Hello - Just entering the GV world (Jan 2024). Hoping to choose our avenue for Portugal GV by investment in the next week or two. Mercan seems to be entirely real estate driven so I’m wondering if they are still relevant now that real estate investing is no longer an option in Portugal? Also considering La Vida as a one-stop-shop. Would love to hear from anyone regarding good/bad experiences with these companies or others. Thank you!
Closed funds or investments are sus to a lot of us. Consider an open ended fund (disclosure, I invested in an open ended fund, IMGA)
Expect extremely long delays. Likely 3+ years before your first residency visa, if not longer. It may be shorter, but the current delays are huge.
Mercan just announced an investment fund in hospitality. I don’t have many details but it looks like they are pivoting to stay in the game.
Sounds like they just wrapped their hotel investments in a fund. Which raises the question - how do they sidestep the prohibition on real-estate funds?
Just as a guess… they were building and operating a hotel, after all. So now instead of you buying the hotel asset and leasing it to the management company, they sell you a share of the management company, which happens to need a purchase and renovate a hotel in order to operate.
So they have another company that builds the hotel. The GV entity agrees to lease the completed hotel. That provides the backing needed for regular commercial loans to build the hotel.
Or they just use the GV cash as the startup capital for the company and Mercan itself builds the hotel. It’s clear to me that the GV cash is NOT the total capital, that Mercan is putting in its own money as well, and there are a lot of costs involved besides just building the hotel itself - like, say, funding salaries and operating costs for the first couple years til you get cash flow positive. Same dif.
Either way, you can characterize the GV entity as an actual operating company that hires bunches of employees and generates commercial economic activity, not a real estate venture. Really, they could even be bringing it in as that other class of GV where you are setting up a company that hires employees… wouldn’t that be clever. The only difference here would be that you wouldn’t have that “security” of owning the physical building. By now though they’ve proven themselves so that may be less of a factor in getting customers.
1 Like
I would think it might be risky to rely on a fund that is veiling their real estate ties. Would hate to invest the money and learn down the road that it won’t qualify for GV because it is still leading to real estate development. Thoughts?
On the one hand, yes, I tend to agree with @garrett that open ended funds in many ways are preferable to closed funds. Optimize is another such fund that proved popular with Nomad Gate members last year.
On the other hand, while Mercan’s offering sounds more risky on paper, at least their buy-back is supposed to kick in if you don’t get your GV. Most other closed funds don’t have this benefit. Part of what you’re buying into with Mercan is the whole GV process they can offer. I don’t think you’ll find a more streamlined operation in Portugal. Of course they can’t do anything about the AIMA delays…
Roughly speaking, you may fall into one of these buckets depending on your preferences:
-
Open-ended funds are good if want the possibility to get your capital out at any point (at the then current market value). The Portuguese stock market hasn’t done particularly well historically, so you may also be paying a bit for this flexibility.
-
Closed (private equity) funds that are not focused on real estate would be a good option if you find one you believe can make a solid return, but you’re less diversified so you can do both better or worse than investing in the open-ended funds. One potential bottleneck in terms of performance may be access to enough good deals in Portugal. On the plus side, you minimize the risk that you somehow won’t get your GV since these funds are clearly in accordance with the law.
-
Closed funds that are somewhat related to real estate (but still within the bounds of the updated law, having legal opinions to back it up) could still make sense if you think this market will do better than the private equity market. Or offer other benefits in terms of the process (like Mercan). But there’s definitely more legal risk here than the two first options. I would personally only consider a fund like this once it’s a bit more clear whether they will actually qualify or they offer a solid buy-back in case of non-qualification (and have the capital available to exercise the buyback).
-
Finally, I’ve seen one or two funds already that are really trying to skirt the new rules by letting you invest in a fund but at the end of the holding period your investment gets converted into an apartment unit. I would steer clear of any such fund, and I won’t be listing any such funds on Nomad Gate either. Not only do you risk your own GV, but if these funds get popular I think it’s much more likely the program gets completely shut down in a couple years…
And you may of course mix and match… You don’t need to only invest in one fund. You could do €250K in Mercan’s fund to get the benefits of their process, €100K in a PE fund that fits your preferences and €150K in an open-ended fund for easy access to capital if needed in the future.
The usual disclaimers apply: This is not investment/financial advice, I’m not a lawyer, don’t listen to what “some guy on the internet” says without doing your own due diligence, etc.
2 Likes
I mean… you have the risk tolerance to apply for a Portuguese GV in 2024, you can do anything!
1 Like