Hi Bill,
All very good points, please continue to upload any new info you may uncover. I am also researching the Portuguese PE Fund route vs physical RE and was concerned about financial transparency & full disclosures of these local funds.
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Sure thing! I’ve copied your lawyers tab and added it as a 2nd tab to the funds comparison spreedsheet.
Welcome Bill! Appreciate the expertise of a lawyer in the conversation. =)
I agree with you on priorities – fees are less important than track record and performance. The spreadsheet simply contains what we currently know. If you learn more, please do request edit access to contribute.
I share your concern about NEST’s 50% profit share and worry about the psychology of thinking more expensive = better. As for the lack of disclosure, do you think a name brand underwriter helps mitigate that risk?
Overall what I’m hoping is we can leverage the collective wisdom of this group to assess and evaluate all Portugal GV funds. Just as Amazon provides product reviews to those who haven’t bought every product, so too should we be able to build collective knowledge without individually having to meet with or invest in every fund out there.
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Personally, I am pretty convinced on the fund route for a number of reasons. The most important one being that I am very confident that I would get completely fleeced if I tried to find a decent property for investment! Also, trying to find a good property at the right price point would be a challenge (although there are no doubt plenty of properties for sale at right around €500k, but I suspect their real value is much lower), then there are additional, substantial fees for refurbishment, purchase costs and taxes, maintenance and management, etc. All in all a very hefty investment, and unlikely profitable.
On the other hand, the nice thing with property is, if all goes to hell and you’re invested in a fund, you are the proud owner of a piece of paper, whereas if you buy a house, no matter what, you’ve still got a house! That is worst case scenario thinking, but stranger things have happened. And of course, none of this logic applies if you are now, or soon plan to be living in Portugal (I do not plan to be anytime too soon), in which case buying reap estate might make sense.
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Agreed Faizal, the more we can share our knowledge, the better off we will (hopefully) be! I am in many ways impressed with NEST, as both the fund manager and advisor seem to be the most experienced of the choices so far, and seemed to have raised the most capital (which I think is very important). They were the front-runner for me in fact, and I still may invest with them. And yes, having well established companies involved, particularly if they are investing, is a huge positive in my opinion.
I am concerned partly on the economics, because I don’t fully understand the distribution (or what is referred to as the “waterfall”), but also because I have misgivings about the future of retail and commercial, where they are focused.
But I certainly have not discounted them, and will continue to consider them seriously.
Why you guys dont connect with a Portugese banker or fund manager ,put your investment all together and make your own fund recognised by the Portugese Gov,instead of searching for the right one?At least you know with what to deal,there might be some hurdles,but you can put together the best options for your needs.Just a suggest.
The lawyer tab is very helpful. Where did the specific list of lawyers come from? I have a list as well, but finding actual reviews of their quality is complex. I’m just starting some interviews. Would be happy to call some of these folks as well if it would be helpful.
@AlamoMustang provided this particular list of attorneys. Feel free to request edit permission and add yours!
Thanks for all the points. My biggest costs will not be attorneys or fund fees, but rather the opportunity costs of not investing the money in either US equities or a US PE fund that will return more. Just a 3% annual compound earnings difference will be 20% in real returns or $80K.
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I agree with you on that (although given what the markets are doing right now, I’m expecting it may be better to sit on cash for the next few months!!).
Personally, most of my investments are in the US (through a typical diversified portfolio), and I like keeping it there to the extent that I can. I am doing this because I want to retire to Europe, but don’t have a passport to do so. So for me, this is basically a way to purchase that right. If I get a return on the money I spend, I will consider that a bonus, but that is a secondary consideration for me. I am certainly not doing this because I think it’s the best investment option available, and am most worried about losing money (never any guarantees in investing, and even less here as far as I’m concerned). I am hoping that the fund route will minimize risk to the greatest extent possible. I’m quite certain that if I went the traditional route of purchasing real estate, I’d get completely fleeced.
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I am getting ready to transfer dollars over to the fund. At $1.20 per Euro that has a bigger effect than being concerned about fees. When I sent money over to the immigration attorney it was at $1.13.
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There’s certainly no question that that’s one of the biggest variables!
So do I understand that you have already made your decision as to which fund you’ve chosen? If you don’t mind sharing, very curious which one and for what reasons.
I chose Nest. I prefered Dunas Capital, but was nervous about house rehab market. Normally I would not go with the fund that is heavily marketed. What appealed to me with Nest is that they have the ability to charge above market interest on construction loans if things slow down.
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That’s interesting about the construction loans, and not something that I saw.
I think Nest is a good choice, and they are the ones I’ve been leaning towards. They seem very experienced and professional, and most importantly (from my perspective) seem to have done the best job raising capital (I like Dunas too, but they’ve only raised a bit over €5m, which worries me).
My only hesitation is investing in commercial real estate (or any real estate) right now. But I may end up going with Nest in the end as well.
Anyway, congratulations, and hope it goes well for you!!
Well, I have also been reviewing several funds including one from Quadrantis Capital in renewables - not guaranteed returns but definitely a sector which is seeing strong interest and good visibility on project completion and exit. Has anyone looked at Monarque funds - seemingly well-experienced like the Lince guys and c. 30-50% of investment will be in listed or highly rated securities. They seem to be targeting 5% return thereof - still have to speak to them to get better detail but any views on this? On Lince, I think there is too little return threshold. Like NEST too and is in consideration criteria. I buy William’s argument that no one knows the structure of retail/commercial post COVID, but given the time frame and if you believe in Lisbon being a tourist attraction, it is not a bad bet. I am sure if not 2021, 2022 will see full-fledged travel yet again.
I like the idea of the fund investment. I am thinking of suggesting it to my clients. Much simpler than a real-estate transaction and with less up-front fees. If inflation picks up, they migh provide a decent hedge, granted they are non-REITs. Also many real-estate projects are way overvalued. For example, an large established group is currently proposing a project respecting the 350K GV treshold in a small village not too far from the coast. They are selling the property at 3,000 euros/sqm whereas high-end comparables scarcely sell above 1,200/sqm! And that is with no buy-back clause. It’s ridiculous, but they’ll still find customers very quickly.
In my opinion, promoters and buyers are currently missing the big opportunity in Portugal, while they are all doing the same mistake as in Cyprus and in the Caribbeans. They focus too much on luxury properties. It’s fascinating.
That said, with proper expectations, you can find good value with a property investment.
As mentioned, I like the idea of the fund investment. But in practice, for now it looks a little bit too clever for my taste. I will have to make a deeper evaluation.
To have worked in private investment in the past, a big question for us was always about the transparency of the offering memorendum. As Bill previously mentioned, many have unusual models, to say the least. I am always wary of clever investment models, and I will see a redflag when the documentation is limited or when it can easily lead to misunderstandings. And then you know that the average life expetancy of a fund is 5 years… Some of these funds seem slightly too oportunistic for my taste; they remind me of these new real-estate developments (often terrible) that began sprouting in the Caribbeans over the last decade, once Grenada and the others established their citizenship by investment program.
Would be interested to know what you’ve learned about Quadrantis and Monarque. On the one hand, it is tempting to invest in a “true” venture capital fund (i.e. investing in start-ups as opposed to real estate), as the potential returns are higher. On the other hand, the risk is higher too!
You are probably right about retail returning (I’m less sure about commercial, as the world is going to change big time, and I think commercial RE has some long term problems). That being said, perhaps because of Covid, valuations for retail/commercial are/will become attractive. (That’s just a guess – I have no idea which way it will actually go!)
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I am pretty convinced with the fund versus property investment. As I mentioned earlier, I am sure I would take a beating on the actual valuation, and there are also significant fees. If you are going to live in Portugal sometime soon, it might make sense (I will not in the near future), and so I want to keep my transaction costs as low as I can to qualify for the GV.
As for the documentation, I have just gotten used to the fact that Portuguese funds use documentation that contains a LOT less information than your typical Cayman fund. While I do find that a bit unusual, to be honest, most of the information in those prospectuses are just full of disclaimers (written by us lawyers of course! 
) about why you shouldn’t invest, why you are almost bound to lose money, why it’s the worst investment you could ever make, etc.!!
On another note, did anyone watch the Rock Capital webinar today? Despite the rather annoying technical gaffes at the beginning (where they couldn’t get started for 15 minutes!) and a presenter who lacked confidence, they have (I think) an extremely compelling financial modeling. Management fees are only 0.5% (and 0.35% if they raise more than EUR 20m), which is extremely low (the average being 2%). Then, they only get a performance fee after a 30% hurdle rate (in non-technical terms, that means they only START to make money after they return 30% profit to the investors). In addition, they say that they have invested their own funds (which means that they will presumably share in that initial return).
I find this very, very interesting, as they will be VERY motivated to get a good return. The sector is refurbishment of residential real estate, which I personally think is a decent, conservative play (by which I mean I think there is lower risk than investing in start-ups). The fund manager is Lince, which I understand is one of the more experienced fund managers.
I have some questions for them, including the track record and experience of Rock as fund advisor (which doesn’t seem substantial at first glance), as well as how much capital they raised and how much of their own they have invested, which are both key factors for me. (Rather annoyingly, I asked this question early on in the webinar. They ignored it, which I find somewhat troubling, although I had to jump off before it ended, so if anyone did tune in and knows the answer, please advise).
I have already scheduled a meeting in a couple of days, and will report back to all.
Bill
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Thanks, Bill. I attended the webinar today as well, and have very similar questions.
If I remember correctly, they said they had raised about $2M so far, with about $500K of their own money as part of their figure. It was also mentioned that they would be open to drafting a side letter that their involvement would stay around 15-20%. I also had some sound issues throughout, so I may have missed a moment or two of the details.
I really appreciated the info about current market values in Lisbon. All of my research so far is that so many of these valuations are inflated to hit the GV mark, and may be projections of what the properties should be worth in 5 years, including the guaranteed yield.
Would love to hear your update after the call.
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