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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