Real Estate, Real Gains

The numbers are in, and 2017 was great year for anyone with investments in Costa Rica’s real estate market. Real estate investment funds, also known as real estate investment trusts (REITs), entered the Costa Rican market in 1998 and have since helped to create a robust real estate sector. Confidence in Costa Rica’s real estate sector was further solidified most recently by American Tower Company’s REIT performance in 4Q2017. Succinctly, the holding group’s REIT was upgraded from a “sell“ rating to “hold,“ indicating expected growth and continued faith in the sector in Costa Rica and the region.

According to Business News America, in the year measured from April 2016 to March 2017, real estate investment funds in Costa Rica spent USD284 million on 32 properties. The average rate of return over this period was 6.1%. By April 2017, total assets managed amounted to USD1.33 billion, representing a 26% YoY increase as measured by securities regulator Superintendencia General De Valores (SUGEVAL).
Two investment funds (SAFI), BCR SAFI and Improsa SAFI, held 133 properties that amounted to over 90% of total investment as of March 2017. Improsa CEO Jaime Ubilia expects the real estate sector to continue progressing, becoming an even more significant pillar of the economy.
On the financial side, investment fund managers and brokers largely focused on commercial real estate as well as office buildings and warehouses. In an exclusive interview with TBY, Carlos Robles, General Manager of commercial real estate services provider Newmark Grubb, revealed that their biggest segments of the brokerage branch are retail, industrial, office space, and land for development. Robles added, “We are also strong in the capital markets and investments side,“ which include both private and public real estate funds.
Construction companies and real estate developers are in sync with investors. Several TBY interviews with construction companies and real estate developers in Costa Rica confirm shifts toward mixed-use spaces in all segments, signaling the real estate investment success seen in Costa Rica is likely to continue. Mixed-use projects are on the rise as socio-economic trends move demand toward all-inclusive properties that make the most of limited land.
Beyond segment diversification, investment is diversifying across geography as well. Aldesa, a consulting company and one of the longest-standing companies on the Costa Rica Stock Exchange, has an Income and Surplus Real Estate fund with properties in all seven provinces. Robles noted the increased development and investment opportunities outside of San José, in Guanacaste, and Limon specifically.
Major players in the real estate sector are expecting continued growth within Costa Rica but are also eager to expand regionally. Many are using success in Costa Rica as a launch pad for entering other markets in Latin America such as Panama, Colombia, the Dominican Republic, El Salvador, and Nicaragua.
Acobo Vista’s core business are REITs and brokerage services, which started in Costa Rica in 1976. Recently, especially following the 2008 financial crisis, it is seeing both increased interest in non-financial assets from investors as well as strength in regional expansion.
Diego Soto Solera, General Manager of Acobo Vista, shared the company’s regional ambitions with TBY: “Hopefully by the second half of 2018, we will be trading in all Central American countries … Our strategy is to cover the Caribbean and Central American regions before moving on to South America.“ Totaling almost USD40 million in Central America, Acobo Vista’s fund is registered in Panama, El Salvador, and Nicaragua, with plans to be registered in Guatemala and Honduras by the end of 2017 and first half of 2018, respectively.
The indications of a successful 2018 in Costa Rica’s real estate market abound, and financiers are well positioned to capitalize on the country’s high performance to unlock regional opportunities.