Top headlines and news impacting Latin America and Africa commercial real estate.
Latin America Headlines
Emerging Real Estate Digest has been critical of Exito’s vast shopping mall holdings through its controlling stake in Viva Malls. The parent company is French Casino Group which is bankrupt and the Exito Group, Colombia’s largest retailer, is presently on the market as a result. A bid to purchase 51% of Exito from billionaire Jaime Gilinsky was recently rejected. Last month a bid from Gilinsky was rejected to purchase 97% of Exito for $836 million.
The move was made possible by inflation reducing in the country from 14.1% last year to 7.6% today. Latin America was the first region to aggressively increase interest rates and is expected to lead the cutting. The cut was more than double what analysts expected. In contrast, the US Federal Reserve tightened this week. Colombia and Mexico are expected to cut last due to conflicts between Central Bankers and the leadership in the respective regimes. Brazil likely next on the cutting block.
We have been preaching this for some time and urging caution to those expecting future waves of private equity “dumb” capital to cascade into emerging market real estate deals and funds. The GIC attributes higher rates and volatility to private equities struggles. The private equity gimmick has harmed investors and distorted markets in emerging markets.
The corruption relates to campaign funds received illegally from drug traffickers to fund Petro’s campaign. Looks to be a similar situation as Joe Biden using his son Hunter to handle the dirty work of profiting from a political office. Joe Biden's corruption looks much deeper and involving much larger sums of money and depravity.
The bone of contention relates to a 2007 investment by its third fund into Tenco, a shopping mall developer and owner in Brazil. The investment has gone to zero and the shareholders (most are wealthy [and upset] Brazilian families) instigated legal proceedings against Patria in 2020. The final assets were sold this week and the end result is complete loss of principal. Excess leverage is a primary culprit.
The official has been given 2 days to explain the missing money or be executed by firing squad (video of the Minister crying below). The military has intervened to run these proceedings of the corrupt government. Niger is considered a country still subject to French economic dominance and political control. Macron has threatened reprisals if French interests are harmed in the country.
The partner is developer Mwenda Thuranira who popularized strip malls in Kenya. Safaricom is the largest telecom company in the country and an early innovator of mobile money and payments through its M-Pesa. The developer will soon deliver Mytown Mall Karen, a different project, in Nairobi (rendering below).
The 50 basis point SARB hike in May has damaged the property sector but student housing seems immune. A supply and demand imbalance persists keeping demand high for student-focused developments.
Lack of reliable data makes it nearly impossible to attract foreign investments into the real estate sector and the NMRC managing director urged increased collaboration on the issue.
The UN estimates 230 million Africans live in “slum households”. The problem receives little attention and most focus is on infrastructure. Worse is that Washington DC is mostly focused on pushing historically radical and unwelcome social policies, and unreliable “clean” energy programs, onto Africans. Americans have no idea how poorly they are being represented in Africa.
Reader’s Insights (Podcast)
This week we interviewed Adam Greenfader and Amanda Staerker, Latin America hospitality real estate developers and capital advisors. During these ~10-minute interviews, we always ask the same three questions:
What is one thing people don't understand correctly about your industry that they should? Why does it matter? [Industry question]
Describe a skill or trait that has aided you throughout your career. How did you discover and foster it, and how has it helped you? [Career question]
How do you stay consistently motivated and hungry to improve yourself and your business? [Philosophy question]
[Click Image to Listen]