BR Properties (BRPR3.SA), Brazil's largest
commercial real estate developer, agreed to buy rival WTorre Properties,
growing by another leap as demand for office and warehouse real estate booms in
Latin America's largest economy.
BR Properties signed a memorandum of
understanding with local securities firm BTG Pactual, WTorre Properties'
majority shareholder, to acquire 100 percent of the Sao Paulo-based developer
within 90 days, according to a filing. BTG bought a 72 percent stake in WTorre
Properties in March.
Under terms of the deal, BTG Pactual will
become BR Properties' biggest shareholder with a 30.8 percent stake. None of
the existing shareholders of BR Properties will exit the company.
The transaction highlights BTG Pactual's big
bet on commercial real estate in Brazil, where investors such as Sam Zell's
Equity International and real estate investment trust Hines have banked
sizzling gains through the development and sale of warehouses, office compounds
and shopping malls.
BR Properties, founded in 2006 by a group of
private equity investors led by GP Investments (GPIV11.SA), the largest Latin
American buyout firm, will have over 10 billion reais ($5.8 billion) in property
holdings when the deal closes.
"The bigger operation from this
combined portfolio will give us leverage to continue making major
acquisitions," said Claudio Bruni, chief executive of BR Properties.
"The combination is giving us a backlog of projects that is simply hard to
match."
The acquisition of WTorre Properties comes as
BR Properties expands through acquisitions in the commercial real estate
market, where demand for new office space and warehouses continues to outpace
project launches.
Lack of office space in Brazil's main cities
should keep demand high and continue to be a key driver of growth, Goldman
Sachs Group analyst Leonardo Zambolin said in a recent report.
According to real estate consultancy firm CB
Richard Ellis, about 400,000 squared meters of new office space will be
delivered in 2012, of which about one-quarter already has a rental contract
signed. This compares to about an estimate of 280,000 squared meters this year.
BTG Pactual BTG.UL, the largest independent
investment bank in Brazil, bought a controlling stake in WTorre Properties
after the latter's parent company, WTorre Emprendimentos, faced financial
difficulties.
WTorre Emprendimentos, which in recent years
underwent fast growth after overseeing the construction of Banco Santander
Brasil's (SANB11.SA) Sao Paulo headquarters, parks and other commercial works,
suspended an initial public offering late last year.
Similar plans by WTorre's founding partner
Walter Torre to attract strategic partners and raise fresh funds by using
assets as collateral did not take off.
Partners at WTorre will hold 8.4 percent of BR
Properties under terms of the deal.
Recently, Brazil's second-biggest homebuilder
Cyrela (CYRE3.SA) and other construction companies have faced a decline in
demand for new homes, tougher financing conditions and difficulties trying to
offload inventory.
Source: Reuters
