Opportunistic returns are often created through mispricing that occurs at certain times in the market. Brazil’s epic downturn and now nascent recovery have created a select number of unique opportunistic investment opportunities for global investors. Recently a top-tier global investor with a local asset manager and co-investor purchased a large portfolio of logistics assets at an opportunistic price.
This transition came about through a unique combination of factors that were brought together by merchant banking firm InDev Capital.
While all real estate is cyclical, emerging markets are often even more cyclical. Based on the fact that the cycles are shorter but also tend to have large dislocations of capital, the real estate returns can become quite large. When Brazil’s downturn was at its worst, merchant banking firm InDev Capital decided that it was time to prepare for an uptick. The firm began to research recent investment strategies that made the most sense as the market turned and, importantly, local co-investment partners and asset managers that thought the same way.
The research into investment strategies during the downturn has positioned InDev Capital correctly during Brazil’s upturn. In 2016 and 2017, the firm began deep research into which sectors had the best risk-adjusted returns upon Brazil’s recovery. The firm decided to focus on four investment strategies: one, regional cluster logistics; two, data centers; three, residential lot development, four, infrastructure project refinance. All of these investment opportunities benefit from Brazil’s transition and the overhang of a very tough recession. Indev Capital has several whitepapers highlighting opportunistic investment opportunities with attractive risk-adjusted returns for interested investors.
Recently, the firm partnered with Alianza Investimentos and Managing Partner Fabio Carvalho, and a large global opportunistic investor to close a large-scale logistics transaction, a portfolio of over 200,000 m2 with 90%+ occupancy at an opportunistic price below both replacement costs and below comparable transactions with an approximate 250 to 300+ basis points acquisition spread. How?
The overhang of Brazil’s downturn has put some pressure on certain asset owners to sell top quality assets. InDev focuses on these mispricing opportunities. While InDev cannot give specifics on the exact size of the transaction, it is north of US$100M and the transaction was one of the largest real estate transactions in Brazil in the past twenty-four months. The LP investor has a global opportunistic orientation and believes that this opportunity has very high risk-adjusted returns.
InDev Capital’s Managing Partner Joseph Williams states, “2018 and 2019 may be an ideal time for smart global investors interested in Brazil. We see unique opportunities with mispricing and high risk-adjusted returns in our current pipeline. Opportunistic global investors obviously are location agnostic, however, we believe that the overhang of a downturn and a nascent recovery will benefit certain strategies. In actuality this is already in process. Our team is especially interested in co-investing in these unique opportunities: one, the acquisition of approved, ready-to-launch lot subdivisions; two, Data Center acquisition and refurbishment of existing data center shells; three, infrastructure project refinance; and four, regional super-cluster logistics opportunities.”
For global investors interested in learning more about how to take advantage of Brazil’s nascent recovery via an opportunistic real estate, data center, and infrastructure investment strategy, please click here for the Guide to Opp Investment for 2018 and 2019.
InDev Capital is a global boutique merchant banking and advisory firm which focuses on large-scale opportunistic real estate and real asset investment opportunities in emerging markets. The firm has particular expertise in creating large transactions between wicked smart global opportunistic investors and game-changing local asset managers in emerging markets. The firm is based in São Paulo and New York. The firm is active in Brazil and has begun to work on its efforts in Vietnam which will launch in 2019. InDev Capital can be reached at joseph.williams@indevcapital.com
