3 Ways to Buy Brazil

19-Oct-2010

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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By Ronan McMahon, Real Estate Trend Alert

There are three real estate trends taking shape in Brazil that you can take advantage of right now. I’ll tell you more in a moment. First, some quick background on the country—and the region I’m most bullish on.

The economy in Brazil is strong. It’s on track this year to grow by close to 8%. Brazil’s energy, food and minerals are in hot demand particularly in the Asian powerhouses. The goods they manufacture are selling well abroad and at home.

Fortaleza in Brazil’s North-East is doing particularly well. In fact, it has outperformed the rest of the country for the past decade. Fortaleza is Brazil’s biggest tourism destination. And, at only a six-and-a-half-hour flight from Europe it is set to become a major export hub. Just west of Fortaleza a free trade zone has been established.

Airport traffic can be a useful indicator of economic activity. Passenger traffic at the Fortaleza airport increased 23% year-on-year to the end of August 2010, and cargo traffic rose by 40% in the same period. This increase is on top of a record-setting previous year. This tells us how quickly economic activity is increasing here.

This means lots of new jobs (2.5 million new jobs for Brazil this year) and new consumers (Brazil is now a middle class country).

The pace of this fast-growing market is why I’m bullish on Brazil and Fortaleza in particular.

There are three plays here that I’m playing close attention to for Real Estate Trend Alert members—ways we can profit from in the coming months:

– Rentals for the tourist and executive market

– Office space to house the new businesses the boom is creating

– Housing for Fortaleza’s new middle class

Two years ago I recommended pre-release condos along the boardwalk to Real Estate Trend Alert members. We could get in with only 1% down. Today prices have increased by 40% and the boardwalk is all but built out. It’s unlikely the opportunity in the coming months will be in this area.

The hot opportunities in the coming months will be created by a government plan to bring an underground rail link and a mega convention centre to a previously overlooked area of Fortaleza.

Fortaleza is getting a major infrastructure upgrade as part of the build-up to the 2014 Soccer World Cup. Fortaleza is a host city: $5.8 billion is being spent.

Last week the contract was awarded for the east line of Fortaleza’s new metro. This will be a fully underground line. It will run under leafy residential and commercial areas (like Aldeota) as far as the new convention center. The exterior of the convention center is practically complete. It will be the second biggest in Brazil. With 2 million square feet of space it will hold up to six events at the same time.

The convention center is just blocks away from the central park and is located on Ave Washington Soares. This is the axis of growth of the city toward the rich suburbs of Eusebio and Aquiraz. The University of Fortaleza (the largest private university in North-East Brazil—25,000 students) is located here. Nearby is Iguatemi, the largest mall in Fortaleza with over 300 stores. Hundreds of businesses are located in this area.

This is set to be a high growth pocket, in one of the fastest growing cities in one of the world’s fastest growing economies. This is the type of real estate market I want exposure to.

As I write, I’m finalizing a pre-release deal on a condo building right next to the convention center. Members of Real Estate Trend Alert will be able to buy here with a special and exclusive pre-release discount, when I release details of this in the next few weeks. The locals will pay more. Spacious two-bed condos will likely start at $140,000. Members of our group will get in with a $7,000 down payment and monthly payments of $1,330 (plus some adjustments).

The next deal in the pipeline for this area is an office building. The developer is finalizing the office sizes and configurations. Based on his current plans we’ll be able to buy small office units here for $115,000.

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