PLA Chile, a real-estate investment fund managed by U.S. firm Prudential Financial Inc. (PRU), signed an agreement Friday with shareholders of Chilean real-estate developer Paz Corp. (PAZ.SN) to buy new shares totaling 18.3 billion Chilean pesos ($34.3 million), or 18% of the company.

Four investment companies known as Familia Paz, which currently control 59.2% of Paz Corp., have agreed to approve the capital increase in a shareholders meeting, Paz Corp. said in a statement.

Familia Paz will retain control of the company with a 42% stake, Prudential's PLA Residential Fund III Chile LP, known as PLA Chile, will own 18%, and minority shareholders will hold the remaining shares.

The capital increase is designed to strengthen the Chilean company's investment plan, Paz Corp. said in a statement.

The deal is pending PLA Chile's due diligence study of Paz and its subsidiaries, the statement said.

"Prudential is a strategic investor given the size of the fund and their expertise ... it's too early to say what specific investment opportunities this will create (for Paz)," said a person close to the operation.

Paz will issue 91.3 million new shares, and PLA Chile will subscribe 100% of the shares worth CLP200.00 each.

Paz Corp.'s shares were trading at CLP250.00 midday Monday, down 3% from Friday as Chile's blue-chip stock index, the Ipsa, tumbled 2%, tracking losses in the U.S. market. Paz has traded at a high of CLP314.99 and a low of CLP109.00 in the last 52 weeks.

BanChile and Citigroup Global Markets are advising Prudential in the operation.

This is Prudential's first residential investment in Chile after signing an agreement in 2008 to develop an office building project in the upscale Santiago neighborhood of Las Condes, said Theresa Miller, Vice President of Global Communications at Prudential Financial Inc.

That transaction has not yet closed, said Miller.

Paz has 40 years experience developing real-estate projects in Chile, and it currently has 64 projects in development in Santiago and other parts of the country.

-By Julian Dowling, Dow Jones Newswires; 56-2-820-4241; julian.dowling@dowjones.com