Paladin Realty Partners has made the first investment in Peru on behalf of its latest fund, Paladin Realty Latin America Investors IV, as part of an effort to commit approximately 15 percent to 25 percent of its overall investments in the region to the Andean country over the next few years.
Capitalizing on Peru’s housing deficit is Paladin’s main strategy moving forward. “There’s a huge demand for housing that’s driven by strong economic growth over the past 10 years, a strong demographic shift to a younger population and a healthy banking system,” said Randall Loker, managing director at Paladin and co-manager of the firm’s Peruvian investments.
Paladin’s most recent project, Tucan III, is a homebuilding platform that marks the third joint venture between the Los Angeles-based real estate fund manager and local Peruvian partner CCIASAC, which holds a 5 percent interest in the venture. Tucan III will target the development of for-sale middle- and upper-income housing with Class A and Class AB projects priced in the $2,000 to $3,000 per-square-meter range.
Paladin, which initially is committing $6 million in equity, may scale up Tucan III over the next few years and could produce up to 500 residential units with a total projected sales value of up to $150 million. Paladin representatives said the firm could commit up to $30 million to the project, with CCIASAC committing up to $1.6 million in the long term. The joint venture’s projects are expected be capitalized with approximately 30 percent equity, with buyer deposits and mortgages funding the remainder. The venture also may develop select commercial properties.
Investing in ventures like Tucan III, Paladin has the advantage of being one of the few sophisticated developers in the area. According to Loker, more than 90 percent of the projects in the region are being developed by small “mom and pop” shops handling only one job. “There’s an opportunity to grow the company, build a brand and take a disproportionate share of that market,” he said.
Homebuilder CCIASAC has worked with Paladin on two previous joint ventures, completing five projects and planning for 161 residential and commercial condominium units throughout the city. “Through this new partnership with Paladin Realty, we believe we can develop badly needed housing and commercial properties that will make a positive difference,” said CCIASAC managing director Alonso Gonzalez in a statement.
This is the third investment Paladin has made on behalf of Fund IV. All of its investments thus far have been joint ventures for homebuilding platforms. The firm announced a $100 million joint venture with YOU Inc. in Brazil in March and a $10 million venture with CSC Management and Development in Costa Rica in July. Fund IV, which held a first close on $75.7 million in February, is targeting $400 million in equity.
To read more about Paladin’s plans for Peru, check out the October issue of PERE.