Patria Investimentos has launched an initial offering of R$ 500 million for a credit fund intended to finance real estate development projects amid a capital shortage in the market.
The first issuance of the Patria Crédito Multiestratégia CDI (MCDI) Real Estate Investment Fund foresees the initial issuance of 5 million units at a unit price of R$ 100.
The offering could be increased by up to 25%, with the issuance of an additional 1.25 million units, bringing the total amount to R$ 625 million, according to the operation's prospectus.
Speaking to NeoFeed , Rodrigo Abbud, partner and head of real estate at Patria in Brazil, stated that the fund is being launched with the same credit strategy as MVBI, a vehicle created by the firm in partnership with EQI , which currently has a net worth of R$ 352 million and registers a total annualized return of 15.6% per year.
The success of the first vehicle led EQI and Patria to consider creating a new fund, given the complexities of issuing new MVBI shares.
“MVBI is a fund that we created five years ago based on EQI, with EQI clients, and it did very well,” says Abbud. “There was a certain complexity in doing a follow-on offering of the fund; those who invested earlier would be diluted. EQI said, ‘Let’s simplify everything here, let’s create a new vehicle’,” Abbud states.
MCDI intends to invest in mortgage lending, predominantly in CDI plus [a specific rate/value]. In addition to recurring income, it aims for reduced volatility and capital preservation. In its prospectus, Patria states that the projected return is 17% per year, net of taxes, in nominal terms.
The document also points out that the fund has a pipeline of R$ 480 million distributed across 16 assets. The fund will concentrate its exposure on securities linked to residential real estate development – this segment will account for 52% of the total. This is followed by residential inventory (17%), residential (14%), and shopping malls (6%).
Because of its exposure to incorporation, Abbud says the fund carries slightly more risk, but emphasizes that it is structured to mitigate potential problems. One of the protections adopted is limiting exposure to a maximum of 10% of net assets per CRI (Real Estate Receivables Certificate).
The fund will also adopt strict criteria for structuring operations and defining guarantees. A large part of this allocation will be structured in-house, according to Abbud.
"When you look at this fund's return profile, you need to take on a bit more risk," he says. "There's still the risk of execution, construction, and development. But this is a dynamic we're very used to. We've always been equity investors. We know where the pain points are and where to look in terms of construction risk."
The idea of conducting a large offering came from the assessment that the reduction in savings and FGTS (Brazilian employee severance fund) resources opened up space for specialized funds.
The reduction in the volume of savings resources has also benefited REITs – last year, withdrawals exceeded deposits by R$ 85.6 billion, according to the Central Bank (BC), harming a traditional source for financing ventures.
"Capital is relatively scarce. Therefore, the mortgage market needs capital. We understand that this is an excellent time for allocation," says Abbud.
Patria has R$309 billion in assets under management, with R$38 billion in the real estate vertical, which includes more than 30 funds and exclusive mandates. The credit segment has R$12.6 billion under management in REITs (Real Estate Investment Trusts).
The prospectus indicates that reservations are scheduled to begin on July 9th and end on December 18th. The MCDI has a six-year investment period and a further two years for divestments, with no possibility of extension.
The operation is being coordinated by BTG Pactual , which is also acting as the fund's administrator.
