Brazil’s Largest Real Estate Brokerage Plans Major Acquisitions

on Aug 24, 2012
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Brasil Brokers Participacoes SA, (BBRK3:SAO), the country’s biggest real estate company by sales, plans to expand in the secondary housing market. The Rio de Janeiro-based broker’s growth strategy involves two main acquisition targets and plans to purchase three more real estate companies this year. Brasil Brokers also intends to increase its revenue derived from the sales of existing homes from the current 15 per cent to 35 per cent within five years, Sergio Newlands Freire, the company’s Chief Executive Officer said in an interview on Wednesday (August 22).

“The secondary real estate brokerage market in Brazil is made up of small companies, so acquisitions to consolidate this market are part of our growth strategy,” Mr Freire remarked. According to him, housing demand in Brazil will rise as near full employment and growing credit allow an increasing number of consumers to make home purchases. Sales in the broker’s largest markets of Rio de Janeiro and Sao Paulo will also continue to be boosted by improvements in the infrastructure and security in the cities.

!m[](/uploads/story/292/thumbs/pic1_inline.png)The only clarity that Mr Freire provided around the planned acquisitions was that the two companies that are about to be purchased are based in Sao Paulo, the main focus of Brasil Brokers’ growth strategy. Refusing to announce the exact amount of the planned purchases, the broker’s CEO said that the company, which manages about 250 million Brazilian reals (£78 million), will not need to borrow money to finance the deals.

According to a survey conducted by economists from the central bank and published earlier this week, Brazil’s gross domestic product (GDP) will expand at an annual rate of 1.75 per cent this year, its second-weakest performance in nine years. Brasil Brokers’ earnings during the first half of the year reflected this weakening economic growth. The real estate company posted a 34 per cent profit drop in the second quarter. The broker’s net income was 21 million reals (£6.5 million) compared to 31.7 million reals (£9.8 million) posted a year earlier. Contracted sales fell eight per cent to 4.6 billion reals (£1.4 billion). Despite the figures, Mr Freire remains optimistic about the South American country’s real estate market. The Brasil Brokers’ CEO said that after a first half with slowing housing credit amid weakening economic growth, new projects and sales of existing units will increase in the second half of the year.

Brasil Brokers’ expansion started earlier this year when the company made two major acquisitions. In March the company agreed to a 6.6 million reals (£2 million) deal for the purchase of 65 per cent of broker Miranda Imobiliaria. A month earlier, the company bought 55 per cent of real estate broker Bamberg Planejamento & Empreendimento Imobiliarios. The estimated price of the deal was 25.5 million reals (£7.9 million). Brasil Brokers has also committed to purchase the remaining 45 per cent of Bamberg over a period of four years from the initial acquisition.

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