Investors Look to Brazil For Growth

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History isn’t always repeated, but when it comes to real estate investing, many bet on Sam Zell’s past history. In the 1990’s, he gained the nickname “grave dancer” by buying and profiting on distressed properties. And, worldwide, distressed properties are definitely in the news now. So, real estate investors everywhere pay attention to what Sam Zell says, such as in a recent CNN interview: “Brazil is the number one country in the world for investments.”

There is a lot going on in Brazil, whether it be government or private sector housing investment and construction. The government’s $18 billion stimulus plan for building affordable housing is keeping a great many home builders busy. Couple that with a 5 percent cut in Brazil’s Selic interest rate, and you have a pretty positive climate for real estate. Real estate financing is where Sam Zell says the country needs to place its emphasis. His privately-held firm, Equity International, has taken an interest, with a large stake in home builder Gafisa SA. According to an article at the Wall Street Journal Online, half of Equity International’s invested capital and 70% of its investments’ market value is in Brazil.

One source reports that the Banco Central do Brazil places Brazil’s residential mortgage lending at only 2.5% of the GDP. This is quite low compared to estimates of 11% in Mexico, 20% in Chile, and 45% in Spain. Worldwide financial crisis aside, mortgage lending in Brazil is rising, some reports putting it at 41% this year, and companies like Equity International are moving to invest and profit from the growth in Brazil’s economy and particularly the residential housing initiatives and construction. Of course, building homes spurs purchases of durable goods; refrigerators and appliances. The supermarket giant, Grupo Po de Acar purchased Ponto Frio, an appliance manufacturer to cash in on this boom in appliance sales.

Let’s not leave out opportunities in commercial real estate in Brazil. Singapore recently entered the commercial real estate arena via a joint venture with Cyrela Commercial Properties. Add to this investment from the Canada Pension Plan Investment Board’s real estate subsidiary for this joint venture to invest in office buildings, shopping centers, and distribution centers. Analysts from five banks and brokerages recently reported to Reuters that Cyrela, Gafisa SA, and Rossi Residencial all posted operational profits gains in 2008. Taking all of this into account, many analysts predict that Brazil will emerge first and fast with growth after global financial markets stabilize.

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Source by Tony Osust