Increased interest in Latin American real estate has led to a record number of private real estate funds targeting the region on the road. This blog takes a detailed look at the development of private equity real estate in Latin America and the potential for future growth. Part I of this blog examines fundraising in the region.
Real estate investment in Latin America has grown significantly in recent years, bolstered by strong economic growth and an increase in investor appetite for exposure to the region. Additionally, an expanding middle class in many countries in the region has led to a surge in demand for residential real estate. 2012 was the most successful year for Latin America-focused fundraising, with eight funds closing on a combined $3.4bn, a small increase on the $3.0bn which was raised by the nine funds to close in 2011. Latin America-focused funds accounted for 5% of all capital raised globally in each of these years. In contrast, the $2.9bn raised by Latin America-focused funds in 2007 accounted for just 2% of the $131bn raised globally.
The largest Latin America-focused fund to close since 2008 is PLA Residential Fund III. Pramerica Real Estate Investors raised $860mn for the opportunistic fund which focused primarily on Mexican real estate. The second largest Latin America-focused fund to close in the same period was GTIS Brazil Real Estate Fund II run by GTIS Partners. The fund raised $810mn to target office and residential real estate in Brazil.
Fundraising has been slower so far in 2013, with only one fund, the $236mn Terranum Capital Latin America Real Estate Fund I, holding a final close. Nonetheless, there are a record number of Latin America-focused funds on the road, with $3.8bn targeted by 14 funds. This is in contrast to July 2010, when seven funds were targeting $2.5bn in capital commitments. One of the largest Latin America-focused funds currently on the road is TFI-Hines Brazil Income Real Estate Fund, which is jointly managed by Hines and The First Investor. The fund, which is looking to garner $500mn of commitments, employs a core-plus strategy and is the first Shari’ah compliant real estate fund targeting Brazil. Tishman Speyer is also targeting $500mn for its Tishman Speyer Brazil Fund III, which makes opportunistic investments in a range of property sectors in Brazil.
In the second part of this blog, we take a look the growth of Latin American managers and the geographic scope of funds targeting the region.