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Billionaire Targets Portuguese Property Turnaround

Billionaire Nicolas Berggruen
Nicolas Berggruen, billionaire investor and founder of Berggruen Holdings Inc., travels the world in a Gulfstream IV jet while living in five-star hotels. He owns 50 percent of Edge Berggruen Investments. Photographer: Michele Tantussi/Bloomberg

Billionaire Nicolas Berggruen and two Portuguese partners plan to spend as much as 1 billion euros ($1.3 billion) on real estate in the country, though they’re not expecting to make a quick return.

Berggruen, Jose Luis Pinto Basto and Miguel Pais do Amaral will target assets such as office buildings, hotels and parking lots, Pinto Basto said in an interview in Lisbon. The properties may take as long as 10 years to sell at a profit, he said.

“We’re not in a hurry,” said Pinto Basto, who formed Edge Berggruen Investments with his partners to make acquisitions. “The thing about Nicolas is that he’s a marathon runner, not a sprinter.”

Prices for the best Portuguese properties should stabilize this year after falling as much as 15 percent in 2012, according to Walter Fabrega, broker Jones Lang LaSalle Inc.’s head of capital markets in Portugal. The government has forecast that the economy will grow in 2014 for the first time in four years.

Berggruen, a German-American who travels the world in a Gulfstream IV jet while living in five-star hotels, owns 50 percent of Edge Berggruen Investments. Vanessa Osorio, a spokeswoman for Edge Group and Edge Berggruen Investments, said he wasn’t immediately available for comment.

Portuguese banks are among those looking to sell assets. Banco Espirito Santo SA, the country’s biggest publicly traded bank, is selling some loans made to distressed companies in the real estate and tourism industries to private-equity funds, Antonio Souto, a board member at Espirito Santo said on Feb. 20. Banco Comercial Portugues SA, a Portuguese lender, is selling more than 700 repossessed properties, including offices and warehouses with discounts of as much as 12 percent, according to the bank’s website.

Turnaround Plans

Edge Berggruen is focusing on deals of 200 million euros to 300 million euros and is talking to banks and state-owned institutions with large real estate holdings, said Pinto Basto, who is also a commercial airline pilot. “The goal is to focus on indebted assets, pay off some of the debt and turn around these businesses,” he said.

Tim Seconde, associate director of capital markets at property broker CBRE Group Inc. in Portugal, said investment levels in the country’s commercial real estate “hit rock bottom” in 2012 as investors watched the euro-zone crisis unfold and speculation about countries exiting the currency increased.

‘Doubts Continue’

“So far in 2013, we have seen doubts continue and investment volumes will remain relatively low,” Seconde said by e-mail. “However, there had been a notable increase in interest from new investors and some of them will be able to take advantage of the lack of competition and highly readjusted pricing.”

Portuguese real estate investment declined by 38 percent in 2012 to 125 million euros, the lowest in the last decade, according to Jones Lang. Investment in commercial property dropped by 50 percent from the previous year, Cushman & Wakefield Inc. Managing Partner Eric van Leuven said in January.

Political and economic uncertainty in Portugal, meanwhile, hasn’t abated and unemployment is the highest since at least 1998. The southern European nation was the third euro member to seek an emergency bailout when it got 78 billion euros in 2011 following Greece and Ireland.

The country is facing new barriers to meeting aid requirements and is promising further budget cuts after its Constitutional Court last week blocked a proposal to suspend a payment to state workers and pensioners. That risks delaying completion of the seventh aid-plan review and reducing the chance of international partners giving the nation more time to pay back rescue loans.

“This is the right time to act” because valuations have been adjusted, Jones Lang’s Fabrega said by e-mail. “Owners are more evidently accepting the depreciation of their assets” and that “presents excellent business opportunities.”

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