Pátria Renda Urbana Expands Portfolio with Significant Pernambucanas Acquisition
In a strategic move to bolster its holdings, Pátria Renda Urbana (ticker: HGRU11) is acquiring 23 additional stores from the Brazilian retail giant Pernambucanas. The transaction, valued at R$ 223 million, signifies an increased investment in a tenant that already represents a substantial portion of the fund’s portfolio.
Details of the Transaction
The purchase is structured in installments. HGRU11 has made an initial payment of R$ 66 million and will disburse an additional R$ 113 million upon completing certain due diligence procedures. The remaining balance of R$ 44 million will be split into two payments, scheduled for 12 and 24 months post-conclusion. The deal boasts a cap rate of 11.3% in the first year and 10% in the second year, ultimately stabilizing at 9% upon full payment.
This cap rate is notably higher compared to a similar transaction in 2021 when HGRU11 acquired 66 stores from Pernambucanas at a 7.2% cap rate. Market conditions, including liquidity constraints, have contributed to more attractive pricing this time around.
Long-Term Rental Agreement
Pátria Renda Urbana has secured a distinctive rental contract with Pernambucanas. The retailer will pay a fixed monthly rent of R$ 1.6 million alongside a variable year-end rent based on store revenues. The additional stores span across five Brazilian states—São Paulo, Mato Grosso do Sul, Minas Gerais, Santa Catarina, and Paraná—covering a total gross leasable area of 47,703 square meters.
Portfolio Impact
The acquisition will elevate Pernambucanas’ contribution to the fund’s revenue to approximately 25%, making it the second-largest tenant after Atacadão, which constitutes 37% of the portfolio. HGRU11’s diverse portfolio includes other prominent tenants such as Sam’s Club, Mineirão, and several Brazilian universities.
Strategic Financial Moves
This expansion comes at a time of significant changes for HGRU11. In recent weeks, the management of the fund transitioned from Credit Suisse to Pátria, following the latter’s acquisition of Credit Suisse’s real estate fund operations for R$ 650 million last year. The transfer, involving seven funds, awaits finalization by the end of next month.
As HGRU11 holds no cash reserves for the latest acquisition, it faces the necessity of either issuing new shares or liquidating assets. There’s an approved plan to raise up to R$ 1.2 billion through an offering, a process delayed due to the sale of the funds but now likely to proceed swiftly.
Market Position
HGRU11 stands as the largest fund in the urban income category, a concept innovated by Credit Suisse. Its closest competitor, TRXF11, has a net worth of R$ 2.1 billion.
This notable transaction not only strengthens HGRU11’s portfolio but also underscores its proactive stance in navigating and capitalizing on current market dynamics. For more information, visit the official Pátria website.
