Friday, July 30, 2010
Dear Reader,
Today, there is a pocket of opportunity right in the heart of downtown Fortaleza. I’m talking about an area that has been neglected…but whose fortunes an ambitious plan is about to change.
Iracema Beach is immediately to the west of Fortaleza’s bustling boardwalk—the tourism, social, entertainment, and high-end real estate center of Fortaleza. Real estate prices have doubled here in the past three years.
Ocean view condos sell for up to $4,500 per meter. (That’s approximately $450,000 for a 1,000-square-foot condo.) Rentals here stay full and charge top dollar. This is where Brazilian millionaires and billionaires own condos; some as big as 5,000 square feet.
Today the boardwalk is fully built out. There is one remaining developable site on the corner at the eastern edge of the boardwalk. This is the site that’s just a couple of minutes walk from the Gran Marquise Hotel. You may have heard me refer to this site as the “swamp” project.
This project (like many others in the Fortaleza area) has been held up due to permitting delays. A complete staff change at City Hall has paralyzed the permitting process. Unfortunately this delay, and the way prices have been rising, means that prices here will likely be 8,500 reais ($4,810) per square meter at launch. That’s more than double the RETA price I discussed with the developer two years ago.
We Can Do Better Than That
Don’t worry. There’s a way we can get in on Fortaleza’s boardwalk at the ground floor. This ain’t a time machine…it’s a Path of Progress…
Iracema beach hosted 1.1 million revelers for the 2010 New Years party. Concerts and major beach volleyball tournaments are a regular fixture. But visitors prefer to stay along the family-friendly and buzzing boardwalk. Now Iracema is getting a major facelift.
The result will be to extend the boardwalk to include Iracema Beach.
This project is part of the $5.6 billion investment in tourism and infrastructure in the lead up to the 2014 soccer world cup:
- $135 million will be spent on the new Aquarium (set to be the largest in South America)
- $30 million is being invested in a general upgrade of the area including the extension of the boardwalk
- $10 million is to be spent on the culture center renovation. (This is Fortaleza’s art and theater center)
For those of you that are familiar with Fortaleza, the boardwalk is to be extended from La Casa restaurant as far as the new Aquarium. Dingy bars will be replaced with more family friendly restaurants and cafes…shiny new condos and hotels will take the place of 3-star hotels. This area will also benefit from the $19m that is being spent upgrading the boardwalk. Three years from now, there will be no visible break from the boardwalk to Iracema beach and to the cultural center.
Families on vacation will want to stay here…as will visiting executives. Yet today, prices here are 22%-60% lower than along the boardwalk.
As Iracema becomes part of the boardwalk, its prices will catch up with boardwalk prices.
The Deal
Jardins de Iracema is located in the heart of Iracema Beach. This area was re-zoned last January, bringing the maximum height down to 48 meters. This project was the last to be approved under old zoning laws, at 72 meters high.
Two bedroom, 72 square meter (774 square feet) units start at 260,000 reals ($147,130). Make a 25% down payment, and the developer will finance the balance over 100 months.
The same developer also has smaller 1-bedroom units in another project close by, called Studio Iracema. One-bed units here start at 163,000 reals ($92,239). The payment terms for Studio are 10% down, 20% on completion—which is scheduled for December 2010—and the rest paid over 100 months. This is the cheapest entry point you’ll find in Fortaleza. An ocean-view apartment for only $92,239…
My recommendation is to go for the larger 2 bedroom units in Jardins. These units are perfect for the long-term rental market. This where young professionals who move to Fortaleza will want to live.
This is what my contact on the ground Daniel Neves discovered when he recently made units he had bought here available for rental. He planned on offering these units as short-term rentals…but the demand from long-term renters was so strong he switched course. Now he makes a hassle-free net yield of 8%. I expect he will enjoy capital appreciation, too. This is the area that will likely see the most capital appreciation in the coming months.
Here’s what Daniel told me:
“What we discovered is that there is a new rising demand for nicely furnished apartments, rented long term, to young professionals moving to Fortaleza for new jobs or to expand their companies here. They don’t want to buy an apartment, or rent an unfurnished one. They want to move into an “all inclusive” apartment where they’ll only have to worry about their work.
These professionals belong to the upper middle class. They are used to a very high standard of living. So, they want to live in a furnished apartment, in a good neighborhood, full of restaurants and bars… and they want to be walking distance from the beach.
They don´t mind paying more rent than average to live in a nice place because this is going to be their home for a few years and they want to impress their new friends.”
Daniel and his team are standing by to send you a full information pack here. This is a great deal in an area on the rise. I strongly recommend this opportunity. I have already invested in this area. In fact, I bought 4 units in a project close by. I would buy here myself but having bought multiple condos in Fortaleza over the past couple of years, I’m maxed out for the moment.
Meantime, strong and positive news continues to flow from Brazil—and Fortaleza in particular.
Brazil last year became a middle class country and this year should add 2.5 million jobs and grow by 5.5%. Credit and mortgage finance is opening up. Brazilians have a new confidence. My contacts on the ground tell me that today when they make some money, they invest it in their business and country. It wasn’t always like this. In the past, when someone got ahead, they moved their money offshore. Today, Brazilians see that some of the best opportunities are in Brazil. As soon as people move into that middle class category, they become consumers like us. That includes putting themselves in the market for a new condo or a vacation in the sun.
Fortaleza is set to profit from Brazil’s new middle class and consumer boom. Fortaleza is where Brazil’s best beaches are. Fortaleza is Brazil’s #1 domestic tourism destination, hosting 3 million Brazilian tourists in 2008. We don’t have official numbers yet for 2009. I expect they will be extremely strong. We do know about airport traffic, though. February 2009 saw 678,682 passengers through Fortaleza´s airport. This year (February 2010) saw the number surge to 912, 670…an increase of 34.5%.
This surge in visitors is exacerbating what’s already a chronic shortage of rentals. Contact Daniel for more information on this deal today.
Ronan McMahon
P.S. I told members of my Real Estate Trend Alert group about this opportunity just over 3 weeks ago. They got first dibs on units…and a FREE furniture package. 19 months ago, I recommended a project on Fortaleza’s boardwalk called Landscape. Members of my RETA group got in early at special prices and terms. Members who bought in January 2009 have seen the value of their units increase by close on 40%.
You might also be interested in:
Prices here could double before the next World Cup
Posted Under:
brazil, rental yield, appreciation potential, profit play
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