Hemisferio Sul Investimentos is expected to hold a final close of $650 million next week on its latest real estate vehicle, Hemisferio Sul Investimentos Fund IV. The firm is expected to deploy the capital into retail, residential and office real estate investments in Brazil.
Fund IV is the first offering from Hemisferio Sul; its predecessor company, Prosperitas Investimentos, had raised three Brazil-focused funds, including Prosperitas Real Estate Partners (PREP) III, which closed on $750 million in 2011. Maximo Lima, a founding partner of Prosperitas Investimentos, formed Hemisferio Sul last November, following the exit of the firm’s two other founding partners, Luciano Lewandowski and Jorge Nunez. Lewandowski is pursuing non-real estate opportunities but will remain involved with major decisions regarding PREP II and III, while Nunez will be retiring after the two funds have divested their assets.
The new company, which is led by Lima and four new partners, will serve as the platform for any new funds and investments, while Prosperitas will continue to manage its legacy assets. In early December, Hemisferio Sul held a first close of $140 million on Fund IV, which is capped at $650 million but had confirmed demand of $1 billion.
The fund attracted commitments from about 20 investors, all of which had previously invested with Prosperitas. About half of Hemisferio Sul’s investor base – which according to PERE sources include Washington State Investment Board, Government of Singapore Investment Corporation and Harvard Management Company – are based in the US, while the remainder are evenly split between Asia and Europe and the Middle East.
Despite the significant amount of investor interest, Fund IV was sized smaller than the predecessor vehicle based on what Lima saw as more limited opportunities in the market. ”I think the market is a little tougher to invest this time around,” he said. São Paulo, the largest office market in Brazil, is considered “off-limits” because of overpricing, while residential properties are due for a correction, he said.
Also, Brazil “is not a huge market,” he added. “You need to be careful not to raise too much money, because it’s difficult to deploy it. You end up in a situation where you’re in the tail end of an investment period, and people tend to make poor choices. We’d rather go back to our investors more often than sit on so much capital.”
Fund IV – which is targeting 20 to 25 percent net returns – will be focused on retail properties, particularly shopping malls, and residential subdivisions throughout Brazil, as well as office assets in Rio de Janeiro. In December, Hemisferio acquired an existing shopping mall in São Paulo and developed another in the state of São Paulo for a total of R$280 million (€117.1 million, $153 million) on behalf of the fund. The firm also has identified a pipeline of future deals that represents about 50 percent of the fund’s committed capital. Hemisferio primarily invests through development deals and typically handles projects in-house.
Lima, however, anticipated that more investment opportunities would arise from a correction in the São Paulo office sector and Brazilian residential market. “There will be some opportunities in the future to buy out of a tougher cycle,” he said. “And that’s the time to raise more money.”