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DEFINITION

 

What it is

Certificate of Real Estate Receivables (”CRI”) is a nominal, freely trading debt security backed by Real Estate credits that constitutes a promise of cash payment and can only be issued by securitization companies.

 

Remuneration

The titles can be paid in several ways, with fixed or floating rates, payable monthly, yearly or at maturity depending on the structure of each issue.

 

Term

Typically medium to long-term investments.

 

Advantage

Income Tax exemption for individual investors


TYPES OF CRI BY PURPOSE

 

Residential

The securitization company acquires Real Estate credits from developers, builders, banks and/or mortgage companies arising from the purchase and sale of residential properties or subdivisions. The credit risk is diversified.
 

  1. Standardized and Performed CRIs: are backed by loans secured by real estate that already have a certificate of occupancy.

  2. Not Performed CRI: are backed by loans secured by real estate not yet finalized. 



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Corporate

The securitization company acquires real estate receivables arising from lease contracts. The credit risk is concentrated on one or a few debtors.

  1. Anticipation of Revenues: The lessee anticipates the revenues of the lease contract. 

  2. Built to suit: The property will be designed and custom built to meet the needs of the client, in a way that the company makes use of the property without the need to immobilize capital. Is backed by a non-standard long- lease contract.

  3. Sale-and-lease back: Sale and lease back of the property at the same time, with the purpose of turning fixed assets in capital available for investment. Is backed by a non-standard lease contract with less corporative risk.

CRI: REAL ESTATE RECEIVABLES CERTIFICATES

REAL ESTATEMENT INVESTMENTS

In recent years the securitization of mortages in Brazil credits has developed at a very fast pace.  This growth can be explained by the need to finance the real estate industry, aligned with the fact that this is a very attractive option to the investors.

 

Although the first operations were performed in the 90´s, it was only in 1997 that several companies used securitization as part of their financing strategy, but it was not until 2008 that the market began to take off.

 

 

The securitization of  Real Estate credits is a financial practice that consists in grouping various types of liabilities, notably debt securities such as invoices issued but not yet paid, debts resulting from loans, among others, converting them into standardized securities that are negotiable on the capital market.

MORTGAGE BACKED SECURITIES

Quotas of FII (Quotas of Real Estate Investment Funds) are securities registered with the CVM (Brazilian Exchange Commission), structured in the form of “closed-end fund”, with the goal of obtaining gains through rent, acquisition, property development, leasing or sale of the units of the Real Estate enterprise acquired by the Fund.

 

CCI (Real Estate Credit Notes) is an executive extrajudicial title, payable at the value calculated in accordance with the terms and conditions agreed in the contract that gave rise to it. It can be issued with or without guarantee, real or from  third parties, in a  book-entry or in a physical form. 

 

 

CCB (Banking Credit Notes) constitutes a guarantee of cash payment, necessarily backed by a loan of any kind and submitted to the legal regime of debt securities. It is not traded in the capital market but at the credit market, in which the operations take place through the intermediation of financial institutions granting loans or financing. In these transactions, the investor does not wish to be involved, or to receive any profit from the Real Estate developed, but only seeks a return on the capital borrowed. These transactions are not subordinated to the legal regime of debt securities and the monitoring from the CVM, but, instead, are regulated and supervised by the Central Bank.

 

 

LCI (Real Estate Letter of Credit) is a nominative, negotiable security issued exclusively by financial institutions and it is backed by Real Estate financing operations, granted by mortgage or fiduciary titles.

 

LH (Mortgage Note) is a debt security  issued by financial institutions authorized to grant mortgages, such as  Caixa Econômica Federal (Government-run Federal Economic Bank), Multiple Banks keeping a Real Estate Credit portfolio, Savings and Loan Associations, Real Estate Credit Company and Mortgages Companies. This title is secured by first mortgage credits and works as a loan that the investor makes with a financial institution in exchange for a free that will be added to the capital invested at the end of a specified period.

OTHER REAL ESTATE SECURITIES

  • Search for well-known companies interested in developing structures.

  • Respect the operational functioning of the market. 

  • Seek commercial links within the structure.

  • Understand investor’s needs and structure products that meet their demands. 

OCTANTE´S FIELDS OF EXPERTISE

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