CPP Investments Expands Brazilian Multifamily JV
Greystar Real Estate Partners has marked its entry into the Brazilian rental housing market by joining Canada Pension Plan Investment Board (CPP Investments) and Cyrela Brazil Realty’s existing partnership.
Greystar said it joined the duo to develop a portfolio of rental housing assets across São Paulo.
In November last year, CPP Investments and Cyrela teamed up to invest R$1bn (€154m) to develop a portfolio of residential properties in the southeast region of Brazil.
At the time, CPP Investments said it will own an 80% interest in the joint venture.
The joint venture will continue to target an investment of up to R$1bn in combined equity following Greystar’s participation in the venture.
CPP Investments will maintain a majority interest in the joint venture, Cyrela will also own a significant interest and Greystar will acquire an ownership interest through the expansion of the partnership.
Greystar will manage the properties acquired through the joint venture along with contributing to the design process, with Cyrela developing and building the assets.
Bob Faith, founder, chairman, and CEO of Greystar, said: “São Paulo is one of the most dynamic and densely populated markets in the world with a significant institutional investor presence that is attracted to the multifamily asset class because of its relative stability, compelling risk-return profile, and demographic tailwinds.
“We see tremendous opportunity in Brazil, where the existing for-rent housing options lack the efficiency and sense of community that are hallmarks of Greystar.”
“We’re proud to be working alongside best-in-class partners that have a demonstrated track record of success in the local market, and we are excited to leverage our sector expertise and global experience to offer renters a hassle-free lifestyle. Together we will redefine the rental experience for South America’s largest population.”
Hilary Spann, MD, head of real estate Americas, CPP Investments, said: “CPP Investments sees increasing demand in the rental multifamily sector in Brazil, which will particularly benefit developers of modern, high-quality residential space.
“We are pleased to join our partners Cyrela and Greystar in building a best-in-class portfolio in Brazil.”
CPP Investments put out this press release going over the joint venture:
Greystar Real Estate Partners, LLC (Greystar) is joining Canada Pension Plan Investment Board (CPP Investments) and Cyrela Brazil Realty (Cyrela) in a joint venture that will develop, own and operate purpose-built multifamily rental housing in São Paulo. This milestone marks Greystar’s entry into the burgeoning Brazilian rental housing market, and a further step in its continued expansion in South America.
The platform and partnership first created by CPP Investments and Cyrela, which was announced in November 2019, has now expanded to include Greystar, the global leader in rental housing. Together, the joint venture partners will develop a portfolio of world-class rental housing assets across São Paulo’s most desirable, walkable and well-connected neighborhoods. Each community will have distinctive design elements and exceptional amenities, appealing to a variety of tenants who seek convenience, comfort, security and an active urban lifestyle.
The joint venture continues to target an investment of up to R$1 billion in combined equity. CPP Investments will maintain majority interest in the joint venture, Cyrela will also own a significant interest and Greystar will acquire an ownership interest through the expansion of the partnership.
Four development projects located on premium sites in São Paulo were initially identified as assets to seed the joint venture, with three already secured by the platform. This gives CPP Investments, Greystar and Cyrela’s partnership immediate scale in the market and accounts for approximately 40% of the joint venture’s target equity allocation.
“São Paulo is one of the most dynamic and densely populated markets in the world with a significant institutional investor presence that is attracted to the multifamily asset class because of its relative stability, compelling risk-return profile, and demographic tailwinds. We see tremendous opportunity in Brazil, where the existing for-rent housing options lack the efficiency and sense of community that are hallmarks of Greystar,” says Bob Faith, Founder, Chairman, and CEO of Greystar. “We’re proud to be working alongside best-in-class partners that have a demonstrated track record of success in the local market, and we are excited to leverage our sector expertise and global experience to offer renters a hassle-free lifestyle. Together we will redefine the rental experience for South America’s largest population.”
This partnership is unique in being one of the first institutionally owned and operated multifamily real estate investment platforms in Brazil, which is experiencing a confluence of consumer behavior and demographic trends, as well as structurally lower interest rates, that will continue to make this an attractive investment in Brazil over the coming years.
“CPP Investments sees increasing demand in the rental multifamily sector in Brazil, which will particularly benefit developers of modern, high-quality residential space,” says Hilary Spann, Managing Director, Head of Real Estate Americas, CPP Investments. “We are pleased to join our partners Cyrela and Greystar in building a best-in-class portfolio in Brazil.”
Greystar will manage the properties acquired through the joint venture along with contributing to the design process, with Cyrela developing and building the assets.
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that invests around the world in the best interests of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments in public equities, private equities, real estate, infrastructure and fixed income are made by CPP Investments. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At June 30, 2020, the Fund totalled C$434.4 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.
About Greystar
Greystar is a leading, fully integrated real estate company offering expertise in investment management, development, and management of rental housing properties globally. Headquartered in Charleston, South Carolina, Greystar manages and operates over an estimated $200 billion+ of real estate in nearly 200 markets globally including offices throughout the United States, United Kingdom, Europe, Latin America, and the Asia-Pacific region. Greystar is the largest operator of apartments in the United States, managing approximately 693,000 units/beds, and has a robust institutional investment management platform with approximately $35.5 billion of assets under management, including over $15 billion of assets under development. Greystar was founded by Bob Faith in 1993 with the intent to become a provider of world-class service in the rental residential real estate business. To learn more, visit www.greystar.com.
About Cyrela
Cyrela Brazil Realty is among the largest residential property developers in the Brazilian real estate market. Thousands of families have trusted their safety and comfort to Cyrela over the last 50 years and the company has grown to more than 15,000 employees. Cyrela constantly invests in its valued workforce through its Corporate University. Cyrela is also committed to social responsibility and improving the neighbourhoods it builds through many types of urban enhancements, as well as caring for the environment through advanced waste-management processes during construction. Cyrela’s brand has become a synonym for high quality through its achievements and innovations. It currently has 200 construction sites spread across 67 cities in 16 Brazilian states in the Federal District and has proudly built more than 56,000 homes.
These days, the only things you hear about Brazil is bad news, like how coronavirus has plunged the country into recession:
Brazil's economy contracted by a record 9.7 percent in the second quarter of 2020, plunging into recession as coronavirus lockdowns hit home, the official statistics agency said.
No doubt, Brazil is one of the worst hit countries but Brazilian President Jair Bolsonaro, who has consistently downplayed the severity of the coronavirus outbreak, said on Monday that nobody will be forced to have the vaccine against the pandemic once it is developed.
However, on Tuesday, he extended until the end of the year payments for low-income Brazilians hit by the economic fallout from the COVID-19 pandemic, a program that has boosted his popularity but created tension with his finance team.
I'm not going to focus too much on Brazil's economic and political woes, over the long run, Brazil remains one of the most important Latin American countries for large institutional investors, and it has remained this way since 2009 when investors fell in love with it.
This deal is a play on Brazil's long-term economy and the boom of the middle class there, many needing rental units.
CPP Investments now has two great partners, Cyrela and Greystar, to develop these properties.
In fact, this marks Greystar’s entry into the burgeoning Brazilian rental housing market, and a further step in its continued expansion in South America.
On its website, I read this:
Greystar Latin America is focused on bringing our proven vertically integrated acquisition, development, and operating platform to markets across Latin America. With offices in Mexico City and Santiago, Greystar aligns local market expertise with the power of a global investment platform. Currently, Greystar Latin America oversees nearly $370.5 million in assets under management and owns nearly 2,661 units.
Mexico
- Greystar opened its first Latin American office in Mexico City in 2013 and has grown its assets under management to nearly $195.4 million, owning more than 1,500 units.
- In June 2018, Greystar opened its first owned property in Guadalajara offering 219 units over 14 levels.
Chile
Brazil
- The company’s initial investment in Chile started in 2016 with the closing of its first rental housing project.
- Greystar opened its office in Santiago in September 2018 and has grown its assets under management to nearly $175.1 million with more than 1,100 units owned and over 700 units in the pipeline.
- The company’s initial investment in Brazil started in 2020 in collaboration with CPPIB and Cyrela with the closing of R$1B in equity commitments dedicated to a strategy focused on the pursuit of purpose-built rental housing.
- Greystar opened its office in São Paulo in August 2020, beginning with the development of 4 multifamily rental housing assets in prime São Paulo locations that will include approximately 800 units.
It's important to note CPP Investments first teamed up with Cyrela in November last year invest R$1bn (€154m) to develop a portfolio of residential properties in the southeast region of Brazil.
Greystar is a powerhouse in global real estate. You might recall, in 2018, PSP Investments, Greystar and Allianz invested in a £1.5 billion joint venture partnership to grow Chapter, London’s leading student accommodation brand.
In terms of multifamily properties, it has its imprint everywhere, including in China where last year it teamed up with APG, Bouwinvest and MIRA to reach a $450 million first close of its first Asia rental housing fund:
South Carolina-based Greystar, which set up Greystar Asia Pacific last year in partnership with MIRA Real Estate, a division of Australia’s Macquarie Infrastructure and Real Assets (MIRA) reached the funding milestone through new agreements with Dutch fund managers APG Asset Management NV and Bouwinvest Real Estate Investors, according to an announcement from the company.
The venture by the US firm, which has approximately $26 billion in assets under management globally, and its Australian and European partners, aims to profit from the development of the multi-family rental market in China and across Asia Pacific, as an increasingly mobile professional class and rising housing prices create demand for professionally managed rental properties in the region’s growing cities.
Fund Set to Kick-Off First Project in Shanghai
Immediately following acceptance of the new capital commitments, the partnership will close on the fund’s initial investment, a property located within Shanghai’s inner ring road that Greystar aims to reposition as a rental property targetted at executives in the city.
“We are in the process of building a vertically integrated local team with specialists in development, investment and operations unique in this market. The team will be locally managed but supported by Greystar’s global team, network, and capital,” said Charles Ma, Managing Director for Greystar in China. “Our investment strategy will allow us to develop a significant rental housing pipeline in China and grow our platform to realize the tremendous opportunity we see in the region.”
This first investment, the details of which have not yet been disclosed, fits into what Greystar says is the fund’s objectives of investing in high-quality assets in top-tier Chinese markets. The new partners are initially focusing on Shanghai, owing to the city’s attractive rental housing supply and demand fundamentals, according to Greystar, which set up offices in the mainland commercial hub in 2017.
“China is an extraordinarily compelling growth market for rental housing investment today and is notably lacking in quality housing for the wave of renter demand driven by the rapid growth of urban market populations and incomes,” Wes Fuller, leader of Greystar’s global Investment Management business said in a statement.
Jumping into a Fast-Growing Sector
Greystar established its Asia-Pacific rental housing platform with MIRA Real Estate as mainland authorities have been supporting the rental housing market by favouring multi-family projects in land sales and working to establish rental-friendly regulatory and financing conditions.
Over the past two years some of the world’s largest private equity firms and pension fund managers have jumped into the mainland rental housing market in response to the maturing market and policy support.
Warburg Pincus has backed both Nova Properties, a rental developer which has significant investment from Singapore’s GIC, and Mofang, a leasing platform that focuses on management. Canada’s CPPIB has gone directly into the sector through a $817 million partnership with developer Longfor Group and Hong Kong’s Gaw Capital Partners last year teamed with Shanghai-based Harbour Apartments in setting up a $2.6 billion rental housing fund of their own.
In December 2019, US private equity giant The Carlyle Group took a bet on China’s growing rental housing sector by investing in Shanghai-based corporate housing operator Anxin Apartment:
Dennis Wang, managing director of Carlyle’s Asia Buyout advisory team, noted in a statement that Anxin is a fast-growing player in China’s affordable corporate housing segment.
“The increasing number of workers in the service sectors moving to first-tier and second-tier cities in China has generated strong demand for well-run affordable housing solutions in these cities,” Wang said. “With an experienced management team, a proven business model and solid operational know-how, Anxin is well-placed for further growth in this market.”
The same story playing out in China is playing out in Brazil and other growth markets and large Canadian pensions are trying to capitalize on this secular growth story investing with great partners across many private markets (mainly real estate and infrastructure but also private equity).
The key to success in these growth markets is having the right partners and being able to weather the storms during periods of high uncertaintty, like now.
Anyway, this is another great deal for CPP Investments and one it will be able to build on in the future with these proven partners.
Below, take a walk through São Paulo after the pandemic, a municipality in the Southeast Region of Brazil. The metropolis is an alpha global city and the most populous city in Brazil, the Americas, the Western Hemisphere and the Southern Hemisphere. Additionally, São Paulo is the largest Portuguese-speaking city in the world. The municipality is also the world's 4th largest city proper by population.
The city is the capital of the surrounding state of São Paulo, the most populous and wealthiest state in Brazil. It exerts strong international influences in commerce, finance, arts and entertainment.
And last month, Brazil's death toll from the pandemic surpassed 100,000, making it the world's worst outbreak after the United States. Al Jazeera reports on Brazil's grim new reality.
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