Equity International Sells Stake in Brazilian Holding Company

Chicago-based Equity International is focusing its South American investment strategy on multiple asset categories in Brazil and Colombia.

In at least its third major transaction in Brazil this year, Chicago-based Equity International  has completed the sale of its 20.7% ownership interest in Brazilian Finance & Real Estate (BFRE) to BTG Pactual and Banco PanAmericano S.A., EI announced late Thursday.

The transaction reportedly was approved by Brazil’s Central Bank on June 11, although the transaction did not formally close until about 10 days ago. The deal had initially been announced last December. The value of  the transaction was not disclosed.

BFRE, based in São Paulo, is the holding company for four business units: Brazilian Capital, an investment management company and creator of Brazil’s first real estate private equity fund; Brazilian Mortgages, Brazil’s first independent mortgage company offering commercial and residential mortgages; BM Sua Casa, a retail mortgage lender targeting middle-income and entry-level home buyers; and Brazilian Securities, Brazil’s largest real estate securitization company. EI acquired its stake in BFRE in 2009.

Pursuant to the new transactions, BTG Pactual, the leading Brazilian investment bank, acquired Brazilian Capital, and Banco PanAmericano acquired BFRE’s three other business units. Banco PanAmericano is controlled jointly by BTG Pactual and Caixa Econômica Federal.

The announcement followed EI’s divestment of its remaining 2.4 percent ownership stake in BR Malls in February and its March acquisition of a “significant” equity interest in Grupo Thá, a regional homebuilder based in Curitiba, the largest city in Brazil’s South Region (the states of Paraná, Santa Catarina and Rio Grande do Sul).

Grupo Thá is a privately held homebuilder whose primary business is the development of middle- and upper-middle-income residential projects in Paraná and Santa Catarina. It also operates a national residential and commercial construction arm and a residential real estate brokerage unit.

According to EI, the Brazilian homebuilding sector has a housing deficit of about 6 million units, which, along with a growing middle class, is expected to drive increasing demand for housing for some time to come. In addition, Grupo Thá reportedly has a substantial, well-located land bank in key cities across southern Brazil.

“EI remains very keen on South America, with particular focus on Brazil and Colombia,” a company spokesperson told Commercial Property Executive. “Key for us are scalable opportunities, whether in affordable homebuilding, corporate property, retail property, hospitality, specialty finance or logistics/warehousing. Brazil in and of itself offers scale, and Colombia is a strong beachhead into the greater Andes region (e.g., Colombia, Peru, Chile).”

EI’s Brazil portfolio also includes stakes in privately held companies AGV Logística (logistics and warehousing) and GuardeAqui (self-storage).

The Brazilian commercial real estate market is nothing if not volatile, according to a second-quarter report from Real Capital Analytics Inc., with average prices per square foot fluctuating widely since the beginning of 2009.

Qualifying transactions in the 12 months ending mid-year 2012 totaled $3.35 billion, a 45 percent decrease from the prior 12 months, while the second quarter saw $689 million in transactions, a 973 percent increase over the first quarter of 2012, according to Real Capital Analytics.