Morgan Stanley AIP forms Brazilian JV

The real estate multi-manager arm of the New York-based investment bank is making its first investment in the Brazilian self-storage sector with local operator GuardeAqui.

Morgan Stanley Alternative Investment Partners (MS AIP) has created a joint venture with GuardeAqui to help expand the São Paulo-based self-storage company’s operating platform. The partnership represents MS AIP’s first investment in the emerging property sector in Brazil.

The partnership will acquire, retrofit and develop self-storage assets under the GuardeAqui brand, expanding the company’s footprint in greater São Paulo and Rio de Janeiro and other large metropolitan areas in southeast Brazil.  The venture, which reportedly will invest R$800 million ($330 million) to R$1 billion in self-storage properties through 2018, plans to launch between 45 and 50 projects over the next five years, according to Brazilian newspaper Valor Econômico.

“The venture represents a sizable investment for Morgan Stanley AIP,” said David Boyle, chief investment officer and co-head of real estate, in an email to PERE. “The venture is seeking to acquire a number of greenfield or retrofit assets in various cities across Brazil that we believe can contribute to the growth and expansion of the GuardeAqui platform.” The investment bank’s real estate multi-manager previously invested in Brazil’s office and residential sectors through local partners.

GuardeAqui’s current portfolio consists of five operating properties in São Paulo, Campinas and Ribeirão Preto, and two development projects in Rio de Janeiro and Belo Horizonte. The seven assets total 40,000 square meters (approximately 430,556 square feet) of leasable space.

The self-storage operator currently is 77 percent owned by Chicago-based real estate investment firm Equity International (EI), with the remaining 23 percent held by GuardeAqui‘s founders, according to Valor Econômico. In February 2011, EI closed on a $58 million investment in GuardeAqui, which at the time operated three facilities in the São Paulo metropolitan area totaling approximately 23,000 square meters. The firm's interest in GuardeAqui will not change as a result of the new MS AIP venture.

Self-storage is considered a growth sector in Brazil because of rising demand for the property type but limited supply, as current investors in the space consist largely of single-store operators with mixed-quality properties and insufficient capital for significant expansion. The country presently has approximately 90 such facilities, most of which are located in São Paulo, compared with approximately 50,000 properties in the US.

“The market opportunity for self-storage in Brazil is tremendous, underpinned by limited supply along with favorable demographic trends and economic growth,” said Allan Paiotti, CEO of GuardeAqui, in a statement. “We are honored to partner with Morgan Stanley Alternative Investment Partners to accelerate GuardeAqui’s growth and execute on our pipeline.”