Neither flat nor residential apartment. Meet the JFL real estate fund



Pandemic has had little effect on the property company’s business segment, which is more resilient than that of hotels. See the FIIs program under EXAME

carolina burg JFC - Neither flat nor residential apartment. Meet the JFL real estate fund
Carolina Burg, JFL CEO: we do not rent brick, but experiences

Carolina Burg and her partners decided to invest a few years ago in a common real estate segment in the United States, but still incipient in the country: multifamily developments. In it, a single company controls the rent of a condominium made up of several families. In 2015, they set up JFL Realty, a property company specializing in the purchase of land for the construction of buildings for rent in upscale neighborhoods in São Paulo.

Earlier this year, the company made its IPO through a real estate fund, JFL Living (JFLL11). The fund’s main objective is to generate income for shareholders in the long run. As the assets developed by JFL mature, they enter the fund’s portfolio.

“We don’t rent brick. We rent an experience, which includes services similar to a hotel ”, summarized Burg. The executive participated this Friday, 9, in the FIIs EXAME program, presented by Arthur Vieira de Moraes, professor at the EXAME Academy.

JFL’s rented apartments are furnished, including appliances and layettes, and offer cleaning services and even breakfast. Rents range from R$ 7,800 to R$ 53,000 per month.

The counterpart is to have longer contracts (minimum one year) than those for flats, says Burg. “The idea is for the tenant to feel at home. To make you feel that way, we have to offer larger apartments, differentiated treatment, less people turnover and security. ”

Pandemic resilience

Because it has a more flexible feature, something between a hotel or flat and a traditional residential apartment, the segment has shown itself to be more resilient in the pandemic. In the United States, several investment groups are reallocating resources from the commercial, retail and hotel segments to multifamily investments such as JFLL11.

It is no different here. The segment and the JFL attracted strong names, among them that of Marcel Telles, founding partner of 3G Capital, and that of Jorge Felipe Lemann, one of the sons of Jorge Paulo Lemann.

“We are better than we imagined. The pandemic has meant that apartments with a fast turnover, for those who do not live in São Paulo, have a higher vacancy rate, while large apartments with more divisions keep vacancy low, close to zero. The average term of the contract has risen from 12 to 27 months ”, says Burg.

How the operation works

To reduce the turnover of people, JFL conducts a credit analysis before each tenant enters the condominium. “That is, someone cannot pay by credit card and enter the apartment on the same day.” Units are sold by a company-owned team.

Burg also tells how the ventures control defaults. “As the apartments do not require guarantees, those who go unpaid are owed. As everything inside the apartment are company items, if a tenant fails to pay these items can be removed from the apartment: we just can’t get water, electricity and access. Our defaults are low. There was only one extreme case in which we managed to get the tenant out in 90 days ”.

As part of the company’s equity is in the form of furniture, appliances and layettes, there is a fund to replace items, equivalent to 1% to 3% of the project’s result. If misuse is found, the lessee may be charged for the item.

“The financial part of the project looks more like a single-flag hotel. We have to have strategic vacancy, which works as a stock of items, make quick decisions and maintain the quality of items and services ”, says the executive.

The JFL’s relationship with the fund

The company chose to go public via a real estate fund. The fund is multi-asset, and the role of JFL is that of partner of JFLL11, via holding, and not a shareholder.

“There is a subordination structure. JFL’s participation is only concluded after the fund receives a minimum return. We do not sell the assets under our management to the fund and we exit the assets. The objective is to expand and enjoy tax benefits ”, says the CEO of JFL.

Currently, JFL has nine projects under development, expected to be completed by 2023. The idea is to put two projects into operation in the coming months. “We still have a lot to explore in São Paulo, both in the down and up segments of what we do”.

Exame Reporter: Marília Almeida