INVESTMENT STRATEGY – THE AMERICAS

U.S. Investments

Since 1995, Paladin Realty has been a boutique real estate investor throughout the U.S., investing to date in nearly 200 properties totaling over US$2 billion of total cost, including more than 15,000 rental apartment units, hotels, office, industrial, and land developments. The firm invests through programmatic joint ventures, as well as select directly managed investments.Paladin Realty has historically targeted market segments and strategies that are typically too small or otherwise challenging for institutional investors to access directly. The firm is currently focused on workforce housing in Southern California and select other supply-constrained markets where affordable rental options are scarce. Paladin Realty focuses on value-added strategies to renovate and reposition under-performing Class B/C rental apartment properties, a market dominated by unsophisticated “mom and pop” owner-operators, where Paladin Realty’s experience across more than US$700 million of such investments since 1995 can enhance value and create sustainable cash flow and long-term appreciation for investors.

Latin America Investments

For more than two decades operating throughout Latin America, Paladin Realty has followed an opportunistic approach in selecting the appropriate product mix and geographic diversification for each investment fund. Weightings vary from fund to fund, depending upon market conditions and other factors, however the overriding objective is to achieve attractive risk-adjusted returns by developing diversified portfolios within the region.

Since 1998, the firm has invested in over 200 properties in Latin America, totaling more than US$4 billion of total cost, across a range of product types in seven countries, including for-sale residential, rental apartments, student housing, senior living, office, lodging and land developments.

The firm’s key investment themes in Latin America are currently:

Residential investments, including for-sale workforce (low- and middle-income) housing, rental apartments, student housing and senior housing targeting the region’s strong demand, which is driven by demographic tailwinds, huge regional housing deficits and new household formation that greatly exceeds new supply. Such investments tend to provide attractive project-level economics (targeting opportunistic returns with low debt), greater portfolio diversification due to their relatively small equity requirements, and attractive risk mitigation features (e.g., shorter investment durations, significant pre-sales, inflation-indexed sales revenues).

Opportunistic commercial investments, including acquiring existing institutional-quality assets at discounts to historical values, select distress opportunities, shorter duration value-added renovations, and select new developments to serve the region’s growing economies.

Income-oriented strategiesincluding acquiring existing institutional-quality commercial properties and select build-to-hold opportunities through separate accounts and other types of investment vehicles, aiming to generate long-term income and appreciation. Paladin Realty is a pioneer in the development of purpose-built rental apartment properties in Brazil.

Conservative project capitalization (low debt) has been a key component of Paladin Realty’s Latin America strategy for more than 20 years. Peak levels of debt financing for individual residential projects typically total 30-40% of total cost, resulting in average portfolio leverage of only 10-20% at any point in time.  Commercial investments are often made on an all-equity basis, although moderate leverage may be obtained in some markets.

Control over the real estate and project-level business plans has always been a central feature of Paladin’s hybrid allocator/operator investment approach. The firm’s investments are typically structured through programmatic joint ventures with seasoned local operating partners, most of which pursue multiple projects within a focused business plan over the span of five to six years.  The firm has an established network of local operating partners in the region, having done business with dozens of companies over the past two decades. In select instances, Paladin Realty develops and manages direct investments without a local operating partner, utilizing the deep real estate development and operating experience of its local professionals in Paladin Realty’s four regional offices.