Private Equity And Real Estate Investment
Those who know how to surf the waves of this yet-unknown tsunami
may obtain significant returns on their investments
The recent international financial crisis should have its
ramifications in the Brazilian market, for with globalization, no
world economy is immune to the hiccups of the world's major
economies. Usually, however, moments of crisis are moments of great
opportunity. Those who know how to surf the waves of this
yet-unknown tsunami may obtain significant returns on their
investments and, doubtlessly, the Brazilian real estate market may
be one of the fields where such opportunities tend to appear.
The residential segment
The residential real estate segment in Brazil showed a
considerable increase in activities in recent years, due to the
government's efforts via incentives to increase the
availability of real estate funding, and due to the favorable
economic scenario. Between 2005 and 2007, 21 companies in the real
estate segment went public and began to have their shares traded on
the stock market. With the funds raised from these offerings, these
companies acquired land to compose their land bank and will now
require further resources to develop their projects,
notwithstanding the revision of launches that should ensue from the
worldwide financial crisis. According to a study by Morgan Stanley,
published in "Valor Investe" magazine's July 2008
edition, such companies would need to raise R$ 7.6 billion for
investments by next year. Meanwhile, real estate companies who did
not go public are seeking alternatives to fund their activities.
With the recent closedown of the credit market, funding
alternatives for these companies may go through the venture capital
segment, which, in turn, can benefit from a range of different
structures available in the Brazilian market. Furthermore, the
tendency toward consolidation of the 21 public companies in the
real estate segment has also been confirmed, with the recent
announcement of operations involving the acquisition of
Abyara's brokerage businesses by Brasil Brokers; Tenda's by
Gafisa; and Company's by Brascan. Other similar operations
should also be announced, which may also mean opportunities for
private equity funds.
The industrial segment
Traditionally, Brazilian companies own their own production
plants and distribution centers. In the past years, we have seen a
trend toward divestiture of these types of assets to real estate
investors, with some type of guarantee of occupation...
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