The Republic of Ecuador is the 7th largest economy in Latin America, located between Colombia and Peru on the Pacific Ocean. The country is split into 24 provinces, with Quito the capital city located in the province of Pichincha. Quito, Cuenca and the Galápagos islands are World Heritage sites. The country is also spilt into 4 geographical regions stretching from the north of the country to the south; the coast (la costa) which consists of the provinces to the West of the Andean range, the mountains (la sierra) which consists of the Andean and Interandean highland provinces, the orient or east (el oriente) which consists of the Amazon jungle provinces and the Galápagos islands (la región insular). Each region is very different in respect of climate, diverse landscape and population.
As a Latin American investment location it is fairly unknown to most professional investors with Brazil, Colombia and Chile having received the most international exposure and therefore investment. We believe Ecuador has been over “overlooked” even when the country converted from the Sucre to the US dollar in 2000. Now with a growing population and continued infrastructure projects investment demand is high with the property sector continuing to grow year-on-year. Today Ecuador offers better investment returns than Brazil, Colombia and Chile did in their prime years of growth. The big advantage Ecuador has over other Latin American countries is the US dollar which enables investments to offer consistent returns.
Ecuador has been under invested due to the lack of solid investments options available. Generally speaking investment options are extremely limited (particularly with investment funds) or not catered to international investors which has previously forced those who do want to invest in the property sector for example with no option other than to purchase the direct physical properties (retail). The problem with this strategy is that you will generally pay over inflated prices per square meter and will need to dedicate a substantial amount of time and money to make a standard return (maximum 8% p.a.)
Pegasus Property Funds takes all this hassle away and to date is the only company that offers a range of investment Funds of international calibre that anyone can access (Terms & Conditions apply). Through our vision and strengths buying undervalued assets and providing you with a passive yet profitable investment vehicle.
According to the Ecuadorian Government, it has been proven in previous cases that a country’s attempts to attract Foreign Direct Investment (FDI) are successful when just a small number of sectors are targeted. In the case of Ecuador, among the entire range of the country’s profitable sectors, only 4 sectors have been chosen by virtue of their economic attractiveness on a curve of supply and demand relative to FDI. These sectors are:
• Agribusiness and forestry
• Real Estate
• Fishing and aquaculture
Economic indicators remain positive in the property sector and continued consistent growth is expected throughout 2016 and the coming years. It is important not to limit yourself when investing in Latin America as it is an essential element in any diversified portfolio. Unemployment continues to drop and GDP per capita continues to rise making the investment fundamentals in Ecuador strong over the medium to long-term.
Ecuador came second for the best place to retire in 2016 and won the best place to retire in 2015 achieving a score of 91.1 out of 100 in various categories ranging from real estate to health care. The city of Cuenca was named the second best city in the World to live in 2015. Ecuador also came out on top in 2013, 2014 and 2015 as the top visited expat destination.
Location, Location, Location! Independent studies have shown that the primary factor when selecting any type of property for investment purposes, no matter where it is, that location is the most important fundamental, as it dictates both the acquisition price as well as the potential gains that can be made. Additionally it is important to understand there are various types of location, and it is important when selecting assets that the locations with the most upside are selected. These are not always the current most desirable areas but locations that have the highest future growth potential which therefore maximises the resale value.
All assets in the funds are currently concentrated in the 3 major urban areas in Ecuador due to logistics, price, demand and growth potential, however, should we identify an opportunity in another province or city we may invest a percentage of the portfolio of the Funds in order to benefit the overall performance.
• Quito (capital city) in the province of Pichincha.
• Guayaquil (largest city) in the province of Guayas.
• Cuenca (3rd largest city) in the province of Azuay.
Each province offers different demographics with regards to population, landscape, climate, type of land, type of construction, infrastructure (current and future), purchase and sale price per m2 of the assets in the funds varies based on the analysis of our research team and approval by the Fund Advisory Board (FAB).
Where construction forms part of the funds strategy it is important that the correct type of property is constructed. The real estate market in Latin America represents an excellent growth opportunity, with demand for middle and low income housing significantly outstripping supply, and strong government incentives supporting first time home buyers. Below is a case study based on an asset in the ELDC fund.
Example; Lower income families currently make up the majority of the population and demand far outweighs supply. Housing ranging from just $30,000 - $50,000, known as VIS (viviendas de interés social) or social interest housing and housing ranging from $50,000 - $100,000 known as VIP (vivienda de interés público) or public interest housing is in short supply with sales normally 90% sold prior to building even commencing or sold in phases up-selling each phase to a maximum cap. Currently the 5 major Ecuadorian banks are required to offer mortgages for both VIS and VIP housing which currently Additionally through our network of contacts we are able to approve mortgages automatically (through a third party lender at no risk to the funds) allowing us to provide not only quality low cost housing but the facility for low income families to own their first home. This type of asset (applies to the ELDC fund only) has potential returns of 20 - 35% net.
The type and definition of Residential and Commercial properties that may be included in the funds are;
• Residential - independent or in an urbanisation (a number of properties in a community with communal facilities), low cost affordable, single-family, mid-range, luxury, detached and semi- detached housing (with one, two, and three floors) and multi-family dwellings (blocks up to maximum legal height).
• Commercial - offices (blocks up to maximum legal height), business parks, shops, restaurants, hostels, hotels and bars.
NOTE: All land purchased has basic amenities already installed such as water, telephone, cable TV, electricity and gas lines (apart from when a large piece of land is sub-divided in an urbanisation). This may require additional installation of infrastructure. We may add additional types of properties to the funds. , disposable income etc. The weighting (allocation) of the location