It’s no secret that fast growing emerging nations like Brazil, China, and India represent major investment opportunities, especially for real estate.
One wonders why this nation’s homebuilders haven’t quite got this. May be they should look into this, given the languishing housing demand in the homeland.
In this context, it is interesting that CalPERS just released a press release saying that it and Hines, an international investment firm, earned $160 million from the closing of a Brazilian real estate fund, i.e. the sale of office, residential, and logistics projects in Sao Palo, Rio De Janeiro, Curitiba and other cities. The rate of return over the six-year investment period was a stunning 60%, triple the initial 20% target rate, not bad.
The success was achieved “through a strategic asset investment thesis leveraging off internal growth in Brazil’s emerging economy”, according to a Hines press release. Sounds smart, and CalPERS, who is in the process of acquitting itself from its experience with U.S. housing in its investment, is looking for more “leveraging”. According to its press release on the matter, the Brazilian connection is an ”affirmation of our new strategy to deploy up to 15% of our real estate capital to growth markets like Brazil and China.”
Clearly, growing middle classes in emerging countries provide “favorable demand for the development of shopping centers, warehouses, offices and residential units.”
One wonders why U.S. builders and developers haven’t made a big plunge into the foreign sector, yet. Is it too risky or is it just too much work? On the face of things, they could add a lot expertise to these markets.
Exporting “Orange County” real estate styles and development designs could be an untapped competitive advantage for U.S. builders if they could go from local to global. Some competitive edges U.S. builders might have:
Architectural and land development design. Some California architectural firms — like the Dahlin Group — are working with Chinese builders. •
Financial and project proforma wizardry with access to global financial centers.
Great sensitivity of what growing middle-class customers want
Our master-planned communities. They’re a “brand” already in those countries, because their citizens have bought new homes in the U.S.
Corporate infrastructure that can bring greater efficiencies to the residential construction sector abroad.
Yes, there are risks, different rules and regulations, issues with the repatriation of profits, different business practices and culture, but it might be worth a try. Leverage emerging economies, young real estate person. source
