OPIC-SUPPORTED INVESTMENT FUND IN THE REGION

UNCLAS STATE 026881 E.O. 12958: N/A TAGS: EINV BR CI MX PE SUBJECT: OPIC-SUPPORTED INVESTMENT FUND IN THE REGION ¶1. This is an action cable. See paragraph 4. ¶2. OPIC management is considering support of a new $400-$500 million private equity fund, Paladin Realty Latin America Investors III, L.P. (the "Fund") that will be sponsored by Paladin Realty Partners, LLC (the "Sponsor"),of which a $200 million sub-fund will be supported by OPIC. The Fund is a real estate investment fund focused primarily on developing low and middle income housing in the target geographies of Brazil, Chile, Mexico, and Peru amongst other OPIC-eligible Latin American countries. This particular fund is a successor to the Sponsor's previous OPIC-supported fund, Paladin Realty Latin America Investors II, LP. The Fund will invest long-term capital appreciation, through privately-negotiated transactions, in equity or equity-related investments in new, expanding or other entities owning, financing, managing or developing real estate projects. The Fund's proposed investment strategy is to partner with local developers to implement value-added business plans. Many of these investments will be structured as "platform" companies, which will invest in multiple projects with a single company that is focused on a specific product type, market, and/or strategy. Generally, the Fund will own at least 50% of any investment or platform company. The Fund will typically co-invest with a local developer in financing each project. In addition to providing capital to the affordable housing sector throughout Latin America, the Fund is also permitted to invest in commercial real estate and hospitality sectors (such as office, research and development, resort and hotel, industrial and retail), but it is expected that the majority of the capital will be invested in the housing segment. ¶3. OPIC-supported investment funds are privately owned and managed, with OPIC support taking the form of a loan or loan guaranty that supplements each fund's private capital. In July 2006, OPIC conducted an open and transparent call for proposals from qualified private sector fund managers for the formation, management and OPIC financing of one or more private equity funds that will invest for long-term capital appreciation in private companies in the housing and related sectors. OPIC received 19 responses to the Global Housing call for proposals, and selected Paladin's fund as one of the best that met the criteria of the call. The Fund, Paladin Realty Latin America Investors III, LP, is a follow-on fund from Paladin's first OPIC-supported fund, Paladin Realty Latin America Investors II, LP, which originated from the 2004 Latin America call for proposals. ¶4. ACTION REQUESTED: As part of OPIC's due diligence, OPIC requests post's comments regarding the objectives of OPIC's investment funds program and whether these objectives are compatible with the economic development programs of the target countries. Any other comments relating to the funds' likely success in the regions or other considerations would be appreciated, including Post's opinion on (1) the need for such capital in the various markets, (2) availability of funds from other sources, and (3) local reputation of the prospective fund managers mentioned above in paragraph number two. Please comment by cable to the department and reply to Bill Pearce, Director. Replies may be faxed to (202) 218-0331. ¶5. OPIC appreciates Post's support. CLINTON