Monday, July 06, 2009
“Pioneer Investing” is one of my favorite ways to cash in on global real estate profits. Usually, this is a way to buy before an apparently isolated region is opened up to everyone else. In other words, before a massive infrastructure spend is made by the government.
This is typically a way to take advantage of an early-in spend on the government’s part.
But sometimes…rarely…this can also mean big infrastructure improvements to an area that is already in a strong, desirable location.
The 2014 world cup coming to Fortaleza is just such a big opportunity. The state of Ceara will get a R9.4 billion ($4.7 billion) infrastructure injection…and R6 billion ($3 billion) will be spent on Fortaleza and the surrounding areas.
Last Thursday Ceara’s Governor Cid Gomes outlined an ambitious list of projects he committed to completing in time for the World Cup. I asked the governor’s office for a detailed list of all projects. The projects are a mix of direct government investment and some public-private partnerships, and 62% of the funds are already in place.
The governor’s excited. He says: “The movement of wealth that an event like this can bring to our region is undoubtedly a landmark in our history.??? The people are exited—the entire state has rallied behind him and this ambitious plan.
What has me excited is the list they sent me from Cid’s office.
R850 million will be spent on tourism projects—gentrification of urban areas and installing attractions like the state aquarium. And big amounts will also go toward things you’d expect—improved Internet access, better gadgets for the police, new equipment for the hospitals, and so on.
But the lion’s share—R6 billion—will be spent on transportation. And with the governor’s list, we’re able to see exactly where we should invest to get in ahead of these big projects. It’s like having a secret blueprint.
At a macro level of course this is very good. Many of these projects will start immediately. This represents an immediate injection into the local economy. This will fuel demand for short-term rentals in the city. Specialist skills will need to be brought in from outside Fortaleza. These people will need somewhere to stay.
With close on a R6 billion spend, the Fortaleza area is going to see a major upgrade in road, rail (Fortaleza is getting a metro system), bridge, port, and airport infrastructure. This will make certain areas more accessible and desirable. This will drive real estate prices higher.
Each of the projects on the governor’s list could create an opportunity to profit. I’m drilling down, project by project, to identify the best opportunities.
A few have immediately caught my eye:
- Visiting teams to the World Cup don’t just arrive the day before the tournament starts. They arrive several weeks in advance and base themselves in a training camp. Their supporters follow in their thousands. Fortim (to the east of Fortaleza) has been identified as an area to host visiting teams’ training camps. The government is already negotiating to host Spain. This project will involve a major upgrade in tourism infrastructure in addition to huge marketing exposure for Fortim.
- Over R100 million has been committed to new roads and road upgrades in the Morro Branco area.
- Road access is on its way to the village of Praia Bela from Aquiraz. R10.3 million has already been allocated to this project. This is a relatively small investment but will have a huge impact on Praia Bela. This area will also benefit from the completions of the bridge and new road from Praia do Futuro to the Beach Park area.
- Further funds have been allocated to upgrading the boardwalk area. And to the east of the boardwalk, the Port of Mucuripe is getting a R120 million passenger terminal. More good news if you acted on my past recommendations like Beach Class to invest in this area.
- The South Line of the Metro Atlanta will cost R1.8 billion (R1.5 billion are already in place). I’m going to be looking for condo projects targeted at the local market that are set to benefit from being on this route.
- R 9.7 million has been allocated to complete the bridge over the Coco River. Another R62 million has been allocated to link this bridge with Fortaleza’s ring road. This is a project that will have a big impact on Praia du Futuro and the area that’s going to open up on the other side of the bridge. The new metro and ring roads around Fortaleza will have a big impact on commercial and residential development.
I’ve requested maps and greater detail on all the infrastructure projects. For example, knowing the metro is coming is no good to us—we must know exactly where it will stop to discover how we can profit.
Over the next month I will be going through this list project by project. This is good news for all investments in Fortaleza. But analyzed right, this list will throw out some exceptional pockets of opportunity. That’s what I’ll home in on.
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