Investment Strategy

Paladin Realty generally follows an opportunistic approach in selecting the appropriate product mix and geographic diversification for each investment fund. Weightings will vary from fund to fund, depending upon market conditions and other factors, however the overriding objectives are to achieve attractive risk-adjusted returns through highly-diversified portfolios.

Since 1998, the firm has committed capital to seven countries in the region across a range of product types, including for-sale residential, apartments, student housing, office, industrial, lodging and land developments. The firm is currently focused primarily on:

  1. Residential investments, including for-sale housing, apartments and student housing, targeting the region’s strong demand for housing, driven by demographic tailwinds, huge regional housing deficits and new household formation that greatly exceeds new additions to supply. Such investments tend to provide attractive project-level economics, 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).
  2. Opportunistic commercial investments, including acquiring existing institutional-quality assets at discounts to historical values, shorter duration value-added renovations, and select new developments to serve the region’s growing economies.
  3. Highly-selective pursuit of distress situations, particularly in Brazil, including acquiring controlling interests in existing income-producing assets at discounts to replacement cost, recapitalization existing projects and companies with preferred-equity type structures, and acquiring prime development sites and other assets from troubled sellers.
  4. Income-oriented strategies, including 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 “control” investor employing a hybrid allocator/operator 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 manages direct investments without a local operating partner, utilizing the deep real estate development and operating experience of the local staff in its three regional offices.

Lastly, a key component of Paladin Realty’s strategy has been to capitalize its investments with relatively low levels of debt. Peak levels of debt financing for individual residential projects typically total 30-40% of projected total cost and result in fund level debt averaging 10-20% of projected total cost at any point in time.  Commercial investments are often made on an all-equity basis, although moderate leverage may be obtained in some markets.