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ADIT 2011: Equity International eyes Brazil homebuilders, hotels

The Chicago-based firm is looking to Brazil as it sources new deals in the homebuilding sector, as well as a potential investment with a local hospitality group.

Equity International is set to make a raft of new investments in Brazil’s homebuilding sector, with expectations the firm could “soon” close deals with five or six regional housing developers.

After selling 13.2 million shares in national developer Gafisa last October, Equity International is looking to return to the sector, with chief executive officer Gary Garrabrant telling PERE at the ADIT Invest 2011 conference that it has spent the past few years “navigating and selecting” private homebuilders in which to invest. Eyeing potential equity investments of around $75 million, he said the Chicago-based firm could announce five to six deals “soon”.

Garrabrant, who appeared as the keynote speaker at the annual ADIT conference in Fortaleza, Brazil, today, also said the firm was looking to the hospitality sector for potential deals and was “very excited” about a possible investment with a local Brazilian hospitality group, targeting middle-income hotels primarily for the domestic market. “Our sense is there is a new generation of Brazilian hotel companies that are going to begin,” he said.

“We are seeing more opportunity today than when we first came [to the country a decade ago],” Garrabrant said, adding that Equity International was set to announce another deal with Brazilian entrepreneur Carlos Betancourt imminently. In 2006, the firm, together with Betancourt, Banco Itaú and Capital Trust, founded São Paulo-based developer Bracor Investimentos. In January, Bracor sold 30 of its 42 properties to private equity real estate firm Prosperitas Investimentos for R$2.2 billion (around US$1.3 billion at the time).

Garrabrant rejected fears that the country’s real estate sector is in the midst of a bubble, saying: “Bubble is a strong word and implies transactions, not just people talking about it. There’s a lot to do here [in Brazil].” However, he conceded that the country was suffering from an infrastructure and transportation bottleneck, not least the failure to invest in new airports, highways and ports, which was impeding further growth in the country. Still, he added: “We couldn’t be more excited about Brazil. This is a very special moment in Brazil[‘s economic story].”

Felipe Cavalcante, chairman of the ADIT organisation, which aims to bring investors together with Brazilian developers, also dismissed fears that increasing real estate prices in Brazil are indicative of a bubble. “There is no possibility [of a bubble] in the short-term or mid-term in Brazil,” he said during a press conference earlier today, citing the lack of cheap credit or speculative acquisitions of assets in the country. “Everything is being driven by real demand. We must never confuse appreciation with speculation in terms of real estate.”