Jive Investments Holding Ltd., the biggest buyer of distressed assets in Brazil, is starting the first fund that will invest solely in troubled real estate in the country.
“This market is very big in the U.S. and we see a lot of opportunities in Brazil,” Alexandre Cruz, the 36-year-old founder of the firm, said in an interview in Sao Paulo with Guilherme Ferreira, another partner at the firm.
The decision to create a distressed real estate fund came after Jive received 35 such properties that had been used as collateral on non-performing loans, Ferreira, 35, said. The firm generated “excellent” returns after fixing legal and other problems with the properties and selling them for about 119 million reais, according to Ferreira.
“We gained a lot of experience on how to get rid of all kind of troubles,” said Ferreira, who added that Brazil’s real estate boom has boosted the value of properties under bankruptcy protection.
Jive, founded in 2010, bought a portfolio of 816 million reais ($350 million) of assets from Lehman Brothers Holdings Inc. that year in a transaction approved by the court handling the New York-based firm’s bankruptcy. The purchase included corporate non-performing loans with an outstanding principal balance of about 726 million reais and distressed assets totaling roughly 85.4 million reais originated by Lehman’s fixed-income desk.
Jive has 50 million reais committed to the new fund from two local family offices and international investors and has a goal of 500 million reais in about five years, Cruz said. Distressed properties have legal, tax, environmental or documentation problems, or have been used as guarantees on non-performing mortgages.
Jive, with 3.1 billion reais in non-performing loans under management, is using the experience from that market to diversify into new kinds of investments. The firm, which has increased staff to 47 from 12 two years ago, is starting a business investing in private equity and publicly traded companies with low market capitalization, sometimes by exchanging their non-performing loans for equity stakes.
Jive has invested in companies including Recrusul SA, which manufactures industrial food-refrigeration equipment, and Cambuci SA (CAMB4), which designs and markets athletic footwear and apparel under brands including Penalty and Converse.
“There are a lot of firms with great prospects for the future that just need time to recover from huge debts, and going to court and trying to force the loan to be repaid isn’t the best way to obtain higher returns,” Ferreira said.
The real estate distressed fund started in September, after Jive had already made an investment of 15 million reais in a property belonging to Anhanguera Educacional Participacoes SA (AEDU3) in Brooklin, Sao Paulo, that was valued in December 2012 at 74 million reais. It was sold in June to Mac Engenharia for 78 million reais, without any additional investment by Jive.
Jive also created three hedge funds that now have 45 million reais under management, and it bought 45 percent of SP Ventures, a firm that will manage a fund of 100 million reais from the Sao Paulo State government to invest in startups for technology companies focused on agribusiness, health care, information-services and nanotechnology.
Jive’s fund won’t focus on residential real estate because the deals are too small, the company said. A Carlyle Group LP investment in that industry required a bailout from the Washington-based private-equity firm, according to court and regulatory filings.
Senior Carlyle professionals have injected $66.9 million and the firm has poured another $21.1 million into Urbplan Desenvolvimento Urbano SA, a real-estate developer that’s been hit with hundreds of lawsuits, in part for failing to deliver home sites throughout Brazil, the filings show.
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