Risk factors

Investors should consider their own financial situation, their investment objectives and risk profile before making a decision to invest in the Fund, as well as carefully evaluating all the information set forth in the Prospectus and the Regulations, particularly those relating to the Investment Policy, composition of the Fund’s portfolio and the risks described below.

For the purposes of this section, except as otherwise indicated or if the context so requires, the mention that a risk, uncertainty or problems may cause, or will cause, or may have, or will have an “adverse effect” or “negative effect” on the Fund, or similar expressions, means that such risk, uncertainty or problem could or could have a relevant adverse effect on the Fund’s current and future business, financial condition, operational results, cash flow, liquidity, as well as on the price of Quotas.

 

INVESTORS SHOULD CONTACT THEIR LEGAL AND FINANCIAL CONSULTANTS BEFORE INVESTING IN THE FUND.

 

Tax risk as of the date of the Prospectus

fatores de risco principal

Risk of currency devaluation

The Fund’s resources are primarily allocated, directly or indirectly, to investments in Properties and Real Estate Assets. Therefore, the medium and long-term economic potential of the regions where the Properties in which the Fund invests are located is a factor that must be taken into account in relation to the Fund’s profitability.

The future evolution of the economic potential of these regions should also be considered, as well as the possibility of eventual economic decay of these regions, which can lead to a direct impact on the value of these Properties and, consequently, on the Quotas.

Systemic and Real Estate Risk

The price of the Real Estate in which the Fund directly or indirectly invests is affected by internal and external economic conditions and by various external factors, such as the interference of governmental and market regulators, the moratorium and changes in monetary policy, which may losses to the Fund. Declining purchasing power of the population may have a negative impact on the price of the Property, rents and amounts received by the Fund from the leases, affecting the Fund’s Assets and revenue, as well as the trading price of the Quotas.

Risks Relating to Profitability and the Fund’s Assets

The investment in the Quotas can be compared to the investment in variable income securities, since the profitability of the Quotas depends on property appreciation and the management of the Fund’s assets, as well as the remuneration sale and lease activities.

The devaluation or expropriation of properties acquired by the Fund, the decrease in income from rentals, among other factors in relation to the Fund’s Assets, may negatively impact the profitability of the Quotas. In addition, the Fund is exposed to the risks related to the rental or lease of the Properties, so there is no guarantee that all units to be acquired, preferably commercial buildings, will always be rented or leased.

Also, Real Estate and Other Assets that may be subject to investment by the Fund may be classified as medium and long-term investments, which have low liquidity in the market. Therefore, if these Properties and/or Real Estate Assets in the Fund’s portfolio need to be sold, there may be no buyers or the trading price may result in a loss of equity to the Fund, and also adversely affect the Fund’s equity, profitability and trading price of Quotas.

Risk of vacancy

The Fund’s main purpose is the commercial exploitation of Properties, directly or indirectly, and the profitability of the Fund may vary in case of vacancy of any of its leasable spaces, for the duration of the vacancy.

Enforcement on assets, additional capital contribution by the Quotaholders and possible loss of invested capital

The costs incurred with the measures necessary for the enforcement on the Assets in the Fund’s portfolio and for the protection of the rights and interests of the Quotaholders are the responsibility of the Fund, up to the total limit of its net equity, always subject to deliberation by the Quotaholders’ General Meeting.

The Fund may only adopt and/or maintain the judicial or extrajudicial measures for the enforcement on such Assets, once the limit of its net equity is exceeded, if the Quotaholders contribute the additional amounts required for that purpose. Therefore, if judicial or extrajudicial measures are necessary for the purposes of the enforcement of the Fund’s rights over such Assets, the Quotaholders may be required to contribute capital in order to ensure the adoption and maintenance of the measures to protect their interests.

No judicial or extrajudicial measures shall be initiated or maintained by the Administrator prior to the full receipt of the Quotaholders contribution and the acceptance by the Quotaholders of the commitment to provide the resources necessary to pay for the costs if a decision adverse to the Fund is reached. The Administrator, Manager, Bookkeeper, Custodian and/or any of its affiliates are not liable, jointly or severally, for the adoption or maintenance of such measures and for any damages or losses suffered by the Fund and its Quotaholders due to the non-filing (or continuation) of judicial or extrajudicial measures necessary to protect their rights, guarantees and interests, if the Quotaholders fail to provide the necessary resources to do so, pursuant to the Regulation.

Consequently, as described in the “Risk of discontinuity” item below, the Fund may not have sufficient resources to amortize and, as the case may be, redeem its Quotas in Real, which may lead to Quotaholders losing part or all of their investment.

 

 

SEE BELOW ALL RISK FACTORS

fatores de risco

Tax risk at the date of the Prospectus

Pursuant to Law No. 8,668/93, the FII that invests in real estate projects owned or built by a Quotaholder that owns, individually or jointly, more than 25% of the quotas issued by the fund are subject to tax. If the Fund falls into this situation, the tax applicable to its investments will be increased, which may reduce its profitability.

According to Law No. 11,033/04, individual Quotaholders, resident in Brazil or abroad, are exempt from withholding income tax, provided that (i) the individual investor does not hold an amount equal to or greater than 10% of the Fund’s Quotas; (ii) the respective Quotas do not entitle these individual investors to more than 10% of the Fund’s earnings; (iii) the Fund has at least 50 Quotaholders; and (iv) the Quotas are admitted to trading exclusively on stock exchanges or over-the-counter market. If any of these conditions are not observed, the income distributed to the individual Quotaholder will be subject to taxation at a rate of 20%.

In addition, in case of a change of the applicable tax laws resulting in the elimination or modification of such exemption, the income distributed by the Fund could be subject to tax, including withholding tax upon the income distributed to its Quotaholders.

The tax risk also includes the risk of losses related to (i) the creation of new taxes, (ii) the elimination of tax benefits, (iii) the increase in tax rates or (iv) the different interpretation of the existing law on taxes or the application of existing exemptions, subjecting the Fund or its Quotaholders to new taxations.

Reduced liquidity of quotas

The secondary market of FII quotas trading in Brazil has limited liquidity. The Fund can not guarantee that there will be a market for the sale of shares of real estate investment funds in the future. Quota holders may have difficulty entering into transactions in the secondary market, obtaining only low prices for the quotas they intend to sell and recording their quotas with the CVM for the purpose of realizing a secondary offer. In addition, the value of quotas in the secondary market may be adversely affected in the period between the Fund determining the beneficiaries of their income distribution and the additional distribution of income or principal repayment and the date of actual payment.

Relevant macroeconomic factors

The Fund is subject, directly or indirectly, to the variations and conditions of the real estate and securities markets, which are mainly affected by national and international political and economic conditions. Exogenous variables, such as extraordinary events or specific market situations, or political, economic or financial events, in Brazil or abroad, that change the current order and impact the financial market and/or the Brazilian currency, including interest rate variations, currency devaluation and changes in laws, may result in losses for Quotaholders.

If such events adversely affect the profitability of the Quotaholders, the Fund, as well as its Administrator, Manager, Bookkeeper and Custodian, will not be liable for any compensation, fine or penalty.

Market Risks

Fluctuations in the domestic and international markets may affect, among other things, prices, interest rates, premiums and discounts, as well as the Fund’s volatility, which may generate variations in the price of Quotas, leading to losses for the Quotaholders. The capital market in Brazil is influenced, to different extents, by the economic and market conditions of other countries, including emerging economies. The reaction of investors to events in these other countries may adversely effect the market value of assets and securities issued in the country, reducing investors’ interest in those assets, including the Fund’s Quotas. In the past, adverse economic conditions in other emerging market countries have generally resulted in the outflow of investments and, consequently, in the reduction of foreign investments in Brazil. In recent years, financial crises may affect the global economy, with several reflections that, directly or indirectly, have a negative impact on the Brazilian financial market and the capital market, such as: fluctuations in asset prices (including property prices), lack of credit availability, cost reduction, economic slowdown, currency instability and inflationary pressure. Any new event of a similar nature to those mentioned above, abroad or in Brazil, could negatively affect the Fund’s activities and equity, the profitability of the Quotaholders and the Quotas’ market value.

In addition, the financial assets in which the Fund invests must be marked to market, that is, their value must be updated daily to reflect their market value, or the best estimate of value that would be obtained in their trading. As a consequence, the price of the Fund’s Quotas may suffer frequent and significant fluctuations, including during the day, which could negatively impact Quotaholders. Also, the Fund’s Properties and real rights over the Properties will have their values updated every year, which may generate disparities between the value of real estate assets and the market value of the Properties and real rights over the Properties. As a consequence, the market value of the Fund’s Quotas may not reflect the value of its real estate assets.

Liquidity and divestment risks

The FII is an emerging investment vehicle in the Brazilian market, constituted, under the terms of current legislation, as closed condominiums and, therefore, it is not allowed to redeem its quotas under any circumstances. Quotaholders wishing to sell their quotas on the secondary market may encounter difficulties.

In addition, there may be periods when it may be difficult to dispose of the Fund assets due to low or non-existent demand or trading. Under these conditions, the Administrator may have difficulties in disposing of or trading these assets at the desired price and time and, as a consequence, the Fund may face liquidity problems. In addition, the decrease in the value of the financial assets in which the Fund invests may have a negative impact on the net equity of the Fund.

In such cases, Quotaholders may be required to allocate additional funds to the Fund. In addition, the Regulation provides that in certain circumstances, the General Meeting of Quotaholders may decide to liquidate the Fund or redeem the quotas by assigning to the Quotaholders the assets of the Fund’s portfolio, at the risk of receiving an ideal fraction of Property, Real Estate Assets and Other Assets, which will be delivered after such Assets are incorporated as a condominium. In such cases, Quotaholders may not dispose of the assets received in connection with the liquidation of the Fund.

Risks of using instruments

The value of the derivative instruments into which the Fund enters is subject to significant change even if the value of the underlying assets remains unchanged. The use of such instruments may (i) increase the volatility of the Fund, (ii) limit or extend the possibilities of additional returns, (iii) not lead to expected results, or (iv) lead to gains or losses on the Fund. Shareholders. Derivative operations of the Fund should not be interpreted as a guarantee of the Fund, the Administrator, the Manager or the Custodian, any insurance mechanism or the Credit Guarantee Fund – FGC that distributions will be made in respect of Quotas. Transactions with the Fund’s derivatives may result in losses to the Fund and its Quotaholders.

Risk related to the extensive regulation that the real estate sector is subject to

The Brazilian real estate industry is subject to federal, state and local laws and regulations, including zoning regulations, which may change after the acquisition of a property by the Fund, leading to obstacles and / or changes in real estate, which may Fund to incur compliance costs. This may adversely affect the Fund’s results as well as the profitability of its Shareholders.

The Federal Government has significant influence over the Brazilian economy. This influence, as well as the Brazilian economic and political situation, could adversely affect the Fund

The Federal Government can intervene in the country’s economy and make significant changes in policies and regulations, impacting various sectors and segments. The activities of the Fund, its financial position and results may be materially affected by changes in interest rates, exchange control and restrictions on remittances abroad; fluctuations in the exchange rate; inflation; liquidity of financial and domestic capital markets; fiscal policies; social and political instability; regulatory changes; and other political, social and economic events in Brazil or that may impact the Brazilian economy. In a scenario of rising interest rates, for example, real estate prices may be negatively impacted by the correlation between the basic interest rate and the discount rate used in the valuation of the property. This can also adversely affect the Fund’s assets, profitability and the price of its shares.

Political instability may adversely affect the real estate business and its results

Political crises may have an adverse effect on the real estate sector and its results. The Brazilian political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected, and may continue to affect, the confidence of investors and the general population and have resulted in a slowdown in the economy and an increase in securities volatility issued by Brazilian companies.

Brazil recently went through an impeachment process against former President Dilma Rousseff. The new administration has been facing the challenge of reversing the country’s political economic crisis, as well as approving the social reforms, which are necessary for a more stable economic environment. The inability of President Michel Temer’s administration to reverse the country’s political and economic crisis and to approve social reforms may have effects on the Brazilian economy and may negatively impact the operational results and financial condition of the Properties.

The “Operation Car Wash” (“Operação Lava Jato”) and “Operation Zelotes” (“Operação Zelotes”) are investigations currently under way that may adversely affect the growth of the Brazilian economy and the real estate business. Brazilian markets have been increasingly volatile due to uncertainties arising from such investigations, conducted by the Federal Police, the Public Prosecutor’s Office and other authorities. Operation Car Wash investigates the payment of bribes to senior officials of large state-owned companies in exchange for contracts granted by the government or government related entities to private-sector companies in the infrastructure, oil, gas and energy sectors, among others. Profits of these kickbacks allegedly financed the political campaigns of political parties, as well as served to personally enrich the recipients in the bribery scheme. As a result, a number of senior politicians, including current President Michel Temer and officers of the major state-owned and private companies in Brazil, are being investigated and, in certain cases, resigned or have been arrested. Currently, a complaint has been lodged by the Public Prosecutor’s Office against the current President, Mr. Michel Temer. The Chamber of Deputies may authorize legal action against the President and, as a result, Mr. Temer may be removed from office, and Mr. Rodrigo Maia, president of the Chamber of Deputies, will act as interim president of Brazil. In addition, the Operation Zelotes investigates allegations of improper payments made by Brazilian companies to officers of the Board of Tax Appeals (“CARF”). It is alleged that the purpose of such improper payments was to induce those officials to reduce or waive certain tax-related penalties imposed by the Brazilian federal revenue authority, which were under review by CARF. While these investigations have not yet been concluded, they have already had an adverse impact on the image and reputation of the companies implicated and on the Brazilian economy. It is unclear whether these investigations will lead to further political and economic instability or whether new corruption scandals will emerge in the future. In addition, we cannot predict either the outcome of these investigations or their effect on the Brazilian economy. The development of these cases may adversely affect the Brazilian economy and as a result, the Fund’s assets, profitability and the trading price of the Quotas.

Credit Risks

The Fund’s results depend on the terms of the lease agreements of the Properties that directly or indirectly make up its portfolio, which means it will be exposed to the credit risk of the tenants. Once each lease agreement is concluded, the investment performance of the Fund will be subject to the risks inherent in the demand for lease of said Properties. The Administrator is not responsible for the solvency of its tenants, as well as for possible variations in the Fund’s performance arising from the credit risks mentioned above.

In addition, the financial assets in which the Fund invests are subject to the credit risk of each respective issuer and counterparties and their ability to honor their commitment to make principal and interest payments on their debts. In this case, the Fund may (i) have lower profitability, (ii) suffer financial losses up to the limit of contracted and unsettled operations, and (iii) have to provide for appreciation or devaluation of assets, which may adversely affect the trading price of its Quotas.

Risks related to the acquisition of Real Estate

In the period between the negotiation process of the acquisition of a Property and its registration in the name of the Fund, there is a risk that this asset will be encumbered by debts of the former owners, which may complicate the transfer of ownership of this Property to the Fund. Also, if the Fund acquires a Property, directly or indirectly, in installments, there is a risk that the Fund, in the period between the payment of the first and last installment and due to several unforeseen factors, does not have sufficient resources to meet its obligations.

In addition, since there is a possibility of acquiring Properties encumbered by debts of the former owners, if creditors of the former owners may propose execution and they do not have other assets to guarantee the payment of such debts, it may be difficult to transfer ownership of the Property to the Fund, as well as to obtain income from this Property. In these cases, the Fund’s equity, profitability and the trading price of the Quotas may be negatively impacted.

Extraordinary Expenses Risk

The Fund, as direct or indirect owner of the Properties, is subject to the payment of Extraordinary Expenses such as painting, remodeling, decoration, conservation, installation of security equipment, severance pay, in addition to expenses arising from unpaid rent collection and eviction orders, lease renewal and revision proceedings, etc. The payment of extraordinary expenses may lead to a reduction in the profitability of Quotas.

Operational risk

Considering that the primary purpose of the Fund is to lease and/or sell Properties in which the Fund, directly or indirectly, invests, and that the management of such properties may be carried out by specialized companies, it may represent a limiting factor for the Fund in order to implement the management policies of the Properties that it deems appropriate.

The Properties and participation in SPE will be acquired by the Administrator, on behalf of the Fund, as directed by the Manager. Accordingly, the Quotaholder will be subject to the Manager’s ability to evaluate and select Properties, and the participation in SPEs that will be part of the Fund’s portfolio.

In addition, the Fund’s resources may be invested in Real Estate Assets, Financial Assets and Other Assets, and their acquisitions will be carried out directly and at the discretion of the Manager. This way, the Quotaholder will be subject to the Manager’s ability and discretion in the evaluation, selection and acquisition of these assets that will be part of the Fund’s portfolio.

Therefore, there is a risk of an inadequate selection and evaluation of Properties, SPEs, Real Estate Assets, Other Assets and Financial Assets, which may bring losses to the Quotaholders.

Risk of termination of lease agreements and revision of the rent’s price

Risk of termination of leaseaTenants of the Properties directly or indirectly invested in by the Fund may legally challenge the validity of the clauses and terms of the lease agreements, in relation to the following: (i) indemnity to be paid in case of termination of the agreement by the tenants before the maturity of the contractual term, although there may be a provision in the agreement stipulating the tenant’s duty to pay the indemnity for early termination without cause, they may question the indemnity amount, even though such amount was stipulated on the agreement; and (ii) revision of the rental price, claiming that the rent amount was not established based on lease market conditions. In both cases, any court ruling that does not recognize the legality of the parties’ will in establishing the terms and conditions of the lease under specific commercial conditions, may adversely affect the Fund’s equity, profitability and the trading price of Quotas. agreements and revision of the rent’s price

Risk of changes in the Tenancy Act

The Fund’s revenues derive primarily from the receipt of rent paid to it under the terms of each lease. Consequently, if the Brazilian Inquilinitization Law is amended in a favorable manner to the tenants (including, for example and without limitation, alternatives for the renewal of lease contracts, definition of lease values or changes in the periodicity of readjustments), value of the assets of the Fund, the profitability and the trading price of its Shares may be adversely affected.

Risk of third party claims

As the trustee of the Properties in the Fund’s portfolio, the Administrator may have to respond to administrative or legal proceedings on behalf of the Fund. There is no guarantee that the Fund will obtain favorable results or that any administrative and legal proceedings brought against the Fund will be dismissed, or that the Fund has sufficient reserves to defend its interest in any administrative and/or legal proceeding. If the Fund’s reserves are not sufficient, it is no guarantee that the Quotaholders will make a capital contribution to cover the expenses related to these proceedings. As a result, the Fund’s equity, profitability and trading price of the Quotas may be adversely affected.

Risk of expropriation

The Fund’s Properties may be partially or fully expropriated due to eminent domain. In this case, the indemnification paid by the government authority may be lower than the necessary to indemnify the losses of the Fund and may negatively impact the Fund’s equity, profitability and the trading price of the Quotas.

Risk of additional capital calls

Risk of additional capital callsIf the Extraordinary Expenses Reserve is consumed, there may be a need for new capital contributions, either as a result of a resolution at the Quotaholders’ General Meeting or if the Fund has negative net equity. In these cases, there is a risk of early liquidation of the Fund, in accordance with the Regulation, at which time the Quotaholders will be called upon to make additional contributions, and following such a capital increase, the Fund will not generate returns for its Quotaholders.

The value of the assets in the Fund’s portfolio does not necessarily reflect its market value

Property, plant and equipment are stated at acquisition cost, less accumulated depreciation, calculated consistently at the rate compatible with the remaining useful life of the respective assets, from the month subsequent to the acquisition. In addition, the Administrator and the Manager may adjust the valuation of the Assets in the Fund’s portfolio whenever there is an indication of probable losses in the realization of its value.

In this regard, regardless of the disclosure of the market value of the Properties in the Administrator’s report and the explanatory notes to the financial statements, this does not necessarily mean that the value of the Properties in the Fund’s portfolio reflects its market value.

Risk of other restrictions of use of the Property by Government Authorities

Outras restrições sobre o Imóvel inv

Other restrictions on Real Estate invested directly or indirectly by the Fund may also be imposed by Governmental Authorities, such as the designation of the Property or its surroundings as historical.
Buildings are valued at acquisition cost and less accumulated depreciation, consistently calculated at the rate compatible with the remaining useful life of the respective assets, from the month subsequent to the acquisition. In addition, the Administrator and the Manager may adjust the valuation of the Assets comprising the portfolio of the Fund whenever there is an indication of probable losses in the realization of its value.

In this regard, regardless of the disclosure of the market value of the Properties contained in the Administrator’s report and in the notes to the financial statements, it is not necessarily the Properties included in the Fund’s portfolio that are valued at market value. Exercise of preemption rights or creation of cultural heritage zones, among others, which will imply the loss of ownership of such Property by the Fund, adversely affecting the Fund’s equity, profitability and the trading price of Quotas.

estido direta ou indiretamente pelo Fundo também podem ser impostas por Autoridades Governamentais, como a designação da Propriedade ou seu entorno como histórico.
Os edifícios são avaliados ao custo de aquisição e deduzido de depreciação acumulada, consistentemente calculados à taxa compatível com a vida útil remanescente dos respectivos ativos, a partir do mês subseqüente à aquisição. Além disso, o Administrador e o Gestor podem ajustar a avaliação dos Ativos que compõem a carteira do Fundo sempre que houver uma indicação de perdas prováveis ​​na realização do seu valor.

A este respeito, independentemente da divulgação do valor de mercado dos Imóveis contidos no relatório do Administrador e nas notas às demonstrações financeiras, não são necessariamente os Imóveis incluídos na carteira do Fundo que são avaliados pelo valor de mercado. Exercício dos direitos de preferência ou criação de zonas de patrimônio cultural, entre outras, que implicarão a perda de propriedade de tal Propriedade pelo Fundo, afetando negativamente o patrimônio do Fundo, a lucratividade e o preço de negociação das Quotas.

Social and environmental risks

Environmental issues, such as storms, floods or problems with drainage systems resulting from the excess use of the public network, may lead to the economic loss of the Properties directly or indirectly owned by the Fund and/or located in the areas affected by these issues. In addition, any environmental contingencies may lead to liability to the Fund, implying in some cases the termination of lease agreements, negatively affecting the Fund’s profitability.

Risks of changes in environmental laws and regulations

Owners and renters are subject to environmental legislation at the federal, state, and municipal levels. These environmental laws and regulations can lead to significant delays and costs to comply with them, as well as the prohibition or severe restriction of incorporation, construction and / or renewal of activities in environmentally sensitive areas.

In the event of non-compliance or non-compliance with environmental laws, regulations, licenses and permits, companies and, possibly, the Fund or renters, may be subject to administrative sanctions, such as fines, prohibition of activities, cancellation of licenses and revocation of permits, in addition to possible criminal sanctions (including administrators).

Government agencies or other authorities may also issue new, stricter regulations or seek more restrictive interpretations of existing laws and regulations that may require tenants or property owners to spend additional resources on environmental suitability, including obtaining environmental permits for facilities and equipment that do not require such licenses. Government agencies or other authorities may also significantly delay the issuance of permits and authorizations necessary for the commercial operation of owners or tenants, which may adversely affect such businesses.

Any of the above events may cause tenants to have difficulty paying rent on the Properties, which may adversely affect the Fund’s results in the event of delays or delinquencies. In this scenario, the activities of the Fund may be negatively impacted, as well as the profitability of Quotaholders. In addition, the competent bodies may require the renewal or alteration of these Properties, the costs of which may be required by the Fund to be paid by the Fund.

Landlords and tenants are against environmental legislation at the federal, state, and municipal levels. Debt securities can lead to delays and savings to completion, as well as the prohibition or suspension of incorporation, construction and / or renewal of activities in environmentally sensitive areas.

In the event of non-compliance or downgrading of laws, licenses, permits and environmental permits, companies and possibly the Fund or tenants, such as fines, suspension of permissions and revocation of permissions, and criminal prosecution (including administrators).

The rules may be more stringent and laws stricter than tenants or owners of resources more suited to environmental protection, including the application of facilities and facilities. irresistance such licenses. In addition, there is an issuance of permits and authorizations for a commercial operation of persons or tenants, which may adversely affect these businesses.

People have difficulty paying property fees, which can adversely affect their results in case of late or bad debt. In this scenario, the activities of the Fund may be negatively impacted, as well as a profitability of Quotaholders. In addition, you should have asked for a review or evaluation of the property, its custodians, funds recruits, help becomes necessary.

Risk of natural disasters and related losses

Natural disasters such as storms, floods or earthquakes, may damage the real estate assets in the Fund’s portfolio, which may adversely affect its equity and the price of its Quotas. The Fund cannot guarantee that the insurance covering its Properties will be sufficient to cover such losses. In fact, certain types of losses are not covered by the Fund’s insurance policies, such as acts of terrorism, civil wars or revolutions. In the event of any of those acts, the Fund may suffer significant losses and lead to additional costs, which may adversely affect the Fund’s operating performance. Moreover, the Fund may be legally liable to indemnify the victims of the disaster, which may have a negative impact on its financial condition and, as a result, on the income to be distributed to its Quotaholders.

In the event of a claim involving the physical integrity of the insured properties, the proceeds from the insurance coverage will depend on the insurance company’s payment capacity, under the terms of the required policy. These proceeds may be insufficient to repair the damage suffered, subject to the general conditions of the policies.

In the event of a claim involving the physical integrity of uninsured properties, the Administrator may not recover the loss of the asset. The occurrence of an uninsured loss or indemnity may have an adverse effect on the Fund’s operational results and financial condition.

Risk related to ownership of quotas

The Fund’s portfolio will be composed predominantly, directly or indirectly, of Real Estate Assets and Real Estate, however, the ownership of the Quotas of the Fund does not confer on Quotaholders the direct ownership of such Real Estate and Real Estate Assets, ie, the Quotaholders may not exercise no activity. real right in the Real Estate, directly or indirectly invested by the Fund. Quotaholders, on the other hand, do not personally respond to any legal or contractual obligation related to the Assets in the Fund’s portfolio except for the obligation to pay the subscribed shares.

Risk related to the absence of Assets in the Fund’s assets at the date of the Prospectus

The Fund does not have a Property, Real Estate Asset or Other Specific Asset, and is therefore of broad investment policy. The Manager may not find attractive Real Estate, Real Estate Assets or Other Assets within the profile proposed. Notwithstanding the possibility of acquiring several Real Estate, Real Estate and Other Assets by the Fund, the Fund may acquire a limited number of Real Estate, Real Estate and Other Assets, which may generate a concentration of the portfolio. There is no guarantee that the investments intended by the Fund will be available at the time and in a convenient or desirable quantity to the satisfaction of its Investment Policy, which may result in minor investments or even in the non-realization of these investments.

The non-realization of investments or the realization of these investments in a value lower than the one intended by the Fund, considering the costs of the Fund, among which the Management Fee, could negatively affect the equity of the Fund, the profitability and the trading value of the Quotas.

Risk of concentration of the Fund’s poratfolio

Risk of concentration of the Fund’s poraThe Fund will allocate the resources from the Issue of Quotas to the acquisition of Properties, Real Estate Assets and/or Other Assets, which will comprise the Fund’s portfolio, in accordance with its Investment Policy. New issues may be carried out, as many as necessary, in order to allow the Fund to acquire other Properties, Real Estate Assets and/or Other Assets.

Regardless of the possibility of acquisition of several Properties, Real Estate Assets and/or Other Assets, the Fund will initially acquire a limited number of Properties, Real Estate Assets and/or Other Assets, which may generate a concentration of the portfolio. Oscillations or devaluations of these Properties, Real Estate Assets and/or Other Assets may reflect a possible loss in the Fund’s results.tfolio

Risk relating to the securities of the Fund’s portfolio

Public and/or private debt securities that may be part of the Fund’s portfolio are subject to the ability of its issuers to honor commitments to pay interest and principal of its debt. Impacts on the financial conditions of issuers of securities, as well as changes in the economic, legal and political environment that compromise their ability to pay, may significantly affect the price and liquidity of their assets.

Changes in the perception of the quality of issuers’ credit, even if unsubstantiated, may have an impact on the prices of securities, also affecting their liquidity. In addition, the Fund may invest in other investment funds, and Manager may not identify failures in the administration or management of the Invested Funds, which may lead to losses to the Fund, without any fines or penalties becoming due by the Fund’s Administrator and/or Manager as a result thereof.

Risks related to the prepayment or extraordinary amortization of the securities of the Fund’s portfolio

The contracts governing the Financial Assets and Real Estate Assets of the Fund and / or Other Assets may contain clauses of prepayment or extraordinary amortization.

If the Fund invests the greater part of its capital in securities, the exercise of such prepayment or extraordinary redemption rights may result in the Fund’s portfolio failing to meet its asset concentration criteria.

This may cause the Fund Manager to encounter difficulties in identifying Real Estate Assets, Other Assets and / or Properties that are in accordance with its Investment Policy.

Therefore, the Manager may not be able to reinvest resources in assets with the profitability target that the Fund seeks, which may adversely affect the Bank’s capital, profitability and the market price of its Shares, without any penalties or penalties due by the Fund. Administrator of the Fund or the Depositary as a result thereof.

Risks related to investment in securities

The investment in Quotas is an investment in securities, which presupposes that the Quotaholder’s profitability will depend on the valuation and the income from Assets and Financial Assets.

In this case, the income to be distributed to the Quotaholders will mainly depend on the results obtained by the Fund with revenues from Properties, the sale of Properties and/or the amortization and/or negotiation of Real Estate Assets, Other Assets and Financial Assets in which the Fund invests, as well as costs incurred by the Fund.

Therefore, the Fund may be required to allocate a substantial part of its cash flow to pay its obligations, reducing the income available to be distributed to the Quotes holders, which may adversely affect the market value of the Quotas.

Risk of not reaching a quorum at the General Shareholders’ Meeting

Certain matters on the agenda of the Fund’s General Shareholders’ Meeting require an affirmative vote by a qualified majority of Quotaholders for approval. Since the FII tends to have a large number of Quotaholders, certain issues may not be approved if the necessary quorum requirements (where applicable) are not met.

In this case, no deliberation would be held at the meeting, which could lead, among other consequences, to early liquidation of the Fund.

Legal risk

The structure of the economic, legal and legal model of the Fund considers a set of disciplines and obligations of the parties established through public or private contracts based on the current legislation.

However, due to the low maturity and lack of tradition and jurisprudence in the Brazilian capital market, in relation to this type of financial transaction, investors can face losses as a result of the expenditure of time and resources for the effectiveness of the contractual structure.

Regulatory risk

The FII is governed, among other regulations, by No. 8,668/93 and by CVM Instruction No. 472/08, and any interference by regulatory agencies in the market, changes in the legislation and regulations applicable to the FII, declaration of moratorium, partial or total closing of the markets, changes in monetary and exchange rate policies, among others, may adversely impact the Fund’s operating conditions, as well as its performance.

Concentration and diversification risk

There may be a risk that a single Quotaholder purchases a substantial portion of the quotas being offered or even the total quotas of the Fund. This Quotaholder will have an expressively concentrated position, therefore weakening the position of any minority Quotaholder.

In this case, it is possible that decisions will be taken by the majority Quotaholder according to his/her exclusive interests rather than the Fund’s and/or the Minority Quotaholder’ interests, which may lead to loss to Minority Quotaholder.

Risk relating to the indeterminate Duration of the Fund

Considering that the Fund is constituted as a closed condominium, the redemption of Quotas is not allowed. Without prejudice to the liquidation of the Fund, if the Quotaholders decide to divest from the Fund, they must sell their Quotas on the secondary market, in which they may encounter low liquidity or obtain reduced prices.

Regulatory risk related to the low maturity and lack of tradition and jurisprudence in the Brazilian Capital Market

The low maturity and lack of tradition and jurisprudence in the Brazilian capital market with regard to operations of the same type, may generate losses for Investors as a result of the expenditure of time and resources for the effectiveness of the contractual framework required in the Fund’s financial, economic and legal model structure.

Sluggishness of the Brazilian Legal System

The Fund may be involved in legal disputes related to the Properties and Real Estate Assets, both as a defendant and a claimant. Due to the sluggishness of the Brazilian legal system, the resolution of such disputes may not be achieved in a reasonable time. In addition, there is no guarantee that the Fund will obtain favorable results in legal disputes related to Properties, Real Estate Assets and/or Other Assets, which may negatively impact the Fund’s equity, the Quotaholders’ profitability and the trading price of Quotas.

Risk related to the issue of new Quotas, which may result in a dilution of Quotaholder participation

The Fund may raise additional funds in the future through new issues of Quotas to cover the need for capital or the acquisition of new Assets. If the Fund’s management decides to issue new Quotas, its Quotaholders will be granted preemptive rights to subscribe for the new Quotas, in accordance with the Regulation. However, the Quotaholders may have their respective participation diluted if they do not exercise, fully or partially, their preemptive rights.

Risk related to the non-replacement of the Administrator, Manager or Custodian

Throughout the duration of the Fund, the Manager is subject to bankruptcy proceedings or judicial or extrajudicial recovery, and/or the Administrator or Custodian may be subject to intervention and/or extrajudicial liquidation or bankruptcy, at the request of BACEN, as well as being de-accredited, dismissed or resign from their duties. In these cases, they must be replaced in accordance with the terms and procedures set forth in the Regulation. Their non-replacement may lead to the early liquidation of the Fund, which may result in losses to the Fund and the Quotaholders.

Governance risk

It is not allowed to vote in resolutions in the General Assemblies of Quotists: (a) the Administrator or the Manager; (b) partners, officers and employees of the Administrator or the Manager; (c) companies related to the Administrator or to the Manager, its partners, directors and employees; and (d) the service providers of the Fund, its partners, officers and employees.

Individuals referred to in letters “a” through “d” shall have the right to vote if they are the sole Quotits of the Fund or with the express approval of a majority of other Quotits in the General Meeting of Shareholders or by proxy specifically referring to the General Meeting of Shareholders. Shareholders, where voting permission will be granted. This restriction of votes may lead to losses for the individuals listed in letters “a” through “d” if they decide to acquire the Fund Quotas.

Risk of potential conflict of interests in the preparation of the Feasibility Study

Within the scope of this Issue, the feasibility study was prepared by the Manager and, in any new issues of the Fund’s Quotas, the feasibility study may also be prepared by the Manager, which leads to a risk of a conflict of interest.

The feasibility study for this Offer was prepared by the Manager, therefore, the Investor should carefully analyze the information submitted since the feasibility study was prepared by a person responsible for managing the Fund’s portfolio. Therefore, the feasibility study may not have the expected objectivity and impartiality, which may adversely affect the investment decision of the Investor.

Risk related to the absence of Assets in the Fund’s portfolio at the date of the Prospectus

The Fund does not have one specific Property, Real Estate Asset or Other Asset, therefore, it has an extensive investment policy. The Manager may not find attractive Properties, Real Estate Assets or Other Assets within the profile proposed. Regardless of the possibility of acquiring several Properties, Real Estate Assets and Other Assets, the Fund may acquire a limited number of Properties, Real Estate Assets and Other Assets, which may generate a concentration of the portfolio.

There is no guarantee that the investments intended by the Fund will be available at the time and in a convenient or desirable quantity that comply with its Investment Policy, which may result in minor investments or even the non-realization of these investments. The non-realization of investments or the realization of these investments in a value lower than the one intended by the Fund, considering costs such as the Administration Fee, could negatively affect the Fund’s equity, profitability and the trading price of the Quotas.

Risk from the provision of management services to other investment funds

The Manager, the institution responsible for managing the assets of the Fund’s portfolio, provides or may provide investment management services to other investment funds with similar activities. Therefore, as Manager of the Fund and of other investment funds, the Manager may decide to allocate certain assets to other investment funds that may even perform better than the assets allocated to the Fund, so there is no guarantee that the Fund will have exclusive rights or preference in the acquisition of such assets.

Risk of the Fund not raising all the resources provided for in the Total Issue Amount

It is possible that, at the end of the distribution period, not all Quotas initially offered by the Fund, under the terms of the Prospectus, are subscribed, which may result in equity lower than that estimated. This may reduce the Fund’s ability to diversify its portfolio and practice the Investment Policy under the best available conditions.

Risk of offer cancellation

In case the Minimum Offer Value is not reached, the Offer may be canceled and Investors may have their investment orders canceled. In that case, if the Investors have already paid the Issue Price to the Participating Institution, the expected profitability of these funds may be adversely affected, since the amounts already paid by the Investors will be refunded net of taxes and charges, if applicable, with the profit net of investment in quotas of investment funds or fixed income securities, whether public or private, earned in the period past due.

In addition, Investors and Related Persons who have made their Reserves Orders or Investment Orders are subject to the conditions set forth in Article 31 of CVM Instruction 400/03 and in the item “Partial Distribution” on page 75 of the Prospectus. , would also have their potential gains negatively impacted.

Risk of Partial Distribution and failure of reaching the Minimum Offering Amount

The Issue may be canceled if the Minimum Offering Amount, totaling R$150,000,000.00 (one hundred and fifty million of reais), equivalent to 1,500,000 (one million, five hundred thousand) Quotas, is not reached. In this case, the Administrator shall immediately distribute the financial resources incurred in the period among the subscribers, in the proportions of the paid-up Quotas, plus the net income earned by the Fund’s investment. In addition, if the Minimum Offering Amount is reached but the Total Value of the Issue is not reached, the Fund will have fewer resources to invest in Real Estate Assets and Financial Assets, which may negatively impact the profitability of Quotas.

Also, in the case of Partial Distribution, the number of Quotas distributed will be equivalent to the Minimum Offering Amount, that is, there will be fewer Quotas of the Fund being trade in the secondary market, and the liquidity of the Fund’s Quotas will be reduced.

If, on the Settlement Date, Investors do not pay for the subscribed Quotas, these Quotas must be paid up with the Bookkeeper on the 2nd (or second) Business Day immediately following the Settlement Date at the Subscription Price, provided that, if Investors fail to make the payment again and the Minimum Offering Amount is not reached, the Offering will be canceled and the Participating Institution will return the funds to the Investors.

If the Minimum Offering Amount is reached after the Settlement Date, the Offering may be closed and the balance of Quotas not placed will be canceled by the Administrator.

Investment in the Fund’s Quotas by Investors who are Related Persons may result in reduced liquidity of the Quotas on the secondary market

The participation of investors who are Related Persons may adversely affect the liquidity of Quotas on the secondary market, since Related Persons may opt to keep their Quotas out of circulation. The Administrator, the Manager and the Lead Coordinator can not guarantee that Related Persons will not invest in the Quotas or that, if they do so, they will not opt to keep their Quotas out of circulation.

Risk of not reaching prospects in the Offering Memorandum

The Prospectus contains information about the Fund, the real estate market, the Assets in which the Fund may invest and the prospects for the future performance of the Fund, which involve risks and uncertainties.

There is no guarantee that the future performance of the Fund will be consistent with the prospects of the Preliminary Prospectus. Future events may differ materially from the trends indicated in the Prospectus.

Risk related to the impossibility of trading Quotas until the closing of the Offering

As set forth in the “Information Regarding the Issue, the Offering and the Quotas – Placement and Distribution Procedure” section on page 70 of the Prospectus, the Quotas held by the Investor may only be freely traded on the secondary market, on the stock exchange managed and operated by B3, following the disclosure of the Closing Announcement and the disclosure of the distribution of the Fund’s earnings by the Administrator.

Therefore, Investors must be aware of the impediment described above, so that, even if they may require liquidity during the Offering, the subscribed Quotas will not be available for trading until the closing of the Offering.

Eventual non-compliance by any of the Contracted Institutions and/or Special Participants with obligations related to the Offering may result in their removal from the group of institutions responsible for the placement of Quotas, with the consequent cancellation of all Reservation Orders and subscription forms made with such Institutions Contractors and/or Special Participants.

In case of non-compliance or evidence of non-compliance by any of the Contracted Institutions and/or Special Participants with any of the obligations set forth in the respective instrument of adhesion to the Distribution Agreement, letter of invitation or any contract entered into under the Offering, or any of the rules of conduct set forth in the regulation applicable to the Offering, such Contracted Institutions and/or Special Participant, at the sole discretion of the Lead Coordinator and without prejudice to other measures deemed to be applicable by the Lead Coordinator, shall be removed from the group of the institutions responsible for the placement of Quotas. In this case, the Contracted Institution and/or the Special Participant shall cancel all Reservation Orders and subscription forms received and inform the respective investors immediately about the cancellation and that they will no longer participate in the Offering. The amounts deposited will be returned after deduction of any applicable taxes, and if the rate is higher than zero.

Risks of indemnity to be paid in relation to the Distribution Agreement

The Fund, represented by the Administrator, is a contractual party in the Distribution Agreement, which regulates the placement efforts of the Quotas in Brazil. The Distribution Agreement contains a clause providing that the Fund shall indemnify the Lead Coordinator if there are losses due to any relevant misstatements or omissions in the Offering Memorandum.

If the Fund is sentenced to pay an indemnity in relation to any relevant misstatements or omissions in the Offering Memorandum, the Fund’s equity, profitability and trading price of the Quotas may be adversely affected.

Incidentes e mudanças na percepção de risco em outros países, particularmente em mercados emergentes e nos Estados Unidos, podem afetar adversamente o preço de mercado dos valores mobiliários brasileiros, incluindo o valor de mercado das cotas do Fundo.

O valor de mercado dos valores mobiliários emitidos pelo FII é influenciado, em diferentes graus, pelas condições econômicas e de mercado em outros países, incluindo países da América Latina, Ásia, Estados Unidos, Europa e outros. A reação dos investidores a eventos nesses outros países pode afetar adversamente o valor de mercado dos valores mobiliários emitidos no Brasil. Crises no Brasil e nesses países podem reduzir o interesse dos investidores em títulos emitidos no Brasil, incluindo as Cotas do Fundo. No passado, condições econômicas adversas em outros países considerados mercados emergentes geralmente resultaram na saída de investimentos e, consequentemente, na redução do capital estrangeiro investido no Brasil.

Qualquer um dos eventos mencionados acima pode afetar negativamente o patrimônio do Fundo, a lucratividade e o preço de negociação das Quotas.

Risks related to non-revision and/or update of projections

The Fund, the Administrator, the Manager and the Lead Coordinator have no obligation to revise and/or update any projections contained in the Prospectus, including the feasibility study in Annex VI to the Prospectus, and/or any disclosure material of the Fund and/or the Offering, including, without limitation, any revisions reflecting changes in economic conditions or other circumstances after the date of the Prospectus, the preparation of the feasibility study as Annex VI to the Prospectus and/or the disclosure material mentioned above, as the case may be, even if the assumptions on which such projections are based are incorrect.

Risk related to the return on investment

The investment in quotas of a real estate investment fund is a variable income investment, since the profitability of the quotas will depend on the result of the fund’s asset management.

In our case, the amounts to be distributed to the Quotaholders will depend on the result of the Fund, which in turn will mainly depend on the investment to be made by the Fund, among other several factors, such as acquisition price of Assets and performance of Properties and SPEs, excluding expenses and charges provided for the maintenance of the Fund, in accordance with the Regulation. Additionally, it is worth noting that there may be a time gap between the Fund’s raising of resources and the start date of investments in Properties and SPEs.

Therefore, the resources raised by the Fund may be invested in Financial Assets, which may negatively impact the Fund’s expected profitability.

Risk related to the acquisition or disposal of Real Estate or SPEs

The Fund operations are based on the acquisition of Properties or SPEs. The acquisition of Properties or SPEs depends on a set of measures to be carried out, including due diligence and any registration process in a real estate registry office and boards of trade.

If any of these measures is not perfectly executed, the Fund may not be able to acquire or sell Properties or SPEs, or it may not be able to do so under the intended conditions, which will adversely affect its profitability.

In the period between the negotiation process of the acquisition of a Property and its registration in the name of the Fund, there is a risk that this asset will be encumbered by debts of the former owners, which may complicate the transfer of ownership of this Property to the Fund. Also, if the Fund acquires a Property in installments, there is a risk that the Fund, in the period between the payment of the first and last installment and due to several unforeseen factors, does not have sufficient resources to meet its obligations.

In addition, since there is a possibility of acquiring Properties encumbered by debts of the former owners, if creditors of the former owners may propose execution and they do not have other assets to guarantee the payment of such debts, it may be difficult to transfer ownership of the Property to the Fund, as well as to obtain income from this Property.

Finally, there is also the possibility of due diligence failure, not identifying certain liabilities, whether relevant or not, that may adversely affect the Fund’s equity. All the cases mentioned above may negatively impact the Fund’s equity, profitability and the trading price of the Quotas.

Risk related to competition in the acquisition of Properties or SPEs

The Fund’s operations are based on the direct acquisition of Properties or investment in real estate through the acquisition of SPEs that own these Properties. Since the Fund is exposed to market competition in the acquisition of such Properties and/or SPEs, it may face difficulties in acquiring these assets.

Competition may make certain investments unfeasible due to the increase in prices. If the Fund is unable to make the necessary investments in Properties or SPEs or if prices are excessively increased due to competition, the Fund may not obtain the expected result from such investments and, therefore, its expected profitability could be adversely affected.