Real Estate Firm GTIS Plans Infrastructure Expansion in Brazil

(Bloomberg) -- GTIS Partners LP, a real estate private equity firm with about $5 billion in assets under management, is diversifying into infrastructure -- with Brazil as its first stop.

The firm has hired Eduardo Klepacz from Cubico Sustainable Investments to spearhead the effort, said Joshua Pristaw, GTIS’s head of capital markets and co-head of Brazil. The country is in a “unique moment” in its economic recovery and at a point where infrastructure needs are growing due to increasing demand for power, data and other services, he said.

“We believe this will be the first dedicated Brazilian infrastructure investment management platform,” Pristaw said in an interview. The sector is attractive partly due to regulatory changes such as government-led incentives to encourage investment from private capital sources, he said.

Like its real estate business, GTIS’s infrastructure arm will oversee the entire spectrum of a deal from land acquisition and regulatory approvals to construction and commercialization. It’ll initially focus on energy generation and transmission, including wind, solar and small-scale hydroelectric power, as well as high-voltage lines and gas pipelines.

GTIS will also seek out opportunities in technology and telecommunications infrastructure, such as data centers, digital broadband networks and cell towers, and attempt to find ways to provide low-cost power to those properties.

Pristaw declined to comment on the infrastructure business’s capital-raising plans. Creating a fund or joint venture are among options being discussed, said a person briefed on the matter who asked not to be identified.

Residential, Commercial

Since 2005, GTIS has raised $2.7 billion to invest in real estate in Brazil, where it has developed about 15,000 residential units, 5.5 million square feet (511,000 square meters) of industrial, logistics and office properties, and 53 hotels. Its office tenants include Goldman Sachs Group Inc., Facebook Inc., Credit Suisse Group AG, Apple Inc. and Bloomberg LP, the parent company of Bloomberg News. GTIS’s Brazilian real estate funds have delivered returns of roughly 18 to 20 percent, with leverage of less than 10 percent, according to a person with knowledge of the firm. It is targeting returns closer to 15 percent after fees from its infrastructure effort, the person said.

Investors in GTIS’s Brazilian real estate funds include Dutch pensions PGGM and APG Asset Management, and the Illinois Municipal Retirement Fund.

Brazil’s gross domestic product is expected to increase 1.8 percent this year, according to the median estimate of economists in a Bloomberg survey. That would be the second consecutive annual gain after GDP fell 3.5 percent in both 2015 and 2016. Next year, growth is forecast at 2.5 percent.

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