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Investors Worldwide Target Real Estate in Mexico

27 June, 2013

Mexico’s real estate market is the focus of investors worldwide,following a number of recent deals and the introduction FIBRAs,which are similar to REITs (real estate investment trusts),to the Mexican market. In addition,the wide variety of new financial vehicles in Mexico is expected to drive significant investment dollars into the nation’s hotel industry over the next two years.

What does this mean for buyers? First,it shows confidence among major global financial institutions in the future of Mexico real estate. Second,Mexico’s status as an emerging economy means there are still plenty of opportunities for investors to get in early and to earn a substantial profit.

“Of the five FIBRAs that are now trading on the Mexican Bolsa,two – Fibra Hotel and Fibra Inn – are dedicated to the hospitality industry,” writes the Financial Times. “The two trusts have been able to raise nearly $1.1 billion to expand their portfolios.”

In addition,Mexican investment fund Planigrupo Management invested $255 million to purchase nine shopping malls in May,following a similar $31 million purchase last November. Since FIBRAs were introduced to the Mexican market in 2011,financial firms have raised more than $4.5 billion from local and foreign investors – a number that continues to rise.

Fibra Hotel recently sold around 170 shares in a new offering,totaling more than $350 million. The company is based in Mexico City and announced plans to triple its number of hotel properties over the next few years. In addition,Fibra Inn announced the acquisition of the Holiday Inn Express in Guadalajara for nearly $14 million and also purchased the Wyndham Casa Grande Hotel in Monterrey this June for more than $15.3 million.

The hotel in Monterrey marks the fifth acquisition by Fibra Inn since its IPO on March 13,2013. At least three more property purchases are expected to follow in the near future. Finally,Mexican real estate investment trust Terrafina,which is advised by Prudential,has approved the purchase of a portfolio of properties in Mexico totaling around $600 million in mid-June.

“FIBRAs offer a strong investment play for the hotel investment market in Mexico,” Clay Dickinson of Jones Lang LaSalle told the Financial Times. “These serve as a tool for domestic and international investors and institutional capital to funnel money into the sector.”

All of this equals great news for property owners in Mexico,where hotels in all parts of the country are reporting a steady rise in revenue,occupancy and room rates. In fact,according to the World Property Channel,Mexico City,Cancun real estate and the Riviera Maya are poised to see the largest impact from the FIBRAs.

“The Cancun and Riviera Maya region has traditionally attracted the most investor interest,generating $900 billion in transactions in the last decade,” writes World Property Channel. “In Cancun the revenue per average room increased 12 percent in 2012 and is up 15 percent in 2013.”