Bullish on Latin America

Chicago-based Equity International plans to expand its Latin American footprint with an entry into Peru, as well as additional investments in Colombia.

After making its first real estate investment in Colombia in 2011, Chicago-based Equity International plans to step up its activity in the Latin American country while also eyeing its debut deal in neighboring Peru. In an excerpt from an interview for PERE’s October issue, Brian Finerty, co-lead of investments, spoke about why the real estate investment firm is making its bets on those two countries.

PERE: What real estate opportunities do you see in Colombia right now? 

Brian Finerty: Colombia has an unbelievable geographic advantage. It has the Caribbean coast as well as the Pacific coast, so in terms of the flow of goods and trade, it is extremely well-positioned. And similar to Mexico, Colombia is a very open country in terms of trade. They have signed free trade agreements with nearly all their neighbors in South America, as well as the US, Canada, the EU and South Korea, and they’re in negotiations on others. They’ve done an outstanding job of building up their flow of goods, both exports and imports, and that directly impacts the industrial real estate market in Colombia. As a result, there’s a need for investment in ports, there’s a need for investment in logistics warehouses and there’s a need for corporate real estate offices to support the operations of logistics companies. 

PERE: What are the drawbacks to investing in Colombian real estate?

BF: From a real estate perspective, it’s still a very shallow market. In terms of institutional property that you can buy, it’s very limited. In the near term, you have to develop the product because there’s almost nothing to buy, but we think there’s end-user demand for the product. Vacancy in Bogota is just 3 percent in the office sector, for example. It’s a very tight market right now and the leasing activity has been pretty significant, so it does set up well from a supply-demand perspective. 

PERE: What real estate opportunities do you see in Peru?

BF: It is a bit of a smaller market. The drawback of Peru is that one city dominates, that being Lima, whereas Colombia has five cities with more than one million [people]. That said, it cannot be ignored. It is a growing country, has the fastest GDP expectation in Latin America and shares a lot of the same qualities as Colombia in terms of openness, trade and the quality of the workforce. We’re also trying to find ways in which to invest in that country, whether on a standalone basis or through a broader regional strategy. 

PERE: What do you mean by a standalone basis? Is that just one platform or one company?

BF: By standalone, I’m referring to investing in Peru only through a platform or company based in the country. We’re looking at both options right now, companies or platforms that are Peru-focused, as well as platforms that are broader in geographic focus. For instance, platforms with a presence in Peru, Colombia and other Andean countries.

PERE: Do you find that there are certain property sectors in Peru that you’re likely to look at more closely or that just seem to be more promising in terms of opportunities?

BF: In terms of what’s more promising in Peru, it’s more on the homebuilding side today. The retail sector in Peru is interesting and attractive, but it is much more developed already. Peru has a robust retail sector, where people have been investing in what we consider an institutional way for years, and it’s really been dominated by the Chileans for the most part. Now, that doesn’t mean there’s not opportunity for groups like us, it just means it’s a bit harder. I think there’s scale, but it’s more competitive. We try to go where our capital is most valuable and can be a catalyst for institutionalization.

For Finerty’s perspectives on Mexico, check out this story in the October issue of PERE.