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CBL LATEST FOREIGN DEVELOPER TO ENTER BRAZIL

By Kerri Linden

CBL & Associates has taken a major step into the foreign arena. The retail developer has announced a venture with Brazil’s Tenco Realty to develop, acquire and redevelop shopping centers across Brazil.

This is the latest of a series of deals between North American and Brazilian companies eager to tap Brazil’s massive potential for retail development. It also marks Chattanooga, Tenn.-based CBL’s second international venture. In February the firm purchased a 6 percent stake in subsidiaries of Jinsheng Group, a Nanjing, China-based mall operator and real estate development firm. CBL will initially invest $15.3 million in Tenco to acquire a 60 percent stake in a new development in Macaé, a coastal city two hours north of Rio de Janeiro. The 220,000-square-foot project, called Plaza Macaé, is scheduled to open in the summer of 2008.

Brazil has the world’s 10th-largest economy, accounting for half of South America’s gross domestic product, and its population of 188 million is projected to reach 260 million by 2050. Housing construction is booming, in turn boosting demand for retail space. Last year about 135,000 homes were built, twice the previous year’s number, according to Prudential Real Estate Investors Latin America. Yet the country has only slightly more than 300 malls. That relatively low number is blamed on a lack of capital, and this vacuum has helped spark the recent string of ventures with North American firms.

Following the partnership of Rio de Janeiro-based Nacional Iguatemi and Chicago-based General Growth Properties three years ago, three other North American retail real estate names invested in Brazil last year: Cadillac Fairview, Developers Diversified Realty Corp. and Ivanhoe Cambridge. Moreover, Canada’s Brookfield Asset Management, with assets in Brazil’s real estate, financial services and energy industries, last year created a $700 million-plus specialty real estate fund focused on the acquisition of shopping centers in Brazil.

“Brazil certainly provides one of the best risk-reward scenarios out there today in underdeveloped countries,” said Katie Reinsmidt, director of investor relations. CBL has had a long-standing relationship with Eduardo Gribel, founder of Tenco, based in Belo Horizonte, and spent the past year forming the agreement, she says. Tenco owns and manages six retail centers in Belo Horizonte and Brasilia and has eight projects under development throughout the country. “With a lot of capital constrained in Brazil and a lot of the ownership of shopping centers fragmented, we thought this would be a great way to get into the country with a proven developer,” Reinsmidt said. “Tenco has a solid pipeline that will provide the kind of returns we’re looking for.”