Protest, graft can’t deter Brazil mall operator’s growth

Bloomberg

Gazit-Globe Ltd., which manages commercial real estate worth about $21 billion in more than 20 countries, is extending its Brazilian business even as the country suffers the worst recession in over a century and the streets swell with protesters clamoring for mass political change.
The company will invest $1 billion this year to expand existing shopping centers in Sao Paulo and other major cities around the world, and is looking for other opportunities in Latin America’s largest city, Gazit founder and chairman Chaim Katzman said in an interview on March 13.
It may not seem the ideal time or place to invest in shopping malls. Analysts see no recovery in sight for Brazil’s $2.3 trillion economy, which is expected to sink 3.4 percent in 2016 after contracting 3.8 percent last year. Retail sales across Brazil fell the most on record last year as 1.5 million people lost their jobs. The recession, combined with scandal-riddled impeachment proceedings against President Dilma Rousseff, is deterring foreign investors.

Strong democracy
“Brazil is a strong democracy and I don’t see a risk to the system,” Katzman said in an interview. “In fact, today you see more rule of law than ever. All the untouchables are being brought down. That will be Rousseff’s legacy.”
Gazit expects its shopping center model, centered around supermarkets in growing cities, to weather an economic downturn better than other businesses as people buy groceries in the good times as well as the bad, Katzman said. Gazit has invested 7 percent of its asset portfolio, or some $1.5 billion, in Brazil. The company will also invest in Helsinki, San Francisco and Toronto in 2016, he said.
“Everyone wants to buy stocks and real estate when prices are flying high,” said Katzman. “But as soon as valuations decrease people get scared off. We’re bucking that trend.”