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Global Offering Raises Nearly $800 Million for Mexican REIT

17 April, 2013

Fox Business News and Dow Jones Newswires report that the Mexico real estate investment trust (REIT) known as Terra has raised more than $772 million in a global offering. According to the Mexican stock exchange,more than 47 percent of the sale went to Mexican investors,while more than 52 percent went to international investors.

“Mexican REITs,known by their Spanish acronym as Fibras,are relatively new instruments that have become sought after by Mexican pension funds and wealthy individuals due to their steady revenue streams and long-term horizons,” writes Fox Business News. “Wealthy individual investors typically allocate between 15 and 20 percent of their portfolios to real estate.”

The new Terra REIT provides investors with a way to tap into the enormous growth of Mexico’s industrial sector,which is wide-ranging and mainly privately held,accounting for most of Mexico’s exports. Terra plans to purchase and build more rental properties throughout Mexico and the company is affiliated with a subsidiary of Prudential Financial Inc.

“Mexican REITs by law must return 95 percent of their profit to investors,” writes Fox. “The Fibras pay investors quarterly dividends from the rents they collect.”

According to the report,the first Mexican REIT to appear on Mexico’s stock exchange was Fibra Uno in March of 2011. Since the initial offering,it has gained more than 100 percent. In addition,Fibra Inn was launched in mid-March of 2013 and is backed by revenue from hotels,which stems from one of Mexico’s strongest economic sectors – tourism.

“Heightened global investor interest in Mexican assets and the country’s relatively low real estate valuations also favor the Fibras,” shared Mexican brokerage firm Ve por Mas. “Rents are 40 percent cheaper in Mexico City than in Sao Paulo and between 10 percent and 15 percent cheaper than in Bogota,Colombia,or Santiago,Chile.”