4 de abr de 2009

Where the Deals Are: Real Estate in Emerging Markets


Look for countries with strong middle-class growth -- say, China or Brazil. Stick mainly to housing and retail. Focus on the long term. And don't attempt to do it without a local partner.

That was the consensus among the global real estate developers, investors, finance specialists and executives who spoke at the recent Knowledge@Wharton Real Estate in Emerging Markets Forum. With the economy in a tailspin and demand drying up in the U.S. and Western Europe,
it's not surprising that real estate investors are more attracted to emerging markets than ever before.

In the U.S., for example, housing starts are at an all-time low -- down 2.7% in December, according to Bloomberg -- and builders have seen their share values drop 76% since the housing bubble burst. In early January, research firm Reis reported that mall vacancies have reached a 10-year high and are likely to go up as more stores claim bankruptcy and close their doors following six consecutive months of declining sales in 2008.

Now it seems that the unstoppable consumer demand and high returns once guaranteed by "hypergrowth" markets like the fabled BRICs -- Brazil, Russia, India and China -- are no longer a given, either. Although the Forum panelists and speakers saw value in individual markets, they agreed that the "decoupling" hypothesis -- the notion that emerging markets can maintain growth independently of any major disruptions in the U.S. economy -- has proven to be untrue. In fact, as one panelist noted, the current situation would be more accurately described as "turbo-coupling."

Ignatius Chithelen, managing partner of New York investment firm Banyan Tree Capital, pointed out that between 2003 and 2007, the Standard & Poor's Index rose by 80%, and during the same period, the MSCI Emerging Markets Index was up nearly 400%. "Today, the U.S. market is down 50%, and emerging markets are down 60% to 70%. This isn't decoupling.... Very simply, when [the U.S. market] goes up, it goes up much higher in emerging markets, and when it goes down, it goes down much worse."

Chithelen noted that the BRIC classification was originally developed for marketing purposes. "You can't view these markets as one single entity. Each one needs to be judged individually according to the underlying fundamentals." Within the BRIC classification, for example, China stands apart "as the world's banker," he said, citing the country's $4 trillion in reserves, its trade and budget surpluses, and its ability to allocate huge resources to infrastructure projects. "Today, [China] is the best-situated country."
Brazil or Bust

In addition to projects developing affordable housing in Cairo and in Mexico, Zell's Equity International is focusing heavily on Brazil, which he singled out as a particularly strong opportunity for investment. Like Mexico, Brazil subsidizes low-income mortgages, so consumer access to financing has been largely unaffected by the markets. The country also has "unlimited [natural] resources," and, unlike Mexico, a strong executive talent pool to help outside investors achieve scale in operations. On the retail side, Zell noted that store sales are up 12% from last year in the malls owned by his group -- a stark contrast to the recent U.S. figures. "If you look at all of the facts, I don't think there's another environment in the world that's better than Brazil."

According to Tom Shapiro, president and founder of GoldenTree InSite Partners, a New York-based real estate investment firm, Brazil is not seeing the distress found in other markets. Mortgages account for only 2% of GDP in Brazil, he noted, versus 65% in the United States and 74% in the UK, so consumers aren't feeling the effects of credit contraction. Demand is high, and unlike other markets which have seen rampant speculation, there hasn't been any overdevelopment. Shapiro said that his firm typically sees 40% to 50% of condominium units in a given complex sold within two weeks. Recently, GoldenTree sold 70% of the units in an office project in Sao Paulo in only 10 days.

In Brazil, real estate purchases require 15% cash up front and a 1% monthly pay-down on the principal. If the financial crisis has a wider impact, Shapiro said, market growth may slow among middle class homeowners, who don't receive government subsidies for mortgages.
fonte: Knowledge@Wharton (http://knowledge.wharton.upenn.edu/article.cfm?articleid=2141)

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