Airbnb has finally found a friend in Sao Paulo.
The megacity that is at the heart of Latin America's financial community has modified zoning rules to allow buildings near public transportation hubs to have both residential and commercial units, including short-term rentals, hospitals and storefronts. Companies like Airbnb have struggled in cities around the world that are implementing tougher rules as the groups expand.
Paladin Realty, a Los Angeles-based real estate investor with $5 billion under management, is betting on projects that capitalize on the new regulations in Brazil, where it has half of its assets. Among the first projects is a building in the middle-class neighborhood of Perdizes with 240-square-foot apartments, which are priced 20 percent above the average for the region. The 62 short-term rental studios sold out in the first weekend they went on the market in June.
YouInc is the builder in charge of the Perdizes project and says the addition of commercial usage in residential buildings -- from the city's new so-called "master plan" -- has made a difference. And focusing on selling high-end apartments to young professionals has also allowed it to maintain a net return above 20 percent despite the recession and the sluggish real estate market.
"We were the first ones to approve projects following the new master plan," YouInc Chief Executive Officer Eduardo Muszkat said in an interview. YouInc and Paladin are working on two new residential projects. One of them, in the Pinheiros neighborhood, will include medical clinics.
Airbnb didn't respond to a request for comment.
Sao Paulo needs the investment. Real estate sales are beginning to inch back up, but they're still recovering the country's deepest recession ever and a presidential impeachment. This year, economists expect timid growth of 1 percent. There's also a presidential election next month that has everyone on edge, with the outcome unclear.
With all the instability in Brazil, Paladin is hoping that offering projects with specific ends will help it increase visibility and mitigate insecurities, Ricardo Raoul, managing director for the country, said in an interview. The Brazilian real has weakened 19 percent this year, the worst performance among major currencies, according to Bloomberg data.
"We believe specific projects are easier to visualize than real-estate funds," Raoul said. "Funds are like blank checks."
SundayMonday Business on 09/16/2018