Private Real Estate in Latin America (Part II) – August 2013

by Luke Alexander

  • 16 Aug 2013
  • RE

The development of a private real estate fund industry in Latin America is reflected by the growing importance of managers headquartered in the region. Firms such as Sao Paulo-based Hemisferio Sul Investimentos and Pátria Investimentos have raised sizeable funds in recent years. Latin America-headquartered fund managers accounted for 52% of the capital raised by Latin America-focused funds in 2011-2012. This was a significant increase from the period between 2005 and 2010 when Latin America-headquartered managers accounted for less than a quarter of the capital raised. Of the funds currently on the road, 57% of the aggregate target capital is being sought by Latin America-based firms.

In terms of the geographic scope of funds investing in Latin America, Brazil is the country which is most commonly targeted by private real estate managers. Of the $9.3bn that was raised by the 29 Latin America-focused funds that closed between 2009 and July 2013, $6.4bn was raised by the 17 vehicles targeting Brazil. Six funds investing across Latin America raised $1.7bn, while the same number of funds targeting Mexico raised $1.2bn.

Of the funds in market, an aggregate $2.5bn is targeted by the seven Brazil-focused funds being marketed, accounting for 66% of the capital targeted by all Latin America-focused funds on the road. The Brazilian real estate market is attractive to many investors due to its continued economic growth, its growing middle class and its prospering housing market, owed largely to increasing mortgage availability. Furthermore, with Brazil hosting the FIFA World Cup in 2014 and Rio hosting the 2016 Olympic Games, the country is likely to continue attracting interest and investment.

Another country in the region that has seen significant growth in real estate valuations, particularly in the residential sector, is Columbia. Five funds in market are targeting the country, with the $627mn targeted by these funds equating to 16% of the aggregate capital targeted by all Latin America-focused funds on the road. With significant amounts of land under construction, and a large proportion earmarked for new apartments, Columbia looks set to be a prominent market in Latin America in the years to come.

There are encouraging signs for private real estate fundraising in Latin America. More funds and more capital is being targeted by fund managers raising capital to invest in the region than in previous years and 2011 and 2012 were the strongest years in terms of capital raised to invest in Latin America. The region accounts for a small but growing proportion of all private equity real estate fundraising globally and more managers headquartered in the region are raising funds, reflecting the growing maturity of the private real estate fund industry in the region. Many see Brazilian real estate markets in particular as very attractive, and there is likely to be more capital flowing into the country in the coming years.

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