As chairman of two of the largest publicly traded REITs in the US, Sam Zell is one of the most visible real estate figures in the country. Nevertheless, like most opportunistic investors, he's now moving overseas.
Last month, Equity International, the private equity firm affiliated with Equity Group Investments, the investment company founded by Sam Zell, closed its second fund, EIP Fund II, on $300 million (€250 million). Founded in 1999, the firm had previously raised $370 million for its debut vehicle, most of which was invested in the Mexican market.
In a statement, Gary Garrabrant, chief executive officer of Equity International, noted that the new fund will look to replicate the strategy of the first vehicle by identifying “scalable opportunities in inefficient markets.”
The most prominent example of that philosophy was the firm's 2002 investment in Homex, one of the largest homebuilders in Mexico. Since then, the firm has led an IPO on the New York Stock Exchange in 2004 and a secondary offering in 2006. Equity International's initial $32 million investment in the company is now worth approximately 12 times the firm's invested capital. Equity International made five other investments in the first fund, including three in Mexico: retail developer Mexico Retail Properties, industrial real estate owner-operator Corporate Properties of the America and mortgage and finance company Crédito Inmobiliario Terras.
“We like Mexico and we were in there early,” Garrabrant said in an interview last year. “Now it's de rigueur. Seven years ago, it wasn't. People thought we were crazy.”
As other investors have moved into Mexico in recent years, the firm has begun to look for opportunities elsewhere. Though Garrabrant points out that the firm will continue to look at Mexico, the first investment from the second fund was in Brazil. Last summer, Equity International acquired a $50 million minority stake in Sao Paolo-based residential developer Gafisa SA, looking to benefit from the same factors that drew them to Mexico: a rising middle class and a stabilized political situation. The investment has already paid off: the company went public earlier this year and is currently valued at more than five times Equity International's initial investment.