Asset-Based Investing and BR Properties: Brazilian CRE Leader at NAV Discount

Amit Wadhwaney of Moerus Capital Management discussed asset-based investing and presented his in-depth investment thesis on BR Properties (Brazil: BRPR3) at Best Ideas 2018.

BR Properties is a leading commercial property company in Brazil, with a focus on prime, high-quality AAA office buildings in Brazil’s two largest cities, Sao Paulo and Rio de Janeiro. The investment opportunity stems from the downturn in the Brazilian economy, which exposed the overbuilding in the commercial property market, resulting in vacancy rates rising to multi-decade highs and rents falling roughly 25-40% in a variety of markets in real terms over the past four to five years. Piquing Amit’s interest was the transfer of control of BRP in 2016 from its then-distressed controlling shareholder to GP Investments, the original founder of BRP, which had brought it public in 2010, before totally divesting its holdings in 2012. This purchase of BRP was made in conjunction with a sovereign wealth fund at a per-share price of BRL 11, below the third-party appraised range of BRL 12.20-14.13 per share. BRP raised a further BRL 950 million in mid-2017 to fund its plan to acquire properties in the depressed market. The shares recently traded at 20+% and 30+% discounts to tangible and stated book values, respectively, with said book values reflecting assets written down to reflect depressed market conditions.

About the instructor:

Amit Wadhwaney is a Portfolio Manager and Co-Founding Partner at Moerus Capital Management LLC, and the founding manager of the Moerus Worldwide Value Fund. Mr. Wadhwaney has over 25 years of experience researching and analyzing investment opportunities in developed, emerging, and frontier markets worldwide, and has managed global investment portfolios since 1996. Prior to founding Moerus, Mr. Wadhwaney was a Portfolio Manager and Partner at Third Avenue Management LLC. Mr. Wadhwaney founded the international business at Third Avenue and was the founding manager of the Third Avenue Global Value Fund, LP, the Third Avenue Emerging Markets Fund, LP, and the Third Avenue International Value Fund, an open end mutual fund. Earlier in his career, Mr. Wadhwaney was first a securities analyst, and then Director of Research at M.J. Whitman LLC, a New York-based broker-dealer. Prior to joining M.J. Whitman, Mr. Wadhwaney was a paper and forest products analyst at Bunting Warburg, a Canadian brokerage firm. He began his career at Domtar, a Canadian forest products company. Mr. Wadhwaney holds an M.B.A. in Finance from The University of Chicago. He also holds a B.A. with honors and an M.A. in Economics from Concordia University; at Concordia, he was awarded the Sun Life Prize and the Concordia University Fellow in Economics, and he subsequently taught economics classes there. He also holds B.S. degrees in Chemical Engineering and Mathematics from the University of Minnesota.

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