Altre, a Sao Paolo-based investment management company, is seeking to expand its commercial real estate platform in the US via equity and debt investments in the industrial, multifamily and logistics sectors.
The firm, part of Sao Paolo-based investment holding company Votorantim, launched its real estate business last year and is now looking to scale the platform via joint ventures with best-in-class operators, said Haig Apovian, chief investment officer. To this end, the firm opened an office in New York this year.
Until now, the family-owned business has primarily been known for its platforms in the cement, aluminum and renewable energy sectors in South America. The firm’s partnerships include a venture with CPPIB on an energy trading platform which is the third-largest renewable platform in Brazil, Apovian noted.
“A couple of years ago, we started looking at diversifying the portfolio with the aim of allocating a significant amount of capital that had a more predictable stream of income,” Apovian said. “We are being selective in terms of the names and the types of partnerships.”
The firm would like to expand its exposure to real estate due to its positive characteristics as an asset class. “Real estate plays a significant role if you look at the largest institutional investors in the world. We were always real estate holders, but not investors, mostly as support for industrial operations,” he added.
Apovian, chief investment officer, joined the firm in 2019 as the firm began to start to create a real estate strategy.
“The original portfolio was assets we had inherited from the other companies that were related to our industrial businesses,” he said. “A couple of these properties were inside urban areas and we saw that some of them were fit for conversion and fit for creating value from a real estate investment prospective.”
The firm then began to work to create value and transform those buildings into income-producing real estate. About 15-20 percent of the firm’s real estate portfolio is in developed markets, with the remainder in emerging markets. “We have a long-term goal and desire to have a larger share of the portfolio in developed markets, which is why we opened our office in New York,” he added.
The firm is typically long-term, patient investor. “I think it is fortunate that we are arriving in the US after having followed the market for some years already,” he said. “But this not an opportunistic move due to current rates or lower liquidity in the market. This is a long-term commitment and the fact that we opened an office and are creating a team is to gain exposure and develop our own capabilities in the US market.”
Over the long-term, the firm hopes to have half of its portfolio in the US and other developed markets. Initially, the firm will look at office, industrial and for-rent residential.
“Quite honestly, I think we will start with the residential for rent because the market is in better shape and less challenged for office. We are not afraid of investing in office, but we are very selective on the location and the size and the asset,” he said.
As part of its strategy, the firm is also considering some exposure to the credit markets.
“We see that as an opportunity in terms of risk-return and we see in structured deals rather than holding only the equity, if we find the right opportunity,” he said.
The firm is investing its own balance sheet capital, with an emphasis on value creation.
“Think of us as private equity investor without a need to return the capital at a certain point to investors,” he said. “We can hold properties for the longer-term, especially for real estate with specific cycles that don’t always coincide with the life of funds. We can hold the properties for as long as it makes sense.”
Although the firm is based in New York, the plan is for Altre to have a portfolio of diversified assets across the US. “We will spend a lot of time in the sunbelt and looking at gateway cities on the East Coast and selectively on the West Coast.”
“In the US, the goal is to underwrite and originate business and we will be investing through best in class local partners who can help us to navigate the market and originate opportunities,” he said. “We are looking to invest a couple of hundred million of equity in the US markets, seeking deals of $40 million to $70 million in which we have co-investors along with us beside the GP capital.”
The firm works with brokers, investment bankers and developed and have many connections in the market. “We tend to be diligent and like to know and research our partners, markets and deals. That is something we like to spend a lot of time in terms of learning about the market and the partners,” he said. “The market is a bit less busy than is used to be. We are not looking to make one-off investments, we are looking to development long-term relationships.”
While debt is available, it is more limited and depends on the sponsor and the asset.
“I think lenders are much more selective in terms of choosing the right markets and sponsors and being more conservative in terms of the assumptions and LTVs. In the deals we are analyzing, we are able to secure financing for both multifamily, industrial and in some cases offices. We are seeing a lot of seller financing. We have been in touch with lenders and we notice that the market is not closed, it is more limited than what it used to be. That of course reflects the pricing of assets and is challenging those who have to raise third-party capital,” he said.