Ritz Property is an international Real Estate development and investment company that currently specialises in Brazil.
Here we talk with Andrew Thompson, a partner and the Group Sales Director at Ritz Property about why and how you should invest in Brazil.
- Can you give us an introduction to Ritz Property, how it came to be, your role within it and how you got to that position?
Ritz Property was set up in 2008 in the UK (HQ) and Brazil, and opened its Singapore office in 2012. I joined the Company two-and-a-half years ago as the Group Sales Director. In the UK we have our global marketing team, in Brazil we are building residential and commercial developments, and in Asia we have our core investor market.
- Tell us about Palm Springs your flagship beachfront land development in Natal.
Palm Springs is a stunning 100-acre beachfront condominium development located on Muriu Beach in Natal, the capital city of Rio Grande do Norte. This is one of the few luxury beachfront condominiums in the area and Muriu is one of the most visited beaches in the region.
The genius behind Palm Spring’s masterplan is that it uses a build density of only 40%, which ensures that much of the beautiful natural surroundings are retained, including a natural spring running through the project. Over 60% of the villas and apartments will enjoy stunning direct beach and sea views, as well as views towards the surrounding sweeping sand dunes and the protected Mata Atlantica natural flora. Palm Springs offers a range of facilities including a private pool in each of the two clubhouses, a tennis court, basketball court, five-a-side football pitch and a gym.
The development was completed early this year (31 January 2014) and Brazilian purchasers can now apply for a mortgage to build their luxury home on their plot(s). Following the success of Palm Springs, an exclusive new extension to this development has been created called Dunas de Muriu, which will bring a further 250-luxury apartments to the market and feed the demand for high-end beachfront living.
- Why Brazil and Natal in particular? As an investor, what does it offer, how has the area changed and what impact has the World Cup and the Olympics had?
Brazil, like Natal, is on an exceptional growth curve. The Brazilian Government has specifically highlighted Natal for a multi-billion pound investment plan in infrastructure, and it seems all the figures are stacking up in Brazil’s favour. Over the last two years Brazil has witnessed record tourism, and according to the Knight Frank Global House Price Index, house prices have risen by over 30%.
Natal offers an interesting proposition, it’s relatively underdeveloped and the demand from a new and emerging middle class is significant. It also has something for everyone; amazing lifestyles, beachside living and a relaxed and safe location – Natal is considered one of the safest cities in Brazil.
What our experience has shown is that with a little investment, there are many opportunities to build and re-shape this part of Brazil. This year alone, the new Greater Natal International Airport was completed in April and when it opens on 22 May it will become a new international hub being the closest Brazilian airport to Europe, Africa and North America. The figures are quite breathtaking – the current capacity of 2.6million passengers a year will soar to 6.2million.
Natal is a host city for the 2014 World Cup and the new football stadium Arena das Dunas opened earlier this year and will create new jobs and attract substantial revenue and continued investment.
With the World Cup in 2014 and the Olympic Games in 2016 – the first time a country will host both events consecutively – Brazil will benefit from the multi-billion pound revenue streams that such events typically create.
- Brazil largely hit the mainstream investment headlines after the release of the BRICs report in 2003 following the initial coining of the term by Jim O’Neill. To what extent do you think the boom and interest in Brazil in general has to thank for that? Could/would Brazil still have been as viable without such exposure?
Being a ‘BRIC’ has certainly accelerated Brazil’s growth and exposure to world markets. As an emerging country, Brazil was always going to ‘get there’ due largely to their wealth in natural resources and manpower – exactly the same dynamics as in China and India – but their progress would have been slower. This greater visibility (by being labelled one of the BRIC economies by Jim O’Neill in 2001) gave Brazil the confidence to grow, expand and attract foreign direct investment, which propelled the economy faster and further.
Greater levels of FDI (Brazil averaged USD2.6 billion worth of FDI from 1995 to 2014, according to Banco Central do Brasil) brought greater exposure to western brands, which aptly fed into a new and increasingly aspirational middle class. The desire for self-betterment amongst Brazilians was always there but as a BRIC nation, Brazil saw banking reforms improve credit availability, which has unlocked spending, encouraged the flow of money and opened up the market to a new middle class.
- What are the challenges you face as a property developer in Brazil and trying to get things done?
Like any emerging Real Estate Market, you will always suffer growing pains. Land registry for instance is a good example – in the UK the details are recorded on paper and online, but in Brazil the details are only documented on paper, not online, so you have to go through the local town hall with local officials to find details of the land ownership. As an emerging market, buying procedures can be slow and the red tape sometimes tricky to navigate but this is precisely why it is essential to use regulated legal professionals, a local Notory and a Brazilian Lawyer to carry out these land and title deed searches for you.
As a developing market, the North East is not as commercially advanced as the business sector in the South (Sao Paolo and/or Rio de Janeiro). Undertaking thorough due diligence and finding credible partners is absolutely essential in Natal and Ritz Property has been very fortune to partner with some of the leading companies in the region. Generally, making sure Ritz has done everything we can to ensure the investment process is legitimate and clean is essential to getting through this process safely. Having operated in Brazil for 6 years, Ritz utilises its first-hand experience to offer this 360-degree approach to investors.
- Can the North East become a serious economic powerhouse like Rio or Sao Paolo?
The North East is expanding rapidly but so is the whole of Brazil. This corner of Brazil has many natural resources and the oil and gas sector in particular is developing quickly. This is where Ritz is one step ahead of the game. Recognising the need for both commercial and residential developments we have actively pushed the commercial side of our business over the past six months with the development of two hotels in Natal. The first is the construction of a 252-room hotel for the Accor Group called Mercure Natal, and the second is the refurbishment of a 315-room hotel called The Piramide. Natal is enjoying unprecedented growth and Ritz is offering investors the opportunity to dilute their risks by having a balanced property portfolio of residential and commercial developments. As more investment comes to this region, one day it may well compete with the economic powerhouses of Rio and Sao Paulo.
- Brazil’s financial markets and cross jurisdiction monetary movement regulations are still somewhat in their infancy, despite significant foreign investment over the last decade or so. Is it getting any easier as time goes by?
Yes. The movement of money in and out of Brazil has been a very hot topic. Whilst there were some controls put in place by the Brazilian government after the 2008 financial crisis, which experts believe were beneficial in the short term, restrictions have been discouraged in the long term and things are changing as levels of FDI are increasing. UK Chancellor George Osborne’s recent visit to Brazil was very poignant as the focus was on increasing levels of trade between the UK and Brazil with a £2 million budget allocated to the UKTI (United Kingdom Trade and Industry) in order to improve Latin-American ties. Part of this will be spent on educating a new work force in ‘doing’ business with the West.
- How has the overall infrastructure changed over the past 10 years, is it getting better and working or is it getting tied by outdated legislation?
Overall, from my first-hand experience, Brazilian infrastructure has definitely developed and improved but there is still a way to go. Brazil is the largest country in South and Latin America covering some 8.5million km2 and the sheer size of the country makes the development of infrastructure a somewhat slow process despite the best of intentions. President Dilma Rousseff has been vocal in her intentions to upgrade roads, airports and other infrastructure, and actively seeks foreign investment to help with this.
In general, in many cities including Natal, the roads are much improved and so is public transport. In Rio the expansion of the Metro makes getting around a city of 6 million cariocas much easier as well as the new Teleferico do Alemao cable car running to Complexo do Alemao. What has accelerated growth in infrastructure recently has been the awarding of the FIFA 2014 World Cup and the 2016 Summer Olympics Games. The Brazilian government pledged to invest some USD1.2 billion in preparation for the World Cup, which kicks off in a matter of weeks. The regeneration of the semi-derelict port area in Rio in time for the 2016 Games is also testament to the commitment to improved standards nationally.
The new Greater Natal International Airport is another example of building for the future. The current airport in Natal can accommodate 2.6m passengers, and when the new international airport opens on 22 May 2014 it will have a capacity for 6.2m domestic and international passengers, as well as cargo, further enhancing Natal’s position as an economic hub in the North East.
- Can you tell us about your new residential project, Costa Azul Residences?
Costa Azul (meaning ‘Blue Coast’) is inspired by the surrounding Atlantic Ocean and is a 168-luxury apartment development on a prime hill top in Petropolis, one of the most elite and exclusive districts in Natal.
Residents can enjoy first class amenities – swimming pool, gym, private bar and spa – and captivating views towards the Atlantic Ocean, River Potengi and the Forte dos Reis Magos, or Fort of the Three Wise Men. Petropolis, meaning City of Pedro– honouring the Nation’s second Monarch, Emperor Peter II – is emerging as one of Brazil’s most exciting districts to live, work and play. With its high value landscape elements, excellent conditions for infrastructure and public services, central location and easy access to the city, Petropolis is one of the highest priced real estate areas in North East Brazil. Designed for the elite by Greek architect Giacomo Palumbo, Petropolis combines fashionable boulevards and boutique shops with trendy coffee bars and restaurants. Rental opportunities in this up-market area are rare and demand is soaring, which means Petropolis commands some of the highest rental prices in Natal.
- What is the safest way for an investor to buy in Brazil, what are the pitfalls and what should they look out for?
The safest way for an investor to buy is through a reputable and AIPP accredited Company like Ritz Property and using a Brazilian Lawyer and Notary.
For clients who are buying properties in Brazil, it is vital for a Lawyer to provide comprehensive advice on all aspects of the conveyancing procedure – from who the developers are to planning permission, in order to identify any potential risks inherent to a particular deal. The Lawyer will check the ownership and any charges, encumbrances or liens registered on the matricula (registration) of the property. They will then inform clients about the financial credibility of developers, apply for a CPF number (the equivalent of the National Insurance Number in the UK), provide advice on the contracts and its implications for both parties, and assist with the transfer of funds to Brazil and any implications with the Central Bank of Brazil. The Lawyer will also explain how taxes work (as Brazil imposes a variety of taxes charged at the Federal, State and Municipal levels) and ensure the property is registered correctly in the client’s name.
In terms of buying safely, foreign investors with a freehold title deed are afforded the same rights as Brazilian buyers for residential and commercial property. Every jurisdiction has its own Land Registry Office (Cartorio) where the property should be registered. The registrations are public and anyone can request a copy of a Certificate of Registration (Certidao de Matricula).
The most common mistake is to leave it too late and seek legal advice after a problem arises – you need to stay ahead of the game and use legal representation from the start. In the UK we highly recommend Renata Sa from Brazilian Property Lawyers as she passed the Bar in Brazil, the UK and Portugal, so she has the expertise to move through what can sometimes feel like a legal minefield.
- And finally, what’s next for Ritz Property after the completion of the two new projects mentioned above? Do you see yourself operating solely in Brazil or also developing into other countries?
Ritz Property has invested £millions into Natal since 2008, and we are now emerging as a leading developer in the North East of Brazil. We are certainly committed to Brazil and have recently acquired a significant number of developments including Costa Branca, Dunas De Muriu, Mercure Natal and The Piramide Hotel. We are also expanding into the UK with a number of real estate projects set to launch in Q4 2014.
Ritz’s progressive and ambitious vision will serve our clients with real choice and an opportunity to hold a diverse property portfolio of both residential and commercial property assets in a mixture of traditional and emerging global markets.
For more information contact Ritz Property: www.ritzproperty.com