By André Jerusalem
On August 27, 2018, the Brazilian Securities and Exchange Commission (“CVM”) published Instruction No. 602 (“ICVM 602”), which aims to regulate public offerings for the distribution of hotel collective investment contracts (or “CIC-Hoteleiro”). This rule comes at an opportune time, considering that the national hotel market has been experiencing consistent growth in room occupancy, according to data from the Brazilian Hotel Operators Forum.[1]. Additionally, it is also worth highlighting the fact that until the enactment of the rule in question, such investments did not have specific normative instructions regulating them, since until then only the guidelines provided for in CVM Resolution No. 734, now revoked by ICVM 602, were applicable.
CIC-Hoteleiros are instruments for raising funds to financially support the construction of condominiums that will be used (in whole or in part) as hotels, provided that such contracts include a provision for profitability linked to the expected result of the hotel operation in a building condominium. Thus, CIC-Hoteleiros can be issued by a developer or person who publicly distributes such CICs.[2].
What differentiates a public distribution of CIC-Hoteleiro from a common purchase and sale of autonomous units is the fact that in CIC-Hoteleiro the offeror grants a minimum profitability guarantee, transforming it not just into a property acquisition, but rather an investment in securities.
It is important to emphasize that according to art. 4 of ICVM 602, the provisions of instructions 400 and 476, which deal with public offerings of other securities, do not apply to public offerings of CIC-Hoteleiros, so that the procedure for registering the offering is defined in ICVM 602 itself. In this sense, for the distribution of CIC-Hoteleiros, the hiring of securities distribution institutions is waived, and they may be marketed by real estate brokers, provided that they adopt practices and procedures that ensure compliance with the provisions of ICVM 602.
[1] As can be seen in the August newsletter, available at http://fohb.com.br/wp-content/uploads/2018/09/InFOHB-133-Agosto-2018.pdf
[2] According to Art. 2 of ICVM 602, “hotel CIC” is considered to be the set of contractual instruments offered publicly, which contain a promise of remuneration linked to participation in the result of a hotel enterprise organized through a building condominium and “offeror” the incorporating company or any other person that carries out acts of public distribution of hotel CIC.
