Real Estate Investing in Latin America
- Feb 8, 2024
In this episode of Engaging Alternatives Spotlight, Elana Margulies-Snyderman, Director, Publications, EisnerAmper, speaks with Gregorio Schneider, Founder & Managing Partner, TC Latin America Partners, a Latin American alternative asset management firm focused on the development of real estate projects in the region. Gregorio shares the outlook for real estate investing in Latin America including the greatest opportunities and challenges, how the firm integrates ESG, DEI and more.
Hello, and welcome to the EisnerAmper podcast series. I'm your host, Elana Margulies-Snyderman. And with me today is Gregorio Schneider, founder and managing partner of TC Latin America Partners, a Latin American alternative asset management firm, focused on the development of real estate projects in the region. Today, Gregorio will share with us his outlook for real estate investing in Latin America, including the greatest opportunities and challenges, how the firm integrates E-S-G-D-E-I and more. Hi Gregorio. Thank you so much for being with me today.
Thank you. How are you, Elana?
Good. So Gregorio, to kick off the conversation, tell us a little about the firm and how you got to where you are today.
Sure. So I started my career 25 years ago. I've been investing in emerging markets for a very long time. I started my career doing certain strategies that were more linked to restructurings, that was what's going on in the cycle in emerging markets. Then over the time we started investing in growth. So I worked for very large firms. The large firm I worked for was Och-Ziff, now Sculpture, running the Latin American, Eastern European business. And then in 2012, we decided to start our business together with one of the persons that I have worked with for the last 10 years. And his name is Daniel Grunberg, and we founded TC, and TC was the first Latin American real estate platform, registered with the SEC to invest in development and acquisition of real estate projects in Colombia, Peru, Mexico, and Chi. So today we manage close to a billion dollars. We have managed to invest in many asset classes, including residential, commercial, very little, a lot of digital infrastructure, healthcare, industrial, and we have raised money from around the world, including sovereign wealth funds, pension funds.
Very interesting journey. Gregorio, given your focus on real estate investing in Latin America, love to hear your overall macro outlook for this space.
Sure. Look, it's like everyone in real estate today. They're having a very challenging time. We're at the highest interest rates that we've seen in many, many years, and high interest rates affect real estate. So we're seeing a very challenging environment in the US, in Europe, and Latin America. It's also suffering from that even though Latin America has this deficit of many asset classes because it's a very young population that has been growing and there's a deficit of residential, there's a deficit of commercial. There's more office build out that happened over the last 10 years. But digital infrastructure, there's not enough cellular towers for the cell phones that are among the population. So I think the outlook right now, it's interesting. There's certain sectors that are performing very, very well, and I'll talk about some of the ones that we're focused on. One is industrial real estate, so all the nearshoring play that everyone's talking about it in the papers and you see it in many publications.
That is all the manufacturing and logistics moving away from China and Asia into Mexico because Mexico is becoming a secure provider and partner for the US market and Canada too. So we've been very focused on developing industrial properties in the border between Mexico and the US for very, very important companies, multinational, including Foxconn, including DHL. Then the second strategy is digital infrastructure, so that's data centers and cellular towers. So the reason that's important is that the growth in cellular and mobile acquisition that people owning a mobile has grown exponentially over the last few years. And every time you add a G, we are going from 2G, 3G, 4G, 5G. Every time you add a G, you need more cellular towers and the more towers you have, the more data that is produced. So you need more data centers. So we've been investing in this sector that I believe is also non-correlated to the current and economic environment and the third is healthcare, there's a deficit of beds in Latin America.
There's not enough beds for the size of the population. So we've been seeing a lot of demand for operators to not to own the real estate because they want to grow their business. So they're asking partners like us to develop the real estate and lease it to them instead of selling it to them or instead of them owning it. So those are three segments that I find very, very interesting in this environment. But on the other hand, you have the residential market suffering. High interest rates affect mortgages, so very difficult for people to get a mortgage or the projects are financed, and is also very challenging to have financing with so high rates, Office, there was a massive build out and working from home is also affecting in Latin America and the commercial market shopping mall is coming back, but it's coming back at a slower pace.
Great. You've definitely given us a good overview on real estate investing in Latin America, touching on the different opportunities you've see in the sector and challenges. So I wanted to shift gears a little bit to touch upon ESG and DEI and see how your firm integrates those timely topics.
Yeah, look, I think you know some of our investors are European. We have some German pension funds as investors in Germany. It's priority to be compliant with ESG right now. And we started seeing that in 2019, 2020. We're signatories of PRI and we expect in the case of Mexico, that we own a very large industrial portfolio. We expect it to be one of the first green portfolios. So all the properties will be LEED certified and we expect that to be one of the first green portfolios that exist in the market. So that's something that we're very excited. We're incorporating sustainability criteria into everything we do. We are adopting renewable and green energy, but it's taking longer. In Latin America, sometimes certain things are not as advanced as in the developed world, we are creating a healthy work environment. And of course everything we do, we need to engage the local communities. We cannot come and just buy land and build whatever we want to build because if not, it backfires. So we're definitely trying to engage the local communities to buy into the projects we're doing, and I think it's the future. So we think we cannot ignore it, and it's going to be part of everything we do right now.
Gregorio, we've covered a lot of ground and wanted to see if you have any final thoughts or future plans that you'd like to share with us.
Sure. I think what's going on right now in the environment that you were asking about it, where do we see it? We see a very challenging environment on the fundraising. Never seen that before, and it's mainly because of real estate portfolios are suffering, investors are having a hard time allocating to new opportunities in Latin America is not core to many portfolios. People usually have US, Europe, Asia, and then Latin America. So Latin America is not a priority for them. So we're seeing a very challenging environment in the fundraising side. We're being successful, but it's hard. It's harder than I've ever seen to fundraise right now. But the plan continues to be to grow the industrial presence we have in the region. So one, we're present in the industrial market in the us so we have brought money from Latin America to invest in the US industrial market.
The second thing that we're going to continue doing is developing the industrial portfolio we have in Mexico. I believe that's once in a lifetime. They call it the Mexico moment, I believe in the Mexico moment. I believe this is the time that Mexico will have the ability to take away a lot of the manufacturing and logistics out of Asia into Mexico to serve the most important market that is the US market. So we are betting a lot on that. We're betting on the digital infrastructure. We are partners in a company called ATP Andrean Tower Partners, and we believe that that's going to continue to grow. And finally, we're seeing industrial opportunities in other countries. So we have an office in Dominican Republic. We have been authorized as a manager there, and we're in the process of pitching for the first industrial Built-to-Suit property in Dominican Republic. That will be funded by the local institutions. So we'll have industrial in the US, industrial in Mexico, industrial in Dominican Republic. So the industrial team is very important in our firm right now.
Gregorio, I wanted to thank you so much for sharing your perspective with our listeners today.
Thank you. Thank you, Elana.
And thank you for listening to the EisnerAmper podcast series. Visit eiseramper.com for more information on this in a host of other topics. And join us for our next podcast when we get down to business.
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