SURA real estate income fund will propose a capital increase to its contributors

Real estate investment funds continue to make noise in the market. On June 14, the “Real Estate Income III” vehicle of the general fund administrator (AGF) of SURA announced that it will propose to its contributors to carry out a capital increasewithout providing details of the operation.

The fund will mature in December 2025, and in March of this year it showed 40.4% vacancy among its office assetsfigures dragged down by the 100% vacancy of the former Latam building in the Renca commune (in the photo), as well as the vacancy of 75% of the Estado 10 tower – which also belonged to the airline – located in Santiago.

Meanwhile, the total unemployment rate, including its commercial and industrial assets, stood at 22.4%.

In March, it presented a 40% vacancy among its office assets, impacted by the 100% vacancy of the former Latam building in the Renca commune (in the photo).

In this context, The capital increase will be voted on in an extraordinary meeting of contributors on July 2an instance in which the creation of a new series of fund quotas will also be proposed.

Although the amount that the AGF seeks to raise and the purposes for which it would be raised have not been informed, the manager will hold a webinar for this Wednesday, in which the senior vice president of Real Estate Investments of SURA Investments, Ruperto Lira, and the senior associate of Consulting and Investments of the firm, Rodrigo Balbontín.

“Our experts will talk about the management and results of the fund, in addition to the strategy for the refinancing of the financial commitments of this“, SURA announced in a summons to its contributors.

The large real estate funds that are watching the market after the liquidation of the Toesca vehicle

Restricted debt

From the market they maintained that the operation would seek to strengthen the financial position of “Rentas Inmobiliarias III”.

Along these lines, sources indicated that it would follow the example of its predecessor fund, “Rentas Inmobiliarias II”, which approved in March a capital increase of UF 300 thousand for the partial amortization and refinancing of the debt of the Las Artes Building in Nueva Las Condes (they own 79% in the portfolio).

In a webinar about the operation, they explained that the scenario presented interest rates at their highest levels in the last 10 to 15 years, with a restricted debt market and a reduced level of debt for real estate assets.

In fact, they revealed that in November 2023, a financial advisor was hired to renegotiate the debt of the Las Artes Building with the original financier, “along with evaluating refinancing alternatives.”

According to SURA, they contacted 12 financial institutions, of which only four presented proposals for the operation.

That is why they outlined three possible alternatives, in which the first consisted of selling the tower and paying off the entire debt. “Under current market conditions it would imply making (a) loss of 47% of the fund’s assets,” they warned.

The second corresponded to a loan to the fund for the partial amortization of the debt, but there would be a “legal impossibility of participation for those related to AGF SURA,” they clarified.

Finally, they proposed a capital increase and partial debt repayment. In addition, the extension of the period to liquidate the fund was approved, from a minimum of 18 months to one that “may not be less than 24 months,” reads the internal regulations.