By Sarah de Sainte Croix, Contributing Reporter
RIO DE JANEIRO, BRAZIL – Eike Batista’s real estate company, REX, has been negotiating with Flamengo Football Club to take over the administration of one its buildings overlooking Flamengo Beach. The idea is to turn it into a five star hotel to house tourists for the 2014 World Cup and the 2016 Olympics Games.
The exact terms of the deal are under negotiation but it is expected that the company will invest around R$90 million to renovate the property. They will pay a further R$17 million to the Football Club in exchange for a 25 year lease. In addition to this, the club is likely to receive a percentage of the gross income generated by the hotel and its facilities.
Alexandre Wrobel, vice president of assets at Flamengo, told O Globo, “The value will be converted into building works at the training center and head quarters in Gavea. Flamengo doesn’t want to receive money. It wants to receive improvements in exchange for the use of its property”.
The club is also expected to retain the right to use approximately 24 of the rooms to house Flamengo’s professional players for the two nights prior to football matches in the city. Responsibility for the reported R$14 million in unpaid IPTUs (property taxes) will also be under negotiation.
The building, named Prédio Hilton Gonçalves dos Santos after the millionaire Flamengo fan who donated it to the club in 1982, is located at 170 Avenida Rui Barbosa. It currently has 24 floors comprising 148 three-bedroom apartments of between 140 and 180 square meters each, and various social areas including a spacious entrance hall and a grand ballroom with a terrace.
The building, which enjoys spectacular views of the Parque do Flamengo, was built in 1954 at a time when Flamengo was one of the most up-market neighborhoods in Rio. It has since fallen into disrepair and just 54 of its apartments are currently occupied. The remaining 94 are vacant and in varying states of disrepair, many with broken windows, destroyed floors and significant damp problems.
The handful of tenants that remain in the building currently enjoy favorable rental prices of between R$1,700 and R$2,400 plus condo fees of around R$400 per month. By comparison, rental prices for apartments of the same size in other buildings on Avenida Rui Barbosa go for no less than R$6,000 per month.
Although REX is keeping tight-lipped about the future of the building, if the negotiations go according to plan, the renovation work is likely to begin at the beginning of 2012. It is expected to take around two years to complete. The new, 350-room hotel, provisionally named Hotel Parque do Flamengo (Flamengo Park Hotel) should open just months before the World Cup.
Batista’s latest bid is just one of a string of real estate ventures designed to transform the area to the south-east of the city center. The billionaire businessman told Moneyweek, “I want to make Brazil number one.”