Real Estate Auctions: Margin Strategy Amid Rising Cost of Capital

Santander's offering of 190 properties with nominal discounts of up to 79% signals a tactical bank deleveraging move in a climate where liquidity is the scarcest asset. With the real estate market under pressure from a restrictive macroeconomic environment, acquiring distressed assets is a matter of interpreting the credit cycle. For investors, extreme caution is required: the prospect of deep discounts must be weighed against high transaction and maintenance costs following a period of credit euphoria. Current data highlights this complexity: the commercial dollar at R$ 5.20, with a 2.23% rise in 7 days, inflates construction costs, impacting renovation feasibility. Coupled with a 12-month IPCA of 4.44% and a Selic rate of 14.00% p.a., the opportunity cost for leveraged buyers is prohibitive, making auctions a game for those with immediate cash. Drawing on Ray Dalio’s Credit Cycles, we are clearly in a contraction phase where debt forces asset liquidation. Investors should calculate cap rates carefully, as high interest rates continue to exert downward pressure on asset values. Over the next 180 days, we expect an intensification of bank auctions if the Selic remains at 14%. Following Benjamin Graham's value tradition, investors must perform rigorous due diligence rather than viewing discounts as guaranteed profit.