GTIS Partners (Real Estate - Latin America)

Corporate Overview

GTIS Partners is a leading real estate investment firm in the Americas, headquartered in New York with offices in São Paulo, San Francisco, Los Angeles, Atlanta, Phoenix, Dallas, Charlotte, Paris and Munich. GTIS was founded in 2005 and is managed by President Tom Shapiro and Partners Tom Feldstein, Rob Vahradian, João Teixeira, Peter Ciganik, Maristella Diniz, Ed McDowell and Robert McCall.

The leadership team is comprised of seasoned real estate professionals with deep expertise in investment, development, asset management, legal and operations across multiple economic cycles. The collective experience of the leadership team allows GTIS to pursue and lead vertically integrated operating businesses in each of its chosen markets in the United States and Brazil. GTIS is active across a wide range of real estate sectors including build to rent, single-family, multifamily housing, office, industrial/logistics and hospitality as well as opportunity zones investments. The firm invests at various points in the capital structure, including credit, common equity and structured equity.

GTIS’ dedicated research professionals work hand-in-hand with its investment teams to identify macro trends early, including investing in Brazil in 2005, US residential in 2009 and single-family rental as an emerging asset class in 2010. In Brazil, GTIS is among the largest real assets private equity firms with holdings including office, residential, logistics, and hospitality investments. Marquee assets developed by GTIS Partners in São Paulo include the Infinity office building and Palácio Tangará, a five-star resort style hotel.

GTIS takes a local approach to real estate investing with on-the- ground teams in 10 key markets with 98 employees and $4.3bn of gross real estate assets under management. With broad expertise in structuring, design, development and asset management, GTIS professionals oversee projects in residential, office, industrial/logistics and hospitality from concept to completion.

Sector forecasts

Brazil Macro Outlook

The ongoing fight against inflation combined with political uncertainty around the ambitious agenda of President Luiz Inácio Lula da Silva (“Lula”) has put economic growth in Brazil on a slower path, though the latest indicators suggest a visible path to recovery. Inflation has certainly come down significantly (it is currently lower than in the U.S.), the commodity market has held up well, and China’s reopening figures to help the growth picture.

Such a recovery, however, will almost certainly be a drawn-out one, with the timing hard to predict. The GDP, after falling 0.2% in Q4, is projected for positive but slow growth in 2023. By the end of April, the BCB, Brazil’s central bank, was forecasting 1.0% expansion for the entire year. Unemployment, after reaching a seven-year low at the end of the last year, rose to 8.8% in Q1, while the total number of employed workers ended March about 1.5 million below Q4. Even as much of the developing world is poised to see slower growth this year, Brazil’s forecast would lag that of its peers; Latin America as a region should grow 1.4% this year, according to the World Bank.

The chief driver is higher interest rates. The Selic, Brazil’s benchmark rate, has remained steady at a six-year high of 13.75% since last September, a level that Lula called “irresponsible” for obstructing the economic recovery he made a centerpiece of last year’s electoral campaign. Certain major events—the bankruptcy of retailer Americanas being the most high-profile— were almost certainly exacerbated by dramatic tightening, increasing nervousness in markets and further undermining financing opportunities for other firms. Compounding investor anxieties is the high level of government debt, especially relative to other emerging economies; a flood of government stimulus lifted Brazil’s budget deficit to about 4.5% of GDP for 2022, with outstanding debt reaching about 70% of GDP.

Areas of strength in Brazil’s economy presently include both trade and commodity production, with trade hitting a record high in March and an increase in demand for Brazilian commodity production as production has been declining in other parts of the world (result of war, labor shortages and other factors bringing more capital to the country for future consumption and investment). Additionally projected to remain strong is Foreign direct investment (FDI). At the end of April, the BCB projected total FDI of $80 billion, down from last year ($90.6 billion, the highest in a decade) but still quite high. The rise in interest rates has also been highly beneficial for Brazil’s currency; through April, the real is up almost 12% since the start of 2022, even as a number of global currencies have fallen over that same period.

Brazil Real Estate Market Outlook

Through the first quarter of the year, the overall real estate outlook was stronger than many might have expected. Home prices are more or less keeping pace with inflation, the industrial sector has stayed strong after a record-breaking 2022, and the major hospitality markets saw healthy increases in occupancy. Office market saw an influx of transactions that far surpassed last year’s total. In Rio and São Paulo, activity has generally stayed strong, reinforcing the narrative that Brazil’s office culture has largely recovered from the pandemic.

Though inflation continues to impact gains in Brazil residential home prices, the effect has mitigated as inflation has come down. Though real home prices rose just 1% year-over-year through March (nominal growth was 5.7%), they were falling over 5% YoY as recently as last June. In the industrial sector, the class A logistics market ended Q1 2023 with strong results, with a net absorption of 498,054 sq.m and showing growth compared to the end of 2022. Additionally, Rio/São Paulo hospitality markets experienced 5-6% occupancy increases in Q1 compared to the same quarter in 2022. Rio average occupancy rose from 67.6% to 74.1%, while São Paulo’s rose from 50.4% to 55.8%. Lastly of note is the surge of activity seen by Brazil’s office market in in Q1, with 90 transactions totaling over 82m sq.m in area; by comparison, Q4 saw only 15m sq.m of activity across 5 deals.

Investment principles & strategy

Sustainability: A Core GTIS Investment Principle

GTIS understands its role in social and environmental stewardship, and the impact of its real estate investments on the environment and surrounding communities. ESG considerations, including renewable energy and decarbonization, are an important component of our investment approach, as sustainability has a vital role in minimizing risk and protecting asset value.

Since the initial publication of our ESG Policy in 2012, we have demonstrated an ongoing commitment to responsible environmental practices, with several of the firm’s funds placing in the top 3 of the Global Real Estate Sustainability Benchmark (GRESB) among their peers. In 2022, GTIS received the 10-year Founding member award from GRESB, and launched an initiative to deploy renewable energy generation across its industrial and select residential asset portfolios.

STRATEGY OVERVIEW

Industrial/Logistics

• Focus on urban logistics opportunities

Residential

• Affordable housing development in São Paulo Hospitality
• High-yield, low-leverage debt/deep value acquisition

Renewable Energy

• Onshore wind/solar development
• Operational wind/solar projects

GTIS BRAZIL OPERATING MODEL

• Integrated real estate platform: In-house design, construction and development and asset management expertise, supported by in-house legal, operation, compliance, finance and reporting
• Flexible capital allocation: Hybrid allocator/operator model designed to focus on the best risk-adjusted opportunities as market conditions change. Diversified strategy seeks to unlock value the ‘pure play’ competitors cannot easily capture
• Research and creative origination: Proprietary research at the macro, sector and local market levels
• São Paulo/NY joint execution: Local expertise and sourcing capabilities, combined with US Institutional best practices