After sharp falls in prices, Brazil's real estate market is seen as offering an attractive level to get back in, particularly if the worst for the country's economy is over, the bank believes.

UBS is beginning a new business designed to exploit sharp falls in Brazilian property prices after a sharp recession in the country, the Swiss bank has announced.

UBS Asset Management's global real estate business will offer direct property investment, as well as equity and debt fund strategies, the Zurich-listed lender announced yesterday.

UBS AM has entered into an exclusive partnership with Real Estate Capital, a Brazilian real estate consultancy, under the leadership of Moise Politi, the former CEO and co-founder of Brazilian Finance & Real Estate. This partnership, combining REC's on-the-ground expertise with GRE's global network, will provide investment solutions for international investors in this “highly attractive market”, the bank continued. 

GRE will initially offer products across three investment fund strategies targeted at institutional investors, including: Real estate debt, which will seek to address the market shortage in real estate financing; income generating equity, focusing on investment into high-quality income-producing properties – mainly in the office and logistics sectors; and opportunistic residential, which will target the acquisition of constructed units from distressed sellers, with the potential for asset appreciation and capital gains. 

All strategies will focus primarily on Brazil’s core markets of Rio de Janeiro and São Paulo, it said.

“We continue to see a growing interest in alternative assets from institutional investors globally. We have identified strong demand for Brazilian property investment strategies and are pleased to be expanding our leading global real estate capabilities to meet the needs of our clients,” Ulrich Koerner, President UBS Asset Management, said. 

Thomas Wels, head of global real estate at UBS-AM, commented: "Following renewed interest from international investors and our extensive research into the local property market, we believe that this is the right time to establish a local presence in Brazil. In REC we have a trusted set of advisors to work alongside our investment committee and proven investment process to develop our offering over the coming years."

UBS will be joining banks such as JP Morgan and Grupo BTG Pactual in taking the view that the worst of the fall in the Brazilian real estate market is over; the value of the real, the currency, has sunk by about half since July 2011. The report said the office vacancy rate in Sao Paulo and Rio de Janeiro rose above 22 per cent in the second quarter, a record high, while rental prices slumped (source: Bloomberg).