According to material facts released by administrator BTG Pactual and manager Patria, Brazil's securities regulator, CVM, waived the cash-out right for dissenting unitholders, clearing all conditions for HGLG11 to absorb real estate fund LVBI11. In practice, the units you hold already behave like a fraction of HGLG11. Based on net asset values, that fraction is worth about R$ 105.68, while the market trades it at R$ 99.49.
What Is LVBI11 Worth Now That the Merger Is Approved?
The value of LVBI11 becomes the price of HGLG11 multiplied by the exchange ratio. The exchange ratio will be determined by the net asset value per unit of both funds on a base date to be announced. Using the most recent asset values in our database, our estimated calculation looks like this:
With LVBI11 closing at R$ 99.49 on 11/10, the unit trades about 5.9% below the HGLG11 it will receive. If the exchange took place today, that would yield a gain of roughly 6.2% for investors buying now. We have mentioned in previous editions a ratio close to 0.73. It was never an official figure, but rather the rounded asset ratio. The LVBI11 material fact dated 11/06 states that the base date, exchange ratio, implementation date, and treatment of fractional units will be announced later.
Two factors could shift this value until then. The first is each fund's net asset value on the base date: the sale of a warehouse, a property revaluation, or an extra distribution will alter the ratio. The second is the market price of HGLG11 itself, which now serves as the valuation benchmark for LVBI11. If HGLG11 drops 5%, the implied value drops with it. The remaining discount reflects the waiting period and price risk, not uncertainty over whether the merger will happen. And that uncertainty has just been resolved.
What Exactly Did CVM Decide and Why Did It Take So Long?
CVM waived the right of withdrawal. Under CVM Resolution 175, unitholders who vote against, abstain, or miss a merger meeting can demand their money back. CVM waived this right for unitholders who voted against the merger, abstained, or did not attend the meeting. Without this waiver, the funds might have had to sell properties to pay off departing investors, making it a key condition for the transaction. According to the website Marcelo Fayh, the board's decision was unanimous, and management stated it will take final steps to execute the transaction.
Resistance among unitholders was low. According to the BRFIIs portal, opposition at the LVBI11 meeting was 0.59%, with a quorum of 27.41% of issued units. The delay came entirely from the regulatory side: nearly a year passed between the request and the decision. Management kept active during the interim, as we noted when LVBI11 sold its Itapevi warehouse at a per-unit profit. That profit helped boost the monthly payout. Which brings up the question that matters most to income-focused investors.
Will LVBI11 Dividends Drop After the Exchange?
In the short term, no: the exchange tends to slightly increase income. The caveat is that part of HGLG11's current dividend comes from reserves. LVBI11 has paid R$ 0.80 per unit since August, following a year at R$ 0.75. After conversion, each old unit becomes about 0.7275 of an HGLG11 unit, which pays R$ 1.17 per month. However, as we showed in our analysis of HGLG11's September results and reserve utilization, the fund generated R$ 0.89 that month and bridged the gap using retained cash.
| Scenario (per current LVBI11 unit) | Monthly Income | Annualized Yield on R$ 99.49 |
|---|---|---|
| Today, in LVBI11 | R$ 0.80 | 9.6% |
| Post-exchange, HGLG11 paying R$ 1.17 | ≈ R$ 0.85 | ≈ 10.3% |
| Post-exchange, HGLG11 paying only September generation (R$ 0.89) | ≈ R$ 0.65 | ≈ 7.8% |
The converted figures are our estimates, calculated using the 0.7275 ratio. Management fixed HGLG11's distribution at R$ 1.17 through the end of the second half of 2026. The first converted scenario holds as long as the reserves last. The second represents a floor if recurring earnings do not rise. Management is betting on the merger to improve these results. LVBI11 charged a management fee roughly 40% higher than HGLG11's, and that cost difference disappears after the exchange. In addition, the incoming portfolio is 99.6% leased, compared to 97.1% for the absorbing fund.
Is the Deal Beneficial for Current HGLG11 Unitholders?
On a net asset basis, it is neutral: HGLG11 issues units at net asset value without a discount, so no unitholder loses net value per unit. By our estimate, roughly 11.7 million new units will be issued (R$ 1.94 billion ÷ R$ 165.48), raising net assets from R$ 7.55 billion to approximately R$ 9.5 billion, an increase of about 26%. The gains come from elsewhere: ten high-end, nearly fully leased warehouses, management fees spread over a larger asset base, and greater secondary market liquidity. Risk also applies to income: if the LVBI11 portfolio generates less per unit than HGLG11 currently distributes, it dilutes the same reserve pool across more unitholders. This is part of a broader trend that includes HGLG11's recent asset acquisitions and the absorption of Brookfield funds.
Do I Need to Take Action with My LVBI11 Units?
No. Conversion is automatic on the implementation date, and thanks to the CVM waiver, there is no cash-out right to request. If you prefer not to hold HGLG11, your only option is to sell LVBI11 on the exchange prior to the merger, foregoing the discount. Unitholders with a fractional unit balance that does not convert into whole units should receive cash. That is what HGLG11 did with PATL11, when it auctioned fractional remainders on B3 and paid unitholders in cash. For LVBI11, the rule for fractional units has not yet been published. Suno notes that the merger is not yet effective because administration and management have not released an implementation schedule. Three announcements remain:
Official exchange ratio: near 0.7275, the implied value aligns with the calculation above. Every 0.01 lower reduces your unit value by about R$ 1.45.
Base date and implementation date: as the date approaches, the roughly 6% discount tends to narrow. If implementation stretches past March 2027, the discount may persist.
HGLG11 distribution for the first half of 2027: if it stays at R$ 1.17, converted income will sit near R$ 0.85. If it drops closer to generated earnings of R$ 0.89 to R$ 0.95, income will range between R$ 0.65 and R$ 0.69.
Our assessment on 10/22 was ACCUMULATE, with a fair value of R$ 98.69 based on LVBI11's standalone fundamentals. The CVM decision alters the risk profile: questions about whether the transaction will happen are replaced by uncertainties regarding HGLG11's market price and the sustainability of its dividend. Investors buying LVBI11 today are essentially buying HGLG11 at about a 6% discount, and HGLG11 becomes the primary asset to monitor.