Latin CEO / April 2000
By Larry Luxner
Jacky Delmar doesn't want to be a slum lord. If anything, he wants to help change the face of affordable housing in Brazil. As he sees it, squalid, depressing buildings should be a thing of the past.
"Affordable housing in Brazil is no different that public housing was in North America in the 1950s. It was ugly," says Delmar, the CEO of Brascan Imobiliaria S.A., one of Brazil's largest developers. "Today, you have to have certain levels of quality and aesthetics."
As the 54-year-old Delmar sees the real estate market, it all comes down to housing. "Housing drives the entire economy, and for those like us that operate in the middle to upper class, we have in front of us an enormous challenge: to produce residential units of three to four bedrooms for $120,000 or less, without any detriment to quality and aesthetics."
A major stumbling block, however, is the lack of affordable financing in Brazil, which has long weighed in as one of the most expensive countries in Latin America in terms of interest rates on commercial loans.
This may change in the future, however, with reforms currently under consideration by the national legislature. Once reforms are in place, says the real estate executive, "an enormous underlying amount of assets in Brazil will be financed." The domino effect will, in Delmar's view, unleash a sustained real estate boom.
But Brascan is about more than housing, and its holdings include several of Brazil's largest shopping malls and a growing number of hotels. Delmar has overseen projects ranging from the 189-room Hotel Inter-Continental São Paulo, to the 400-store Riosul shopping mall, to the $80 million Waterways residential complex in Rio's glitzy Barra de Tijuca. Now the company is combining its expertise in different areas to produce more mixed-use projects, using hotels to anchor malls and residental complexes to bolster office towers.
Brascan Imobiliaria S.A., which is a unit of Toronto-based Brascan, now has fixed assets in Brazil worth $300 million. Sales last year came to $180 million, of which $20 million was profit. Half of Brascan's projected $200 million in revenues this year will come from residential condominium sales, the other half from luxury hotels and shopping malls. "We're also examining industrial real estate very seriously," Delmar says.
The company -- ranked as the best of 12 top Brazilian construction and real-estate firms by business magazine CartaCapital -- has been a joint-venture partner with Inter-Continental Hotels for over 25 years, and owns 60% of the chain's two five-star properties in Rio and São Paulo.
After British-based Bass Hotels bought out Inter-Continental in 1998, the chain's growth plans were put on the fast-track in Latin America. It was a difficult challenge for both Bass and Brascan.
"The Inter-Continental flag is a very delicate and important flag. You can't put it on just any hotel," he said. "There are perhaps four cities in Brazil where we could build Inter-Continental properties. Our first priority will be Brasília. After that, we'll look at Porto Alegre, Curitiba and Belo Horizonte."
The merger also opened opportunities for Brascan to develop Bass' other brands: Holiday Inn, Staybridge Suites and Crowne Plaza. In addition to the Inter-Continental in Brasília, for example, Brascan is building a 180-room Staybridge -- with a 25,000-square-meter shopping center and a 120-boat marina. "We're now raising around $65 million in financing," he says. "I hope to break ground on this project by early next year."
Brascan's other projects are also mixed-use. Its $100 million Brascan Century Plaza project is in the Itaím district of São Paulo. It is a three-acre complex that, when complete, will have two office-retail towers and a 350-room Staybridge -- embraced by a retail mall with five cinemas, 30 restaurants and stores, and 1,200 parking spaces.
Despite the company's overall success, Delmar had a difficult time last year following Brazil's "traumatic" currency devaluation, which nearly wrecked the country's real-estate market. But business started to pick up this January, and now Delmar says "Brazil's prognosis for growth is positive."