MEXICO Law and Practice Contributed by: Roberto Cannizzo, Carlo Cannizzo, Stefano Amato and Mauricio Moreno-Rey, Cannizzo
2.11 Legal Restrictions on Foreign Investors In principle, foreigners can acquire real estate in Mexico, with the exception of residential proper - ties located within the restricted zone (100 km- wide strip along the border or 50 km-wide strip inland from the beaches). However, foreigners may participate with 100% of the equity of cor - porations, including in the restricted zone, pro - vided the property will not be used for residential purposes. A foreigner can own property located in the restricted zone through a trust, by holding ben - eficiary rights, which will grant to the beneficiary practically all the benefits of an owner.
(furniture, fixtures & equipment) are also typical depending on the business, cash deposits, etc. Lock boxes, trusts or other forms of cash control may also be requested by the lender. Depending on the nature and function of the real estate, the borrower may create reserves for maintenance, insurance and improvements. The most common equity financing provisions include the following: • equity financing – the amount of investment versus the participation percentage of the company’s equity; • access to the books and records; • reporting and covenants; • expected return for equity; • the right to appoint directors; and • investment restrictions, limiting the use of invested funds to certain projects or pur - poses. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no restrictions on granting securities over real estate to foreign lenders or on repay - ments to foreign lenders under loan or security agreements. However, taxes may be withheld from the interest paid, which in some cases depends on whether it is a foreign bank, on the tax residence of the lender and whether there is a double taxation treaty with the lender’s country of residence. The acquisition of real estate by foreign lend - ers as result of a mortgage foreclosure could be subject to restrictions based on its location and use.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Acquisitions of commercial real estate are gener - ally financed by a loan facility whose terms and conditions will depend on the creditworthiness of the borrower and the collateral available. There are different financing options for the acquisition of large real estate portfolios or com - panies holding real estate. In addition to a loan facility with collateral (trusts, mortgage, pledge, etc), other options include acquiring the seller’s debts or swapping shares, depending on the
transaction and the parties involved. 3.2 Typical Security Created by Commercial Investors
A commercial real estate investor who is bor - rowing funds typically creates the securities requested by lenders. Lenders usually request mortgages, trusts and share pledges. FF&E
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