Legendary real estate investor Sam Zell is bullish on Brazil. He and Gary Garrabrant cofounded Equity International in 1999 and have since invested in 17 real estate-related companies in emerging markets across the globe. Four of those investments were in Brazilian companies--homebuilder Gafisa S.A. in 2005, shopping center owner and operator BR Malls Participacoes S.A. in 2006, corporate real estate company Bracor Investimentos Imobiliarios in late 2006 and logistics company AGV Logistica in August of 2008. Equity International values these holdings at close to US$550 million. The aim of this paper is to examine the investment thesis behind Equity International's investments in Brazil.

Underlying Zell and Garrabrant's investments in Brazil is the overall belief that favorable long-term macroeconomic conditions and demographic trends will drive strong demand for real estate. Brazil has a growing population and an expanding middle class with enhanced purchasing power. There is an extraordinary and unmet demand for housing. The availability of consumer credit and mortgage finance is expected to increase. Furthermore, Brazil has "world-class" managers and an extraordinary talent pool compared to other emerging markets, according to Thomas McDonald, chief strategic officer of Equity International. Lastly, the sheer size of Brazil allows for scalability in operating platforms and growth potential that simply cannot be achieved in smaller countries or regions. However, the global economic recession and slower growth prospects in Brazil present new challenges for Equity International's portfolio companies.