Paladin makes first investment in Colombia

The Los Angeles-based real estate fund manager’s entry into the South American nation is part of a larger strategy to expand into other Latin American markets over the next two years.

 Paladin Realty Partners has closed on its first real estate deal in Colombia with the formation of Pali-Trocha, a homebuilding platform based in Bogota, the country’s capital and largest city. The platform was launched in partnership with La Trocha, a local family development firm focusing on housing and commercial projects in the city’s upper income neighborhoods.

On behalf of its third Latin American real estate fund, Paladin Realty Latin America Investors III, Paladin will commit $18 million to the $20 million platform, with La Trocha contributing the remainder. The joint venture will focus on residential infill development and boutique hotels in urban Bogota, as well as opportunistic land and commercial deals in suburban areas outside of the city.

Paladin and La Trocha have identified eight projects that will be developed through the homebuilding platform over a five-year period, using approximately 70 percent equity and 30 percent debt. Upon completion of the projects, the partners anticipate that the platform will carry a potential sales value of at least $90 million.

“We’ve been looking in Colombia for about eight years,” Paladin vice president Pablo Sala told PERE. “We see good profitability in the market.” He pointed to Colombia’s robust economy – with projected growth of 4 to 5 percent over the next two years, low levels of debt as a percentage of GDP and a strong banking sector.

“Next to Brazil, Colombia and Peru are the two top markets right now” in Latin America, said Fred Gortner, managing partner at Paladin. “They’re the two economies that were the most resilient during the last financial crisis,” posting 1.5 percent real income growth in 2009. “We feel these two economies will weather any future storm better than most.”

Paladin is considering half a dozen other prospective joint ventures in Colombia, both in Bogota and other markets. The firm anticipates making a couple of more investments in the country through Latin America Investors III, which closed on $454 million in equity in 2009 and currently is about 80 percent invested. PERE understands that Paladin currently is raising Latin America Investors IV, which is targeting a similar fund size. The firm declined to comment on the new fund.

Paladin’s new joint venture follows recent forays into Colombia by other private equity real estate firms. Last summer, Chicago-based Equity International completed a $75 million investment in Terranum Development, a Bogota-based commercial real estate investor and developer, and New York’s Avenida Capital announced in September the launch of its first institutional fund targeting retail, commercial, residential and industrial properties in Colombia’s major cities.

Colombia, however, isn’t the only new Latin America market that Paladin is eyeing. The fund manager also has been studying the Panama, Dominican Republic and Uruguay markets and anticipates making investments in the three countries within the next year or two.