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UBS targets $2.3bn for Brazil RE funds

The Swiss asset manager’s new capital raising drive coincides with its direct real estate business’s entry into Latin America’s largest property market.

UBS Asset Management’s global real estate (GRE) business is making its initial foray into Brazil with the formation of a new initiative focused on direct property investments and equity and debt fund strategies in the country.

UBS has formed a partnership with Real Estate Capital, a Brazilian real estate consulting firm led by Moise Politi, who was formerly the chief executive and co-founder of Brazilian Finance & Real Estate. The partnership will offer investment products and services for international investors in Brazil.

Initially, GRE plans to raise institutional capital for three Brazil-focused investment fund strategies: real estate debt, to address the lack of real estate financing in the country; income-generating equity, to invest in income-producing properties, primarily in the office and logistics sectors; and opportunistic residential, to pursue the acquisition of constructed homes from distressed sellers.

The firm is understood to be targeting $300 million for the real estate debt fund; $1 billion for the income-generating equity fund; and $1 billion for the opportunistic residential fund. All three fund strategies will be focused on Brazil’s largest property markets, Rio de Janeiro and São Paulo and are expected to be launched in 2017. Single-investor mandates or club deals are also possible.

“Following renewed interest from international investors and our extensive research into the local property market, we believe that this is the right time to establish a local presence in Brazil,” said Thomas Wels, UBS’s head of global real estate, in a statement. “In REC we have a trusted set of advisors to work alongside our investment committee and proven investment process to develop our offering over the coming years.”

Sylvia Brasil Coutinho, UBS Group’s Brazil country head, added: “UBS believes that the Brazilian real estate market now offers a window of opportunity for investors, based on the prominent absolute size of the market, the economic backdrop, and our in-depth market research which has highlighted the potential to deliver risk-adjusted returns, particularly versus developed markets.”

UBS already has exposure to Brazilian real estate through its global multi-manager platform, which has been focused on indirect investing in Latin America, primarily through unlisted funds, since 2010. The new GRE partnership with REC, however, will concentrate on direct property investments in the country.

Under the new partnership, the REC team, which comprises a total of seven professionals, will work with three local UBS employees at the latter firm’s existing São Paulo office. UBS currently is finalizing the hire of an investment oversight manager for the team.

UBS’s GRE business currently manages real estate investments of approximately €70.7 billion globally across the major real estate sectors. UBS Asset Management is the asset management arm of Zurich- and Basel-based financial services company UBS Group.