PricewaterhouseCoopers: Strong Housing Demand in South America Provides Investment Opportunities

Business Wire, March 28, 2000

Business/Real Estate Editors

NEW YORK--(BUSINESS WIRE)--March 28, 2000

Chronic Residential Shortages in Argentina,

Brazil & Chile are Cited

Latin America's "Southern Cone" countries of Argentina, Brazil and Chile offer investors "tremendous opportunities" in residential real estate development and financing, according to a new report by PricewaterhouseCoopers.

In an article in the Spring 2000 edition of Global Real Estate Now, authors Jack Barthell and Richard Fischler say, "The internal rates of return on investment that can be generated by a successful residential development project can exceed the rates that can be realized by other property types."

The authors predict that the lack of supply for residential units in those countries will worsen in the near term, while at the same time, economic growth in the region will further increase demand. The most significant housing shortages are in the low-income and the middle-to-upper end market segments.

Barthell and Fischler estimate Argentina's housing deficit at three million units, with a significant number of families living in substandard housing product. They are optimistic that recent legislation establishing a basis for standardized underwriting, legal and regulatory practices will result in a more efficient residential capital market and increase capital flows from the country's insurance industry, its pension funds and foreign investors.

Citing a reported 10-million-unit shortage, with a huge portion of the population living in shantytowns ("favellas"), the authors state that Brazil faces even greater challenges. They predict, however, that uniform debt underwriting policies are on the horizon, which should bring about the development of a secondary market for residential mortgage securitizations. They note that Brazil's housing agency plans to offer residential mortgage bonds to foreign investors in the year 2000.

Barthell and Fischler indicate that Chile has made strides by instituting tax incentives in 1999 that resulted in a dramatic increase in housing starts. In addition, relative to its Southern Cone neighbors, Chile has developed a more substantial supply of capital. However, while Chile has a high percentage of home ownership, much of the available product does not meet demand, quality-wise.

The authors conclude that investment returns for well-conceived residential projects in the three nations "are strong relative to alternative real estate investments. As the local capital markets continue to evolve, greater opportunities will develop. Investors should monitor the continued evolution of the local capital markets and should consider residential development projects in their overall strategy for the region.

Barthell is a partner and Fischler is a manager in the New York office of PricewaterhouseCoopers.

PricewaterhouseCoopers (www.pwcglobal.com) is the world's largest professional services organization. Drawing on the knowledge and skills of more than 150,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance in an Internet-enabled world.

PricewaterhouseCoopers refers to the member firms of the worldwide PricewaterhouseCoopers organization. For a copy of Global Real Estate Now - The Evolving International Real Estate Marketplace, contact: (212) 596-8268 or thomas.derr@us.pwcglobal.com.