Target Information

This year, the shareholders of the Brazilian Graveyard and Deathcare Services Fund (FII CARE11) approved a divestment strategy allowing for the sale of up to 40% of its holdings in the Cortel Group, Brazil's leading private cemetery operator.

The divestment initiative began this week following a resolution passed during the assembly in April. A total of 76,016 ordinary shares were sold, representing a stake in the Cortel Group, which encompasses cemeteries, burial plots, and funeral services in Brazil. At a unit price of R$ 52.62, this transaction amounted to R$ 4 million.

Industry Overview

Brazil's death care services industry is witnessing significant growth, driven by demographic shifts and increasing demand for private cemetery services. The industry's total market value has risen notably in recent years, reflecting changing consumer preferences towards investing in high-quality, sustainable funeral products and services.

Within this context, Cortel Group stands out as a major player, offering a range of services from traditional burial plots to contemporary memorial services. The growing investment in this sector illustrates the potential profitability and stability it offers amid Brazil's evolving market landscape.

Recent factors such as urbanization, increasing life expectancy, and changing societal attitudes towards death and memorialization have fuelled the sector's expansion. Additionally, the increasing awareness of the importance of pre-planning funeral services has opened up new avenues for service providers.

Rationale Behind the Deal

The primary aim of this divestment is to provide shareholders of the CARE11 fund with the opportunity to realize profits, given that the fund has reached a mature stage with consistent positive revenues. Over the last two years, the fund's return on investment has been approximately 40%.

During the assembly, participants authorized the sale of up to 734,400 shares held in Cortel Holdings (40% of the total investment) over a span of 12 months, reflecting a strategic move to capitalize on the fund's matured assets.

Investor Information

The shares from the CARE11 fund were purchased by Zion Capital, an investment fund focused on cemetery real estate, managed by Zion Invest. Unlike CARE11, which is publicly traded, Zion Capital is not listed on the stock exchange, implying a different investor profile that primarily includes institutional and qualified investors.

As a non-liquid investment option, Zion Capital targets specific assets like Cortel, allowing for a strategic alignment in investment focus and risk management, catering to investors seeking long-term growth potential.

View of Dealert

From an analytical perspective, this deal presents as a favorable investment opportunity, particularly considering the 42% value appreciation of Cortel over the past two years, growing from R$ 350 million to R$ 500 million. This substantial increase highlights the sector's resilience and profitability.

The approach of enabling shareholders to unlock value amidst a matured investment is strategic and aligned with best practices in investment management. By authorizing a gradual divestment, the fund can optimize revenue generation while ensuring that investors receive beneficial returns.

Moreover, the projected distribution of dividends following the sale reinforces the attractiveness of the CARE11 fund to current and prospective investors, positioning it as a competitive player in the real estate investment trust landscape focused on cemetery services.

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