Paladin Realty Forms JV with Brazilian Homebuilder, YOU
- Mar 20, 2013
Paladin Realty Partners, L.L.C., a real estate investment fund manager focused on Latin America, has formed a new programmatic joint venture with YOU Inc. Incorporadora e Participações S.A. to develop middle-income housing in São Paulo, Brazil.
“This new investment is right in the sweet spot of Paladin Realty’s strategy in Latin America for more than 15 years—programmatic joint ventures to build affordable, for-sale housing targeting the region’s growing workforce and middle class,” Frederick Gortner, Paladin Realty Partners’ managing director, told Commercial Property Executive. “Low- and middle-class housing ventures have accounted for about 60 percent of the capital we’ve invested across the region to date, totaling more than 25,000 residential units and $4 billion of total cost.”
The investment was made by affiliates of Paladin Realty’s fourth institutional fund focused on Latin America, which recently closed. Paladin Realty is investing up to $75 million to the joint venture, with YOU Inc. committing approximately $32 million. With construction financing equal to 30-40 percent of total cost, this new “YP II Homebuilding Platform” has the potential to develop more than 2,500 housing units with a total value exceeding R$1 billion.
Paladin Realty and YOU Inc.’s founder, Abrão Muszkat, have been in business together since 1999 and spans three of Paladin Realty’s prior investment funds. In total, Paladin and Muszkat have invested together in 41 projects, comprising more than 6,600 units totaling more than R$2 billion of value (about $1 billion U.S. at the current exchange rate).
“We always prefer to invest with proven and long-standing local partners in the region,” Gortner said. “(Muszkat) has one of the most accomplished homebuilding track records in Brazil, growing his previous company (Even Constructore E Incorporoadora S.A.) into one of the most successful public homebuilders in Sao Paulo.”
According to Gortner, like other countries in Latin America, Brazil is benefitting from three drivers of housing demand: favorable demographics, rising prosperity and increasing access to long-term mortgage credit.
“Even against the backdrop of slow economic growth, huge housing deficits persist in Brazil, with new construction struggling to keep pace with growing demand for low- and middle-income housing,” he said. “YOU Inc. has a substantial pipeline of projects for the new joint venture platform, which the company expects to acquire shortly.”