Emerging Market High Net Worth Families Investments into USA Real Estate Investments
Opportunities
Through InDev’s experience in Sao Paulo (the financial and business capital of Brazil), the team has realized that there is significant demand from Brazilian investors to invest in US real estate. This demand is the result of a diversification strategy. Due to the end of quantitative easing and US interest rate increase many emerging market investors firmly believe that the dollar will strengthen even further in the medium-term relative to their currencies. As a result, US dollar assets are viewed as hedge to their emerging market currency holdings.
Brazilian Investor Groups
Family Offices – Family offices are a relatively new development in Brazil (and most emerging markets). In fact, just a few family offices existed in Brazil ten years ago. The meaningful growth and wealth creation in the Brazilian economy over the last decade created significant family fortunes. For example, from 2005 to 2013 there were large stock market IPO’s and substantial private company sales to private equity funds that generated liquidity events. As a result, these families have net worth of US$5O million (independent family office) to US$1 billion (multi-family office).
Real Estate Developers – Through InDev’s core business of placing large institutional capital with Brazilian real estate developers, we are in constant contact with the most successful real estate developers and investors in Brazil. As we provide offshore funding for these clients, more of their personal capital is available for additional investments. As a result, these developers (both current and prospective clients) have expressed a strong desire to invest this surplus capital into US real estate.
Individual Investors – These are high net worth (>US$50 million) Brazilians that include industrial farmers, auto dealers, bankers, and etc.
Investment Objectives
Although no two investors have exactly the same objectives, the following are consistent investment themes:
- Diversification – Most of our investors already have US-based investment portfolios in either liquid financial instruments or personal real estate. They often desire to diversify these portfolios with for-profit real estate, an asset class most have already invested in Brazil
- Balanced Portfolio – Real Estate investment is seen as a method to balance their current portfolio. Many Brazilian UHNW families in Brazil moved capital from Brazil to the USA in 2012, 2013, and 2014. Much of this capital sits in fixed income investments
- Long-Term Outlook – This capital is long-term and seeks capital appreciation of US dollar-based assets. There is no short- or medium-term desire to return this capital to Brazil
- Targeted Returns for existing assets are 6% to 8% yield and 12% to 15% levered IRR. Targeted returns for development are IRR of 20% and equity multiples of 2X
- Product Types – Residential (both for sale condos and multi family rental) and Commercial, Hotels, and Logistics
Investment Profile
- Our goal is to place US$30 million per year, with an initial investment $15 to $20 million with one developer in one or two projects.
- Minority or Majority Positions.
- Although major metro areas of New York, Boston, San Francisco, Washington DC, and Los Angeles are always of interest, we have particular interest in less competitive and high growth markets such as Dallas, Austin, Houston, Charlotte, and Raleigh.
- Passive Investors – However, investors likely to visit the projects before investing
- Developers with the following characteristics:
- 15 year track record
- History of solid returns
- Significant Deal Flow
- Well Capitalized
- Excellent Governance and Reporting
