Until the video is out, the slides below cover the whole lesson.

IntermediateBrazilian REITs · Lesson I4.2 · Module I4

P/BV: cheap compared to what?

Module I4: Analysis indicators

11 slides~5 minquiz at the end

In this lesson

The P/BV math
Where book value comes from
When the discount is fair

See the slides

Glass-fronted office towers in São Paulo

Brazilian REITs · Lesson I4.2

A 20% discount. But 20% off what?

P/BV compares the price with a value someone calculated.

Luiz Pantoja · Wikimedia Commons · CC BY 2.0

The math

From net assets to P/BV

R$ 700Mnet assets÷7 millionshares=R$ 100book value per share

R$ 80market price÷R$ 100book value per share=0.80P/BV

P/BV below 1: the market pays less than the balance sheet says the fund is worth.

Where book value comes from

Someone put a price on the assets

Brick-and-mortar fund

Appraisal

An appraiser estimates what the buildings are worth
It may be stale or optimistic

Paper fund

Market

Its CRIs are marked to market
They move with rates and borrower risk

The appraisal's assumption

The appraisal uses 8%. The market pays 10%.

R$ 8Mrent per year÷8%appraisal cap rate=R$ 100Mappraised value

R$ 8Mrent per year÷10%market cap rate=R$ 80Mrealistic value

Cap rate = annual rent ÷ property value. Same rent, different assumption: the building is worth 20% less.

The discount disappears

R$ 100 for R$ 80? Or R$ 80 for R$ 80?

Using appraised book value

P/BV 0.80

Looks like a 20% discount

Using realistic book value

P/BV 1.00

BV of R$ 80: the price pays just what it's worth

Measured by the site

The balance sheet is a weak floor

49%

below book value: the median estimated liquidation value across 11 funds

The range was 28.7% to 63.6%. Selling everything at once fetches far less than the books.

Rico aos Poucos measurement, 09/12/2026.

When the discount is fair

A low P/BV may have a reason

Stale appraisalIt missed the market's decline.
High vacancyThe rent that supports the value isn't coming in.
DebtPart of the value already belongs to lenders.
Hard-to-sell assetFew buyers would want that property.

Remember this

Three takeaways

P/BV = price ÷ BVBook value is the fund's net assets divided by its shares.
Book value is an estimateFor buildings, it comes from appraisals whose assumptions may be optimistic.
A discount needs a reasonCheck that book value is realistic and income holds up.

Quick quiz · 1 of 2

A brick-and-mortar fund trades at P/BV 0.75. Does that prove it is cheap?

See answer

No. If the appraisal is optimistic or income is falling, the discount may just be fair value. A high yield proves nothing (lesson I4.1).

Quick quiz · 2 of 2

Book value R$ 50 per share, price R$ 45. What is the P/BV?

See answer

R$ 45 ÷ R$ 50 = 0.90. Price divided by book value. 1.11 is the math upside down.

Lesson complete

Next lesson

I4.3Intermediate · Lesson I4.3Does the dividend fit the cash the fund generates?Steady income may be burning reserves — count the months left.Continue

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Image credits

Luiz Pantoja · Wikimedia Commons · CC BY 2.0 — Wikimedia Commons
stevepb · Wikimedia Commons · CC0 — Wikimedia Commons

Educational content, written for learners. Not investment advice.