The Northwest Healthcare Properties Real Estate Investment Trust (REIT) stands as the number one health care REIT in Canada with international investments. Importantly, the venerable company recently announced its Q1 2018 results. These showcased movement into the German real estate market, rebranding within Australia and Asia and new investments in health care.
However, the most interesting – and perhaps shocking – finding from the company was the general improvement in its portfolio and how those gains were created. While Australiasia was a big part of the success, so was Brazil. As a result, the total investment portfolio gained US $8 million in fair value.
Canada’s Love Affair with Brazilian Real Estate
The Northwest Healthcare Properties REIT is indicative of many Canadian companies who are moving into Brazilian real estate. The South American country is an emerging market that continues to create a great deal of interest from international investors around the world. Notably, he entrance of Canadian companies into the market happened in a big way in 2014. It is starting to pay off in 2018.
The Canada Pension Plan Investment Board fund gained 11.6% in fiscal year 2018, with a total value of approximately US $356 billion. Additionally, it gained 8% 10 year annualized rate net nominal rate of return. This highly successful fund has been focusing billions of dollars in three emerging markets – China, India and Brazil.
Its real assets now include Votorantim Energia, which is a subsidiary of the Votorantim Group from Brazil. The main focus of the joint venture is the acquisition of two wind parks that are currently in northeastern Brazil with a huge capacity for energy generation – 565 megawatts.
Comparing Brazil to Other Growing Markets
A survey from CBRE Group Inc. found that investors placed Sao Paolo on par with Nashville, Austin, Denver and Vancouver as one of the top up and coming cities for international investment.
Average cost of an apartment in:
- Sao Paolo city center – US $256.83 per square foot
- Nashville city center – US $256.88 per square foot
- Austin city center – US $357.75 per square foot
- Denver city center – US $345.28 per square foot
- Vancouver city center – US $1,161.38 per square foot
- North American Interest in Brazil
Part of the renewed interest in Brazil comes from the fact that North America cannot seem to get itself together. Notably, in two separate real estate conferences, former NAFTA member countries stated that they were nowhere near to an agreement.
The United States spoke on the matter through trade czar Robert Lighthizer. The continent is having a huge issue working around the nationalism of Pres. Donald Trump. Hence, no one can agree on issues of energy, labor, intellectual property, rules of origin and online purchases.
Canada claims that the United States may be trying to reopen negotiations for selfish reasons. This could be to bolster its trade deficit in the region. Mexico has also challenged the prime minister of Canada for clarification in certain measures that threaten to worsen the conditions of Mexican workers and cause a net loss in jobs for the country.
A New Investment Destination
Because there is confusion and grandstanding on the continent, investors could look past the U.S. Therefore, Canada is simply the first country with sense enough to get off the reservation. As a result, Brazil seems to be most attractive economy in reach after the North American continent.
Many of the products that Canada gets from its number one trading partner, the U.S., can also come from Brazil. It seems that real estate is one of those products. Because the prices in Brazil are quite comparable to those in the United States, Canada really has nothing to lose by moving into Brazil over the next few years.
Also, with traditional trading partners looking to stagnate old agreements, Canada may be forced into this tightening market out of necessity. Whether you look at it from a political or an economic standpoint, the result between Canada and Brazil seems to be working out quite well. Perhaps other economies will follow, but for now, the good money is on the Canadian dollar.
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