Terranum Capital has held a final close on its debut real estate fund, Terranum Capital Latin America Real Estate Fund I, raising a total of $235 million. Limited partners comprised pension plans in Peru and Colombia; US and European institutional investors; and Latin American family offices. The fund held a first close in March 2012.
Latin America Real Estate Fund I will primarily be focused on the development of low- and middle-income housing and retail projects in Latin America and target net returns of 20 percent. About 70 percent to 75 percent of the vehicle’s capital will be invested in Colombia and Peru, while the remainder will be in Mexico.
Terranum Capital to date has invested more than $65 million, or 27 percent, of the fund’s capital on five housing projects. These include Sotavento, a middle-income residential project in Bogota in a joint venture with local developer Acierto Inmobiliario, and Las Praderas de Carabayllo, a middle-income housing development in the Carbayllo district of Lima, in partnership with local developer Lider. Terranum typically pursues projects that require $15 million to $20 million in equity, of which it contributes $8 million to $12 million.
The investment opportunities in the three countries comes from the lack of liquidity for residential developers, said Gregorio Schneider, managing partner and chief investment officer of Terranum Capital. “Generally, banks are very conservative and, for early stages of projects, they don’t participate,” he said. “They finance once they see pre-lease. That’s where developers need some help on the capital side.”
However, Schneider noted that the firm has taken a more cautious approach to the region in recent months. “The macro picture in the world is changing,” he said. “You need to look at it with the right eyes.” With respect to Latin America, currency moves, inflation and commodity prices and how they will affect the economies in Colombia, Peru and Mexico, are all major concerns, he said.
Schneider previously served as head of Och-Ziff Capital Management’s emerging markets program. He left the private equity firm in 2012 to help start Terranum Capital in partnership with his former Och-Ziff colleague Daniel Grunberg and Terranum Investment, the alternative investment division of Terranum, the Bogota-based real estate development and services firm jointly owned by investment bank Estrategias Corporativas and Colombia’s Santo Domingo family. Terranum Capital currently has 11 staff in its offices in Bogota, New York and Lima and plans to hire an additional two professionals to open an office in Mexico City this summer.