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Related plots Brazil withdrawal – Exclusive

The New York-based private equity real estate firm, whose vast mixed-use project in the country has ground to a halt, is planning an exit strategy.

Related Companies is expected to close its office in Brazil in the wake of troubles involving a stalled massive mixed-use project in partnership with Starwood Capital. Both firms had established a presence in the Latin American country only several years ago.

Related officially announced its entry into the Brazilian real estate market in 2012, with the formation of a joint venture with its Miami-based affiliate Related Group called Related Brasil. The new venture, led by former Tishman Speyer executive Daniel Citron, intended to invest a total of $1 billion over a three-year period. At the time, Related Group already had been working on two development projects in the country, Parque Global, a master-planned neighborhood that was intended to be one of the largest in São Paulo, and V:House, a 23-story, 303-unit residential tower in the city in partnership with Brazilian residential developer SISPAR.

Related currently maintains its office in São Paulo, but is said to have informed industry contacts of its intention to close the location as soon as it is able to sell its interests in its two Brazilian investments, although the timeframe for that is unclear and unlikely to be imminent.

Both Related Brasil and Starwood were investors in the first phase of what was intended to be a three-phase project, along with majority partner Bueno Netto. The initial phase of Parque Global would have included five residential towers comprising 672 units, with two of the towers scheduled for completion in June 2017. However, in August 2014, a local court issued an injunction to halt construction on the first phase of the project, which was already underway, as a result of lawsuits that challenged the validity of the permits for the project. The parties failed to overturn the injunction in appellate court in August 2015 and currently are waiting to have the case heard in another local court.

Parque Global’s troubles, meanwhile, were further exacerbated as the country slipped into its worst economic downturn in decades. In response, both firms have sought an exit strategy.

Currently, only a handful of full employees and consultants remain in Related’s São Paulo office to help oversee the V:House project. While Daniel Citron officially remains a Related employee, he dedicates little of his time on Related and instead is focused on his own boutique investment firm, Presence Consultoria e Negócios, which he started last April with Americo Nakano, his former colleague at Related Brasil, according to two people familiar with the matter.

Starwood, which opened an office in São Paulo in 2010, shuttered its location last March. Ryan Hawley, who ran Greenwich, Connecticut-based firm’s Brazil operations, returned to the US and is now overseeing Starwood’s Brazilian investments from Miami. Along with Parque Global, Starwood’s other investment in the country is MRV Log, the logistics arm of builder MRV Engenharia, in which the firm bought a 33.3 percent stake for R$250 million ($159 million) in July 2011. While one colleague in the São Paulo office relocated with Hawley to Miami, the remaining staff have departed the firm.