Weekly Roundup | 12.19.2023
Top headlines and news impacting Latin America, Africa and Southeast Asia commercial real estate.
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In March of this year, Tesla announced it would build a $5 billion factory in Mexico without giving a timeline. A condition for that investment was that the Nuevo Leon government deliver electricity, water, and transport infrastructure. Musk was perhaps being polite in October when he blamed his delay on economic slowdowns and not on slow-moving rollouts of promised infrastructure. AMLO has abandoned Nuevo Leon so they are unfortunately on their own to deliver.
Brazil has one of the most complex and onerous tax systems in the world. The World Bank calls it the worst and estimates that companies spend more than 1,500 per year complying with Brazil’s myriad of taxes. The tax overhaul delivered was three decades in the making and won’t be operational until 2033. The delay is due to an amendment to Brazil’s Constitution being required.
The announced local partner is AMBO and the first of the new stores opened on December 14 in Merida (photo of opening below). America’s second-largest burger chain (third worldwide) has been in Mexico for over 30 years but only has 28 locations in Mexico City, Chihuahua, and Nuevo Leon. It sees opportunities to build hundreds more restaurants.
Marco Peschiera runs the investment office and is a former Carlyle Group executive. The deal involves migrating Peru’s Carlyle team to work with him on opportunities in America targeting hispanic-owned businesses. The mandate is to invest 50% in Latin America and 50% in America. Fundraising will begin in 2024 and be anchored by the Romero family.
The invitation was extended to a group of US Army’s 7th Special Forces Group for two months from January 22. Mexico and America are at a standstill over fentanyl (110,000+ overdoes in 2022), human trafficking, and border security. Observers note that AMLO must have allowed this under duress as a concession to slow talks of military incursions into Mexico.
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Since Shoprite, Choppies, and Massmart (i.e., Walmart) have departed Kenya, the large retailers battling it out are Naivas and Quickmart. The retailers are both backed by private equity capital meaning it’s all gas and no brakes for these big spenders. Naivas has doubled its stores in five years, and Quickmart has quickly grown to more than 50 stores.
Shoprite was early to invest heavily in Nigeria, beginning in 2005, but took a beating. It sold its business in Nigeria in 2021 to a local investor. The sale converted the Nigerian business to a franchise model. Shoprite now has 23 stores in Nigeria, only one is in Kano. The stated causes of the closure were poor foot traffic in the mall and a very expensive dollar-denominated lease. Insiders say the Naira-converted rentals in Kano of N27k PSQM were 10x higher than what the most recently opened Shoprite in Kaduna pays, which is N3k PSQM. The Palms Shoprite in Lagos pays N8k PSQM.
Lango was formed as a result of combining the African real estate holdings of Investec and Growthpoint Properties in 2018. It hopes to soon acquire a property (or two) in Kenya growing its Africa footprint from Ghana, Nigeria, and Zambia. Lango owns prime office and retail properties.
Centrum Real Estate is the developer and the proceeds will assist in developing 1,940 “affordable housing” units in Nairobi with a project cost of $91 million. Locals complain there is little affordable about the housing units being delivered. The “affordable” label is required for the IFC to get internal funding approvals.
Currency issues reign, but the country has been a mess for too long with no relief in sight. P&G announced last week it would stop producing its care and hygiene products in Nigeria. GSK and Unilever of the UK have scaled down operations in Nigeria this year. Another UK firm, PZ Cussons, has delisted from Nigeria’s stock exchange. MTN, Dangote, and Jumia are all suffering.
President Marcos has ordered a study on whether changing the country’s 1987 constitution would help draw more foreign investment. The Constitution bans foreigners from operating in certain segments of the economy. Further, foreigners are limited to minority ownership in broadcasting, advertising, public utilities, and deep-sea fishing businesses, among others. Even with these changes foreign investors face red tape, high energy costs, and other barriers to profitability. Skeptics say Marcos’ true motives are to insert clauses permitting him to have more than one term as President.
Hyosung Group is a major Korean conglomerate and it plans to invest to build a biotech fiber manufacturing plant in Vietnam. Hyosung already has a significant presence in Vietnam previously investing $3.5 billion and creating 9,000 jobs.
Chatchaval Jiaravanon, a member of Thailand’s richest family that owns the Charoen Pokphand Group, is seeding a $100 million real estate fund to invest in “luxury” real estate in Southeast Asia. The fund will be based in Kong Kong and its first investment will be Cambodia’s tallest building, Mesong, standing 71 stories. Chatcaval Jiraavanon purchased Fortune Magazine for $150 million in 2018 as a personal investment.
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