In the case of a closed-ended real estate fund, the question of every potential investor is how the value of investments can be preserved if the market trend changes. We chose the Costa del Sol as the Fund’s operating area precisely to be able to provide reassuring answers to this question.
As stated in the separate information sheet, the Costa del Sol is one of the least trend-sensitive regions in Europe due to the multinational nature of its residents and investors. On the real estate market mortgage purchases do not reach 50%. A significant part of buyers invest their wealth acquired in other countries and live on foreign income. The real estate market shows a permanent surplus of demand, the number of transactions has been increasing for years with rising prices. The prices per square meter are still significantly below the actual prices of similar areas (Ibiza, Tenerife, Cote d’Azur) and the peak values of the year 2007. The real estate market is therefore not overheated at all, there is no artificial bubble, and there is no need to fear a market correction. Possible economic problems may not be manifested in a decrease in prices, at most in a decrease of demand. Theoretically the market may temporarily freeze for a while.
- According to historical experiences lack of demand primarily affect unique, special, high-value residential properties. In order to avoid this danger, the Fund’s portfolio consists mainly of apartments of average value, size and type.
- The freezing of the market – if it is part of a global trend – will not be to appear on the Costa del Sol first. The Fund will have the time and opportunity to reduce its real estate portfolio as necessary before the market freezes.
- It is important that the Fund shall not be under acquisition or sales pressure. The first two years of the 7-year term are about the building up of the portfolio, and the last two years will be the time of the gradual downsizing, when no new acquisitions will take place. During both processes and the interim exchange of portfolio elements, there will be plenty of time and opportunity to take advantage of favorable conditions and passively manage unfavorable periods.
- In case of persistently unfavorable circumstances, in the absence of favorable investment opportunities, the Board of Directors may decide to close the Fund prematurely, and to pay out the capital and returns. As a final solution, if the investors agree, in order to avoid cashing out in depression and losing asset value, it is also possible to extend the termination of the Fund.