Ordinance issued by Secretariat for Coordination and Governance of Federal Assets (“SPU”) provides for the appraisal of property owned by the federal government whose ownership will be transferred to FIIs in exchange for quotas, and for the method of approval of such appraisal reports.

On December 07, 2022, SPU/ME Ordinance No. 10,348 was enacted, which, for the purpose of fixing the market value of property, governs:

• appraisal procedures regarding property owned by the federal government whose ownership will be transferred to Real Estate Investment Funds (“FIIs”) in exchange for quotas of such funds, in accordance with article 20 of Law No. 13,240, of December 30, 2015; and
• the respective approval process for such procedures, in accordance with paragraph 8 of article 20 of Law No. 13,240, dated December 30, 2015.

The new Ordinance establishes that the call notice for the contracting of specialized services of structuring, constitution, administration and management of the FII (as authorized by paragraph 3 of article 20 of Law No. 13,240 dated December 30, 2015), among other provisions, must provide for the following obligations required of the winning bidder:

1. contract a specialized company, federal banks or public companies to carry out the appraisal and draft the respective appraisal report regarding each property listed in the notice; and
2. produce evidence of technical qualification and capability from such specialized companies.

Specialized companies authorized to carry out the appraisal mentioned above must fulfill certain requirements established by the Ordinance, which must be attested by the winning company of the bidding procedure.

Appraisal reports issued by authorized companies in regard to such public properties must be approved, in a simplified or complete manner, in accordance with the terms provided for in the Ordinance (together with technical recommendations). In turn, properties whose ownership will be transferred to FIIs are subject to such approval.

If the appraisal is carried out by federal banks and public companies, however, the approval process mentioned above is not required.

Once market values are established through an appraisal report (approved, as necessary), the SPU will steer the vote of the government representative at the FII Shareholder Meeting, for the purpose of transferring ownership of the properties, which must consider the market value established by the report in the transfer of ownership procedure.

The Ordinance aims to render procedures more detailed and secure to avoid uncertainty regarding the appraisal and approval of properties owned by the federal government whose ownership will be transferred to FIIs in exchange for quotas.

Demarest’s Real Estate team is monitoring new developments within the sector and is available to provide any further clarifications that may be necessary.