Mall Operator Grows in Brazil Unfazed by Protests and Graft

  • Sao Paulo projects part of Gazit-Globe's $1 billion push
  • Brazil seeing `more rule of law than ever' says chairman

Gazit-Globe Ltd., which manages commercial real estate worth about $21 billion in more than 20 countries, is extending its Brazilian business even as the country suffers the worst recession in over a century and the streets swell with protesters clamoring for mass political change.

The Tel Aviv-based company will invest $1 billion this year to expand existing shopping centers in Sao Paulo and other major cities around the world, and is looking for other opportunities in Latin America’s largest city, Gazit founder and chairman Chaim Katzman said in an interview on March 13.

Chaim Katzman
Chaim Katzman
Photographer: Pentti Hokkanen/Gazit-Globe Ltd.

It may not seem the ideal time or place to invest in shopping malls. Analysts see no recovery in sight for Brazil’s $2.3 trillion economy, which is expected to shrink 3.4 percent in 2016 after contracting 3.8 percent last year. Retail sales across Brazil fell the most on record in 2015 as 1.5 million people lost their jobs. The recession, combined with scandal-riddled impeachment proceedings against President Dilma Rousseff, is deterring foreign investors.

“Brazil is a strong democracy and I don’t see a risk to the system,” Katzman said in an interview. “In fact, today you see more rule of law than ever. All the untouchables are being brought down. That will be Rousseff’s legacy.”

Weather Downturn

Gazit expects its shopping center model, centered around supermarkets in growing cities, to weather an economic downturn better than other businesses as people buy groceries in the good times as well as the bad, Katzman said. Brazil is home to 7 percent, or some $1.5 billion, of Gazit’s asset portfolio. The company will also invest in other locations including Helsinki, San Francisco and Toronto in 2016, he said.

“Everyone wants to buy stocks and real estate when prices are flying high,” said Katzman. “But as soon as valuations decrease people get scared off. We’re bucking that trend.”

Direct Operator

The billion dollar investment comes as the company seeks to evolve from a holding company into a direct real estate operator.

“Our CEO and CFO come from that world,” said Katzman. “We have several options to execute our strategy.”

Gazit is considering either selling its stake in its publicly-traded units or buying out the other shareholders of those companies, said Katzman. Zehavit Cohen, the office head of Apax Partners Israel Ltd., joined Gazit’s board of directors in March. Her experience in mergers and acquisitions can “contribute considerably” to the company, it said in a statement.

Gazit shares rose 2 percent to 33.30 shekels, the highest in two months, at the close of trading in Tel Aviv.

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