TVP Management, a developer cum fund manager based in the Dominican Republic, is raising its first fund, TVP Capital Fund, with an equity goal of $60 million and a hard cap of $100 million. The firm is expected to close the first round of fundraising for the vehicle, which will invest in residential and commercial real estate projects in the Latin American nation, in August.
TVP Capital Fund will be divided into three sub-funds: a real estate development sub-fund, an affordable housing sub-fund and a rental income sub-fund. The firm currently is selling shares of the real estate development sub-fund, which will target housing and commercial development projects serving the middle class in the Dominican Republic, with the first round of fundraising expected to close at the end of the month.
The closing for the second tranche for the sub-fund, which has a target size of $20 million, is scheduled for September 30, with additional closings expected at the end of each quarter for the next three years. The firm will invest a minimum of $100,000 on behalf of the sub-vehicle, which has a targeted internal rate of return of 10 percent to 15 percent.
Additionally, the company plans to begin selling shares of the affordable housing and rental income sub-funds in the coming months, most likely in the fourth quarter. The affordable housing sub-fund, which also is targeting 10 percent to 15 percent returns, will focus on developing residential projects for lower middle class families. Meanwhile, the firm is seeking an IRR of 6 percent to 10 percent for the income sub-fund, which will be geared toward investments in income-generating office and medical properties and parking facilities. One investment being made on behalf of the sub-fund is Corporativo 20/10, a 1,400 square-meter (15,070 square-foot) office building in the commercial and financial center of Santo Domingo. Both sub-vehicles have projected sizes of $20 million and minimum investments of $100,000.
Over the last decade, the real estate sector in the Dominican Republic has experienced a significant increase in the development of middle and upper-class homes, office properties, shopping centers and infrastructure, primarily in the capital of Santo Domingo but also in other cities in the country. While compound growth in the country’s property sector has averaged 8 percent annually over the last 10 years, that growth has been below market demand over the last three years as result of global economic instability.
“It is expected that this trend will start to change in the second half of 2013, when the monetary measures to revive the economy will take effect and banks are able to provide better facilities for shoppers,” including a reduction of bank interest rates and availability of fixed rates for longer-term loans, TVP Management noted in documents to investors. Additionally, “there is also the political will to accelerate the pace of private construction,” with the passage of legislation in 2011 to help reduce the deficit of more than one million homes in the Dominican Republic.
Longer term, TVP Management has plans to expand its investment focus to other parts of Latin America. The firm is a newly-created entity that replaces Promotora TVP, which was formed in May 2010 and currently is developing five projects totaling approximately $40 million. Promotora’s predecessor companies, Construtora Sofisa and T&B Construtora, previously built some $50 million of real estate projects in aggregate. The local real estate families that oversaw the two firms, the Tejeras and Troncosos, are both represented on TVP Management’s board, with Carlos Tejera serving as the firm’s fund manager.