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How two global real estate giants invested in Santiago, Chile after a sailboat adventure

Real estate giants Ivanhoé Cambridge and Greystar might never have invested in Santiago, Chile, had it not been for a novelty sailboat experiment.

Greystar’s Tom Livelli was a young adventurer from New Jersey when he arrived in Chile 22 years ago to participate in a National Geographic project to sail a primitive sailboat deep into the Pacific Ocean. Livelli blew off into the oceanic aquatic expanse while embarking on a love affair with Chile — as well as with his future wife.

Livelli also learned a lot about the apartment situation in Santiago in the process. “My wife and I lived as renters and it was a miserable experience. It was hard to believe that it could not be better,” Livelli told CoStar News. Livelli realized that there was an obvious market for better quality residences during a time when Chileans were spending only about 14% of their income on housing.

Livelli dived head first into Santiago real estate and became Charleston, South Carolina-based Greystar’s man-in-Santiago in 2017 where, as senior managing director for South America, he played a key role in helping persuade Ivanhoé Cambridge to join Greystar in the launch of a multifamily joint venture in 2021, making them the first global institutional real estate investors to enter the Santiago market.

Greystar and Ivanhoé Cambridge, which each control between US$70 to US$80 billion in assets, now own about 1,400 units in Santiago after investing about US$100 million in a series of projects. Livelli plans to help raise those numbers to 5,000 units and US$250 million, as the companies have about a dozen projects in the works in Santiago over the next two years.

Their most recent undertaking is the leasing of 196 apartments of their 17-floor Somma Asturius property in the residential area of Las Condes, an asset they bought from local interests.

Livelli credits Ivanhoé Cambridge and its CEO Nathalie Palladitcheff for investing in a property 8,000 kilometers from its Montreal head office. “They have taken a different view of the world and have become a lot more proactive in focusing on asset classes where they have conviction,” he said. “They go out and find opportunities and they don’t just wait for the phone to ring.”

Fast-Growing City

Ivanhoé Cambridge, which is the real estate arm of Quebec’s Caisse de depot pension fund, has Adrian Mantesso working with Livelli on the Santiago projects. Mantesso shares the enthusiasm for the fast-growing city, which now has almost 8 million residents — about 40% of Chile’s entire population — and he compares it to economic powerhouse Singapore.

“Chile has a very strong economy, it has one-third the world’s copper reserves and nearly half of the lithium reserves. We will need to have those for wires and batteries and Chile is well-positioned as a natural reserve for growth,” he said.

Both Livelli and Mantesso agree that Chile desperately needs more housing, as almost 1 million immigrants have been flowing into the country annually from places like Venezuela and Peru.

Chile’s private residential market has long been dominated by domestic investors but the consortium found it possible to enter the market after a period of political unrest led many property owners to sell off their assets in the country and buy internationally.

However scooping up bargains is only a fraction of the story, as the level of work involved in hammering out residential deals can be extreme.

“Everything here has a higher degree of difficulty,” Livelli said. Construction workers tend to be less costly but also less skilled, which means that developers tend to avoid more complex approaches and will opt to employ simpler tactics, such as using reinforced concrete rather than post-tension slabs, a technique that requires more expertise.

Trickier Zoning

Livelli said that zoning has become trickier in recent times, as Santiago slowly switches over from a more bureaucratic prescriptive by-the-book zoning philosophy to the liberal style, which is more commonly practiced in North America and involves greater input from citizens.

“Chile has been migrating from prescriptive to liberal in a sort of disorderly fashion. It hasn’t been the smoothest transition. Some municipalities have welcomed input from neighbours when that wasn’t part of the process. People were confused and there has been less certainty and that has caused us as a company to not want to take development risks and instead focus on buying properties from third parties,” he said.

And while Santiago has a solid class of well-heeled potential renters, the country has a ways to go before reaching numbers seen in the United States where the per capita GDP of $69,000 dwarfs the Chilean US$16,000 figure. Even so Chile far outstrips other South American countries like Brazil which has a US$7,500 per capita GDP, according to United Nations figures.

Meanwhile the World Bank also notes that the Chilean economy suffered a decline in real GDP of 2.4% last year. “Medium-term prospects will be shaped by the capacity to generate more inclusive, productivity-driven growth while preserving sound macroeconomic fundamentals,” the World Bank stated in its latest report on Chile.

But Livelli said there is almost unlimited upside in the sliver of land between the Andes mountain range and the Pacific Ocean and that the low level of corruption in the construction industry is also a good sign for the future.

Livell says that he has never encountered corruption in the residential property industry, whereas while working in a different Central American country, he was once forced to leave his anti-corruption handbook prominently on the table during meetings to ensure that all parties understood the message that all transactions must remain above board.

Source: costar