Mid- and high-end developers trade at a discount on the stock market

(Valor Econômico) Alternatives to raise capital could replace IPOs, according to Seneca; analysts disagree and point to governance benefits

Of the 12 main mid- and high-end developers listed on the country’s stock exchange, only 3 are traded at a price above their book value — that is, the result of subtracting liabilities from the value of assets. Of these 12, only 5 have seen their share prices rise from the IPO until Monday (22).

For Daniel Wainstein, partner at the management firm Seneca Evercore, data like this show there is no reason for mid- and high-end developers to be interested in an IPO. The funds needed for their growth can be obtained in other, less costly ways. Analysts disagree, although they point out that real estate development poses a challenge for traditional earnings coverage.

Interest in IPOs is not lacking in the sector. In the last window, between 2019 and 2021, six developers made their initial offerings, and others remained in line. Since 2014, there have been 10 operations in the real estate sector, 11% of all offerings, according to Seneca.

For Wainstein, the lack of earnings predictability among developers — who work with long-term projects — is “terrible for the stock market.” Some of these companies are relatively small and end up with low liquidity on the exchange. Each time results disappoint, the shares become concentrated in the hands of fewer investors.

When these developers want to carry out a secondary offering (“follow-on”) to finance new projects, for example, shareholders won’t approve it. “When you raise capital while trading below [book value], you’re destroying shareholder value,” says Wainstein.

Seneca works with a product he describes as an alternative to an IPO — a “swap fund,” or “project IPO.” These funds bring together projects that need capital to cover the portion of construction not financed by banks or other investment funds, about 30% for mid- and high-end developments. The goal is to attract institutional investors, who come in as swap partners on the construction and earn part of the project’s results.

The model is similar to the investment vehicle announced last week by JHSF, a listed company, which will involve five assets and R$4.6 billion — an amount 20% greater than the company’s market cap. JHSF’s vehicle, however, involves its existing inventory. When asked for comment, the developer said it is in a quiet period.

Analysts say this is not a substitute for an IPO. Bruno Mendonça, head of real estate research at Bradesco BBI, points out that an IPO is “a much broader business than financing a project and buying land,” and that “nothing prevents” a listed developer from also using swap funds, an alternative he finds interesting.

Mendonça notes that listed companies can attract more highly qualified executives because of stock-based compensation. He also highlights the possibility of liquidity events for shareholders and governance gains.

“You’re required to provide accountability that gives you more security in your processes,” says Hugo Grassi Soares, analyst and investor relations consultant.

Soares also notes that, in a period of expensive and scarce capital, listed companies usually have access to better rates and more financing opportunities.

At Helbor, share prices — up 159.4% this year but down 73.2% since its 2007 IPO — “guide the timing and structure of financing operations,” says CEO Henry Borenstein, who sees going public as a “relevant milestone” that allowed the company to sustain growth over time.

Mendonça cautions that IPO windows “happen during periods of excess optimism,” which carries risk. The last window, Soares recalls, was during Paulo Guedes’ tenure at the then-Ministry of the Economy, when interest rates were falling. There were so many new investors that banks needed places to allocate capital. Real estate development has low barriers to entry and is highly fragmented. In other words: there’s no shortage of candidates to answer the banks’ call.

But the sector is also characterized by what Soares calls “murky” accounting. Its fragmentation makes close monitoring of listed companies — and especially IPO candidates — more difficult, concentrating attention on larger players and macroeconomic movements.

Another issue, according to experts, is that a project’s profitability largely depends on land acquisition costs — and the land market is far less transparent than commodities. A strong wave of developer listings alone can push up land prices, making it harder to achieve the projected returns.

Analysts, however, say the sector exercised discipline during the last IPO cycle, which included new offerings, sponsor-backed offerings from established businesses, and follow-ons. “There are very good stories from that class, like Cury, Plano&Plano, Lavvi, and Moura Dubeux, which delivered everything they promised and even a bit more,” says Mendonça.

Diego Villar, CEO of Moura Dubeux, stresses that the company wouldn’t have been able to access the capital needed to sustain its growth without an IPO, except perhaps through direct investment. The company multiplied its launches sevenfold from 2019 to 2024. Without that, it would be “competing” with mid-sized companies in Brazil’s Northeast, he says.

Plaenge, which operates in the mid- and high-end market, sees no reason to go public despite frequent approaches from banks, says managing partner Alexandre Fabian. The company says it is the second-largest developer in its segment, behind only Cyrela, with R$4.55 billion in launches and R$3.64 billion in sales in 2024.

Given Plaenge’s scale, access to bank credit is not an issue, Fabian says. The company has been able to grow organically, and remaining private allows decisions to be made with more “serenity,” according to him. “The stock exchange was designed for the U.S. industrial market, where product cycles are quarterly, but real estate is long-term,” he says. “There’s a mismatch in vision that hinders publicly traded companies.”

MCMV segment shows stronger performance

The situation is different for developers working in the Minha Casa, Minha Vida (MCMV) affordable housing program. Among the five main listed companies in this segment, only MRV — impacted mainly by its U.S. business — trades below book value (at 0.8x). Cury, meanwhile, trades at 7.3x.

Sarah Balestero, also a partner at Seneca, explains that this happens because these companies generally have more standardized, faster operations with a larger volume of projects, which brings them closer to the industrial logic the financial market expects.

Of the 17 listed developers, only four are part of the Ibovespa index, which includes 81 companies. Cury is the newest addition, included in September — Direcional, MRV, and Cyrela round out the group. Only Cyrela isn’t exclusively focused on the MCMV segment, though it has a popular-housing brand and stakes in Cury and Plano&Plano, both in this area.

The positive view of listed companies, especially in the affordable segment, has even led some developers to “skip the line” for going public and pursue a “reverse IPO.” BRZ, a major MCMV developer, signed a memorandum of understanding to merge with Fica (formerly CR2), which, while listed, hadn’t launched projects from 2012 until the end of 2024. “I believe the IPO brings longevity — it’s the transition from a family business to a corporation,” said Marcelo Tolentino, chairman of BRZ.

Others are still waiting. Pacaembu, which builds affordable homes in Brazil’s countryside, tried the 2020 IPO window and hopes for a new opportunity to list. Victor Almeida, chairman of the company, emphasizes that beyond raising capital, an IPO helps ensure the business’s long-term continuity, which is family-owned. “We saw that it opens doors — whether to attract talent, to join discussions usually reserved for public companies, or even in the debt market,” he says.

Published on 09/25/2025 and available at: https://valor.globo.com/empresas/noticia/2025/09/23/construtoras-ficam-descontadas-na-bolsa.ghtml.