Institutional Capital in Costa Rica: How Fund Allocations Work
Most fund managers who look at private credit never consider Costa Rica, and many do not know a local channel for property-backed loans exists. Institutional capital in Costa Rica can be put to work across many smaller first-lien loans, each reviewed and closed locally, instead of sitting in a few large positions. This article explains how that kind of allocation works with GAP Investments, what the fund controls, and what it should check.
One allocation, many smaller loans
A fund, family office or other capital provider sets aside a block of capital, for example US$10 million or US$20 million, to be placed through GAP in property-backed loans. Standard loans start at US$50,000, so an allocation of that size can be spread across many properties and borrowers.
Each loan carries its own security: a first-lien position for the lender over Costa Rica real estate, at a conservative loan-to-value. GAP prefers around 30% or less, and 50% is the maximum for the standard product. Terms run from six months to three years, with interest-only payments and principal repaid at maturity.
Standard loans pay 9% to 16% a year, set loan by loan, and the lender receives the full agreed rate because borrowers pay the loan fees. A lower rate does not by itself make a loan safer, but GAP’s preferred range of 9% to 10% usually goes with more conservative collateral and leverage.
The fund sets the rules
An allocation works best when the criteria are agreed before any money moves. Common rules include:
- Maximum loan size, for example US$250,000 per loan, so no single loan is large relative to the allocation.
- A target or minimum rate.
- A maximum loan-to-value, which can sit below the 50% product limit.
- Preferred locations and property types.
- A term range within six months to three years.
Loans above US$1 million require additional documentation and due diligence.
How institutional capital in Costa Rica is structured
There is no single template. How an allocation is held and documented is agreed case by case with GAP. Some funds, for example, use a trust arrangement with rules such as a maximum loan size. Whatever the arrangement, it is documented with each party’s attorneys before capital moves.
Two legal points shape every structure. First, Costa Rica reserves financial intermediation, meaning habitually taking in money from the public to lend it for the intermediary’s own account and risk, to entities authorized by law and by SUGEF (Law 7558, article 116). Second, a fund or company that lends in Costa Rica as an organized, habitual activity will likely need to register with SUGEF for anti-money-laundering purposes. Our guide explains how to register with SUGEF as a private lender.
What GAP does on each loan
- Finds and screens the loan: property, amount, use of funds, borrower, term and repayment path.
- Reviews the security: title, ownership, existing liens, access, realistic value, location and marketability. GAP determines the valuation used for loan-to-value, with lender input and acceptance.
- Coordinates the closing with an experienced Costa Rica attorney/notary: loan documents, first-lien registration, payoff of any existing liens and funds flow. GAP closes loans within 10 business days once the required documents are complete.
- After closing, borrowers pay the lender directly, and GAP can help with communication if a borrower or lender reports a problem.
What an allocation does not promise
Capital is placed loan by loan as suitable loans become available, so GAP does not promise how quickly an allocation will be fully placed, and no return is guaranteed. Loans can pay late or default, and enforcing security takes time. Spreading an allocation across many smaller loans limits how much any one loan can affect it, but it does not remove risk.
The legal protections that matter for client money, from the public property registry to mortgage enforcement, are covered in what protects family office and fund capital in Costa Rica.
Frequently Asked Questions
Does a fund need to start with a large allocation?
No. A relationship does not need to begin with a large commitment. Individual loans start at US$50,000, and a fund can review a few loans individually before growing its allocation.
Can retirement or pension money be used?
That depends on the rules that govern the fund in its own country. Each fund should confirm with its own advisers what its mandate and regulations allow before committing client or retirement money.
Does GAP pool investors’ money?
No. GAP does not present pooled capital as its standard model. Each structure is agreed privately with the right legal, tax and investment advice.
Who does a fund speak with at GAP?
Glenn handles conversations with funds and professional capital providers. You can reach him at glenn@gap.cr.
Request the Institutional Lender Briefing
For a two-page overview of loan terms, allocation structures, the review process, the legal framework and the risks, request the Institutional Lender Briefing. To talk first, email Glenn at glenn@gap.cr.
This article is general information. It is not an offer of securities or an investment product, and it is not legal, tax or investment advice. No return, placement pace or outcome is guaranteed.
WhatsApp us at +506 4001 6413 to get started, call or email info@gap.cr.
Article by Glenn Tellier (Founder of CRIE and Grupo Gap)
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