Goodman Group’s Brazilian ambitions are back on track, with the industrial property giant’s development pipelines in the country reaching almost $1 billion.
WTGoodman, the group’s joint venture with Brazil’s largest commercial property developer WTorre, has signed an agreement to build and lease a 62,000 square metre warehouse in Minas Gerais, the state with the third-largest economy behind Sao Paulo and Rio de Janeiro, to an undisclosed New York-listed company.
Greg Goodman, chief executive of Goodman, told The Australian the joint venture would focus on developing land bought to the partnership by WTorre and other built-to-suit-agreement opportunities ahead of any possible acquisitions.
“We are looking at acquisitions, but it’s difficult to get value at this point in time because vendor expectations are very high,” Mr Goodman said.
“We’re doing as we do globally, and that is building most of our investment-grade products and buying very little from the market.”
WTGoodman has about one million square metres in its development pipelines, valued at about $US800 million ($855m).
Its Minas Gerais facility will be leased on a 10-year term, and will add to the 480,000sq m of industrial space already on the company’s work book in Brazil. The announcement comes as the venture is beginning to lease its first development in the country, the 57,241sq m WTGoodman OIBP Logistics Park in Rio de Janeiro.
Last year Goodman announced it was conducting due diligence on 34 industrial properties in Brazil it hoped to buy from BR Properties for $1.5bn, but the company was outpaced by Singapore’s Global Logistics Properties, which bought the portfolio after Goodman’s exclusive due diligence period lapsed.
At the time, Goldman Sachs analysts said the failure of the deal could have meant there was a lack of investors for a fund in Brazil. But Mr Goodman said the deal had not proceeded because the portfolio was overvalued.
The investors Goodman had held talks with for a fund based on those assets were still looking to engage, he said.
Mr Goodman said a new fund would be announced once the group had “some more runs on the board with our developments” in the next few years, and any float was off the table because property companies were trading at a discount on Brazilian equity markets.
It is unclear which companies will end up as Goodman’s capital partners in Brazil.
Goodman’s key capital partners, including Canada Pension Plan Investment Board and Singapore’s GIC, already have investments in Brazil, as does China Investment Corporation, which owns more than 9 per cent of the group. This could leave other long-term Goodman investors, such as CBRE Investors and UBS Global Asset Management, as potential capital partners for any such fund.
Cesar Nasser, chief executive of WTGoodman, said he expected the company to be a major player in Brazil’s logistics property market in the next two years.
“Brazil’s logistics stock is going through a process of growth and modernisation and we aim to selectively build a portfolio of assets in Brazil’s key logistics markets,” Mr Goodman said.
WTGoodman is targeting total returns between 15 per cent and 18 per cent.
“Brazil is an emerging nation in regards to e-commerce and consumer spending, but the major concern is getting a site planned and ready to go, a process which sometimes takes six years,” Mr Goodman said.
“There are these land constraints, but the large local and international companies will be growing their businesses over the next decade, so it’s a long-term play.”
He said Goodman had purchased a land bank in Brazil some years ago on the basis that payment would be made once planning was in place.