BCR SAFI Engages in Controversial Transactions Involving $48.8 Million in Risky Real Estate Deals with Ex-Lawmaker's Firm
The Costa Rican Investment Funds Management Company is under scrutiny following findings of irregularities in real estate purchases linked to Humberto Vargas Corrales.
The Superintendencia General de Valores (Sugeval) has reported that the Sociedad Administradora de Fondos de Inversión del Banco de Costa Rica (BCR SAFI) engaged in questionable transactions involving $48.8 million in real estate deals with the business group of former legislator Humberto Vargas Corrales of the Social Christian Unity Party (PUSC).
The transactions occurred between May 2018 and June 2019 and involved the acquisition of seven properties.
Subsequently, the same group sold the controversial Parque Empresarial del Pacífico (PEP) to BCR SAFI for $70.2 million in February 2020, a deal that included allegations of an overprice of $35.2 million.
Sugeval's investigations revealed that just weeks before these purchases, Vargas's business group had acquired several of those properties at significantly lower prices than those later agreed upon with BCR SAFI.
Furthermore, investigators noted that some sales contracts were signed prior to receiving approvals from Banco de Costa Rica, indicating a lack of oversight from the BCR SAFI management.
The seven acquired properties are located in various districts in San José, including Santa Ana, La Uruca, Ciudad Colón, Pavas, and San Pablo in Heredia.
The investigation, documented in report SGV-I-83-2024 issued in June 2024, indicated potential risks associated with these transactions.
This report forms part of a broader investigation by the Fiscalia de Probidad y Anticorrupción, under case number 21-000209-1218.
According to the report, neither the BCR SAFI Investment Committee nor its Board of Directors conducted thorough evaluations or assessments before approving the purchases.
These properties were found to be undergoing renovations, with some not being completed, and all exceeded the age limits recommended by BCR SAFI's internal regulations for investments.
BCR SAFI officials stated that the current management is implementing new procedures and internal regulations to align operations with the regulatory framework governing real estate investment funds.
They indicated that existing procedures were reviewed and updated, with personnel changes made in critical areas including senior management and risk assessment.
Sugeval’s report highlighted that during its analysis, there was no evidence that BCR SAFI evaluated the business structure of the selling firms or the involvement of Vargas Corrales in these sales, despite his mention in several documents.
The investigations specifically noted instances where Vargas's son, Humberto Vargas Sotres, appeared as a seller in transactions, including the sale of the Edificio Madrid.
The investigation revealed that properties were sold through five different anonymous societies, all linked to the Vargas family's business group, with the same two individuals representing them.
These societies were linked to the Grupo Empresarial HVC Inmobiliaria, which was associated with several of the contested transactions.
Rodrigo Alberto Carazo, a spokesperson for the investors of BCR SAFI, expressed concerns regarding the reported irregularities, stating that the nature of the management had defrauded investors by mismanaging funds.
He criticized the administration’s handling of the investments, highlighting cases where more funds were requested than necessary to cover transactions.
The BCR SAFI purchased the properties in four separate transactions over 13 months and is reported to have sold some of the properties while retaining others in its real estate portfolio.
The remaining properties had accumulated substantial overdue rents according to financial statements, raising further concerns about their ongoing viability.
Each of the transactions had specific details regarding acquisition costs, renovation needs, and the financial status post-purchase, raising questions about the appropriateness of funding strategies employed by BCR SAFI.
As investigations continue, the implications for BCR SAFI and its handling of investor funds are under closer scrutiny by both regulatory agencies and affected investors.
The transactions occurred between May 2018 and June 2019 and involved the acquisition of seven properties.
Subsequently, the same group sold the controversial Parque Empresarial del Pacífico (PEP) to BCR SAFI for $70.2 million in February 2020, a deal that included allegations of an overprice of $35.2 million.
Sugeval's investigations revealed that just weeks before these purchases, Vargas's business group had acquired several of those properties at significantly lower prices than those later agreed upon with BCR SAFI.
Furthermore, investigators noted that some sales contracts were signed prior to receiving approvals from Banco de Costa Rica, indicating a lack of oversight from the BCR SAFI management.
The seven acquired properties are located in various districts in San José, including Santa Ana, La Uruca, Ciudad Colón, Pavas, and San Pablo in Heredia.
The investigation, documented in report SGV-I-83-2024 issued in June 2024, indicated potential risks associated with these transactions.
This report forms part of a broader investigation by the Fiscalia de Probidad y Anticorrupción, under case number 21-000209-1218.
According to the report, neither the BCR SAFI Investment Committee nor its Board of Directors conducted thorough evaluations or assessments before approving the purchases.
These properties were found to be undergoing renovations, with some not being completed, and all exceeded the age limits recommended by BCR SAFI's internal regulations for investments.
BCR SAFI officials stated that the current management is implementing new procedures and internal regulations to align operations with the regulatory framework governing real estate investment funds.
They indicated that existing procedures were reviewed and updated, with personnel changes made in critical areas including senior management and risk assessment.
Sugeval’s report highlighted that during its analysis, there was no evidence that BCR SAFI evaluated the business structure of the selling firms or the involvement of Vargas Corrales in these sales, despite his mention in several documents.
The investigations specifically noted instances where Vargas's son, Humberto Vargas Sotres, appeared as a seller in transactions, including the sale of the Edificio Madrid.
The investigation revealed that properties were sold through five different anonymous societies, all linked to the Vargas family's business group, with the same two individuals representing them.
These societies were linked to the Grupo Empresarial HVC Inmobiliaria, which was associated with several of the contested transactions.
Rodrigo Alberto Carazo, a spokesperson for the investors of BCR SAFI, expressed concerns regarding the reported irregularities, stating that the nature of the management had defrauded investors by mismanaging funds.
He criticized the administration’s handling of the investments, highlighting cases where more funds were requested than necessary to cover transactions.
The BCR SAFI purchased the properties in four separate transactions over 13 months and is reported to have sold some of the properties while retaining others in its real estate portfolio.
The remaining properties had accumulated substantial overdue rents according to financial statements, raising further concerns about their ongoing viability.
Each of the transactions had specific details regarding acquisition costs, renovation needs, and the financial status post-purchase, raising questions about the appropriateness of funding strategies employed by BCR SAFI.
As investigations continue, the implications for BCR SAFI and its handling of investor funds are under closer scrutiny by both regulatory agencies and affected investors.