Sam Zell and former partner Gary Garrabrant ready themselves for battle in a field they once conquered together: emerging-markets real estate. Both are preparing funds to buy stakes in property companies in Latin America, China and India.
Garrabrant, who stepped down as chief executive of Equity International in 2012, hopes to raise $1 billion at his new firm, Jaguar Growth Partners. While Zell, the billionaire chairman of Equity International, wants to raise about $600 million. Both men pioneered emerging-markets real estate investing more than 15 years ago when Equity International made it big in Mexico and Brazil.
Now, potential investors ask who was responsible for the previous gains, and who will be responsible for them in the future.
After U.S. commercial real estate values have risen in the past five years, many big real-estate investors worry values have peaked in the U.S. and seek to put their money abroad. "If you want more exposure to real estate, you should be looking outside the U.S., including emerging markets," said Scott Simon, chief investment officer of the Fire and Police Pension Association of Colorado.
Zell and Garrabant were the first and by most measures have been the most successful in the industry. "It will be interesting to see where the major investors put their money," said Rick Singer, a founder of New York-based property investor Eastbridge Group. "I'd be shocked if they share between the two funds."