unlike loans (debt projects), there is no fixed interest rate or a fixed payment schedule. Instead, the return on investment depends on the commercial success of the project, and profits are distributed at the end or throughout the project, depending on the strategy followed.
At Urbanitae, equity projects are divided into:
- Capital appreciation projects: Focused on generating profits through the purchase, development, and sale of a real estate asset, typically within a short or medium time frame. The return for investors comes from the appreciation of the asset.
- Rental projects: Designed to generate periodic income through the leasing of a property. In addition to these rental incomes, investors may also receive capital appreciation if the asset is sold at the end of the investment period.
Both types share the equity legal structure, although they differ in the nature and timing of the expected returns.
Key aspects to consider
Direct participation: Investors become partners in a special purpose vehicle that participates in the real estate project, without direct involvement with the developer or the physical property of the asset.
Variable return: There is no guaranteed profitability or capital repayment, as it depends entirely on the development and outcome of the project.
Time horizon: They usually have a longer investment period than debt projects, especially in the case of rental projects.
Types of return:
- In capital appreciation, a single return at the closure of the project.
- In rental projects, periodic returns plus a final settlement if the asset is sold.
- Diversification: Investing in different equity projects allows for diversification both by strategy (rental vs. capital appreciation) and by geographic location and type of asset.
- Alignment of interests: At Urbanitae, the developer contributes their own capital to the project, ensuring their interests are aligned with those of the investors.