FIBRAS, An Attractive Investment Alternative In Mexico?

Mexico
Following the economy’s slowdown in 2013, when the GDP grew 1.2%, the consensus of analysts estimate that the Mexican business environment will accelerate and GDP will grow close to 2% in 2014; this as a result of increased external demand following the recovery in the U.S., increased government spending with emphasis on infrastructure and a potential recovery in domestic demand.

Major international investors are becoming more interested in Mexican real estate. As an example, Sam Zell, chairman of Equity Group Investments, recently said during a panel on global real estate investment opportunities, “Looking forward, the single most attractive investment in the world is Mexico. From a thematic point of view, Mexico is in a unique position.”

FIBRAS (Fideicomiso de Inversión en Bienes Raices, Spanish for Real Estate Investment Trust) represent a young market (the first one had its IPO in early 2011) and today report an aggregate income of over 230 million USD, with an annual growth of 180%. These investment vehicles are performing above the market’s average; the FIBRA index of the Mexican stock exchange had a yield of 3.8% in the first quarter of 2014, which contrasts with the 5.3% drop of the general index.

Mexican REITs (FIBRAS)

Today, Mexican REITs keep growing: Fibra Uno (the largest one) announced this week their biggest acquisition yet, 15 properties worth 1.8 billion USD. They also announced the development of a new office building located in Mexico City’s CBD Polanco submarket. This investment of 57 million USD will feature 130,000 rentable square feet, and is expected to generate a NOI of 4 million USD a year.

Real estate investment beyond FIBRAS is also expanding. The National Real Estate Developers Association confirmed committed investments for 9 billion USD through 2020, of which a quarter is already distributed.

Cushman & Wakefield Mexico is growing a Capital Markets/Investment Advisory business. Recent examples include a mandate by Palisades Capital Fund I to raise 40 million USD in Mexico for a private fund dedicated to investing in suburban office buildings in the western United States. Fast results are a part of this growing expertise. For example, in an accelerated process (just one month) C&W executed the sale and leaseback of Dixon’s industrial plant in Tultitlán, Mexico City vicinity.

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