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Mexico Real Estate Investment Trust (REIT) to hit market in 2011

13 September, 2012

The planning that has gone into the Mexican equivalent of the real-estate investment trust has finally paid off. The Mexican Stock Exchange will host a public offering of their version of the REIT in January,which is known by the Spanish acronym Fibras. A group of private investors has come together to place a listing of 16 properties on the stock exchange.

The structure for placing real-estate investment trusts was established in 2004,however this is the first real-estate group to use the structure,reported the Wall Street Journal.

“Various stars had to align,” Augusto Arellano said. As the director of Protego Asesores,he was key in structuring the deal. “First,the government had to solve a complex puzzle of tag regimens,” he explained,“Then,the mexico real estate sector was being financed by the private market,so they didn't see the need to go to market.”

The group came together approximately 18 months ago. First,Protego's real-estate trust client was approached by a financial advistory firm to form a Fibra. Known in Mexico as fideicomiso,the trust is funded by several individual investors and administered by the El-Mann family.

“Sophisticated individual investors – both within Mexico and those based internationally – will be able to access the Mexican real-estate market via this completely new and innovative approach,”said Luis Tellez,president and chief executive of the Mexican Stock Exchange.

The first portfolio contains 16 properties that are around the country and they range from malls to offices to industrial sites. According to Mexican regulations,the trust is responsible for distributing at least 95% of its returns to investors,and invest a minimum of 70% of its assets in real estate. They need to adhere to these rules or they will lose on the Fibra tax treatment.

Merrill Lynch and UBS will be placement agents in the U.S. with Santander filling the same role in Mexico. Involving the U.S. Companies is a strategy to attract more global investors in the Fibra. The investment proposal will be shopped around to investors in the U.S.,Europe and Mexico beginning January 10th. The Fibra Uno will list in the same month,although the specific date is not known.

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