FII: the assessment for the shopping malls, logistics, offices and hotels sector

Where are the best opportunities in Real Estate Investment Funds?

On the subject, Finance News talked to Jacinto Santos, Master in Finance and Controllership from the Institute of Accounting, Actuarial and Financial Research Foundation, CNPI analyst (National Investment Professional Certificate) and partner at Funds Explorer.

In the interview given to journalist Clara Almeida, Jacinto talks about the shopping malls, logistics, offices and hotels sector.

Finance News: Considering the FIIs, I would like you to speak objectively about the prospects for the following segments of shopping malls, logistics, offices and hotels.

Jacinto Santos: I am of the thesis that malls are coming back strong. Obviously, we don’t see that return at the moment. You can even say “I went to the mall last weekend or the day before and saw a lot of movement”. But it’s not enough yet. The shopkeeper is still hurting and is making up for what he lost. They are different things. He is recovering because he lost a lot of revenue, and there is still a fight with mall administrators. There is this fight, it is not something simple to resolve. I think malls will still recover the quota price. People are still quite reticent. They go to the mall, but fear still exists in relation to the pandemic, the Delta variant.

You realize that people are still a bit suspicious and, another thing, many people have lost income. People even go to malls, but they don’t buy anything. At most they feed there and that’s it. This for the mall is very bad, because it basically leaves money for the establishment of the restaurant plus parking, and the parking fund is greatly impacted by, for example, Uber.

A stronger return, I hope for next year. But I am of the thesis that shopping can come back very strong. So the exhibition for malls is interesting at this moment, yes. Obviously, you don’t need to focus on the mall, but I think it’s interesting to have it in your portfolio.

Finance News: And about the logistics sector, what is the assessment?

Jacinto Santos: Logistics is the sector that, in my opinion, has benefited the most from the pandemic. E-commerce abruptly reached all people who live in large capitals, in large centers and large capitals, and there was a very strong demand in these spaces. And the real estate funds were institutions with capital and able to make the acquisition of logistics warehouses. So it was even interesting, because the real estate fund competes with companies in terms of resource allocation and the real estate fund is much more effective. The real estate fund issues shares, for example, and manages to raise R$600 million, R$300 million, R$400 million in just over a month, two months at the most.

Since a normal company, even if it is a SA, can even issue new shares, well, it also competes, but the advantage of the real estate fund, as I said, is that it is very tax efficient within its structure. So the real estate fund raises faster and manages to buy better assets at a much greater speed.

I see logistics on very interesting horizons and vacancy, in Brazil, I think it is at a level of 11%, with a lease level of around R$ 19.00 per square meter, I see that these numbers will improve. That is, vacancy will decrease and the lease price will most likely increase.

Finance News: Now talk a little about offices and corporate slabs.

Jacinto Santos: In the corporate slab sector, we have to be more selective. What I see is the following: there is a recovery, yes. But this recovery is not homogeneous. We have several levels of offices and commercial spaces. One building is better than the other. For several reasons: location, construction standard, type of occupant, external appearance, arrangement of spaces in a way that facilitates the flow of people, buildings that have a food court, common spaces, internal parks. It has several differences. Those developments that have all these requirements very well located and with a high constructive standard, have resilience. There are buildings in São Paulo, for example, that managed to pass through the IGP-M in its entirety, even though it reached almost 33%. But they managed to get through. It’s difficult? IT IS. But they did. The owner knows there is demand, there is a queue to enter the development and it is very well located. He knows this.

What I want to say is that these types of well-located developments, with a high standard of construction and with a high demand for allocation, did not suffer from the crisis. They continue to have low vacancies and the possibility of increasing the rental price. These have not suffered and can be a good investment. Those who are not so well located, who are outside the traditional commercial axis in any city, those indeed suffered. And these are seeing that a large part of the employees are still working from home, unlike the other ventures where you already see the hybrid model working and the returns are less and less frequent, and with more and more employees returning to normality, with the presence of the hybrid model. The hybrid model is going to be a trend, but not the whole company is going to follow that path. Therefore, what I see is the following: offices have to make a selection. Recovery becomes more and more homogeneous, but it is one step at a time.

Finance News: What about hotels?

Jacinto Santos: This segment, in my view, was by far the hardest hit. By far. You see that most hotel funds are not distributing dividends yet. Or, if they are distributing it, it is a very low level, with the exception of one or two who maintained the distribution. You count on your fingers. I think only one is Mahogany Hotels, and look there. All the others suffered a lot. The airspaces of the states closed, of the countries also closed for a long time. The fear of contagion was absurd. Hotels did not receive guests. It was a very tough moment for the tourism sector. Many broke.

Some companies are still accounting for losses and trying to reduce past losses. My feeling is that the worst is over. We see the numbers improve, but far from pre-pandemic levels. We see that the occupancy rate is improving, yes, obviously not to pre-pandemic levels, and bookings are increasing.

But I see that the daily rate is decreasing a little to bring more guests. The hotel is losing margin, it is reducing the daily rate to bring more people, to have a higher occupancy rate. The first point for you to see if a hotel is good is obviously the location, but the occupancy rate is very important. It’s the center point. But the hotel sector has been badly affected by the pandemic and is likely to recover, quite possibly only in the medium term. We will have to wait for the tourism sector to recover so that we can have a more accurate recovery point for hotels.

Read too: Do you want to invest in FIIs? Analyst explains advantages, risks and other important details


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