Latin America Expertise in Demand as Region’s Real Estate Market Booms
In the middle of a global liquidity crisis linked to the collapse of the US subprime market, one region remains largely insulated from the fallout: Latin America. In fact, real estate finance in Latin America is booming. Growth and economic stability are spurring investment in real estate development projects throughout Latin America, led by Brazil. The region’s housing market is benefiting from a growing population and an influx of international retirees. Developers seeking financing in Latin America are also generating new opportunities and asset classes for bankers, advisers and investors. Executive recruiting firm, A.E. Feldman says investment professionals with expertise in Latin America are in a position to benefit from this trend.
Brazilian stocks soared last week, despite volatility stemming from the U.S. subprime meltdown. Latin America has minimal exposure to U.S. subprime-backed securities, according to Fitch Ratings. A poll on banks and insurance companies by the international ratings agency reveals that the region’s exposure to U.S. subprime-backed securities is negligible or non-existent. “In the isolated cases where exposures to subprime paper exist, the exposure is minimal and will not by itself lead to negative rating actions,” Fitch said.Problems with U.S. subprime mortgages have not eliminated the underlying bullish sentiment in local markets, according to Prudential Real Estate Investors (PREI) - the real estate investment management business of Prudential Financial currently managing $1 billion in assets in Latin America. The group says the long cycle of relative stability and high liquidity in international markets continues to benefit Latin America. External conditions have also fueled growth, as the high-liquidity environment there continues to draw investors to Latin America in search of higher returns. As a result, real estate in Latin America is garnering a lot of attention in the public equity and debt markets.
Real estate companies in Brazil continue to attract capital, according to research compiled by PREI. Six real estate developers (CR2, Agra, JSHF, Even, Inpar and EzTec) and one shopping mall operator (BR Malls) raised over $1.8 billion in the second quarter. The group says economic stabilization has contributed to the successful IPOs of Brazil’s housing companies in recent years.
Meanwhile, Brascan Residential Properties S.A. (Brascan), Brazil’s fourth-biggest real estate developer by sales was added to the Indice Brasil, or IBrX 100, an index composed of 100 of the most-traded stocks in Brazil. Net income for the company increased 174% in the second quarter. Brascan’s contracted sales also jumped a staggering 146% year-over-year.
Foreign investors appear to have an unrelenting appetite for real estate investment in Latin America. Advent International’s Patrice Etlin told the Latin Business Chronicle that Brazil’s long-term growth prospects are favorable. ”Due to factors like macroeconomic stability, GDP growth and mainly the increase in real estate credit, we expect strong and solid growth for the next few years.”
Latin America offers the benefit of diversification and some analysts say they must be better bets for investors seeking more exposure to global growth and bigger returns. Thus, demand for investment professionals with expertise in developing countries remains high. A.E. Feldman says emerging markets opportunities are growing in the money management business. Firms want people who specialize in emerging markets valuation and professionals who can understand these regions on a ground level basis. Real estate market and business consultants and others interested in real estate financing, development and investment in Latin America are also poised to gain from growing investment in the region. Candidates with experience in credit risk and analysis, transaction management and people with business relationships or who have done business in Latin America are also in demand. The executive recruiting firm adds that language proficiency in Spanish and Portuguese are highly sought after skills.
