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Argentina Real Estate Developer TGLT's IPO Raises $55M

Source: WSJ, Dow Jones Newswires
By: Shane Romig

Argentine real estate developer TGLT wrapped up Argentina's first initial public offering in two and a half years on Friday, raising ARS220 million ($55 million) in fresh funds as it moves forward with ambitions plans to develop luxury housing projects in Argentina and Uruguay.

The sale price of ARS9.034 per share was well within the company's expectations and the cash raised will be used to fuel organic growth, Federico Weil, TGLT president and founder, told Dow Jones Newswires in an interview.

The company will now have 48 million shares listed on the Buenos Aires Stock Exchange and overseas as Global Depositary Shares with a value of ARS434 million. The IPO brings TGLT's total market capitalization to ARS636 million.

After the IPO, Brazil's PDG Realty S/A Empreendimentos e Participacoes (PDGR3.BR) remains the largest shareholder in the company, and together with the management team will own over 50% of the company's shares.

PDG is one of the largest real estate developers in Brazil, and investment bank Credit Suisse recently highlighted the firm as one of its top picks for real-estate investments across the developing giants of Brazil, Russia, India and China.

TGLT first filed its IPO documents with the Argentine authorities in late 2009, but the slow approval process and market instability delayed the offering.

However, Argentina's stock market has been on a tear in recent weeks, with the Merval Index of leading shares rising 12.8% in October and closing the month at a record high.

The company looks set to benefit from gangbuster growth in Argentina this year. The Central Bank estimates that gross domestic product will rise 9% in 2010.

Real estate values in Argentina have also performed strongly, as Argentines habitually look to property as a safe haven in both good times and bad, Weil said. Land is seen as a hedge against inflation and as a safe way to save, considering that real estate is generally priced in U.S. dollars and "has always maintained its value," he said.

Many investors were badly burned by Argentina's economic crash of 2001 and 2002, while more recently, unorthodox economic policies and confrontational politics have kept money on the sidelines. Economists estimate that the annual inflation rate is running at between 20% and 25%.

TGLT's growth plans focus on five of the largest cities in Argentina -- Buenos Aires, Rosario, Cordoba, Mendoza and Salta, as well as in Uruguay's capital Montevideo, Weil said.

The fresh cash will be used to purchase new properties, and the company has about ARS2 billion in potential sales volume in the pipes from its current projects, he said.

Financing is costly and frequently hard to secure in Argentina due to political and economic instability which makes lenders hesitant to offer long-term credit. TGLT has focused on financing its developments through a host of other means such as pre-sales, land swaps and vender swaps, rather than taking on large debt, Weil said.

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