Each fund manager or fund advisor has been invited to answer a series of questions about their own funds as well as the market in general. We took the opportunity to speak to the team at Optylon Krea to find out more about Prima Capital Fund.
Could you please start by giving us some background about yourself and the team
working on your fund?
The team is composed by Stag Fund Management FCR as the fund manager and Optylon Krea as the fund advisor. Stag is part of the wealth management company Dixcart, based in the UK, with international exposure, operating in the market for more than 45 years.
Optylon Krea is an investment management and real estate development company that caters to the needs of international Golden Visa investors. With €1.7 Billion managed to date, our team has vast experience navigating today’s complicated business world. We advised the first Golden Visa eligible fund when SEF (immigration office) announced the VC funds were admissible for Golden Visa investments in 2018.
All Funds combined, we advised more than 300 investors from 25 different countries for a value of €100 million, making us the pioneer and the market leader in this investment segment in Portugal.
This is Optylon Krea’s fourth Portuguese Golden Visa fund and one of those, NEXT Fund, is currently still open. Why did you decide to create this new Prima Capital Fund?
PRIMA Fund was born on the idea to expand our PRIMA COLLECTION brand. The team analysed the data and felt that in Europe there is a lack of Branded Residences supply.
During COVID, our statistics on the occupancy levels of touristic apartments exceeded our expectations. On average, our units had a +60% occupancy rate, compared to the 30% local market average. Once we realized that our units were preferable and our brand was being appreciated, we knew that our view had the required support. Despite Lisbon’s residential prices being at an all-timehigh, when you deep dive on the financials behind, you can find that there is a lot of opportunities in this sector, more specifically in the branded sector.
On the other hand, this fund combines our longstanding investors (risk takers that are expecting attractive returns) and GV investors, who tend to be more risk-averse, with a downside protection mechanism and still attractive returns, providing the support to meet everyone’s
Has the management/advisory team invested in Prima Capital Fund and, if so why? If not, why not?
Optylon Krea, as the General Partner of the fund, is required to subscribe €50,000. Additionally, and as a sign of our commitment to the fund, Optylon Krea will invest €950,000 in the Junior class, for a total of €1,000,000 investment in the fund.
Prima Capital Fund’s chosen investment profile is Branded Residences serving both the residential and hospitality markets. Please explain why this particular sector of the real estate market is the focus.
Before deciding to pursue this specific sector, we studied the market very carefully. When Europe and the rest of the World are compared, everyone can see that Europe lacks a supply of branded residences. Amongst European tourism hubs, the pipeline for Branded Residences is starting to grow but still remains low.
One additional feature is that branded residences units trade with approx. 30% premium compared to non-branded units. Based on the gathered data, non only from our brand but also from the financials within the sector, the strategy designed provides solid support for our investors (Senior and Junior).
We usually ask funds to assess their own risk profile: Conservative, Moderate, or Ambitious – but it would appear from your presentation that investors have a degree of choice with regards to the risk profile as they can select to be either Junior or Senior Equity. Could you please explain how this mechanism works?
The Prima Capital Fund will provide a combination of two risk profiles for investors. The risk-averse and risk-takers. Senior Class investors will enjoy a more risk-averse approach towards the investment since they will be supported by the Junior investors. The team designed a downside protection mechanism that will allow the protection that senior investors seek in their investments.
The Golden Visa rules state that a qualifying investment must be held for just five years but Prima Capital Fund’s lifetime runs for longer. Could you please explain the fund’s lifetime including the launch date and subscription period?
The fund was approved in June 2021, PRIMA’s duration is 6+1+1 years meaning that in June 2027 there will be a general assembly and the ones who have completed their 5 years of residency card can exit the fund and the ones who need to stay invested to complete their last 1 or 2 year can stay invested till June 2029.
On average, how long does it take to onboard a Golden Visa investor into Prima Capital Fund and what are the main obstacles in the onboarding process?
This can vary from investor to investor. Nevertheless, and assuming that everything is done promptly and accordingly, 4 to 6 weeks is the average timeline.
On the fund subscription part, Optylon Krea and Stag work together to onboard a client as soon as possible due to the dedication and know-how on the process however the bank account opening process can vary from one to another.
In general, some investors are cautious because of the funds’ lock-in periods. How do you plan to deal with investors who wish to exit Prima Capital Fund before its full lifetime?
If the investor withdraws from Golden Visa and exits within the lock-in period if there is liquidity available in the fund, he may exit the fund or we need to find an investor/s to buy the subscription units.
So it is possible and there are no penalties however it can take a bit of time.
It seems that most Golden Visa funds in Portugal are focused on real estate. In your opinion, what gives Prima Capital Fund the edge over other funds?
The strategy of the fund aligned with the target amount and the experience of the team will be the main differentiating factors that other funds will not meet.
The strategy of fulfilling a lack of supply in the targeted sector, combined with the 100+ million Euros that the fund is raising, allows the best conditions to a stable and diversified Golden Visa process.
Many of those considering the Golden Visa are currently comparing funds vs real estate. What advice can you offer to help investors make the right decision for them?
This will always depend on the risk profile of the investor. Nevertheless, numbers do favor the found route. It is more efficient, less costly, and more diversified. We understand that buying a property allows investors to depend only on themselves, nevertheless choosing a unit in the right place, managing the property to allow it to generate attractive income can be time-consuming and time is money for everyone!
Additionally, it’s the most tax-efficient way since you avoid paying municipal taxes (IMI) and property purchases taxes such as (IMT) and Stamp Duty that can reach approximately € 40k on a €500k real estate purchase as well as not having income tax nor capital gain tax unlike the direct incomes from property.
Considering that we’re entering the final months before the Jan 2022 Golden Visa rule changes, another possible benefit that may arise for fund investors who miss the application deadline is that, rather than being stuck with a property that doesn’t qualify under the new rules, they could simply invest a further €150,000 into a fund and still qualify under the new rules. It’s not an ideal scenario but at least it gives some flexibility compared to investing directly into real estate.
For people who are unfamiliar with investing in funds and may even be nervous about learning, what advice would you like to give them?
The best advice that we can offer is to always perform due diligence on the track record of the most relevant parties related to the fund. Who are they? Do they have experience? Can they present evidence of their track record?
Additionally, you should be aware of the fund’s strategy and the tools adopted to mitigate the risk. What methods will be used? Where will it be invested? What data is supporting the strategy and why do you believe that this strategy will perform? The last, but not least advice is the amount that is being raised by the fund.
Even if you are unfamiliar with this route, if you follow the grand majority of investors you will have one question answered: are they all wrong? We don’t believe so.
Considering the incoming Golden Visa rule changes on January 1st 2022, what advice would you give to investors who are currently looking into the program?
The first thing is to have the most experienced advisers. Not only in terms of fund management/advisement but also by securing the best intermediates to help you on the process.
On the legal counsel, we believe that you should prefer law firms that are used to working with the Portuguese Golden Visa program. They have established routines that allow you to be timely and efficient during the application. The second is to be efficient and fast on the onboarding process.
Fill out the required forms, perform the required tasks in a timely manner to secure that you meet the € 350k deadlines. The clock is ticking and the €350k window will close at the end of 2021.
What is your outlook for Portugal from both an investment and lifestyle perspective over the coming years?
Portugal is being discovered by the world in the past few years and this is supporting our economy.
On the investment side, there is still a lot to do, but companies are more sophisticated and ready to deal with the upcoming opportunities that are being presented to the market.
From a lifestyle perspective, Portugal is one of the best countries in the world in terms of quality of life and peace and this should support a very attractive investment