Social Icons Superfish

Private Equity Real Estate Funds Focusing on Latin America

08/09/2013 | By Carisa Chappell

The private real estate fund market in Latin America has been picking up steam over the past several years with growing numbers of Latin America-focused funds in the market looking to raise capital and fund managers headquartered in the region, according to an Aug. 8 report from alternative assets research firm Preqin.

Currently,14 Latin American funds are trying to raise capital and are targeting $3.8 billion. The report noted that fund managers are increasingly seeing more opportunities in the area thanks to strong economic growth and an expanding middle class in many of the countries within the region.

In 2012 eight funds reached a final close and secured an aggregate $3.4 billion in investor capital. The report noted that was the most successful year on record for funds focused on Latin America. In the previous year, 2011, $3 billion was raised.

Andrew Moylan, head of real asset products for Preqin, said 2013 is on track to becoming another strong year for fundraising in the region.

“These are encouraging signs for private real estate fundraising in Latin America, with a record number of funds on the road seeking capital for investment in the region,” Moylan Said. “With 2012 being the strongest year in terms of capital raised to invest in Latin America, the region accounts for a small but growing proportion of all private equity real estate fundraising globally.”

Private real estate funds focused on Latin America accounted for 5 percent of the capital secured by real estate funds that closed globally in 2012, up from 2 percent in 2007.

Additionally, Moylan said the growth of domestic managers headquartered in the region indicates increased interest. Funds headquartered in Latin America accounted for 52 percent of the capital raised by real estate funds focused on the region that held closings in 2011 and 2012.  In 2009 and 2010, they accounted for just 17 percent.

“More mangers headquartered in the region are raising funds, reflecting the growing maturity of the private real estate fund industry in the region,” Moylan said. Of the funds now on the road, the report said 57 percent of the target capital is being sought by Latin America-based firms.

Within Latin America, Brazil accounts for 66 percent of total capital sought as seven Brazil-focused funds are seeking $2.5 billion. A number of factors are attracting investors to Brazil’s real estate market, according to the report, including a growing middle class and a prosperous housing market. Brazil hosting the World Cup in 2014 and Rio de Janeiro hosting the Summer Olympics in 2016 is also playing a part, according to Preqin.

“The flow of fresh capital is likely to lead to more opportunities for developers to undertake large-scale development projects in key growth markets such as Brazil in coming years,” Moylan said.