CNV Promotes Low and Middle Income Real Estate Investments

On February 12, 2021, the Argentine Securities and Exchange Commission (the “CNV,” after its acronym in Spanish) issued Resolution No. 882 (the “Resolution”) to include a new section in the legal regime for Collective Investment Products for real estate development, which had been previously established in General Resolution No. 855.

Within the framework of Law No. 27,440 for Productive Financing (the “Law”), and with the purpose of boosting participation in capital markets for the development of housing construction projects, the CNV issued the Resolution and established provisions applicable to closed mutual funds (the “Mutual Funds”) and financial trusts (the “Trusts”) for real estate development.

The Law established, in article 206, the application of differentiated rates to the distributions made by the Funds or Trusts whose investment purpose is real estate developments for housing in low and middle income sectors, mortgage loans and/or mortgage securities, as long as they meet, inter alia, certain conditions:

• including in the Prospectus or Prospectus Supplement the following sections describing: (i) the investment purpose; (ii) in the “Taxation” section, in accordance with the requirements established by the special regime, the tax consequences derived from the asset acquisition, holding and disposal; and (iii) in risk considerations, the consequences derived from the supervening breach of requirements;

• the Mutual Funds Manager or the Trustee must monitor compliance with dispersion requirements as follows: (i) that the Fund or Trust have been placed by public offering with authorization from the CNV with a life term of no less than five (5) years, and distributed among no fewer than twenty (20) investors; and (ii) that no investor or shareholder hold more than twenty-five percent (25%) of the total issuance;

• any supervening breach of the minimum investment percentage must be reported immediately to the CNV and corrected within a period of three hundred and sixty five (365) days from its configuration. If breaches were not corrected in the established deadlines, they must be communicated as “Relevant Facts” and submit the situation to the consideration of the corresponding assembly for the purposes of resolving the liquidation of the vehicle or its continuation under other conditions; and

• the CNV must inform the Argentine Federal Revenue Administration of any situation of non-compliance with the established requirements.

Regarding real estate developments for housing in low and middle income sectors, the Resolution provides a duty to carry out the investments that match the specific object within a period of time that may not exceed three hundred and sixty five (365) calendar days from the date of issuance and the requirement to affect at least 25% of the funds resulting from the placement of the specific project. Compliance with the minimum investment percentage established in the Regulatory Decree must be done before half the term of the respective product has lapsed. However, in no case may these terms be extended.

Finally, the term for the total integration of the investments related to mortgage loans and/or mortgage securities will be one hundred and eighty (180) calendar days from the date of issuance. That period may be extended only once for an equal or shorter period, and the extension decision must be communicated as a “Relevant Fact” with the grounds of the case.