By Georgia Grimond, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL – As Brazil is rocked by political uncertainty and alarmed by a shrinking economy, canny investors are turning to the country’s real-estate market in search of a bargain. Companies are keen to identify “stranded” properties from a surplus of stock and secure large discounts on them. By buying at a low in the country’s economic cycle investors hope to make a return on their purchases when the economy picks up in the future.
Ahead of a conference on April 12th, hosted by newspaper O Estado de S. Paulo and in partnership with the housing union of São Paulo, SP Secovi, a number of high-profile international companies spoke to the paper about the real-estate market in Brazil.
Kenneth Caplan, global chief investment officer of American private equity firm, Blackstone, who will attend the second Summit Imobiliário (Real-Estate Summit) next month, said the appetite of his firm is strong. Though proceedings are at an early stage, the group has US$15.8 billion ready to invest in the market.
“Brazil is particularly stressed because of low economic performance and political uncertainty. These situations tend to create good opportunities,” he said.
Daniel Maranhão of Grant Thornton, an accounting and consulting firm, has recently seen an increase in the interest of investors, particularly from abroad, and expects it to continue.
“I have been very busy. Many conversations and some business are already underway. But I think it is the coming months that will be more important,” he says.
Maranhão points to the devaluation of the real and the deterioration of the local market as reasons Brazil is now an attractive option for many investors. “A lot of people are waiting for greater clarity in the political and economic scenario. Brazil must pass an economic reform and then assets can be even cheaper,” he explains.
Tim Chen of Top Capital said his firm would be seeking discounts of at least thirty percent. “We look for top luxury hotels in the main squares of the country and budget hotels in secondary and tertiary cities.”
Exxpon, a Brazilian real-estate growth company that specializes in high-risk investments, is looking at discounts on houses of up to sixty percent. “The greatest opportunities today are in the residential segment, with the high number of cancellations (returns),” says founder Jonathan Franklin. According to the Fitch credit-rating agency, dissolutions in construction between January and September 2015 were 41 percent.
In recent months, Exxpon has already spent R$120 million on real-estate assets, most of which are residential. “We are in due diligence for another R$500 million in office buildings, residential and commercial properties,” says Evaldo Lima, a partner at the firm.
The Brazilian housing market fell as much as twenty percent in 2015, according to Moody’s credit-rating agency. Political and economic factors are likely to continue to affect consumer confidence and it is thought the local housing market will continue to contract this year.