Cross-border investors take first steps
International investors and developers are increasingly becoming involved in the Mexican market, with US and Canadian investors taking the lead, with the Europeans not far behind.
DIFA became the first German open-ended real estate fund to invest in Latin America last month by taking a 30% stake in the region’s tallest building – the Torre Mayor in Mexico City.
“In 2004, Mexico City saw a record 430,000m2 of space change hands against a backdrop of strong economic growth that reached 4.4%,” said DIFA board member Reinhard Kutscher.
“Dynamic development of the office market in Mexico City has generated interest among US and domestic pension funds. Due to rising demand, which is also being supported by the launch of real estate investment trusts, initial returns within Mexico City can be expected to fall.”
To support its upcoming entry into the Asian market, DIFA recently signed a strategic agreement with ING Real Estate.
Canadian group Reichmann International, owned by the family of Paul Reichmann, who developed Canary Wharf in London, developed the 55-storey tower in Mexico City in 2003 to provide 90,000m2 of high quality office space.
Letting agent Cushman & Wakefield Healey & Baker says the building has attracted international tenants (often a must-have for overseas investors), such as Hewlett Packard, Deloitte & Touche, McKinsey & Co and Mercer Management
The California Public Employees’ Retirement System (CalPERS), has been a major investor in Mexico. It recently announced its involvement in a joint venture with US developer Hines to develop a mixed-use property in Monterrey. Hines already has operations in Mexico City, and other major cities.
For CalPERS, the deal met an interest in working on residential and retail projects with Hines, though the two could pursue other types of development together as well, Hines said.
Hines has $250m (e194.2m) and
$300m invested in Mexico so far and is
looking at four more projects. Mark Cover, director for the region, says the Mexican economy is becoming increasingly linked
to the US.
And in September last year CalPERS was a major investor in a consortium put together by LaSalle Investment Management, which carried out one of the largest deals in Latin America, buying a $300m portfolio of 53 properties in 12 cities from G Accion, a quoted Mexican real estate company.
Also involved in the consortium were British Columbia Investment Management Corporation and funds owned and controlled by the Jones Lang LaSalle group.
The portfolio comprised more than 5.6mft2 and included 52 industrial properties and one office building. Tenants of the buildings are primarily multinational corporations, with 100% of the leases denominated in US dollars – this is usually demanded by overseas investors in such markets, who don’t want rental income to be vulnerable to fluctuations in weaker currencies.
Amy Erixon, director of Mexican Operations for LIM, says: “We believe that the risks associated with investing in Mexican real estate have been decreasing at a rapid rate, as evidenced by the country’s achievement of an investment-grade rating.”
Earlier last year, LIM also advised CalPERS on the purchase of a 32% interest in a $100m portfolio comprising 21 industrial buildings in major Mexican cities.