Hines Turns a Profit on $128M Sale of Three Brazilian Industrial Properties

It's not easy to turn a profit on a commercial property sale in the U.S. these days, but it can be a different story for certain commercial real estate sectors abroad, and as evidenced by its recent disposition of three Class A industrial properties in Brazil, Houston-based Hines is well aware of that fact.

May 3, 2010
By Barbra Murray, Contributing Editor

It’s not easy to turn a profit on a commercial property sale in the United States these days, but it can be a different story for certain commercial real estate sectors abroad, and as evidenced by its recent disposition of three Class A industrial properties in Brazil, Houston-based Hines is well aware of that fact. Acting on behalf of its sponsored entity Hines Real Estate Investment Trust (Hines REIT), the international real estate firm sold the assets to BR Properties SA of Brazil for an aggregate $127.9 million, after having acquired them in December 2008 for $116.2 million.

The three properties involved in the transaction encompass an aggregate five buildings. Two of the properties, Distribution Park Elouveira and Distribution Park Vinhedo, are located in the São Paulo suburb of Louveira and account for an aggregate 1.1 million square feet in four structures. Developed between 2006 and 2008, the four facilities are leased in their entirety to global express delivery company DHL. The third property, the single-building Distribution Park Araucaria (pictured), sits in Araucaria, an industrial district of Greater Curitiba. Developed in 2006 as a build-to-suit, the one-story warehouse consists of nearly 460,000 square feet.

While many commercial real estate sectors across the world continue to struggle to emerge from the ramifications of the global recession, Brazil’s industrial sector appears to have already seen the worst of it. “As a result of falling industrial output, many speculative schemes were either postponed or cancelled, although demand for the best equipped, well located stock remained stable over the year,” real estate services firm Cushman & Wakefield Inc. concluded in its recent global industrial report. “However, the industrial sector started to stabilise in the fourth quarter of 2009, as industrial production levels increased, led by the automotive and the food and drink sectors.”

Other factors beyond improving market fundamentals provided Hines REIT an opportunity for fruitful property dispositions in Brazil. “The large movements in the foreign exchange markets presented us with the opportunity to realize an attractive profit in both returns of capital and also currency exchange gains due to the strengthening of the Brazilian Real,” Charles Hazen, president and CEO of Hines REIT, noted in a prepared statement.