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Eduardo Costantini anticipated what the risk of a hypermarket is - La Nación
Source:
www.lanacion.com.ar
August 04, 2023
By: Carla Quiroga
In an exclusive one-on-one, the businessman anticipated that there is no more time to delay "order": "Argentina has an endemic disease that is beyond its resources"
With the participation of more than 200 businessmen from the industry, LA NACION held the eighth edition of the Real Estate Summit, the meeting that anticipates what is to come in the real estate market in a context in which the political scenario and exchange volatility affect the macroeconomic expectations. In addition, he stated that he discounts a change of government.
-How do you maintain your passion for investing in a country with so many macro roller coasters and changes in the rules of the game?
I was born in that Argentina, that is, I never experienced economic stability, or rather only for a few, relatively short periods. For example, in the 1990s I had some good years. Argentina has an endemic disease that is beyond its resources. So inflation is classic, the deficit, the reserve crisis, the disparity of relative prices always upsets the macro.
"Argentina has no resources, the State is bankrupt, it has zero reserves, a structural deficit, there is a lack of international credit," said the businessman.
What are your prospects then?
The short term is a blender. It's all disjointed. But for the medium term I expect a change for the better. Argentina has no resources, the State is bankrupt, it has zero reserves, a structural deficit, and a lack of international credit . There is a big mess. That is why there is no alternative but to return to order and we are on that path towards long-term stability that at 77 years of age I never experienced.
-To achieve that stability, should the rulers assume the political costs of ordering the macro?
In the short term yes. What happens is that achieving order should be a State policy. That order begins with the institutional and moral, ethical and macroeconomic stability. The first pillar is to order the public accounts, that is to say, that the State does not spend more, which is what ends up leading it to issue more, to intervene in the Central Bank, to delay the dollar, unbalancing all relative prices. You run out of reservations. When you follow the mess, the macro bills you. The stocks are the first slap of the politician to delay the dollar, so that inflation does not come to the surface or comes out with less virulence.
Costantini: "To achieve stability, the rulers must assume the political cost"
-But, there is still inflation...
And of course, ultimately, we have the inflation that we have with the stocks, fair prices, regulated prices...
-And how do you get out of all this: gradualism or shock?
That is a difficult question. I believe that in the experience of the economies that had such imbalances, it took several years for the inflation rate to come down. You can't do it from one year to the next. In reality, the countries that did so also reached a political agreement that is not seen in Argentina. The country has a political problem, it does not have any insurmountable material problem. On the contrary, if you see the potential that Argentina has, it is very strong in everything: in agriculture, in mining, in the knowledge industry, in the amount of private sector reserves abroad. So it is politics that has to give that answer that it never stops giving, because there is no statesman who puts priority in order. Today a lot is handled for the short term, to prevail, to be elected in the next election.
-What should be the value of the dollar?
The official dollar is very cheap and the free one is too high. The reality is in the middle, but it is like shooting at it while it is moving, because when you begin to readjust, to balance, to calibrate the different variables, a devaluation occurs that will inexorably occur. In other words, there is no way that it cannot be devalued.
You have to devalue it because there are no reserves and the demand for this dollar is infinite. All this will lead to a jump in inflation in the short term. So obviously the equilibrium dollar is going to go up but it has to be much lower than the free. What a good economic plan that has political support does is modify expectations, change the direction of dollar flows. And you have to manage that because there is going to be an accelerated change in expectations for the better: then dollars come in, you delay it, you fall asleep on your laurels with that backwardness of the dollar and that also produces an imbalance in the long term. So you always have to calibrate the variables, but based above all on the fiscal balance.
-What should a plan focused on fiscal balance have?
Within the fiscal balance it is necessary to achieve the social viability of the change. You can't make an adjustment outright. You have to make the State more efficient and the allocation of resources also more efficient. It is not a problem that can be solved overnight with a shock plan. If fiscal balance is achieved, the government does not need to borrow excessively because it does not need to pay for that excess spending.
Today what is happening is that since the Government cannot borrow because they do not lend it the totality it needs, what it does through the Central Bank is issue money, which ends up generating an increase in prices. If you have your household finances in order, you don't have to go into debt. This is the pillar for ordering the monetary variables and achieving price stability, which is what makes the currency strengthen and what makes savings increase. We do not have currency and it is essential that there be currency and national savings. That is the ABC of a country.
-What makes you think that we would order ourselves... if in Argentina we have been repeating this story for years. Why now?
Because if it's not done, as we've already hit rock bottom, you have no way of financing day to day, that is, public debt has a yield of 30%. The Government is selling bonds with a 50% cost, nonsense. So there is no way to finance yourself, otherwise the risk is a hyper. By obligation you have to make a return to order. I think there will be a political change as well. I don't think the ruling party will win and it seems to me that we are heading towards an economic orthodoxy out of obligation and also out of ideology because I think the opposition will win.
-And this economic orthodoxy is what could save us from a hyper…
I think so.
-You spoke of devaluation, how will it impact the price of properties that are sold in dollars?
Devaluation is devalued all the time. The free dollar is worth what it is worth and actually in Argentine history, every time there was a currency run, property sales fell and property values too. That is an almost inexorable axiom, except for the pandemic that after 50 years as a real estate investor we are experiencing, for example, in Nordelta and Puertos an increase in sales and prices in dollars even with a currency run. Something that happened through a very strong external effect, which was the change in the desire of families to leave the apartments punished by the situation in the city.
Except for this situation, you have an inverse correlation between the dollar and the properties. Now, it is also true that we sold the BBVA building due to regulatory issues that prevented the bank from sending profits abroad or could not dollarize. So, what is taking place today is also the purchase motivated to protect those pockets that must remain in pesos. So, in this context, we move with sales of the different projects, we navigate and produce non-euphoric sales.
-Are you talking about a change of cycle in the real estate market?
What has happened in recent months is that the market began to discount the change of government late because in the previous cycle, with the possibility of a change of government during Cristina's second presidency, it began to discount earlier -for the better-, a political change. Now, a few months ago that began to happen. That is why the stock market went up, Argentine bonds went up and also property.
-Brick is a refuge of value here in the country and in the world...
You have to see how it is segmented. You have the investment in offices that fell in general due to the lower occupation and the emigration of work to peripheral cities and the home office. There the increase in rates hits the investor more because it is done with debt and little capital. Then the inflation that has almost doubled the cost of construction in the United States in the last ten years and there is that protection of the brick against the dollar. Then you have winning cities like Florida where land went up three times in dollars.
-And today prices in Miami hit a ceiling…
I don't know that. I am suspicious of the values reached. For example, when we built Bal Harbor in 2014, the land and construction cost US$8,000/m² and today it is US$20,000/m². In this case, it happened because the State has made a structural transformation: it has absorbed people, companies, so property has been greatly appreciated. It's not the same thing that happened in New York.
-Returning to the local market, something countercyclical is happening, properties are being sold in pre-election times
It is selling but in an incipient way. It is not that anything is sold. Nordelta and Puertos are doing relatively well. Nordelta is better because there is a neighborhood and a half left and people know the shortage and that it will increase in dollars. And in Capital projects, the improvement is relative.
-Puertos was not harmed by the phenomenon of "return to the city"?
No, no, not at all.
Did prices hit the floor?
The market is very selective due to property specification changes. The new projects respond better: they have amenities such as the gym, swimming pools, open spaces, meeting places. These are things that people value a lot compared to property from 30 or 40 years ago that does not have those services and that are being punished by the lawsuit. So what happens today is that you have transfer of families from one project to another.
-What happened to the land you have in Catalinas? What will you build?
In Catalinas you have a case of flexibility. We had a spectacular project for an American studio, they were state-of-the-art offices: 92,000 square meters of our own with large terraces, but the corporate market is a hard hit market. We were afraid of structural demand in the medium, long term. So we turned it into a mixed-use project that in principle will be a residential tower with all the attributes that the new demand requires.
And of that mixed project, what percentage will be residential and how much will be offices?
We do not know. Now it is conceived as all residential with a great activity on the ground floor of shops, art projects, open-air designs, closed spaces, work spaces, studios with pools on the 40th floor, and a club on the 12th floor.
Will it be a vertical city like the project being built on Avenida Huergo?
By scale it is larger: it will be 240 meters of unification from zero. There is a project with our co-owners, because there are seven buildings and Madero Avenue is going to be recycled, expanding the sidewalks, making an art project, urban furniture, which will totally change the area.
How much will you invest in that project?
Considering the value of the land, it will be about US$350, US$400 million.
-How do you see the potential of that area?
There are more than 200,000 meters, seven plots of land that will generate a new place in the city of Buenos Aires that will also provide services to Catalinas, which on its ground floor do not have gastronomic services or places and which lacks life because it was conceived at another time. With these ventures there will be connectivity with the other side of Madero Avenue, so people from Catalinas and other places will receive for the events that we are going to do.
-At some point the square meter in Buenos Aires will reach that of properties in first world cities?
No, no, equate I don't think so. That would be Argentina a green year, if politics, the level of corruption and macro stability are not fixed…. Now the value of the properties in the country is ridiculous, because if you take the relative prices in Uruguay they cost exactly 100% more, half an hour from here. They are cities that offer you much fewer services and where building costs exactly twice as much.
Another example: in Miami a building built without the land you have to think about an investment of US$8,000, US$9,000/m². When I went to Miami during the 2009 crisis, the first piece of land I bought - which was Oceana Key Biscayne - was cheaper than it was in Buenos Aires. I bought for less than US$2,000/m² on the water, four blocks on a spectacular island, while behind the Malba a piece of land was sold for US$4,500/m². But now that piece of land in Miami costs US$15,000/m². In other words, it multiplied by 10 in dollars from the beginning to the end of the 2008-2009 crisis to today. This means that relative prices change and today building super high end on the water with the cost of the land costs US$18,000 and here would come a decimal of that.
What is the advice you give to an investor?
You have to diversify. The same today who invests in a property as a property for use also seeks quality of life. That was an effect of the pandemic: to revalue the quality of life of families.
-In this context, are there opportunities?
There are opportunities because the offer will be different and more aligned with what is sought, which is what I mentioned previously about the amenities, that is, if the land is well located, its width, if it is conducive to what you want to develop, for the piece architecture, there is a comparative advantage over the other departments that have its age and people are clearly going to want what you are building over the above.
-What would you say to a young man who is starting a business, who dreams of being a developer in the sector and who is starting to encounter some obstacles along the way?
Something that is encouraging is that people reward the honesty of a project. People value that you keep your word, do things with creativity, with content: Coldplay came and filled River. Malba explodes with people because if you do good things, the Argentine responds. Of course, it is unfortunately very segmented because many people do not have the resources to be able to enjoy it, but those who do value it and respond.
Source:
Eduardo Costantini anticipó cuál es el riesgo de una híper y a cuánto debería estar el dólar
En un mano a mano exclusivo, el empresario anticipó que no hay más tiempo para dilatar “el orden”: “La Argentina tiene un mal endémico que está por encima de los recursos que tiene”
www.lanacion.com.ar
August 04, 2023
By: Carla Quiroga
In an exclusive one-on-one, the businessman anticipated that there is no more time to delay "order": "Argentina has an endemic disease that is beyond its resources"
Euardo Costantini stated at the LA NACION event that "we have to make a return to order. I think there will be a political change as well. I don't think the ruling party will win and it seems to me that we are going towards an economic orthodoxy out of obligation and also out of ideology because I believe that the opposition will win.With the participation of more than 200 businessmen from the industry, LA NACION held the eighth edition of the Real Estate Summit, the meeting that anticipates what is to come in the real estate market in a context in which the political scenario and exchange volatility affect the macroeconomic expectations. In addition, he stated that he discounts a change of government.
Industry benchmarks analyzed the future of property prices, especially if one takes into account that real estate is dollarized. And they agreed on favorable prospects for a key sector in the development of the country. At the end of the annual meeting, Eduardo Costantini, CEO of Consultatio and creator of Nordelta, was in charge of analyzing not only the future of investments in bricks but also what is in store for the Argentine economy: devaluation, the risks of hyperinflation, shock or gradualism and what will happen to the real estate market were some of the topics on which he responded.-How do you maintain your passion for investing in a country with so many macro roller coasters and changes in the rules of the game?
I was born in that Argentina, that is, I never experienced economic stability, or rather only for a few, relatively short periods. For example, in the 1990s I had some good years. Argentina has an endemic disease that is beyond its resources. So inflation is classic, the deficit, the reserve crisis, the disparity of relative prices always upsets the macro.
"Argentina has no resources, the State is bankrupt, it has zero reserves, a structural deficit, there is a lack of international credit," said the businessman.
What are your prospects then?
The short term is a blender. It's all disjointed. But for the medium term I expect a change for the better. Argentina has no resources, the State is bankrupt, it has zero reserves, a structural deficit, and a lack of international credit . There is a big mess. That is why there is no alternative but to return to order and we are on that path towards long-term stability that at 77 years of age I never experienced.
-To achieve that stability, should the rulers assume the political costs of ordering the macro?
In the short term yes. What happens is that achieving order should be a State policy. That order begins with the institutional and moral, ethical and macroeconomic stability. The first pillar is to order the public accounts, that is to say, that the State does not spend more, which is what ends up leading it to issue more, to intervene in the Central Bank, to delay the dollar, unbalancing all relative prices. You run out of reservations. When you follow the mess, the macro bills you. The stocks are the first slap of the politician to delay the dollar, so that inflation does not come to the surface or comes out with less virulence.
Costantini: "To achieve stability, the rulers must assume the political cost"
-But, there is still inflation...
And of course, ultimately, we have the inflation that we have with the stocks, fair prices, regulated prices...
-And how do you get out of all this: gradualism or shock?
That is a difficult question. I believe that in the experience of the economies that had such imbalances, it took several years for the inflation rate to come down. You can't do it from one year to the next. In reality, the countries that did so also reached a political agreement that is not seen in Argentina. The country has a political problem, it does not have any insurmountable material problem. On the contrary, if you see the potential that Argentina has, it is very strong in everything: in agriculture, in mining, in the knowledge industry, in the amount of private sector reserves abroad. So it is politics that has to give that answer that it never stops giving, because there is no statesman who puts priority in order. Today a lot is handled for the short term, to prevail, to be elected in the next election.
-What should be the value of the dollar?
The official dollar is very cheap and the free one is too high. The reality is in the middle, but it is like shooting at it while it is moving, because when you begin to readjust, to balance, to calibrate the different variables, a devaluation occurs that will inexorably occur. In other words, there is no way that it cannot be devalued.
You have to devalue it because there are no reserves and the demand for this dollar is infinite. All this will lead to a jump in inflation in the short term. So obviously the equilibrium dollar is going to go up but it has to be much lower than the free. What a good economic plan that has political support does is modify expectations, change the direction of dollar flows. And you have to manage that because there is going to be an accelerated change in expectations for the better: then dollars come in, you delay it, you fall asleep on your laurels with that backwardness of the dollar and that also produces an imbalance in the long term. So you always have to calibrate the variables, but based above all on the fiscal balance.
-What should a plan focused on fiscal balance have?
Within the fiscal balance it is necessary to achieve the social viability of the change. You can't make an adjustment outright. You have to make the State more efficient and the allocation of resources also more efficient. It is not a problem that can be solved overnight with a shock plan. If fiscal balance is achieved, the government does not need to borrow excessively because it does not need to pay for that excess spending.
Today what is happening is that since the Government cannot borrow because they do not lend it the totality it needs, what it does through the Central Bank is issue money, which ends up generating an increase in prices. If you have your household finances in order, you don't have to go into debt. This is the pillar for ordering the monetary variables and achieving price stability, which is what makes the currency strengthen and what makes savings increase. We do not have currency and it is essential that there be currency and national savings. That is the ABC of a country.
-What makes you think that we would order ourselves... if in Argentina we have been repeating this story for years. Why now?
Because if it's not done, as we've already hit rock bottom, you have no way of financing day to day, that is, public debt has a yield of 30%. The Government is selling bonds with a 50% cost, nonsense. So there is no way to finance yourself, otherwise the risk is a hyper. By obligation you have to make a return to order. I think there will be a political change as well. I don't think the ruling party will win and it seems to me that we are heading towards an economic orthodoxy out of obligation and also out of ideology because I think the opposition will win.
-And this economic orthodoxy is what could save us from a hyper…
I think so.
-You spoke of devaluation, how will it impact the price of properties that are sold in dollars?
Devaluation is devalued all the time. The free dollar is worth what it is worth and actually in Argentine history, every time there was a currency run, property sales fell and property values too. That is an almost inexorable axiom, except for the pandemic that after 50 years as a real estate investor we are experiencing, for example, in Nordelta and Puertos an increase in sales and prices in dollars even with a currency run. Something that happened through a very strong external effect, which was the change in the desire of families to leave the apartments punished by the situation in the city.
Except for this situation, you have an inverse correlation between the dollar and the properties. Now, it is also true that we sold the BBVA building due to regulatory issues that prevented the bank from sending profits abroad or could not dollarize. So, what is taking place today is also the purchase motivated to protect those pockets that must remain in pesos. So, in this context, we move with sales of the different projects, we navigate and produce non-euphoric sales.
-Are you talking about a change of cycle in the real estate market?
What has happened in recent months is that the market began to discount the change of government late because in the previous cycle, with the possibility of a change of government during Cristina's second presidency, it began to discount earlier -for the better-, a political change. Now, a few months ago that began to happen. That is why the stock market went up, Argentine bonds went up and also property.
-Brick is a refuge of value here in the country and in the world...
You have to see how it is segmented. You have the investment in offices that fell in general due to the lower occupation and the emigration of work to peripheral cities and the home office. There the increase in rates hits the investor more because it is done with debt and little capital. Then the inflation that has almost doubled the cost of construction in the United States in the last ten years and there is that protection of the brick against the dollar. Then you have winning cities like Florida where land went up three times in dollars.
-And today prices in Miami hit a ceiling…
I don't know that. I am suspicious of the values reached. For example, when we built Bal Harbor in 2014, the land and construction cost US$8,000/m² and today it is US$20,000/m². In this case, it happened because the State has made a structural transformation: it has absorbed people, companies, so property has been greatly appreciated. It's not the same thing that happened in New York.
-Returning to the local market, something countercyclical is happening, properties are being sold in pre-election times
It is selling but in an incipient way. It is not that anything is sold. Nordelta and Puertos are doing relatively well. Nordelta is better because there is a neighborhood and a half left and people know the shortage and that it will increase in dollars. And in Capital projects, the improvement is relative.
-Puertos was not harmed by the phenomenon of "return to the city"?
No, no, not at all.
Did prices hit the floor?
The market is very selective due to property specification changes. The new projects respond better: they have amenities such as the gym, swimming pools, open spaces, meeting places. These are things that people value a lot compared to property from 30 or 40 years ago that does not have those services and that are being punished by the lawsuit. So what happens today is that you have transfer of families from one project to another.
-What happened to the land you have in Catalinas? What will you build?
In Catalinas you have a case of flexibility. We had a spectacular project for an American studio, they were state-of-the-art offices: 92,000 square meters of our own with large terraces, but the corporate market is a hard hit market. We were afraid of structural demand in the medium, long term. So we turned it into a mixed-use project that in principle will be a residential tower with all the attributes that the new demand requires.
And of that mixed project, what percentage will be residential and how much will be offices?
We do not know. Now it is conceived as all residential with a great activity on the ground floor of shops, art projects, open-air designs, closed spaces, work spaces, studios with pools on the 40th floor, and a club on the 12th floor.
Will it be a vertical city like the project being built on Avenida Huergo?
By scale it is larger: it will be 240 meters of unification from zero. There is a project with our co-owners, because there are seven buildings and Madero Avenue is going to be recycled, expanding the sidewalks, making an art project, urban furniture, which will totally change the area.
How much will you invest in that project?
Considering the value of the land, it will be about US$350, US$400 million.
-How do you see the potential of that area?
There are more than 200,000 meters, seven plots of land that will generate a new place in the city of Buenos Aires that will also provide services to Catalinas, which on its ground floor do not have gastronomic services or places and which lacks life because it was conceived at another time. With these ventures there will be connectivity with the other side of Madero Avenue, so people from Catalinas and other places will receive for the events that we are going to do.
-At some point the square meter in Buenos Aires will reach that of properties in first world cities?
No, no, equate I don't think so. That would be Argentina a green year, if politics, the level of corruption and macro stability are not fixed…. Now the value of the properties in the country is ridiculous, because if you take the relative prices in Uruguay they cost exactly 100% more, half an hour from here. They are cities that offer you much fewer services and where building costs exactly twice as much.
Another example: in Miami a building built without the land you have to think about an investment of US$8,000, US$9,000/m². When I went to Miami during the 2009 crisis, the first piece of land I bought - which was Oceana Key Biscayne - was cheaper than it was in Buenos Aires. I bought for less than US$2,000/m² on the water, four blocks on a spectacular island, while behind the Malba a piece of land was sold for US$4,500/m². But now that piece of land in Miami costs US$15,000/m². In other words, it multiplied by 10 in dollars from the beginning to the end of the 2008-2009 crisis to today. This means that relative prices change and today building super high end on the water with the cost of the land costs US$18,000 and here would come a decimal of that.
What is the advice you give to an investor?
You have to diversify. The same today who invests in a property as a property for use also seeks quality of life. That was an effect of the pandemic: to revalue the quality of life of families.
-In this context, are there opportunities?
There are opportunities because the offer will be different and more aligned with what is sought, which is what I mentioned previously about the amenities, that is, if the land is well located, its width, if it is conducive to what you want to develop, for the piece architecture, there is a comparative advantage over the other departments that have its age and people are clearly going to want what you are building over the above.
-What would you say to a young man who is starting a business, who dreams of being a developer in the sector and who is starting to encounter some obstacles along the way?
Something that is encouraging is that people reward the honesty of a project. People value that you keep your word, do things with creativity, with content: Coldplay came and filled River. Malba explodes with people because if you do good things, the Argentine responds. Of course, it is unfortunately very segmented because many people do not have the resources to be able to enjoy it, but those who do value it and respond.
