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Mexico Real Estate Investment Trusts Strongly Outperforming Stock Market

19 April, 2013

Reuters reports that fibras – which are Mexico’s version of real estate investment trusts,or REITs – are experiencing unprecedented growth,with no signs of slowing down. 

“Domestic and foreign investors are piling into Mexican real estate investment trusts,which are strongly outperforming the wider stock market,” writes Reuters.

Known as fibras,the trusts issue certificates that function very similar to shares and are required to pay out 95 percent of their taxable income in the form of dividends to their shareholders,so they continually issue shares in order to fund expansion. Fibra Uno was the first of its kind to emerge in 2011,but since November of 2012 five more fibras have been announced,including Fibra Hotel,Fibra Macquarie,Fibra Inn and Terra.

Year-to-date,Fibra Uno is up 12.8 percent,while Fibra Macquarie is up 13.3 percent and Fibra Hotel has grown by an impressive 15.2 percent. One of the most attractive aspects of these property investment trusts is that they allow investors to begin dabbling in Mexico real estate without actually having to buy a property,although that is often the next logical step,considering the market’s ever-growing range of possibilities.

“Mexico’s properties look attractive compared to countries like Chile,Colombia and Brazil,” writes Reuters. “The success of the fibras coincides with new President Enrique Pena Nieto’s ambitious economic reform agenda that has stoked interest in Mexico’s booming financial sector.”

In addition,fibras provide investors with a stable way to participate in Mexico’s impressive infrastructure outlay and ongoing development plans,but they also provide rapid capital appreciation and a nice dividend to boot. Some projections have at least 20 new fibras entering the market over the next five years. As a result of this heightened activity,Luis Tellez,who is the head of Mexico’s stock market,is in the process of deciding whether to grant the fibras their own index or to include several of them on the nation’s benchmark IPC index. Regardless,this is an investment opportunity to consider for portfolio diversification.