Ask Brazil-focused private equity real estate firms what the biggest opportunity in the country is right now, and many would have the same answer: BR Properties.
São Paulo-based BR Properties, one of the largest-commercial real estate companies in Brazil, made headlines when it announced in February that Brookfield Asset Management and Brazilian investment bank BTG Pactual, which already was a 40 percent shareholder in the firm, had launched a tender offer to take control of the company. In a letter to BR Properties’ shareholders, BTG wrote that the parties were launching their bid because “the current quotation at the stock market of the shares issued by the Company does not reflect its proper value, as it reflects a material discount regarding the equity value of its assets.”
In July, however, BR Properties disclosed that the takeover bid was not moving ahead because the bidders had failed to meet certain conditions by a specified deadline. According to sources, the transaction was said to have presented multiple conflicts of interest and would not have been approved by the Securities and Exchange Commission of Brazil.
After the deal collapsed, one Brazil-focused real estate manager said that BR Properties, which is regarded to be the owner of many of the best commercial real estate assets in Brazil, presented an unusual opportunity for property investors to acquire some of the highest-quality assets in the country at a significant discount. “Most private equity firms are having conversations with BR Properties,” the manager said. However, while very large firms could potentially go after the entire company, “we could see more sober-minded groups cherry-picking and targeting specific properties,” he said.
Indeed, in August, BR Properties announced property deals with two of the world’s largest alternative asset managers within the space of a week. First, the company said it was selling 10 warehouse and office properties for R$1.064 billion (€275.8 million, $301.28 million) to an undisclosed buyer, which was later reported to be The Blackstone Group. Days later, BR Properties and Brookfield Asset Management disclosed that the latter firm was buying seven new office properties in the cities of Rio de Janeiro and São Paulo for R$2.08 billion.
Once closed, these two transactions alone would account for nearly half of BR Properties’ overall real estate portfolio, which includes 39 office, eight industrial and three retail properties in five states and the federal district, according to its website. Given the significant amount of interest in BR Properties and its property portfolio, however, the two firms are unlikely to be the only buyers for long.