BTLG11: Analysts Praise the Fund's Strength and Market Position Following Billionaire Acquisition Announcement

BTG Pacal's fund announced, through a material fact, an agreement to acquire 11 industrial assets primarily located within a 60 km radius of the state of São Paulo for a total value of R$ 1.7 billion

Fernando Crestana, Associate Partner Real Estate of BTG Pactual

By: SiiLA News

09/02/2024

BTG Pactual’s logistics-focused real estate fund, BTLG11, announced on August 16th, via a material fact disclosure, that it has entered into an agreement to acquire 11 logistics assets, predominantly located within a 60 km radius of São Paulo, for a total of R$ 1.7 billion. Although the deal is still subject to due diligence and approval from the Administrative Council for Economic Defense (CADE), analysts see the potential acquisition as a positive move, further solidifying the fund’s position as a key player in the logistics market.

Read more: Faria Lima Faces Tenant Exodus: What's Behind the Decline in São Paulo's Premier Real Estate Hub?

According to the announcement by BTLG11, the 11 assets encompass a total gross leasable area (GLA) of 541,000 square meters, all of which are currently under lease agreements.

BTLG11 has indicated that the estimated cap rate for this transaction is 9.5% per year, with an expected impact on dividends of R$ 0.32 per share.

However, an analysis by the intelligence and research team at SiiLA suggests that the cap rate for the first year following the transaction is likely to be around 8.28%, due to the Fund benefiting from guaranteed income during this period. After this initial phase, the company’s researchers estimate the cap rate to stabilize at approximately 7.7%.

Carolina Borges, an analyst at EQI Research, views BTLG11’s moves as highly significant, adding substantial value to an already impressive portfolio.

"The fund is maintaining and potentially enhancing its profile of high-quality properties. Although they haven’t disclosed the specific logistics warehouses involved in this acquisition, we know some of the tenants are reliable, with long-term contracts, which gives us an optimistic outlook for the deal," she says.

Another positive aspect highlighted by the analyst is the strategic location of the assets relative to São Paulo. Of the 11 properties announced by BTLG11, 94% are within a 60 km radius of São Paulo, where prices are more affordable compared to properties within a 30 km radius. However, the slightly greater distance does not significantly impact on the deal, as occupancy for the properties included in the transaction is 100%.

Regarding the cap rate of 9.5% disclosed by the Fund, Carolina believes it aligns well with the deal's expectations. "We need to see whether the rents have already been adjusted, and we will only know this once the transaction is finalized. Even so, I believe the figure is accurate or close to it," she adds.

Asset Diversification and Fund Consolidation

At least 15% of the new assets are "climate-controlled," further diversifying BTLG11's current portfolio and boosting the Fund's net asset value. According to Ricardo Figueiredo, a partner at Grupo Primo and responsible for FII coverage at the Finclass channel, this factor enhances the tenant portfolio, as the cost of occupying a climate-controlled warehouse is typically higher.

"I’m pleased with how this Fund is solidifying its position. It’s a time of expansion in logistics," he comments.

When asked if the transaction value is indeed the largest in the history of a logistics-focused FII, Figueiredo remarked, "I can’t recall any transaction above this value, but the number is secondary; what matters is that it’s a good deal."

"BTLG11 is establishing itself as one of the major portfolio consolidators, creating a point of attention for others. There may come a time when the consolidators absorb the consolidated ones, and I believe that’s a natural path for a fund that grows not just for the sake of growth but to preserve its qualities and gain scale with quality assets," he adds.

BTLG11: What’s Next for the Portfolio?

BTLG Cajamar Assaí, a venture that is part of the fund's portfolio | Source: SiiLA

Upon CADE’s approval and the fulfillment of precedent conditions, BTLG11’s portfolio will expand to 32 assets. In total, the Fund will boast a GLA of over 1.2 million square meters, with 97% classified as A+ and 3% as B. At least 10 tenants will account for around 50% of the revenues, including companies like Assaí, CEVA Logistics, Amazon, Braskem, and BRF.

At least 89% of the updated portfolio, following the acquisitions, will be in São Paulo, with 71% within a 60 km radius.

According to the Fund's management, proximity to São Paulo is considered strategic as it correlates with higher rental rates. Together, the properties within this radius will represent 88% of the Fund’s total revenue.

Source: BTLG11

"[This deal] stands out as the most significant among the Fund’s acquisitions, representing the largest logistics portfolio transaction in the history of Real Estate Investment Funds, reinforcing the distinguished position that BTLG has achieved," BTLG11's management stated.

Moreover, the Fund sees the opportunity for potential appreciation and capital gains from future sales, following its strategy of "buying wholesale and selling retail."

"The transaction generates revenue of approximately 14.6% p.a. over the first 18 months due to the full receipt of lease payments against the payment of 65% of the upfront portion, resulting in a 24% increase in FFO during this period," the relevant fact informs.

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