Our pick of headlines this week impacting commercial real estate in the emerging markets.
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Headlines:
Global
WeWork has rebuffed previous offers by Adam Neumann to purchase his former company out of bankruptcy. The latest was for $1 billion in October 2022 for double the market cap of the company when it fell into bankruptcy. The attorney who manhandled Twitter to accept Elon Musk's offer and subsequent acquisition of the company is also representing Adam. Can WeWork ignore good-faith offers without recourse? Will Adam manage WeWork better this time without larger-than-life venture capital "investors" breathing down his neck? We are about to find out, stay tuned!
Barry Sternlicht is the founder and CEO of Starwood Capital Group, a real estate investment manager with an AUM of over $120 billion. He’s fed up with high rates and this clip is valuable because it allows us to peer into a senior real estate investor’s mind. He has spent a lot of time thinking about why interest rates have been so high and for so long.
Latin America
Tiendas 3B's listing on the NYSE is a top 10 largest American listing out of Mexico behind such listings as America Movil's (NYSE: AMX) $10.8 billion listing in 2000, Grupo Aeromexico's (NYSE: VX) $2.5 billion listing in 2013, and FEMSA's (NYSE: FMX) $2.2 billion listing in 1985 [figures adjusted for inflation]. Mexico's dry spell of listings since 2018 has recently been broken due to its very good fortune of being located next to the largest economy in the world presently decoupling from its main manufacturer and economic competitor, China. Most of Mexico's nearshoring boom activity is from Chinese manufacturers and not from American manufacturers choosing to establish large operations in Mexico as we've previously written.
Zinc is used in a wide range of applications including galvanizing steel to prevent rust and corrosion, creation of alloys such as brass and bronze, die-casting, rubber manufacturing, paints and pigments, batteries, agriculture fertilizers, and much more. China has a stranglehold on zinc controlling over 70% of the refining of the mineral, and many of the mines. Bolivia's far-left government has given up control of one of its refiners and is building another zinc refiner which will be funded and controlled by the government.
Many are predicting that Colombia's Juan Valdez coffee brand is the top contender to take on and dethrone Starbucks. The brand and name are iconic, the product many argue is better, and it seems to be making all the right moves. Its first coffee shop was established in 2002 in Bogota's El Dorado International Airport and is the culmination of a joint effort of over 500,000 coffee producers and growers who wanted also to participate in the refining and selling of end products from the beans they produce. 80% of the stores to be opened in 2024 will be international which indicates where the brand is looking for its future market share.
Africa
While copper remains Zambia's biggest export, most output today comes from the mines in the North-Western province and not the Copperbelt region. This wasn't always the case and any move to increase production in this part of Zambia is a welcomed move for the highly indebted country battling to stave off further currency depreciation. President Hakainde Hichilema's goal is to triple Zambia's copper production to 3 million tonnes per year by 2032 and this won't be possible without more production from the Copperbelt. Copper production fell precipitously under the previous President of Zambia and hasn't recovered to previous highs in 2013.
Toyota's investment in Kenya signals a shift from sales and distribution to manufacturing in the country. The Japanese powerhouse has similar arrangements in other African nations such as Côte d'Ivoire, Ghana, Egypt, and Nigeria. South Africa is its only "serious" operation in Africa which has been in existence since 1972 and employs over 7,000 people to man its Durban plant and distribution channels. $1.5 million was invested in 2023 to bolster distribution and carry out light assembly, and the latest $7.5 million announcement will be to repurpose the oldest vehicle manufacturing plant in Kenya to make Toyotas.
Until South Africa can solve its electricity issues, it's largely a no-go zone for foreign real estate investors. Professor Hausmann has advised South Africa's government for years and is one of the top experts in the field of development finance. According to him, the ANC's biggest sin is ignoring electricity challenges and that sin has led to South Africa de-industrializing at a rate in "orders of magnitude worse than anywhere else [in the world]." Emerging Real Estate Digest has previously written about Professor Hausmann's views on economic complexity as a determinant of how a country performs.
Southeast Asia
As China continues to assert claims of other nations' maritime territories nations such as the Philippines are making moves to protect their interests. The anticipated submarine purchase will be the first for the nation and complement existing fleets in nearby nations of Vietnam and Indonesia, and the larger more advanced fleets of Japan and South Korea.
CapitaLand doubles down on its Southeast Asia real estate portfolio with investment in Thailand logistics to create Thailand's largest industrial park of its kind. The Thailand investment, a major advanced logistics park is set to become the nation's largest when construction concludes in 2026. CapitaLand, with regional real estate AUM of $65 billion, and $133 globally, is already a major player. Other investments include logistics properties in Japan and self-storage acquisitions in Singapore.
After surging demand, Vietnam's motorbike sales crashed 17% in 2023, marking the lowest level in a decade. Motorbike sales in Vietnam dipped in 2023 to 2.5 million, nearly 17% lower than 2022 sales. Not since 2013 have annual sales been so low. There are many factors influencing motorbike purchasing activity but it is an indicator that inflation, high interest rates, and the global economic slowdown are hitting the average Vietnamese in the pocketbook.
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