Investors Finding Bargains in Brazil’s Real Estate Market

In the wake of a recession and a financial scandal in the giant energy company Petrobras, Brazil’s real estate markets are going through hard time. Its two largest real estate companies, Cyrela Brazil Realty SA and Rossi Residencial SA, have seen declining revenues. This is true of both commercial buildings and residential housing. But Brazil is the world’s 8th largest economy. With over 200 million people, many of them rising to middle class status, and a large amount of natural resources, Brazil has a strong long-term potential.

Blackstone Group LP is buying up bargains in Brazilian real estate. One example is the 18-story office building Visconde de Inhauma Corporate. JP Morgan Chase and Brookfield Asset Management are also bargain hunting in the country. Overbuilding in anticipation of the Summer Olympics has contributed to the current oversupply of real estate.

As one of the ten largest construction firms in Brazil, Construcap is active in the home housing real estate industry. The company’s headquarters are in Sao Paulo. It is active in many areas: commercial construction, airports, streets and highways, industrial buildings, railways and infrastructure for sea and river ports. This covers projects in such industries as oil and gas, mining, metal, manufacturing, automotive and power infrastructure. It employs over 12,000 people, and is privately held. It has had revenues of over $1 billion. Its full official name is Construcap-CCPS Engenharia e Comércio SA.

Construcap began business in 1944. It attributes its continued growth and success to how it continues to develop and to adopt technological improvements. Plus it is concerned over social responsibility and the environment. It even hires social workers to help develop its employees. In Brazil, construction standards are controlled by SIG (Integrated Management System). Construcap strictly complies with the standards set by ISO 9001/2000, OHSAS 18001/1999 and ISO 14001/2004.

In 2012, Construcap announced a joint venture with Fluor Corporation to pursue construction projects in Brazil. The new partnership is CFPS Engenharia e Projetos. It pursues projects in chemicals, life sciences, the generation of new power and manufacturing.

Brazil also has its version of Real Estate Investment Trusts, known as Fundo de Investimento Imobiliario, or FII. They can be listed on the Bovespa, the Sao Paulo Stock Exchange, though many are privately held. They are required by law to distribute at least 95% of both profits and capital gains to their investors on a semiannual basis. Their profits must come from the operation of real estate, from rents and from capital gains from selling appreciated real estate.

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