Washington, D.C., May 3, 2005—
The International Finance Corporation, the private sector arm of the World Bank Group, approved an equity investment of up to the lesser of $15 million or 19 percent of the limited partnership interests in Paladin Realty Latin America Investors II, LP. Paladin is expected to raise $105 million in funding.
The fund will invest at least 70 percent of its assets in housing, with a target of at least 51 percent in affordable and middle-income housing, and the rest in industrial, commercial, and other properties. The fund manager is Palador Realty I GP, LLC, a Delaware limited liability company.
The fund is expected to focus on projects in Brazil, Chile, Mexico, and Central America. One innovative feature is that it will enter into joint ventures with local Latin American developers to execute deals and put in place operating agreements to develop and manage acquired properties. The local partners will be required to invest substantial capital alongside the fund’s equity investment. In addition to capital, the fund brings technical advice, in-country management, underwriting of contracts, structuring of investments, currency mitigation, and experience in valuation of projects.
The fund’s developmental impact is high. In the past decade, several affordable housing programs have been sponsored by Latin American governments to produce more reasonably priced housing units, for purchase and for rent. Brazil, Chile, and Mexico are at the forefront of such programs. However, in light of fiscal challenges that Latin American governments are currently facing, no additional funding has become available to build affordable housing. For this reason, specialized private real estate companies are looking for innovative, yet financially rewarding solutions to fill the housing need.
Haydee Celaya, IFC’s Director for Private Equity and Investment Funds, added, “the Paladin team has invested in affordable and middle-income housing projects in Brazil, Chile, Mexico, and Central American countries through its predecessor fund and achieved favorable returns for investors. This investment in Paladin complements IFC’s activities in housing finance, such as financing to Su Casita and Hipotecaria Nacional in Mexico and Colombia’s Titularizadora Colombiana, as well as IFC’s support to develop secondary mortgage markets in Brazil, Colombia, and Mexico.”
IFC’s strategy for funds is to invest in those that are managed by successful and experienced teams, have a solid track record, and execute value-added strategies. IFC’s experience shows that there is a strong relationship between fund performance and development impact, and that the quality of the fund manager is the main driver of performance.
The mission of IFC (www.ifc.org) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY04, IFC has committed more than $44 billion of its own funds and arranged $23 billion in syndications for 3,143 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY04 was $17.9 billion for its own account and $5.5 billion held for participants in loan syndications.
