UNITED STATES - Pramerica Real Estate Investors has closed its latest Latin American commingled fund and completed its first transaction in Chile.
Pramerica raised $900m (€572.2m) in equity for the PLA Residential Fund III and some of its major investors were New Jersey Division of Investment, New York State Teachers Retirement System and California Public Employees Retirement System.
Investors are projected to achieve gross IRRs of 18% to 23% as the fund has a maximum of 70% leverage and will place capital into single-family residential projects in Mexico, Brazil and other Latin America counties.
Pramerica believes there is a growing demand for housing in Mexico, so this is where 80% of the fund will be invested, as there is an expanding middle class in the country where a larger segment of this population will be able to buy homes.
The real estate manager's first deal in Chile was a $65m investment to fund the development of a mixed-use project in Santiago - the best way to go in Chilean real estate at this time, according to Roberto Ordorica, vice president with the real estate manager and head of Pramerica's Latam operations.
"New development makes the sense right now. Most of the existing properties are old and outdated. The limited newer properties are not up for sale. This is why we are creating out own new product," said Ordorica.
The capital invested by Pramerica should cover the full development cost of the project and groundbreaking should be soon, as completion is scheduled for December 2009.
The mixed-use project includes a combination of office and retail totaling 220,000 s.f. (20.4386m2). The office building component totals 180,000 s.f, and Pramerica feels there will be strong demand for this space as office vacancy around Santiago is in the 5% range.
On the other side, the retail part of the project totals 40,000sf and it is anticipated tenants in the retail section will serve the companies in the office building and the surrounding area.
Pramerica will continue to look for additional investment opportunities in Chile and most are expected to be in areas around Santiago.