LATAM e-News – August 2018
Interview: Cristián Roberts Castro
Cristián Roberts Castro
1- Can you describe PRIME’s mission and operations in the region?
PRIME is a Private Equity Real Estate company with an active role in identifying and structuring real estate investment opportunities in Latin America. Through its data-driven processes and primarily following an opportunistic and value-added investment strategy, PRIME structures real estate projects and private investment vehicles and invests capital in consolidated and emerging markets with favorable structural trends.
2- Which are the main drivers of real estate investment opportunities in Latin America today?
At PRIME we have identified four drivers of structural or disruptive opportunity that are replicated in one form or another throughout Latin America:
1. The natural environment of a country or city is an important driver of tourist attraction and opportunities in that real estate sector (hospitality, related retail, etc.). Likewise, a robust and green ecosystem is aligned with the experience and quality of life that the market demands today for almost any type of asset, a sustainable and hopefully regenerative real estate experience of its environment.
2. The demographic distribution of cities has demonstrated the availability of opportunities, either to serve an ageing population lacking the infrastructure associated with life stage, or for example, a young population with a high capacity to generate commercial and residential consumption, etc., given the coming stages of its life.
3. We found the map of real estate investment opportunities in the general infrastructure of cities, since normally the impact of any investment in this sense is an immediate driver of a new market (airports, ports, roads, etc.). Investment in new infrastructure helps to improve connectivity between primary, secondary and tertiary cities and this has boosted their economies and strengthened the development of increasing domestic tourism – mainly business tourism – and new destinations for the international vacation market; excellent examples of this are Peru and Colombia.
4. Finally, technological disruption is changing the structural composition and behavior of our cities. In this sense, market is reacting faster than governments and developers and real estate investors themselves, which means that our strategies need to be adapted very quickly, especially as governments adapt legislation in this regard. The latter is the consolidator of change, but it is necessary to be ready before and know how to read the impact that will affect lifestyles and therefore consumption patterns of the different market players.
3- What forms of financing are currently being applied?
Compared to the existing supply in more developed global markets, the capital markets established in Latin America are relatively shallow and incomplete in their supply, so there are limited capital and debt options. With interest rates rising in some major markets and some recent geopolitical currents, the possibilities for funding projects with local resources are relatively limited. Notwithstanding the above, these are typical cycles of market players and will eventually be reopened.
On the other hand, these conditions in Latin America and the fall in real estate yields in markets such as the United States have redirected the focus of major institutional players towards the region, opening up equity and debt options for new external players, adding to the recent wave of Latin American pension funds seeking to expand their investment frontiers.
4- What are the factors that are driving real estate development in the region? In this context, what would be the most favored markets?
In addition to the factors mentioned above (natural environment, demographic distribution, investment in infrastructure and technological disruption), the organic growth of our secondary cities and the alignment of our tourism offer with global demand (“wellness”, “barefoot luxury”, “cultural immersion”, etc.) are two factors that boost our potential for real estate investment. That is to say, there are two driving forces, one local and one international, that effectively interconnect and interact. The consolidation of secondary cities generates a number of structural opportunities by evolving into a larger, more complete and interconnected ecosystem. On the other hand, the increase in global demand for Latin tourism supply has boosted the growth of the sector, and if it manages to overcome the lack of local funding capacity and align itself with the interest of foreign investors in the region, should sustain significant growth in the coming years.
5- Can one say that there has been an expansion of foreign investors in in the last years? in what markets and why?
Among others, due to the reasons mentioned above, Latin America is an interesting market for its population and structural growth. Markets have become more sophisticated and transparent, making foreign investors more comfortable with the region. To the above we add the fall in real estate yields in some of its base markets and the result is growth or new investment in our product.
6- In your opinion and considering your experience, what aspects do banks and investors consider when defining an investment or project in Latin America, and what challenges do they face?
The main aspects to be considered are typically structural; that the project or product has a financial, operational and corporate structure appropriate to its type of asset, market (city), risk, and environment (natural, cultural, etc.). If there is a well-structured development or investment, it will always be possible to obtain the capital and debt necessary for its execution or acquisition. One of the major challenges in Latin America is that there is a significant shortfall in well-structured product and of a certain base size (USD $100b +), which makes it difficult for some global players to come and participate and nurture the ecosystem.
7- What is your vision of hotel investments in the region and what growth can be projected?
Latin America is a popular tourist market. At the international level, as a region we are the “new horizon” of the global tourism market, and as we invest more in adequate infrastructure and basic elements such as personal safety, training of our people, etc., the consolidation of the industry and the destination will grow. This, together with the internal interconnection of cities, will boost the tourism-oriented economy and particularly the growth in the demand for hotel products. In addition, population growth in the region and the trend towards lower transportation costs will also create an organic growth driver.
8- How are projects involving sustainability evaluated and what would you advise investors?
As part of any development or investment analysis, it is essential to understand the impact it will have on your environment and its ability to successfully endure over time. This is essential because the end customers themselves place a very high value on these characteristics and the ability to do so or not directly affect the risk profile of any investment.
Notwithstanding the above, today there is a very strong push towards regeneration, which goes beyond sustainability. Real estate regeneration seeks that its projects strengthen its ecosystem and improve its behavior over time. It is a change of mentality from “no subtraction” to “long-term addition”.
Investors must take sustainability and/or regeneration into account in their projects or investments, as customers demand it and the system will increasingly incorporate it into its structural analysis; and it is also the right thing to do.
9- What are the opportunities in Colombia today?
Colombia is a country that has most of the favorable characteristics and opportunities set out in my previous responses. A significant resident population, strong investments in infrastructure (e.g. consolidation as a regional air hub), investment in strengthening personal security (peace process), trade openness, etc. and a country with recognized natural virtues and exquisite culture and people. Colombia is one of the countries with the greatest tourism potential in the region and with a growing global position. I see many possibilities for the country in its main cities and in the creation of specific clusters to maximize its experience and tourist product.
10- What do you expect from your participation in SAHIC South America 2018? In your opinion, how does this type of conference contribute to the hotel industry?
To be able to meet many friends of the industry and very important players in it. SAHIC is an event that always has a place on my annual agenda. It is a catalyst of opportunities and a space to support the consolidation of relationships in the hotel industry.
11- Which social network do you use most often and why?
LinkedIn. It’s the most relevant for what I’m looking for in social media.
12- When you travel for pleasure, where do you choose to stay: hotel or Airbnb?
Mr. Roberts is President of PRIME, a Private Equity Real Estate firm with an active role in identifying and structuring real estate investment opportunities in Latin America.
Through its data-driven processes, PRIME structures real estate projects and private investment vehicles and invests capital in consolidated and emerging markets with favourable structural trends, mainly following an opportunistic and value-added investment strategy. PRIME has participated in more than 120 real estate projects in 17 Latin American countries.
Prior to PRIME, Mr. Roberts worked at MESOAMERICA – a sister organization of BAIN & COMPANY and BAIN CAPITAL – at PACHECO COTO (now EY Law), where he accumulated additional experience in strategic financial and legal consulting, as well as in mergers and acquisitions, participating in multiple operations in Central America and the Caribbean.
Mr. Roberts is also an external member of the Board of Directors of several companies and over time has contributed time and resources to several family legacy institutions such as the HOSPITAL CLÍNICA BÍBLICA and ASOCIACION ROBLEALTO, among others, and to the PRIME FOUNDATION (PRIME’s vertical CSR foundation, whose focus is community intervention in villages surrounding the projects in which PRIME is involved).
Since 2013, Mr. Roberts has been an active member of the Business Council of Latin America (CEAL), now serving as President of the Costa Rican Chapter (2015 – present).
To contact Cristian Roberts: Srta. Ana María Carvajal email@example.com
To learn more about PRIME, visit: primelatam.com