‘They won’t pay,’ says FII LVBI11 manager of property rental for Americanas

Owner of a partially leased logistics warehouse in Americanas in Bahia, the real estate fund VBI Logístico (LVBI11) is already operating with the worst-case scenario in relation to the lease agreement it maintains with the company: default.

Rodrigo Abbud, founding partner of VBI Real Estate, spoke on the matter during the Where to invest in 2023organized by Money info. The event discusses the key topics that will impact your finances and investments throughout the year. Click here to register now.

“They won’t pay the rent and it will be a bit difficult for those who have Americanas as a tenant,” admits the manager. “So, at this point, let’s not kid ourselves. Our decision making has already been like we had the worst case scenario,” says Abbud, referring to the disruption to the lease payment stream.

Last week, Americanas reported that it had found a R$20 billion gap in the company’s balance sheet. In light of the discovery, the Rio de Janeiro judge gave the company 30 days to file for a judicial recovery, which could reduce or even stop its rent payments.

Currently, the company occupies approximately 60% of the approximately 100,000 square meters of the LVBI11 logistics warehouse in Aratu, Bahia. The dealer contract represents 7% of the fund’s revenue.

Facing the prospect of default, Abbud says VBI Logístico is already planning to work on repossessing the property, as a way to cut any losses.

“The quickest thing to do is to ask for the property to be repurchased and the space to be re-rented,” he points out. “It also has the potential to do that upwards [elevar o atual valor da locação] in the change of tenant”, he specifies.

The manager points out that a real estate fund invests in real estate and not in business risks. The space in Aratu, he adds, was not tailor-made for Americans but rather to meet an existing demand in the region, which would indicate a good potential for tenant replacement.

beyond the (LVBI11)at least six other funds – among those that disclose the names of tenants – maintain some relationship with Americanas.

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Brick or paper: which FII to choose in 2023?

In addition to Abbud, the panel on real estate funds of the Where to invest in 2023 introduced Daniel Lemos, CEO of Riza Asset Management. Both managers had the challenge of detailing which are the best FIIs for 2023, which starts with a Selic rate of 13.75% per annum.

The higher the rate, the more lucrative fixed income becomes, which ends up attracting variable income investors, including real estate funds. Hence the challenge for the FIIs in the coming year.

In Abbud’s assessment, it is very difficult to have an unequivocal answer to this topic. “Everything is part of a strategy. The art of investing is precisely having sobriety and serenity in making decisions and understanding what is happening right now ”, he specified.

He points out, however, that about two years ago the interest rate was 2%. “The increase we see today won’t last, it’s unsustainable for an economy. Let us remember the cycles that exist in the market. There has been a run on the Cdi (which accompanies the Selic) and all the listings of real estate funds have been reduced», underlines Abbud.

According to him, there are excellent brick funds on the Stock Exchange – which invest directly in real estate – paying excellent dividends of around 9% per annum.

“This fund will return to the level (price) it was at. But for this it will have to increase by about 20%”. This, from Abbud’s point of view, should take place in three or four years. This 20% appreciation over this period could have an additional return of about 6.5%, he predicts.

“The dividend plus asset appreciation will generate a return of 12.5% ​​per annum. It is not to be despised, bearing in mind that there is also a tax exemption”, completes the VBI representative.

Lemos agrees with Abbud, but recommends caution in choosing FIIs. “There are ‘brick bottoms’ and ‘brick bottoms’, he jokes.

To differentiate, we need to go back to the basics, the manager points out. “You have to analyze what are the assets, sectors, tenants behind the contract profile, among other points”.

Furthermore, Lemos points out, investors need to find out what their profile is and what part of their portfolio they want to dedicate to receiving dividends and increasing share value.

“The outlook is for the Selic to remain at 13.75% a year for a longer period of time. If I had to choose between “paper” funds – which invest in fixed income securities – or brick funds, I would opt for the “paper” ones, he points out.

“It’s just that paper funds are more tied to this part of the income (dividend distribution), and with the Selic staying high for a longer time, there’s more potential for us to navigate these incomes,” he projects. .

During the panel, Abbud also bolstered his defense of investing in real estate funds, which he says have always been a great asset class, offering recurring income and, many times, being “the gateway to variable.

“It tends to be easier to understand, and looking back, you can see very interesting results,” he recalls. “Funds launched in 2009 or 2010 have had returns that easily outpace the CDI,” adds the manager, noting that, even with the volatility, real estate funds are worth it.

End of FII dividend exemption?

Guests of Where to invest in 2023 practically rule out, in the short term, the end of the FII dividend exemption – one of the advantages of the product.

“This discussion on the taxation of dividends will take place and this was already recorded by the previous government,” recalls Lemos. “But there is a great complexity of tools that must be well thought out. If any proposal arrives in the next six months, it will be confusing and the possibility of moving forward is much less, ”he analyzes.

According to him, the taxation of FII dividends would require the same practice for other financial products such as Fiagros, LCI, CRI and CRA, which – in theory – would make the initiative unfeasible.

“It’s a disorganized and confused discussion that will bring unnecessary volatility to the market,” he reflects. “But we are in Brazil and we can expect anything,” she concludes.

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