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Equity financing through the issuance and public offering of stocks, are the most competitive formula to obtain long term resources for your company. When the company wants to get resources without increasing its liabilities and get additional capital, the best option it’s the issue of shares, which increases its capital based on appropriate strategies for growth and expansion.
An investor’s profit can be derived from:
- Dividends generated by the company (equity allows investors to grow in partnership with the company and, therefore, gets benefits from the company’s profits).
- Capital Gain, which is the difference if any between the price at which you bought and the price the stock is sold.
FIBRAS are an investment trusts dedicated to the acquisition and development of real estate properties in Mexico. FIBRAS are intended to lease or purchase of the right to receive the income from the lease of such properties.
Yields obtained in FIBRAS:
By law, the trusts must distribute 95% of their revenue between investors’ owners of FIBRAS securities.
FIBRAS is a mixed system of investment with benefits that are perceived in three ways:
- Dividends. Throughout the utilities obtained from the leasing less operating expenses (fixed income).
- Performance. Throughout the performance of the BMV (Equities). Performance may generate profits if their capital gains increases, and could result in losses if the real estate market falls.
- Capital Gains. In most of the cases, this will increase with the integration of properties in a FIBRA.
FIBRAS’ main objectives:
- Enhance the real estate sector in Mexico.
- Be a source of liquidity for real estate developers.
- Allow investments in real estate to qualified and institutional investors.
- Contribute in the diversification of investment portfolios, providing a new investing alternative in a regulated market.
- Enhance financing for different commercial and industrial segments, among others.
Mortgage Real Estate Investment Funds:
Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Their revenues are generated primarily by the interest that they earn on the mortgage loans. Mortgage REITs make loans secured by real estate, but they do not generally own or operate real estate.
Mortgage REITS portfolio:
Mortgage REITs invest in residential and commercial mortgages, as well as residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS).Mortgage REITs hold mortgages and MBS on their balance sheets, and fund these investments with equity and debt capital. Their general objective is to earn a profit from their net interest margin, that is, the spread between interest income on their mortgage assets and their funding costs. Mortgage REITs rely on a variety of funding sources, including common and preferred equity, repurchase agreements, structured financing, convertible and long-term debt, and other credit facilities. Mortgage REITs raise both debt and equity in the public capital markets.
A warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry date. It is also defined as a derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame.
- Underlying stock:
Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or dividends. They can be used to enhance the yield of the bond and make them more attractive to potential buyers. Warrants can also be used in private equity deals. Frequently, these warrants are detachable and can be sold independently of the bond or stock.
- Restrictions on exercise:
Like options, there are different exercise types associated with warrants such as American style (holder can exercise any time before expiration) or European style (holder can only exercise on expiration date).