Morgan Stanley's special situations fund is acquiring a 14.3 percent stake in Sao Paulo-based real estate broker and developer Abyara Planejamento Imobiliário. The terms of the acquisition were not disclosed, but in a conference call with analysts, a Morgan Stanley pro said the price paid for the shares was “close to their market value.” At press time, the investment bank's stake of approximately 7.2 million shares was worth around R$140 million ($69 million; €53 million).
Morgan Stanley executive director Alfonse Munk said the firm's interest in Abyara was based on a belief in the property fundamentals of Brazil, particularly Sao Paolo, as well as the company's management team.
“The quality of Abyara as a company has been a factor that has impressed Morgan Stanley, as has the business model, which combines some intermediation of real estate transactions together with real estate development,” Munk said on the call. “Obviously Abyara enjoys a market-leading position in the country. We're extremely excited to make this investment and continue to invest in the country and with Abyara.”
Abyara was founded in 1995 as a brokerage and consulting firm. Through the end of 2005, the firm had worked on 338 projects. Since then, it has focused on its brokerage business, selling off projects in which it was a co-investor, according to the company's website. Abyara posted a fourth quarter 2006 profit of R$9.4 million and, at year's end, Abyara was co-developing 46 projects valued at R$1.6 billion.
Morgan Stanley's investment in Abyara is consistent with the bank's emerging market strategy, which includes making investments in local operating companies. Morgan Stanley has acquired minority stakes in real estate developers in China, India and Russia.
Nevertheless, going forward, Munk said the investment bank would consider investments in real estate companies as well as direct assets. Asked if the firm had any plans to make asset investments alongside Abyara, Munk did not rule the option out.
“We don't have any specific plans for further investments in assets with them, but if the opportunity arises we'd be happy to review,” he said. “It would be within our scope of investments in the country.”
Morgan Stanley Real Estate Special Situations Fund III closed last year with $2.2 billion in capital. Munk said the fund's portfolio was currently valued at around $3 billion.