Inter Asset has presented a proposal to reorganize and consolidate four real estate investment funds (REITs) into a single vehicle, a move that has been gaining momentum in the market due to high interest rates, which make raising capital difficult.
Inter 's investment arm, which has approximately R$ 24 billion in assets under management, including R$ 1.4 billion in the real estate vertical, announced on Tuesday, June 30th, a proposal to consolidate the ITIP11 and ITIT11 funds, vehicles mandated to invest in FII quotas in the brick-and-mortar segment following ETFs, and INRD11, focused on residential properties, into INHF11.
If approved, the consolidation will result in a fund with net assets of approximately R$ 391 million, a projected average daily liquidity of R$ 500,000, and a balanced exposure between real estate (27%), REITs (26%), CRIs (15%), and cash (32%).
The assessment is that, through a more robust vehicle, the asset manager will be able to deliver greater diversification, liquidity, and returns to investors, especially given the current volatile environment and restrictions in the asset fundraising and recycling market.
"In the current context, permeated by uncertainties, more restrictive interest rates, greater volatility, and expectations regarding the conduct of fiscal policy in the coming years, we have identified an opportune moment for allocation to financial and real estate assets, given more pressured pricing due to a higher opportunity cost," says an excerpt from the Inter Asset letter accompanying the proposal.
"Despite this opportune moment, this context also hinders the recycling of existing portfolios, in addition to limiting the ability to raise new funds for publicly traded vehicles, reducing the exploitation of these opportunities," he adds.
The operation foresees the issuance of new INHF11 units for the acquisition of the assets and cash of the ITIP11 and ITIT11 funds, while the properties of INRD11 will be sold to INHF11, with payment in units and/or cash.
According to Inter Asset, INHF11 was chosen because the fund has an active management mandate, with a flexible and dynamic investment policy capable of exploring different classes of real estate assets.
According to the asset manager, the ITIP11 and ITIT11 funds face challenges related to low liquidity and outdated pricing in the secondary market, hindering portfolio recycling and adherence to benchmark indices.
INRD11, which invests in multifamily residential properties, presents a structural gap between the net asset value of its assets and the price of its shares traded on the stock exchange.
"The reorganization will enable potential value creation for investors who are currently in less liquid vehicles with secondary market pricing that is out of sync with the real value of the assets invested," says Inter Asset.
The consolidation is contingent upon approval at the shareholder meetings of the funds involved and has an estimated completion time of approximately 180 days, with the possibility of extension.
Inter Asset's proposal is not an isolated move. The consolidation of REITs (Real Estate Investment Trusts) has been occurring and should continue given the excess of small funds in the market. Currently, there are 435 listed REITs, with an average net worth of R$ 455.2 million, according to data from Clube FII.
The assessment is that larger funds, with assets in the billions of reais, are able to raise capital more easily, exhibit lower volatility, and better dilute costs.
Patria Investimentos is following this strategy. After a series of acquisitions, the asset manager reached R$ 38 billion in assets under management in the real estate vertical, distributed across 30 funds. The idea, however, is to consolidate these vehicles, grouping them into the firm's six different strategies.
“We see great synergies and the ability to create great vehicles in different sectors,” Rodrigo Abbud, partner and head of real estate at Patria in Brazil, told NeoFeed when the purchase of RBR Asset's listed funds area was announced.
Contacted by NeoFeed , Inter Asset stated that the proposed reorganization of the funds aims to expand the scale, liquidity, and efficiency of management.
"The operation has been structured and is subject to current regulations, being submitted for approval by the shareholders, with broad disclosure of the information and criteria that underpin the proposed reorganization, as per public documents already released through official channels," says an excerpt from the statement.
