Getting Started with Real Estate Investment Funds (REIFs): What You Need to Know

The logic is simple: pool capital from multiple investors to achieve projects with scale, maintain investment discipline, and gain efficiency. As a result, the fund broadens the range of opportunities, benefits from professional management and reinforces negotiating power. In parallel, it allows small investors to access markets that, on an individual basis, would be out of reach, given the capital that would be required.

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What is an FII

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A Real Estate Investment Fund (FII) is a collective vehicle that allows you to participate in the real estate market by subscribing to units of participation. The fund's assets are autonomous and are located under management of an SGOIC, which applies the investment policy defined in the regulation, with clear risk, assessment and reporting rules. Instead of directly purchasing a property, the investor is part of a common asset that benefits from scale, diversification and specialized management, with its own governance and oversight.

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• Autonomous heritage that brings together the capital of several participants to invest in real estate.
• Managed by an SGOIC, in the exclusive interest of the participants and according to investment and risk rules.
• Generate income and/or capital appreciation, distributing results according to the units held, or capitalizing on those same income by investing in new assets.

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Types and liquidity

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The legal form of the fund conditions the liquidity, the time horizon, and the form of entry and exit. In practical terms, the decision between open and closed funds defines how and when the participant can subscribe or redeem units, as well as the distribution policies (income distribution, capitalization, or mixed models).

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In terms of liquidity, the type of fund determines how and when it is possible to enter and exit: closed ones favor defined windows and a fixed horizon; open ones allow more regular movements, although subject to regulatory rules.

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• Closed Funds: consisting of units of participation (UP's) in a fixed number defined in the issue, which may be increased under conditions pre-established in the management regulations; subscription at defined times/windows; exit at the end of the fund or at events provided for in the regulation.
• Open Funds: consisting of variable number of UPs (the number of units is adjusted to demand); they allow more frequent subscriptions and redemption, in accordance with the rules of the regulation.

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Form of compensation

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The compensation policy defines how the fund treats the income generated by the portfolio and affects the investor's cash flow profile.

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• Income funds (distribution): distribute, on a periodic basis, the income generated (e.g., rents).
• Capitalization funds: they automatically reinvest income in their own portfolio, and there is no distribution

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Note: some funds adopt mixed policies (distributed part, capitalized part). The investor must confirm the policy in the fund's regulation.

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Key players

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In any FII there are clearly separated functions to ensure good governance, participant protection, and transparency. Assets are managed by a specialized entity, custody and control are under independent supervision and the link to the investor is guaranteed by those who sell the units. Together, these functions avoid conflicts of interest, promote investment discipline, and ensure compliance with fund regulations.

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• SGOIC: makes investment decisions, manages risks, and executes fund policy.

• Depositary: holds assets and oversees operational aspects (custody, flow control).

• Trading entity: promotes subscription/redemption with investors.

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Practical advantages

FIIs are designed to make real estate investment more efficient and predictable. They bring together capital, processes and specialized skills in a single structure, allowing us to access opportunities with scale, manage risk methodically, and make decisions based on consistent information. In practical terms, translate into the following benefits:

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• Diversification: exposure to multiple assets, locations, and tenant profiles, reducing risk concentration.
• Professional management: selection, negotiation, operation and disposal conducted by a specialized team, with performance processes and metrics.
• Access and scale: minimum investment generally lower than necessary in a direct property, allowing you to participate in larger opportunities.
• Transparency: clear investment, valuation, and reporting rules, which support informed decisions throughout the fund's cycle.

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Risks to consider

Like any financial instrument, FIIs involve risks that it is important to know before subscribing. Performance depends on the business cycle, asset quality, and the execution of the defined strategy. A close reading of the fund's documents helps to frame expectations and to calibrate risk.

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• Market and occupancy: rents, occupancy rates and yields vary with the economic cycle, demand and asset quality.
• Valuation and liquidity: the value of the units depends on valuations and market conditions; liquidity differs between open and closed funds and follows the rules of the regulation.
• Costs and charges: management and deposit fees, as well as other operating costs, impact net returns.
• Execution and operation: pipeline quality and daily management influence performance; operational deviations may affect results and deadlines.

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FIIs offer a structured way to invest in real estate with scale, professional management, and risk discipline. The informed decision involves understanding the strategy, costs and liquidity, ensuring that they are appropriate to the investor's profile and time horizon.

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At Nexa, management is based on criteria of technical rigor, transparency and proximity. The team favors clear investment, risk control and reporting processes, focusing on asset quality and the creation of sustainable value throughout the fund's cycle.

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