Structure & Finance
Build a structure that can own, fund, control and deliver the project.
At a glance
- Indicative duration
- 1–3 months, in parallel
- The decision
- At the end of this phase, you should be able to determine which entity will acquire and develop the property, who owns and controls it, how capital is contributed, which security the lender requires and whether the project remains financeable under adverse scenarios.
- Documents
- Company incorporation and beneficial ownership registration.
- Facility agreement with conditions precedent and drawdown milestones.
- Shareholders' or joint-venture agreement covering deadlock and exit.
The decision this phase helps you make
At the end of this phase, you should be able to determine which entity will acquire and develop the property, who owns and controls it, how capital is contributed, which security the lender requires and whether the project remains financeable under adverse scenarios.
At the end of this phase, you should be able to determine:
- which entity will acquire and develop the property;
- who will own and control that entity;
- how investor capital will be contributed;
- whether funding will be equity, shareholder debt or third-party debt;
- how additional funding requirements will be managed;
- how development decisions will be approved;
- which security the lender will require;
- what must happen before finance can be drawn;
- how cost overruns and delays will be funded;
- how project income will be applied;
- how investors and lenders will exit;
- and whether the project remains financeable under adverse scenarios.
The structure should be legally valid, tax-reviewed, commercially workable and understandable to every investor and lender.
01Start with the project structure
A typical development may use one or more entities.
Project company or SPV
A special-purpose vehicle, or SPV, is commonly used to acquire, develop and hold a specific project.
Separating the project into its own entity can assist with:
- investor participation;
- project accounting;
- financing;
- security;
- governance;
- risk allocation;
- project sale;
- and financial reporting.
An SPV does not eliminate liability or guarantee legal separation in every circumstance. Its effectiveness depends on proper incorporation, governance, documentation, accounting and conduct.
+Show details(4)
Holding company
A holding company may own one or more project companies.
This structure can facilitate:
- investment across several projects;
- centralised management;
- reinvestment;
- investor participation at portfolio level;
- and disposal of individual project companies.
It can also create additional tax, accounting, governance and finance considerations.
Operating company
Where the development will be operated after completion, the property owner and business operator may be different entities.
For example:
- one company may own the hotel;
- another may operate it;
- and a third may employ staff or provide central services.
The separation must have a real commercial purpose and be supported by properly priced and documented agreements.
Joint-venture company
Two or more investors may own the project company under an agreed joint-venture structure.
Participants may contribute different resources, including:
- land;
- capital;
- guarantees;
- development expertise;
- operator relationships;
- management;
- or access to finance.
The ownership percentage should not be agreed without also defining control, funding obligations, distributions and exit.
Direct ownership
In some cases, an investor may acquire the property directly without a Portuguese project company.
This may appear simpler but can create different consequences for:
- tax;
- finance;
- liability;
- accounting;
- succession;
- administration;
- and future exit.
The structure must be reviewed before the acquisition becomes binding.
02Common Portuguese company types
Portuguese real estate projects are frequently held through a:
Sociedade por quotas — Lda.
A private limited-liability company may have one or more quota holders.
It is commonly used for privately held development projects because it can provide a relatively flexible ownership and management structure.
Sociedade anónima — S.A.
A public limited company has a share-based capital structure and a different governance regime.
It may be considered for:
- larger investments;
- broader investor participation;
- institutional structures;
- more complex governance;
- or projects requiring a different approach to shares and corporate bodies.
Other structures
Depending on the investor and project, alternatives may include:
- branches;
- partnerships;
- regulated investment vehicles;
- real estate investment companies;
- collective investment undertakings;
- or other domestic or cross-border structures.
Regulated investment vehicles require specialist regulatory and tax analysis and may be subject to CMVM supervision.
There is no universally correct project vehicle. The appropriate structure depends on the investors, development strategy, financing, tax position, governance, intended holding period and exit. Portugal's online company service currently allows the incorporation of single-member private limited companies, private limited companies and public limited companies. Foreign corporate shareholders require Portuguese tax and corporate identification and supporting corporate documentation.
03Questions to answer before incorporating the SPV
Define:
- the shareholders or quota holders;
- ownership percentages;
- voting rights;
- management body;
- registered office;
- corporate purpose;
- share or quota capital;
- initial funding;
- investor funding commitments;
- signing powers;
- accounting period;
- bank mandates;
- project management arrangements;
- beneficial owners;
- and intended exit.
The company's constitutional documents should be coordinated with:
- the shareholders' agreement;
- investment agreement;
- financing documents;
- acquisition agreement;
- development-management agreement;
- and operator arrangements.
A shareholders' agreement does not replace the company's constitutional documents or mandatory corporate approvals. Provisions intended to have corporate or third-party effect may need to be reflected in the articles of association, registered or implemented through separate corporate acts.
04Beneficial ownership, KYC and source of funds
The ownership structure must identify the natural persons who ultimately own or control the project entities.
Portuguese entities and certain foreign entities doing business in Portugal are subject to beneficial-ownership reporting requirements through the Central Register of Beneficial Ownership, known as the RCBE.
The information should be updated whenever a relevant ownership or control change occurs and confirmed as required by law.
Banks, lawyers, notaries, accountants and other obliged entities may request information concerning:
- shareholders;
- directors and managers;
- beneficial owners;
- corporate structure;
- source of funds;
- source of wealth;
- project purpose;
- expected transactions;
- tax residence;
- politically exposed persons;
- and sanctions exposure.
Incomplete or inconsistent information can delay:
- incorporation;
- bank-account opening;
- acquisition;
- finance approval;
- drawdown;
- and completion.
RCBE information identifies declared beneficial owners but does not itself prove the complete legal status of an entity. Corporate registration and supporting documents must also be reviewed.
05Structure the investor relationship
Where a project has more than one investor, the relationship should be documented before material capital is committed.
Ownership
Define:
- initial ownership;
- economic participation;
- voting rights;
- classes of investment;
- and whether ownership changes if an investor fails to fund.
+Show details(9)
Capital commitments
State:
- the total commitment of each investor;
- contribution dates;
- conditions to funding;
- permitted uses;
- evidence required;
- and whether commitments are several or shared.
Capital calls
The agreement should establish:
- who may issue a capital call;
- the approved budget on which it is based;
- notice periods;
- payment mechanics;
- maximum commitment;
- emergency funding;
- and consequences of non-payment.
Project governance
Identify:
- day-to-day management powers;
- board or management composition;
- quorum;
- voting thresholds;
- delegated authority;
- budget approval;
- business-plan approval;
- reporting;
- and project-bank-account controls.
Reserved matters
Decisions requiring enhanced approval may include:
- property acquisition or disposal;
- changes to the business plan;
- additional borrowing;
- granting security;
- material design changes;
- construction contracts;
- related-party agreements;
- changes to the operator;
- settlements;
- distributions;
- new investors;
- and project sale.
Cost overruns
Define whether cost overruns are funded through:
- additional equity;
- shareholder loans;
- lender facilities;
- contingency;
- insurance;
- contractor claims;
- or a combination of sources.
The agreement should distinguish between approved overruns, emergency expenditure, overruns caused by a particular investor or manager, and expenditure outside the approved business plan.
Default
Investor default provisions may address:
- default interest;
- suspension of voting;
- dilution;
- forced transfer;
- loss of preferential return;
- third-party funding;
- loans by the non-defaulting investor;
- and damages.
Default remedies must be proportionate, legally reviewed and coordinated with the company's articles and finance documents.
Transfers
The agreement may include:
- lock-up periods;
- permitted transfers;
- rights of first offer;
- rights of first refusal;
- pre-emption rights;
- tag-along rights;
- drag-along rights;
- lender restrictions;
- and change-of-control provisions.
Deadlock
A 50/50 ownership structure should not be created without a workable deadlock mechanism.
Possible mechanisms include:
- escalation;
- mediation;
- independent expert determination;
- rotating decision rights for defined matters;
- buy-sell procedures;
- project sale;
- or dissolution as a final remedy.
Exit
Define the intended routes and decision process for:
- sale of the property;
- sale of the completed units;
- refinancing;
- sale of the project company;
- portfolio sale;
- investor buyout;
- or long-term operation.
06Funding the project
A project can be funded through several layers of capital.
Sponsor equity
Equity absorbs the project's initial and residual risk.
It may fund:
- acquisition deposits;
- transfer taxes;
- design;
- licensing;
- early works;
- lender fees;
- interest;
- construction;
- cost overruns;
- and operating deficits.
Lenders commonly require a defined amount of equity to be invested before or alongside debt drawdowns.
+Show details(11)
Share capital
Share or quota capital forms part of the company's formal equity structure.
Its contribution, increase, reduction and repayment are subject to corporate-law requirements.
The registered capital amount should not be confused with the total cash required to finance the project.
Share premium and other equity contributions
Investors may contribute amounts in addition to the nominal share or quota capital.
The legal, accounting and repayment characteristics of each contribution must be documented.
Supplementary capital contributions
In a Portuguese private limited company, supplementary capital contributions may be available where authorised by the articles and approved under the applicable corporate requirements.
Their repayment is not equivalent to repayment of an ordinary commercial loan and is subject to corporate and financial conditions.
Shareholder loans
Investors may finance the SPV through shareholder loans, known in certain circumstances as “suprimentos”.
The documentation should address:
- amount;
- purpose;
- availability;
- maturity;
- interest;
- repayment;
- ranking;
- security;
- transfer;
- conversion;
- and subordination to third-party lenders.
Interest, repayment and deductibility must be reviewed from a tax and transfer-pricing perspective. A shareholder loan should not be presented as equity to a lender unless the lender has expressly accepted its treatment, terms and subordination.
Senior development debt
Senior debt is generally secured and ranks ahead of investor capital.
It may fund:
- acquisition;
- construction;
- professional fees;
- finance costs;
- or other approved development costs.
The facility is normally subject to detailed conditions, drawdown controls, covenants and security.
Bridge or acquisition finance
Short-term finance may be used to acquire or hold the property pending:
- planning;
- long-term development finance;
- investor funding;
- or disposal.
The refinancing risk, maturity and repayment source must be realistic.
Mezzanine finance
Mezzanine finance generally ranks behind senior debt but ahead of ordinary equity.
It can increase available funding but may carry:
- higher pricing;
- participation in profits;
- additional security;
- control rights;
- and restrictive enforcement arrangements.
Senior-lender consent and intercreditor documentation are normally required.
Preferred equity
Preferred equity may provide an investor with priority distributions or a preferred return before ordinary equity receives distributions.
The legal substance of the instrument should be reviewed. Calling an instrument “equity” does not determine its tax, accounting, insolvency or lender treatment.
Seller finance
The seller may defer part of the purchase price or provide another form of credit.
The agreement should address:
- repayment;
- interest;
- security;
- ranking;
- acceleration;
- subordination;
- and the seller's rights if the project underperforms.
Pre-sales and buyer payments
Deposits or staged payments from future purchasers may contribute to project cash flow where legally and contractually permissible.
They should not be treated as unrestricted project finance without considering:
- buyer-contract obligations;
- deposit protections;
- lender controls;
- construction milestones;
- consumer rules;
- refund exposure;
- and delivery obligations.
Grants and incentives
Some projects may qualify for public funding, tax benefits or sustainability-related incentives.
Eligibility should be verified before inclusion in the committed funding plan. An application or expected benefit is not equivalent to available cash.
07Build a complete sources-and-uses budget
The financial model should identify all uses of capital.
Acquisition uses
- purchase price;
- IMT;
- Stamp Duty;
- legal and registration costs;
- finance costs;
- due diligence;
- and acquisition adjustments.
+Show details(4)
Development uses
- design;
- planning;
- surveys;
- municipal fees;
- infrastructure;
- demolition;
- construction;
- landscaping;
- professional fees;
- project management;
- marketing;
- sales commissions;
- operator costs;
- insurance;
- certification;
- and completion costs.
Finance uses
- arrangement fees;
- legal fees;
- valuation;
- lender monitoring;
- interest;
- commitment fees;
- non-utilisation fees;
- hedging;
- security registration;
- and refinancing costs.
Contingency
The contingency should reflect:
- design maturity;
- site conditions;
- construction complexity;
- procurement strategy;
- inflation;
- planning risk;
- programme risk;
- and identified project uncertainties.
A contingency is not a substitute for known costs that have been omitted from the budget.
Working capital and operating deficit
For operating assets, include the capital required between construction completion and stabilised operations.
This may cover:
- recruitment;
- training;
- inventories;
- marketing;
- pre-opening costs;
- utilities;
- maintenance;
- rent-free periods;
- and operating losses.
08The development cash-flow model
A development appraisal should be converted into a period-by-period cash-flow model.
The model should show:
- timing of equity contributions;
- debt availability;
- acquisition payments;
- tax payments;
- design expenditure;
- construction expenditure;
- finance costs;
- sales or operating receipts;
- debt repayment;
- investor distributions;
- and final exit proceeds.
The model should distinguish between:
- total project cost;
- eligible lender-funded cost;
- committed cost;
- paid cost;
- cost to complete;
- and forecast final cost.
Sensitivity testing
Test the effect of:
- lower sale prices;
- slower sales;
- reduced occupancy;
- lower rent;
- higher construction cost;
- delayed planning;
- delayed completion;
- increased interest rates;
- lower lender valuation;
- and additional equity requirements.
The base case should not be the only scenario capable of repaying the debt.
09Core finance metrics
Lenders and investors may assess different metrics.
Loan-to-cost — LTC
Compares the loan amount with the agreed eligible project cost.
+Show details(5)
Loan-to-value — LTV
Compares the loan amount with the lender's accepted value of the property or completed development.
Cost and value are not the same.
Cost to complete
Measures the funding still required to complete the project against the undrawn debt and equity still available.
Interest cover and debt-service cover
For income-producing assets, lenders may assess whether operating income can cover interest and scheduled debt service.
Equity multiple and internal rate of return
Investors may assess total cash returned relative to invested capital and the timing of those returns.
Break-even point
The model should calculate the sales, price, occupancy or revenue level required to repay debt and recover invested capital.
Definitions should be agreed. The same label can produce different results if the model includes or excludes tax, interest, fees or certain project costs.
10Preparing the lender information package
A finance process is more efficient when the lender receives a structured and consistent package.
It may include:
- executive project summary;
- sponsor and investor information;
- ownership chart;
- beneficial-ownership information;
- property documents;
- due diligence reports;
- acquisition documents;
- planning status;
- architectural project;
- area schedule;
- construction budget;
- development programme;
- contractor strategy;
- financial model;
- valuation;
- market evidence;
- sales or leasing strategy;
- operator information;
- equity evidence;
- tax structure;
- and proposed security.
All figures should reconcile across:
- the financial model;
- cost plan;
- area schedule;
- valuation;
- planning documents;
- and investment memorandum.
11The lender term sheet
A lender term sheet should be reviewed as a complete risk-allocation document, not only as an interest-rate proposal.
It may address:
- borrower;
- guarantors;
- facility amount;
- permitted purpose;
- availability period;
- maturity;
- interest;
- default interest;
- arrangement fees;
- commitment fees;
- equity contribution;
- drawdown sequence;
- security;
- financial covenants;
- project covenants;
- sales conditions;
- prepayment;
- cash sweep;
- hedging;
- information requirements;
- lender monitoring;
- conditions precedent;
- events of default;
- transfer by the lender;
- and legal and valuation costs.
A term sheet may be wholly or partly non-binding. Confidentiality, exclusivity, costs, governing law and other provisions may nevertheless be binding. A lender's credit approval or term sheet is not the same as an unconditional obligation to fund.
12Finance due diligence
Before entering binding finance documents, the lender may review:
The borrower
- incorporation;
- ownership;
- management;
- beneficial owners;
- accounts;
- tax status;
- existing debt;
- and corporate authority.
+Show details(5)
The sponsor
- development experience;
- financial capacity;
- track record;
- litigation;
- existing commitments;
- and ability to fund overruns.
The property
- title;
- boundaries;
- encumbrances;
- access;
- planning;
- environmental position;
- occupation;
- and valuation.
The project
- planning status;
- design;
- programme;
- cost;
- procurement;
- construction team;
- infrastructure;
- sales;
- operation;
- and exit.
The funding plan
- committed equity;
- shareholder loans;
- third-party debt;
- grants;
- buyer payments;
- contingency;
- and cost-to-complete coverage.
The transaction documents
- acquisition agreement;
- construction contract;
- consultant appointments;
- development-management agreement;
- operator agreement;
- pre-sale contracts;
- insurance;
- and material project contracts.
13Conditions precedent to finance
The lender will normally require specified conditions before the facility becomes available.
Corporate conditions
- constitutional documents;
- corporate approvals;
- ownership evidence;
- beneficial-ownership information;
- authorised signatories;
- and legal opinions.
+Show details(5)
Property conditions
- registered ownership;
- satisfactory title;
- mortgage documentation;
- discharge or ranking of existing security;
- valuation;
- and insurance.
Planning conditions
- satisfactory planning status;
- required licences or communications;
- approved project;
- evidence of applicable rights and validity periods;
- and confirmation of outstanding conditions.
Project conditions
- approved budget;
- construction programme;
- contractor appointment;
- professional appointments;
- cost consultant report;
- fixed-price or cost-control arrangements;
- and building-contract security.
Equity conditions
- evidence of committed equity;
- investment of the required equity amount;
- shareholder-loan subordination;
- and confirmation that no unauthorised distributions have been made.
Security conditions
- execution;
- registration;
- notices;
- acknowledgements;
- consents;
- and evidence of agreed priority.
Each condition should identify the required evidence and the person responsible for delivering it.
14Drawdown mechanics
Development finance is normally made available in stages rather than paid in full at the beginning.
A drawdown request may require:
- updated cost report;
- invoices;
- contractor certificates;
- evidence of expenditure;
- progress report;
- updated programme;
- no-default confirmation;
- compliance certificate;
- updated sales report;
- proof of equity contribution;
- and confirmation that the remaining funding is sufficient to complete the project.
The lender's monitoring surveyor or cost consultant may assess:
- work completed;
- cost incurred;
- forecast cost;
- contingency;
- variations;
- programme;
- and cost to complete.
A lender may refuse or reduce a drawdown if the contractual conditions are not satisfied. The project programme must allow time for certification, review and release of each drawdown.
15Security package
The finance documents may require security over some or all project assets.
Mortgage
A mortgage over the property provides security for the identified obligations.
A Portuguese mortgage must satisfy the applicable formalities and be registered. The IRN confirms that the effectiveness of a voluntary mortgage depends on registration.
+Show details(5)
Share or quota security
The lender may require security over the ownership interests in the project company.
The documentation and perfection requirements depend on the company type and security structure.
Bank-account security
Project accounts may be pledged, controlled or subject to agreed payment restrictions.
Receivables and project contracts
The lender may require security or assignment arrangements relating to:
- sale proceeds;
- rent;
- insurance proceeds;
- construction contracts;
- consultant appointments;
- operator agreements;
- guarantees;
- and other project receivables.
Assignment restrictions and counterparty consents must be reviewed.
Guarantees
Security may include:
- shareholder guarantees;
- parent-company guarantees;
- completion guarantees;
- cost-overrun guarantees;
- interest shortfall guarantees;
- or limited recourse support.
The amount, duration, release conditions and enforcement triggers should be clear.
Direct agreements and step-in rights
The lender may require direct arrangements with:
- the contractor;
- development manager;
- operator;
- architect;
- engineers;
- or other material counterparties.
These may allow the lender or its nominee to preserve or assume the contract following borrower default.
16Financial covenants and project controls
The finance documents may restrict:
- additional debt;
- granting further security;
- changes to the project;
- changes to the budget;
- changes to the contractor or operator;
- related-party payments;
- distributions;
- property disposals;
- pre-sales below agreed prices;
- new leases;
- changes in ownership or control;
- and use of project income.
The borrower may also be required to provide:
- management accounts;
- cost reports;
- updated programmes;
- sales reports;
- planning updates;
- construction reports;
- covenant calculations;
- tax confirmations;
- and notification of disputes or defaults.
These obligations should be reflected in the project-management and accounting systems before the loan is signed.
17Cost overruns and funding shortfalls
The finance structure should assume that the project may not follow the base-case budget.
The documents should establish:
- who funds overruns;
- when additional equity must be contributed;
- whether undrawn contingency can be used;
- whether lender consent is required;
- how disputed contractor claims are treated;
- whether investor commitments are capped;
- and what happens if an investor cannot fund.
A lender may apply a cost-to-complete test and require additional equity where the remaining debt, committed equity and approved contingency are insufficient to complete the project. Failure to fund an overrun can delay construction, block further drawdowns and trigger default.
18Cash waterfall and distributions
The project documents should define how project receipts are applied.
A typical sequence may include:
- taxes and mandatory payments;
- operating and project costs;
- senior interest and fees;
- senior principal;
- reserve accounts;
- subordinated or mezzanine debt;
- shareholder loans;
- preferred investor returns;
- return of equity;
- residual profit distributions.
The actual waterfall depends on the transaction. No distribution should be made solely because cash is available in the project account. Corporate-law restrictions, finance covenants, tax, future liabilities and cost-to-complete requirements must also be considered.
19Tax structuring
Tax analysis should be completed before incorporation, acquisition and financing.
The review may include:
- corporate income tax;
- municipal surcharges;
- VAT;
- IMT;
- Stamp Duty;
- taxation of finance and guarantees;
- withholding tax;
- interest deductibility;
- transfer pricing;
- tax losses;
- capital gains;
- profit distributions;
- shareholder-loan repayment;
- group taxation;
- permanent-establishment risk;
- investor residence;
- double-tax treaties;
- and the intended exit.
Finance costs
Portuguese tax law limits the deductibility of net finance expenses according to statutory thresholds and conditions.
The financial model should not assume that all interest and financing costs are deductible. See the Portuguese Corporate Income Tax Code — Article 67.
+Show details(3)
Related-party finance
Shareholder loans and related-party guarantees should be commercially documented and reviewed under Portuguese transfer-pricing rules.
The agreed interest rate, fees, security and other terms should be supportable.
Stamp Duty
Credit, guarantees, interest and other financial arrangements may fall within the Portuguese Stamp Duty rules, subject to the facts, duration, parties and any applicable exemption.
Do not model financing costs without a transaction-specific Stamp Duty review.
Tax structure versus legal substance
The parties should not adopt a structure solely because it appears to produce a tax advantage.
The structure must have commercial substance, be correctly implemented and remain consistent with:
- actual ownership;
- management;
- decision-making;
- risk;
- funding;
- accounting;
- and project operations.
20Foreign-investment considerations
Foreign individuals and companies can generally participate in Portuguese real estate projects, subject to the applicable:
- tax identification;
- corporate registration;
- beneficial-ownership;
- banking;
- anti-money-laundering;
- sanctions;
- tax;
- and sector-specific requirements.
A foreign corporate investor may require:
- Portuguese tax identification;
- Portuguese corporate identification;
- certified corporate documents;
- evidence of representation powers;
- translations;
- beneficial-ownership information;
- and local tax or legal representation where applicable.
Portugal also has a screening regime concerning certain foreign investments in strategic assets. Ordinary real estate development is not automatically subject to this regime, but projects involving strategic infrastructure or protected sectors should be reviewed. See Decree-Law 138/2014.
21Indicative financing sequence
Step 1 — Define the ownership structure
Select the project entity, ownership, management and intended exit.
+Show details(9)
Step 2 — Agree investor terms
Document commitments, control, funding, defaults, distributions and exit.
Step 3 — Build the financial model
Prepare the complete sources-and-uses budget, cash flow and sensitivities.
Step 4 — Determine the funding gap
Calculate the equity, senior debt and any additional capital required.
Step 5 — Prepare lender information
Create a consistent project, legal, planning, construction and financial package.
Step 6 — Obtain financing proposals
Compare pricing, leverage, maturity, security, covenants and funding conditions.
Step 7 — Complete lender due diligence
Respond to corporate, property, planning, technical, tax and commercial questions.
Step 8 — Negotiate finance documents
Agree the facility, security, intercreditor, guarantee and direct-agreement package.
Step 9 — Satisfy conditions precedent
Deliver the evidence required before the facility becomes available.
Step 10 — Establish drawdown controls
Coordinate equity, certifications, lender monitoring and payment timing.
22Structure and finance cost categories
Allow for:
- company incorporation;
- corporate registrations;
- accounting setup;
- tax advisers;
- legal advisers;
- investor documentation;
- bank-account compliance;
- lender arrangement fees;
- commitment and non-utilisation fees;
- lender legal costs;
- borrower legal costs;
- valuation;
- technical due diligence;
- lender monitoring;
- security documentation;
- mortgage and other registrations;
- Stamp Duty;
- hedging;
- insurance;
- agency fees;
- and refinancing or exit costs.
The model should identify whether each amount is:
- paid upfront;
- financed;
- capitalised;
- recurring;
- refundable;
- or contingent.
The structure and finance decision gate
Proceed to construction commitments only when the following questions can be answered.
- Ownership and governance: is the project entity established, with documented ownership and beneficial ownership, clear management and signing powers, agreed reserved matters and reporting, and a workable mechanism for investor default and deadlock?
- Equity: is the required equity legally committed, with defined contribution dates and conditions, capacity to fund cost overruns, correctly distinguished shareholder loans and documented related-party terms?
- Debt: is the lender approval sufficiently advanced, are the material commercial terms agreed, is the security package understood, can all conditions precedent be satisfied, and does the drawdown programme match construction payments?
- Financial model: does the model include all acquisition, development, finance and operating costs, is contingency adequate for the design maturity, are interest and taxes correctly modelled, has the cost-to-complete position been tested, and can the project repay debt under downside scenarios?
- Project readiness: is the planning status acceptable to the lender, is the construction budget validated, is the procurement strategy bankable, are contractor and consultant appointments suitable, and are insurance and guarantees available?
- Exit: is the expected repayment source credible, are prepayment and cash-sweep obligations understood, can the project be sold or refinanced under the transaction documents, and are investor distributions compatible with lender and corporate restrictions?
If any critical funding source remains uncommitted, the project should not enter unconditional construction expenditure that depends on that funding.
Key risks in this phase
- Committing to acquisition or construction before equity and debt are legally committed.
- Shareholder loans treated as equity without written lender acceptance and subordination.
- Conditions precedent that cannot be satisfied within the acquisition or construction programme.
- Bank-account opening and KYC timelines underestimated for foreign or multi-layered structures.
- Security and guarantee packages granted without understanding enforcement consequences.
- Cost overruns with no defined funder, capped investor commitments or exhausted contingency.
- Distributions made in breach of company law, covenants or cost-to-complete requirements.
- Tax structures without commercial substance or supportable related-party terms.
Indicative timing
Project structures and finance processes vary substantially.
As an initial planning assumption:
- ownership and tax structuring: 2–6 weeks;
- incorporation and corporate setup: 1–4 weeks;
- bank-account and compliance process: 2–8 weeks or longer;
- investor documentation: 3–10 weeks;
- lender approach and term sheets: 4–12 weeks;
- lender due diligence and documentation: 6–16 weeks;
- satisfaction of conditions precedent: 2–8 weeks after signing.
A straightforward equity-funded project may be structured quickly. A project involving several investors, foreign entities, institutional capital, senior and mezzanine lenders, complex security or unresolved planning conditions may require several months. The financing programme should not assume immediate account opening, unconditional credit approval or same-day drawdowns.
Common structure and finance mistakes
- 1Incorporating before agreeing the investment structure: changing ownership, rights and capital after commitments have been made can create avoidable legal and tax consequences.
- 2Using a standard company constitution for a complex joint venture: standard articles may not reflect investor control, funding, transfer and exit arrangements.
- 3Confusing registered capital with total project equity: a company may have been incorporated with a small formal capital amount while still requiring substantial investor funding.
- 4Treating shareholder debt as lender-accepted equity: the senior lender may require shareholder debt to be subordinated, interest-free during the facility or unavailable for repayment.
- 5Assuming the term sheet guarantees funding: funding remains subject to documentation, due diligence, conditions precedent and absence of default.
- 6Comparing loans only by interest rate: fees, leverage, equity timing, covenants, security, sales controls and repayment terms may be equally important.
- 7Omitting finance costs from the development budget: interest, lender fees, monitoring, security, tax and delay costs can materially affect profitability.
- 8Underestimating KYC and bank-account timing: foreign and multi-layered structures can require extensive supporting information.
- 9Failing to model cost overruns: a project can be profitable on completion and still fail because it runs out of cash during construction.
- 10Using one financial model for investors and another for the lender: inconsistent assumptions undermine confidence and can create contractual reporting problems.
- 11Making unauthorised distributions: available cash may still be restricted by company law, finance covenants, reserves or cost-to-complete requirements.
- 12Ignoring related-party tax rules: shareholder loans, guarantees, management fees and other group arrangements require supportable commercial terms.
- 13Granting security without understanding enforcement: a security package may allow the lender to take control of the property, shares, accounts, contracts or project income following default.
Structure and finance checklist
Before entering construction commitments, confirm that you have:
Progress: 0/30
Progress is saved in this browser only.
Frequently asked questions
Do I need a Portuguese company to develop property in Portugal?
Not in every case. A foreign individual or company may be able to own Portuguese real estate directly, but a Portuguese SPV is commonly used for governance, accounting, finance and risk-separation reasons. The correct structure depends on the investors, tax position, financing and exit.
Is an Lda. always the best SPV?
No. An Lda. is frequently used for privately held projects, but an S.A. or another structure may be more suitable for institutional, regulated or more complex investments.
Should the project be funded with equity or shareholder loans?
Usually through an appropriately structured combination, but the correct balance depends on tax, lender requirements, investor return, repayment flexibility, insolvency risk and corporate rules.
Can the land be contributed to the project company?
Potentially. A contribution in kind requires appropriate corporate, valuation, tax, property-transfer and registration analysis. It cannot be treated as a simple cash contribution. The standard online incorporation process does not accommodate incorporation with capital contributed in kind.
Can the land value count as investor equity?
A lender may recognise part of the land value as equity, but this depends on acquisition price, current valuation, existing debt, title, planning status and lender policy. It should not be assumed without written lender confirmation.
Can finance be obtained before full planning approval?
Potentially. Acquisition or bridge finance may be available before full planning, but leverage, pricing, maturity and security may reflect the additional risk. Development drawdowns may remain conditional on planning milestones.
Does a lender term sheet guarantee that the loan will be provided?
No. Most term sheets remain subject to credit approval, due diligence, documentation, conditions precedent and other requirements.
What happens if construction costs increase?
The finance documents and investor agreement should establish who provides additional funding. The lender may require the investors to inject additional equity before further debt is released.
Will the lender require personal or corporate guarantees?
It depends on the transaction. The lender may request sponsor, shareholder, parent-company, completion or cost-overrun guarantees. Their scope and release conditions are negotiable and should be expressly limited where appropriate.
Can project profits be distributed before the loan is repaid?
Only where permitted by company law, the finance documents, the approved cash waterfall, cost-to-complete requirements and the company's financial position.
Are all interest costs tax deductible?
No. Portuguese law contains limitations on the deductibility of net finance costs, and related-party finance must also comply with transfer-pricing and other tax rules.
Does a mortgage become effective when the finance agreement is signed?
No. A Portuguese mortgage must comply with the applicable legal formalities and be registered. Registration is essential to its effectiveness.
Tools for this phase
SPV Structure Builder
Compare direct ownership, a Portuguese SPV, a holding structure and a joint venture.
Build the ownership structureInvestor Governance Builder
Define ownership, reserved matters, capital calls, defaults, distributions and exit.
Build the investor termsSources and Uses Calculator
Organise acquisition, development, finance, operating and contingency costs.
Build the funding planDevelopment Cash-Flow Tool
Map monthly equity, debt, expenditure, income and repayment.
Build the project cash flowFinance Term Sheet Comparator
Compare leverage, pricing, maturity, security, covenants and drawdown conditions.
Compare finance proposalsConditions Precedent Tracker
Organise lender conditions, responsible parties, evidence and deadlines.
Track finance conditionsNext phase
07 — Construction & Delivery
Convert the approved and funded project into a controlled construction programme. The next phase explains contractor selection, construction contracts, professional responsibilities, guarantees, payment control, variations, delay, quality, completion and handover.
Continue to Construction & Delivery
Legal support through VVA
Make the investment and finance structure work as one system
VVA can support investors, developers, family offices, funds, landowners and operators in structuring and financing Portuguese real estate developments, including project-company incorporation, corporate structuring, shareholder and joint-venture agreements, investment agreements, capital commitments, shareholder loans, governance and reserved matters, beneficial-ownership compliance, acquisition and development finance, lender due diligence, facility agreements, mortgages and security, guarantees, intercreditor arrangements, direct agreements, conditions precedent, drawdown support, refinancing, project disposal and investor exit.
Legal services are provided by Valente Veiga & Associados.
Official sources and further reading
- Portuguese Commercial Companies Code.
- Official Portuguese company incorporation service.
- Permanent commercial certificate.
- Central Register of Beneficial Ownership.
- Portuguese anti-money-laundering legislation.
- Portuguese Corporate Income Tax Code.
- Corporate Income Tax Code — finance-cost limitations.
- Portuguese Stamp Duty Code.
- Voluntary mortgage registration.
- Portuguese foreign-investment screening regime — Decree-Law 138/2014.
- Portuguese Securities Market Commission — CMVM.
Last reviewed: 21 August 2026
This page provides general information about corporate structures and real estate development finance in Portugal. It does not constitute legal, tax, accounting, regulatory, investment, valuation, banking or financial advice, nor an offer or recommendation to provide or obtain finance. The appropriate structure and funding terms depend on the investors, property, project, lender, tax position, risk profile and applicable law. Obtain project-specific professional advice before incorporating an entity, accepting investment, contributing capital, entering finance documents, granting security or making distributions.