Sam Zell enters South American retail

Sam Zell’s international private equity real estate firm has acquired a $50m interest in a shopping mall developer with a presence in Chile, Argentina and Peru.

Equity International, the private equity real estate fund affiliated with Sam Zell’s Equity Group Investments, has entered the South American retail sector with a $50 million (€39 million) investment in Santiago, Chile-based Parque Arauco, which develops and manages malls in Chile, Argentina and Peru.

The deal is subject to regulatory and shareholder approval. Parque Arauco shareholders are scheduled to vote on the share offering on October 2. If approved Equity International would hold approximately 12.5 percent of the company.

“The South American retail sector offers a wealth of opportunities for us as we continue to seek investments in emerging markets,” said Gary Garrabrant, Equity’s chief executive officer, in a prepared statement.

The statement described the Chilean retail market as “extremely competitive,” and said there is room for growth as more retailers focus on expanding their store base thanks to the growing shopping center sector.

In addition to its holdings in Chile, Parque Arauco also has a 30 percent interest in the Buenos Aires-based Alto Palermo Shopping Center portfolio and a 45 percent interest in the Lima, Peru-based MegaPlazaNorte, giving it 450,000 square meters of leasable space.

Equity International, which closed its second fund on $300 million in March, already has a large presence in both Mexico and Brazil, with successful investments in homebuilders in both countries in recent years.

The private equity real estate firm is also expected to have a presence on Parque Arauco’s board.