Equity International, the Chicago-based real estate investment business which focuses on real estate entity investments outside of the US, has made its first foray into the Brazilian self-storage sector.
The firm announced that it has made a $58 million investment into GuardeAqui, a São Paulo-based privately owned self-storage company. The transaction represented Equity International’s sixth Brazilian portfolio investment.
GuardeAqui was founded in 2006. Targeting both commercial and residential tenants, the company has grown to three facilities in São Paulo’s ‘metropolitan area’ comprising 248,000 square feet of leasable space. Equity International said its investment comes as the company is looking to begin its ‘next phase’ of growth.
The investment by Equity International is expected to enable ‘accelerated management and portfolio growth’ the firm said, with the ultimate target of creating a national platform. To assist GuardeAqui in achieving this objective, Equity International’s Christopher Fiegen and Gustavo Browne will join the company’s board of directors.
Equity International said that the self-storage sector in Brazil is currently small and is widely considered ‘non-professional’. The firm said the majority of self-storage businesses in the country were single-store operators with mixed-quality properties and insufficient capital. The firm said there are currently 50 self-storage facilities in Brazil, mostly in the São Paulo area, compared with approximately 50,000 in the US.
Gary Garrabrant, chief executive officer of Equity International said the ‘long-term, explosive growth of the middle class in Brazil’ was a key driver behind its investment. The investment comes just a couple of months after he said at a recent conference that Brazil’s demand for real estate across the asset class’s sub-sectors well outstripped supply.
Despite reports of overheated real estate markets in Brazil, Garrabrant said: “It is going to take some time for Brazil to create the financial infrastructure whereby capital is available in debt and equity form, intelligently, rationally. There’s a capital inefficiency that prevails, so the hype, the headlines, have to be tempered a bit by this inefficiency that’s going to continue to improve.”
“We’re advancing deeper into new sectors, where the barriers to entry are even higher. We’re progressing in regional markets,” he said, adding: “We feel there is more political risk in the US than Brazil.