With the proposal to invest in cemeteries, tombs, crematoria and funeral services, the real estate fund CARE11 (Brazilian Graveyard Death Care) has completely clashed with its peers and accumulates a strong appreciation in 2022.
Structured in mid-2016 and managed by Zion Invest, the fund rose about 71.5% this year, up to May 27, while the Ifix (Index of Real Estate Funds on the Stock Exchange) recorded a slight increase of 0.06% in the same period. .
Unlike most of its peers, which invest in projects considered more traditional in the real estate sector, such as corporate slabs, shopping malls and logistics warehouses, CARE11 has cemeteries and tombs in its portfolio.
The first real estate fund listed on the Brazilian stock exchange with this proposal, CARE11 is the controller of the Terra Santa cemetery, in Sabará, in the metropolitan region of Belo Horizonte, and holds 2,873 deposits in the Morumby Cemetery, in São Paulo. The deposits are sold for values that can vary between R$ 15,000 and R$ 30,000.
The fund also has a stake of around 20% in Cortel, a company with a 60-year history dedicated to managing cemeteries, funeral homes and crematoria (including for pets) in various capitals across the country.
The administration fee is 1.47% per year, with 20% of performance on what exceeds 7.20% plus the variation of the IPCA (Broad Consumer Price Index). There are about 9,200 shareholders and R$ 290 million in equity.
According to Francisco Garcia, partner and director of Zion Invest, the aging of the Brazilian population over the next few decades is the main thesis that supports the fund’s strategy.
The executive points to calculations by the IBGE (Brazilian Institute of Geography and Statistics) that indicate that the mortality rate, estimated at 0.65% in relation to the total Brazilian population in 2018, should rise to 0.85% in 2038, with the number of deaths surpassing births by mid-2045.
“The ‘death care’ sector [cuidados relacionados à morte] has a guaranteed and growing demand in Brazil, which makes it more resilient than average even in crisis scenarios”, says Garcia.
The Zion partner assesses that the pandemic meant that a much larger number of people had to start dealing with death in some way, making them aware of the importance of having some kind of planning to face a difficult but inevitable moment for any.
Cortel raises BRL 200 million to participate in cemeteries auction in São Paulo
At the beginning of the year, Cortel raised approximately R$200 million with the issuance of a CRI (Receivable Real Estate Certificate), which will be used in the auction dispute to be held by the City of São Paulo.
22 public cemeteries and a crematorium (Vila Alpina) will be granted to the private sector in the capital of São Paulo, in an event that should take place in June. The public notice also provides for the creation of three crematoria. The concession must be for a period of 25 years, with a forecast of savings of R$ 656 million for the municipal coffers.
The projects will be negotiated in four large blocks, and the Zion partner says that the intention is to buy one of them with the funds raised with Cortel’s CRI.
The executive estimates that the bids to take the blocks should vary between R$100 million and R$170 million. “I believe that it must be a trend for large cities in Brazil to privatize public cemeteries”, says Garcia.
The director of Zion says that Cortel’s partners came to evaluate the company’s IPO last year, in the face of strong investor demand for new shares on the Stock Exchange with interest rates at historically high levels. low.
The plan ended up being postponed with the arrival of the second wave of the Covid-19 pandemic, but the executive says that the resumption of the process is still on the radar for a little further.
He states that the presentation rounds that were made with several groups of investors for the IPO of Cortel, as well as the process for raising the CRI, also made the real estate fund better known by the public. in general, which may have contributed, in his assessment, to the strong appreciation of the shares in the year.
Good performance and increased liquidity in the secondary market led to CARE11 being included in Ifix in early May, giving greater visibility and an additional boost to the strategy. On Friday (27), the share of the real estate fund was traded at R$ 4.75 on the Stock Exchange.
Low dividend payout weighed on 20% drop last year
Garcia adds that the poor performance of 2021, when the fund depreciated by around 20%, also contributed to the strong rise seen in recent months, with investors taking advantage of the discount to build positions.
The low dividend distribution — the annualized dividend yield (percentage distributed in earnings in relation to the price of shares) was only 1.36% in December 2021, according to data from the Comdinheiro platform — weighed on last year’s drop, says the executive, noting that investors in real estate funds are usually attracted by the dividends paid by products of this type.
The manager’s partner says that, as it is still in the phase of bringing new investments to the portfolio, dividends end up falling short of what is observed among peers, which offer yields that reach double digits.
“With the aging of the population, the moment is of consolidation in the sector, with the purchase of the best assets, to be well positioned for the next decades.”
From a medium and long-term perspective, he adds, the tendency is for the portfolio to be more consolidated, when the fund should then increase the distribution of earnings on a permanent basis.
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