Mexico’s Real Estate Investment Trusts Becoming Popular as Economy Grows

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Photo credit: Housing in Corte Madera by Kamesg

Mexican Real estate investment trusts (REITs), after being introduced to the market two years ago, are now outperforming the stock market and are increasingly finding favor with investors at home in Mexico and abroad.

REITs in Mexico are known in that country as fibras (fideicomisos de infraestructura y bienes raíces) and the certificates that are issued can be considered like shares on the stock exchange; their function is the same.

Fibra Uno, the first REIT on the market, appeared in 2011 and was the only product of this type on the stock exchange until the end of 2012.  However, since November of that year, there are four more Mexican fibras available:  Terrafina, Fibra Inn, Fibra Hotel, and Fibra Macquarie.

Andre El-Mann, Fibra Uno chief executive, spoke of why more and more investors are flocking to fibras rather than traditional real estate.  “The attraction at the heart of the fibra is the ability to invest in property without having to buy a building” he said.

In the previous quarter, Fibra Uno’s offering on the stock exchange in Mexico was the largest.  At 22 billion pesos, (about $1.8 billion), it edged out Grupo Sanborns’ latest offering which was 12.1 billion pesos.  Grupo Sanborns is the retail company belonging to businessman Carlos Slim, reputed to be the richest man in the world.

In year-to-date measures, Mexico’s main stock index rose by 0.75 percent.  In comparison, the fibras have done exceptionally well; Fibra Uno was up 12.8 percent, Fibra Macquarie rose 13.3 percent, and Fibra hotel went up to 15.2 percent.

Another indicator of the rising popularity of the fibras is listings in the last quarter: out of five, three were fibras.

Fibras need to issue certificates on a regular basis to fund their expansion; this is because these trusts must pay out as dividends to their shareholders a full 95 percent of their taxable income.

According to experts in the real estate field, business properties in Mexico are attractive to investors right now because rents in Mexico City are up to 40 percent lower than comparable properties in Sao Paulo, Brazil, and are significantly lower than countries such as Chile and Colombia.

The growing popularity of fibras is partially due to the current government’s plans to reform key sectors of the economy.  The reform agenda under President Enrique Peña Nieto is ambitious and is creating a lot of foreign and domestic interest in the Latin American country’s financial sector.

Rick Hoss, portfolio manager of Euro Pacific Latin America fund, stated that along with being a way to bet on infrastructure outlay and the investment plans of the current Mexican government, there are other benefits with fibras.

“With these REITs not only do we like the stability and … the dividend but we think that the capital appreciation associated with it is probably the best opportunity” he said.

To illustrate the success of fibras in Mexico, one only needs to look at the numbers.  When Fibra Uno was first offered in 2011, 3.6 billion pesos worth of stocks were sold at 19.50 pesos each.  By the time the third offering came around, stocks were at over 44 pesos each, an increase of 126 percent.  Other local shares, although they did show increases, did not perform as spectacularly.

According to Credit Suisse Mexico, about half of the most recent fibra investors have come from the United States and abroad.  In the next five years, up to twenty new fibras are expected to enter the market.

About the author

Alberto Esenaro

I am a Mexican lawyer with experience in technology, energy, automotive, infrastructure and business. Worked for law firms, international companies and Government bodies on business advice, regulatory compliance and litigation.

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About Author

Alberto Esenaro

I am a Mexican lawyer with experience in technology, energy, automotive, infrastructure and business. Worked for law firms, international companies and Government bodies on business advice, regulatory compliance and litigation.

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