The Hectare CE real estate fund (HCTR11) is seeing its shares devalue more and more every day, even though it is a “paper fund”, a segment that remains heated in the secondary market. In the last 30 days, the devaluation of FII shares was 6.54%. In 12 months, losses reach 24.62%.
After the trading session this Wednesday (13), the FII HCTR11 figured in the ranking of biggest drops of IFIX on the day, with a loss of 3.3% of its shares. After all, what’s going on with HCTR11?
Classified by the market as a high yield “paper fund”, the EC hectare invests in real estate receivables, such as Certificates of Real Estate Receivables (CRIs), Mortgage Letters of Credit (LCI) and others. The sector in which the FII contributes is multi-property, subdivisions, among other higher risk corporate properties.
Higher risk also means higher return. In the last 12 months, HCTR11 paid R$19.40 to shareholders, equivalent to 17.45% of dividend yield. An extraordinary number even for the “paper funds” segment, which are delivering more in this scenario of strong inflation and high interest rates.
However, recently the HCTR11 dividends began to attract the attention of investors and went from being a positive point to being a point of concern.
HCTR11 “burns cash” to pay dividends
Since the beginning of 2022, the fund managed by Capital hectare is using cash from the cashier to pay the shareholders’ earnings. In this last month of April, the FII even reduced the value per share in relation to the last few months.
In January, HCTR11’s accounts closed negative at R$ 348,830 so that the fund could pay a dividend yield of 1.36% to shareholders, equivalent to R$ 1.60 in dividends, as in previous months.
However, in February, the negative balance worsened more than 4 times, to a deficit of R$ 1.42 million, and even so, the FII was unable to maintain the same level of dividend yieldwith a decrease to 1.19% and delivery of R$ 1.40.
In practice, the income statement for the year (DRE) of the EC Hectare points out that the fund has revenue problems, but does not want to lose shareholders by reducing the value of its dividends, having to resort to cash to cover the financial vacuum.
In management report published in March, the manager explained the drop in the amount distributed in the month. Hectare Capital argued that the reduction was driven by lower monetary correction income. Since:
- February has fewer working days; and
- the cooling of the IPCA in the months of December and January resulted in lower payments.
In previous months, in 2021, the HCTR11 even had cash reserves, accumulating significant amounts between the months of September and December, the document indicates. But the increase in the deficit this past month has sparked a wake-up call among investors.
Controversy with the Shopping Circuit and the FII XBXO11
As of last year, the fund’s position in securities related to the Shopping Circuit (popular mall where the Feira da Madrugada takes place, in São Paulo) causes controversy. Not only does the mall have a low credit rating (BB- and B+), it was also the subject of a lawsuit at the São Paulo Municipal Court of Auditors (TCM-SP) and is currently part of a piracy CPI.
Felipe Tadewaldpartner of Suno Researchused his social networks to comment on the current situation of HCTR11.
According to him, the Shopping Circuit is full of “rolls”, with a giant vacancy rate due to the charging of rental prices outside the profile of the region, in addition to the risk of embargoing the delivery of the property (which is still under development) due to to judicial problems.
Previously, Hectare CE had a share of more than 10% in the Purchase Circuit CRIs. In the last report, the position had already decreased to 4.15% of the fund’s net worth.
However, at the end of last year, the HCTR11 acquired the XBXO11 real estate fundwhose only investment is the Shopping Circuito de Compras.
Tadewald questions the fact that the real estate fund invests in equity (XBXO11) and debt in the same project. In this way, the shareholder is doubly exposed in a property with problems of reliability and risk of return, with 15% of exposure adding the shares.
HCTR11 makes an issue every 4 months
Starting in September 2018 and just over 42 months of listing on the stock exchange, HCTR11 concluded 12 issuance of quotas and communicated the 13th on the 7th of April. In practice, the fund issued quotas practically every 4 months.
Initially, investors and market experts viewed the fund’s move as an aggressive growth strategy. However, with the latest events, the alert among investors has worsened.
For Tadewald , the sequence of issues means that fund managers are using shareholders’ money in risky market movements in which the purpose is not very clear.
“The emissions look like they are being made in desperation to rescue some of the bombs in the portfolio itself. To try to diversify the patrimony by ‘running’”, he wrote on social media.
THE HCTR11 has shareholders’ equity of R$2.42 billion and 19,720,457 shares issued. The new offer of quotas is public (for the first time) and should increase the FII’s PL to R$ 3 billion.