Decision Making Process
The BTG Pactual team carefully manages each element of the investment decision process in seeking to optimize risk-return ratios when investing in greenfield real estate development projects.
BTG Pactual’s investment committee (the “Investment Committee”) meets on a weekly basis to discuss potential investments. The deal team develops a preliminary presentation on a prospective development project for the Investment Committee based on an on-site visit and the initial available information (such as construction cost, commercial conditions, project concept and developer’s experience).
After initial approval from the Investment Committee, BTG Pactual starts the business due diligence process that includes:
(i) Market Research Analysis
- general overview of new project’s location/region (general characteristics, reference points, average occupancy rate, infrastructure, etc.);
- research regarding competition generally within the local area of the project and identification of the project's key competitors; qualitative and quantitative analysis and comparison of the target project against key competitors;
- recommendation of price and price conditions;
- estimates of how quickly the units will be sold/rented.
(ii) Developer Business Due Diligence
- unaudited and audited financial statements analysis;
- receivables servicing reports (including delinquency and aging);
- property titles;
- land acquisition/land swap contracts;
- existing cost consulting reports;
- insurance policies;
- capital structure;
- loan agreements;
- tax position.
After the business due diligence process, BTG Pactual will draft a Memorandum of Understanding (“MOU”) with the general terms and conditions of the potential investment and exclusivity for the deal during the due diligence process. The MOU is typically subject to further due diligence as well as final Investment Committee approval.
The due diligence process includes: (i) land appraisal report, (ii) cost consulting report, (iii) environmental report and (iv) legal due-diligence report. Along with the due diligence process, BTG Pactual is responsible for the management and coordination of internal and external legal counsels and other professionals preparing and advising on the contracts to be entered into by the Fund and the new developer partner, such as: shareholders agreements, real estate management agreements and financial management agreements.
Environmental report details: Environmental inspection, environmental aspect, environmental impact, environmental damage, environmental liability, potentially contaminating activity and potentially contaminated area