After nearly four months of deadlock, the controversy surrounding a Securities and Exchange Commission (CVM) questioning over a dividend from the Maxi Randa real estate fund (MXRF11). In response to an appeal from portfolio managers, the autonomous system reversed itself in a decision that would have an impact not only on the fund itself, but also on the entire FII market.
What fell — by a collective decision from CVM this Tuesday (17) — is the understanding that a real estate fund cannot pay out more dividends than the accounting profits accrued by the portfolio. In the event of an accounting loss, the income must be suspended or transferred in the form of amortization, i.e. return of equity.
The CVM understanding was reached in December 2021 and announced in January of this year, based on Maxi Renda’s specific case.
With the unanimous approval of Maxi Renda’s appeal, her dividend, as well as that of her other FIIs, remain unchanged. But what are the practical implications of the new decision for the investor?
At first, specialists and fund managers listened before Infomoney Mention at least three. In addition to offering more safety to the sector, yesterday’s Asset Verification Mechanism (CVM) statement should increase transparency for investors and ease pressure on funds investing in stocks of other FIIs.
“The Cash Appraisal Model (CVM) unanimously approved the request for reconsideration of the applicant and, after reconsidering the understanding of the previous decision, decided to regularly recognize the accounting treatment given for the distribution of cash profit surplus in retained earnings/losses,” the statement from the municipality highlighted.
For Telêmaco Genovesi, director of “brick” FIIs at Fator Administração de Recursos, the real estate fund sector is returning to what it was before with the re-positioning of the CVM model.
He explained that “the previous understanding was not logical because the real estate fund will continue to make money and will not be able to distribute it to shareholders.” “Cash will be stopped due to the ending balance which closed negatively due to the fluctuation of the assets that make up the portfolio portfolio,” he explains.
For him, the issue that left investors was another question mark regarding the dividend distribution of FIIs going forward.
fisheries market reaction
The market celebrated the new CVM decision – which, according to experts, met all the expectations of the real estate fund sector.
“For us, the decision of the new risk check mechanism is very welcome and maintains the prior understanding of the matter, i.e. everything remains as we know it so far, with no tax implications or penalties in the recurring monthly earnings,” highlights a report signed by Larissa Nabo and Marcelo. Potenza, analysts at Itaú BBA.
Until December 2021, when CVM made its first decision, FII managers were guided by Law 8668/93, which governs real estate trusts. The law provides for a distribution of 95% of the profits calculated by the governor on the basis of semi-annual budgets, regardless of revaluation of assets, and therefore any accounting loss.
By a decision of the Canadian Appeals Commission, the adoption of this system was confirmed.
One of the pioneers in the real estate fund sector, Moise Politi, partner at REC Gestão de Recursos, rated CVM’s decision as difficult and very common sense.
For him, who followed and participated in the drafting of legislation on the manufacturing industries, the final position of the corporate investment mechanism increases investor confidence in the legal security of Brazil and the self-regulation itself.
Even before CVM was reconsidered, Politi was against the new understanding on dividend payouts from manufacturing firms, noting that there was already law on the subject. “Failure to follow applicable law is considered a violation,” he says.
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Why Maxi Randa?
CVM’s previous understanding was based on Maxi Renda’s financial statements between 2014 and 2020, a period in which the fund experienced an accounting loss, yet continued to pay dividends.
In January this year, in an interview with the program FIIs . Universityfrom InfomoneyAndre Massetti, Director of XP Asset, explained it Follow Maxi Randa Legislation And unlike other periods, the fund had finished 2021 in the blue. This way, the portfolio will not need to interrupt the dividend to make up for any losses.
After reconsidering CVM, the management of Maxi Renda – the largest fund by number of shareholders, with 515,000 – manifested itself in a fundamental truth, confirming only the decision indicated in the minutes of the extraordinary meeting of the Self-Government.
Marks Gonsalves, an analyst at Nord Research, takes a positive view of the controversy, as the outcome of the case will allow more transparency for investors in the future.
“The shareholder ends up looking only at the distribution side and, often, not being aware of the accounting position of the fund,” he recalls. “Maxi Randa is in the black today, but in previous years there has been an increase in losses and keep turning profits.”
For the analyst, CVM’s concern is legitimate as it will help standardize the information provided to investors about the true state of portfolios and generate income itself.
More transparency for fisheries industries
In yesterday’s statement, CVM recommended that real estate fund managers improve disclosure of portfolio financial information. Optimization, according to the subjective system, would help the investor in making a decision.
“The guidance is not far from what was expected, because the role of the administrator is precisely to ‘protect’ the fund’s shareholder and pass on information as clearly and transparently as possible.” , highlighted by Larissa and Potenza, in the Itaú BBA Report.
The analysis is in line with that of Maria Fernanda Violatti, an analyst at XP, who views the demand for more information for the real estate fund sector as positive.
“The entire complex situation appears to have had initial media interest, and in the end, the decision brings ways to improve this information,” he analyzes. “The latest decision cancels any legal and especially financial changes that could occur if the first decision of the university is maintained.”
The XP analyst expects an initially positive reaction from the market, as the uncertainty surrounding the dividend system has been overcome. However, it does not believe in the catalyst that would price major changes in FII prices, given the current moment for the industry as a whole and the macroeconomic scenario for the country.
Is it time for FoFs?
If the first understanding of the asset verification method is applied, one of the sectors most affected by the interpretation will be funds that invest in stocks of other FIIs.
Since the equity in these funds consists of assets that fluctuate daily, the distribution of dividends from the portfolios will be practically correlated with a bull market. This is because if the value of the shares is reduced, the accounting result of the fund will be affected.
“It takes a lot of pressure from the FFs, as they will all be affected. A lot of the receivables money will also be damaged,” confirms Ricardo Vieira, Head of FoFs at VBI Real Estate.
For the manager, the end of the Maxi Renda issue has “little backpack weight” for the real estate fund sector, but the interest rate remains the biggest weight for the sector.
“It might provide relief in the short term, which is really a pretty big relief from a structural point of view of the product, but the situation that is putting pressure on real estate funds today is the interest rate.”
According to Vieira, although the base rate of the national economy – Selic – has already advanced a lot, there is still no definition of an index ceiling.
“We don’t have very clear indications of that, mainly because of the external scenario, which also continues with higher inflation, as is the case in the US,” he says. “All of this combined is putting pressure on real estate fund shares.”
As interest rates increase, fixed income investments – which offer less risk – gain greater profitability and attract investors in variable income products, such as the fisheries industries. From 2021 onwards, the Selic index has increased from 2% to 12.75% annually.
Will the shares of Maxi Randa rise?
In the first session after CVM’s new decision, Maxi Renda shares led the biggest gainers of the day. At 2:51 pm, shares were up 2.20%, the highest level this Wednesday (18).
For investors finally excited about the outcome of the case, Danilo Bastos, a specialist in real estate funds and co-founder of Ticker Research, recommends patience and a focus on strategy.
He warns that “no one will get rich because they have bought the share that could rise in the next few days.” He notes, “It’s easier to find people who have built up fortunes over the years, and to invest in quality assets with discipline.”
He also asserts that the investment should focus on the long term and that in this period crises like the one experienced by Maxi Randa will occur and you must face more cause than emotion.
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