Zell's Firm in Talks to Invest in Mexican Property Companies
 Alexander Cuadros - Bloomberg
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September 25, 2010
| | Gary Garrabrant, chief executive officer of Equity International. (Paulo Fridman/Bloomberg) | |
Billionaire investor Sam Zell’s Equity International is in talks to invest in Mexican and Colombian real-estate firms as economic growth prospects outweigh drug-fueled violence, Chief Executive Officer Gary Garrabrant said.
Equity International may return to Mexico after selling its last investment there in 2008 and may put money in Colombia for the first time,Garrabrant said in a phone interview yesterday from Chicago. He declined to name the companies involved in the discussions.
“This bigger theme of societal change trumps the skirmishes,” said Garrabrant, who founded the company with Zell in 1999. “You have growth of the middle class and increasing consumerism. The demand is constant, the demand is high.”
An escalating drug war in Mexico has drawn comparisons to Colombia two decades ago, when cocaine kingpin Pablo Escobar helped make the country one of the world’s most violent. The South American nation, which has cut kidnappings by 93 percent and murders by half since 2002, posted the fastest economic growth since 2007 last quarter. Mexico expanded the most since 1998, even as the government says violence saps 1.2 percentage points from gross domestic product annually.
‘Next Best’
Equity International is seeking to buy stakes in companies that benefit from rising demand for affordable and middle-income housing, Garrabrant said. The firm invested $32 million in Desarrolladora Homex SAB, now Mexico’s biggest homebuilder, in 2002 and sold the last of that stake in 2008, earning its investors more than $500 million, he said. Retail property, logistics and mortgage-finance companies are also attractive, he said.
Zell, who three years ago sold his Equity Office Properties Trust to Blackstone Group LP for $39 billion just as commercial property prices were peaking, said at a Sept. 16 conference in Chicago that Colombia may be the “next best” Latin American market.
Colombian President Juan Manuel Santos will double government housing subsidies to the poor and middle class as part of plans to boost growth in Latin America’s fifth-biggest economy, Finance Minister Juan Carlos Echeverry said in June, when he was an adviser to Santos’s campaign.
A Finance Ministry press officer, who asked not to be named because he’s not authorized to speak publicly, declined to comment today.
‘Rising Phoenix’
Santos, who took office last month and served as defense minister in the previous government, has helped engineer the Colombian rebels’ worst defeats. The killing of Mono Jojoy, second-in-command of the country’s biggest guerrilla group, by Colombian forces on Sept. 22 “is going to change our history,” Santos said yesterday.
“Colombia is now viewed as this rising phoenix,” Garrabrant said. “It’s been off the screen for so long. We like to be early, if not first.”
Colombia’s plan to integrate its securities exchange with those of Peru and Chile also boosts growth prospects because it increases liquidity and attracts international investors, Garrabrant said. The Andean countries may start a system of cross-border stock transactions in November, Lima Stock Exchange President Roberto Hoyle said on Sept. 21.
Equity International has invested $1.5 billion in markets outside the U.S., more than half of that in Brazil, Latin America’s largest economy, Garrabrant said. The firm bought stakes in companies including Gafisa SA, Brazil’s second-biggest homebuilder by revenue, and BR Malls Participacoes SA, Brazil’s biggest owner of shopping malls.
Gang Violence
In Mexico, Latin America’s second-biggest economy, violence related to organized crime has killed more than 28,000 people since President Felipe Calderon began battling drug gangs when he came to office in December 2006. Economic growth that tops developed markets including the U.S. makes the country attractive, Garrabrant said.
Mexico has added 677,373 formal jobs this year, already surpassing the central bank’s 2010 forecast, after losing 181,271 positions last year. Job growth is giving the government’s housing agency more capital to provide mortgages, Homex Chief Financial Officer Carlos Moctezuma said on a conference call in June.
“The scale of this middle class growth and evolution is much more powerful than the violence that’s occurring on the border and in other areas of the country,” Garrabrant said. “It’s horrifying, the whole thing, and yet we like to be contrarian.”
To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros(at)bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos(at)bloomberg.net |
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