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Equity International in Brazilian homebuilding PIPE

The real estate investment firm co-founded by Sam Zell and Gary Garrabrant has purchased 20m shares of Sao Paolo-based Construtora Tenda after Equity’s portfolio company Gafisa took a 60% ownership stake last year.

Private equity real estate company Equity International has purchased roughly 5 percent of publicly-listed Brazilian homebuilder Construtora Tenda through its $500 million fourth fund.

The firm purchased roughly 20 million shares for an undisclosed price. The stock opened for trading Thursday on the Bovespa at R$1.54 (€0.50; $0.68) per share.

Tenda is a homebuilder focused exclusively on the affordable housing sector. Affordable housing has become an increasingly popular investment target in Brazil as the global economic crisis deepens and the spending power of the middle class is hit.

Equity International portfolio company Gafisa, a Sao Paulo-based homebuilding company, acquired a 60 percent ownership stake in Tenda in October 2008. Chicago-based Equity International invested equity in Gafisa in 2005 and then again in 2008 alongside Brazilian private equity firm GP Investments.

Listed real estate companies in Brazil have garnered attention from private real estate investment firms due to their desperation for capital. Some real estate companies rushed to the public markets to gain access to capital. However, following the credit crunch and the shutdown of the equity and debt markets, listed companies saw their stock prices plummet, with many now heavily overcommitted to projects they are unable to finance.

Publicly listed builders have a total shortfall of roughly R$18.5 billion in financing, according to data from New York-based private equity real estate firm GoldenTree Insite Partners.

The Sam Zell-owned firm made four investments in Brazil prior to Tenda, including Gafisa, the logistics company AGV Logística, retail property company BR Malls and development and management company Bracor Investimentos Imobiliarios.