The market has come a long way since Fibra Uno launched Mexico’s first real estate investment trust (REIT) back in 2011. Today, Fibra Uno remains Mexico’s largest REIT but it is also joined by a slew of other options, which have collectively raised more than $10 billion over the last three-plus years.
“Investment bankers say demand for Mexican assets remains strong, stoked both by liquidity abroad and a growing domestic pension system,” writes the Wall Street Journal. “The appetite overseas is tremendous.”
Furthermore, with new legislation making Mexico real estate more attractive than ever, analysts at Morgan Stanley are advising investors to obtain an overweight position in Fibra Dahnos, Fibra Macquerie and Fibra Terrafina, as even stronger economic growth in Mexico is expected to prevail over the long term. And according to a recent report by Goldman Sachs, Fibra’s have “strong growth potential,” and already account for at least 3.5 percent of the Mexican market cap.
“We expect strong structural demand for real estate assets in Mexico,” the report says. “In addition, we see room for a gradual convergence in prices per square meter of Mexican real estate towards Latin American peers, which are currently 40 percent more expensive on average.”
The term “Fibra” refers to a Mexican REIT, which is a widely held trade instrument created in late 2010 that allows 95 percent of its income to be distributed annually on a tax-free basis to shareholders and invests 70 percent of its assets in real estate.
“Mexican real estate looks cheap and could re-price long term,” writes Barrons. “[This] growth appeals to investors today.”
Click here to read more about real estate investment trusts in Mexico.
Here is a brief overview of Mexico’s major REITs:
As the world’s 14th largest REIT, Fibra Uno now accounts for nearly half of the more than $10 billion that has been raised by Mexican REITs since 2011, and it has attracted the attention of fund managers at firms like Fidelity, Evercore Partners and Blackrock, to name only a few. In late Oct.,Fibra Uno announced it is planning a $1.5 billion acquisition in Mexico properties and plans to tap bond markets during the first half of 2015.
Also of note, in early Nov., Fitch Ratings affirmed its “BBB; Outlook Stable” ratings for Fibra UNO, which reflects the REIT’s solid market position and large, well-diversified portfolio of industrial, retail and office properties, which exhibit a strong franchise value, high quality tenants, high occupancy rates and more than adequate financials.
With a target price of $31,Morgan Stanley calls Fibra Macquarie “a play on Mexico’s manufacturing renaissance,” citing the REIT’s investment in more than 250 industrial real estate properties throughout the country. It’s capital structure is an even mix of equity and debt, with the majority of properties located in the cities of Juarez and Monterrey. In late Oct.,Fibra Macquarie announced that it will pay upwards of $84,000 this year in distributions to shareholders.
Boasting a $33 target price, Fibra Terrafina acquires, owns, develops and manages more than 215 industrial properties in Mexico, most of which are located in the northern areas. One-third of the properties are related to the automotive industry, while another third are tied to industrial goods and 17 percent are in consumer goods. In early Nov., Fibra Terrafina announced that it will make a distribution to shareholders totaling $18,002,236.
With a 19 percent potential upside to $42,Fibra Dahnos boasts a tenant mix of 57 percent retail,23 percent mixed-use and 21 percent office space, with an equity based capital structure. It currently develops, leases, operates and manages premium shopping centers, offices and other properties in and around Mexico City.
Mexico’s Fibra Inn specializes in acquiring properties in Mexico’s booming hotel industry that serve business travelers and was formed primarily to acquire, develop and rent a wide range of hotel properties throughout Mexico. In late Oct. Fibra Inn announced that it will issue new tradable certificates totaling $300 million to existing shareholders. In addition, a cash distribution payment was announced for the third quarter of 2014 that will total more than $4,440.
With a $633 million initial public offering (IPO) earlier this month, Fibra Prologis is the first Mexican REIT to be backed by residential mortgages. According to Reuters, the trust plans to use these funds to help purchase an initial portfolio of around 5,540 mortgage loans from around Mexico that were initiated by Infonavit, the government’s federal housing fund, which originates around 70 percent of the nation’s home loans.
“The IPO adds to evidence of a turnaround,” writes Bloomberg. “REITs have surged since the asset class debuted in Mexico in 2011.”