By Dow Jones Business News, March 20, 2013, 07:01:00 PM EDT
--Terra is second Mexican REIT to raise capital in March
--This REIT specializes in industrial properties
--Flood of Mexican REITs has many questioning how much is enough
By Amy Guthrie
MEXICO CITY--Mexican real-estate investment trust Fideicomiso PLA Administradora Industrial (TERRA13.MX), known as
Terra, has raised 9.52 billion pesos ($772 million) through a global offering, the Mexican Stock Exchange said
Wednesday, marking the second sale for a Mexican REIT this month.
Just over 47% of the offer placed with Mexican investors, while the rest was sold to international investors. The
offer priced at MXN28 per certificate, with the company having sold a little more than 340 million certificates.
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.
The Wednesday placement from Terra sold to 3,179 investors, the stock exchange said. Mexican units of Citigroup and
HSBC led the deal.
The Terra trust currently consists of 146 properties, 132 of which are industrial, concentrated in northern and
central Mexico, and in the Bajio region. Many of the properties are engaged in light manufacturing, or are warehouses.
The trust plans to use the capital it raised Wednesday to pay down debt and other expenses related to the acquisition of
the properties, with any leftover capital going toward general corporate purposes.
Terra plans to purchase and build more property in Mexico, with the objective of renting out those properties. Terra
is affiliated with Prudential Real Estate Investment Latin America, an investment subsidiary of Prudential Financial
Inc. ( PRU ). The Terra Fibra offers investors a way to tap into growth for Mexico's expansive and largely privately held
industrial sector, which accounts for the bulk of Mexican exports.
The first Mexican REIT to list on the Mexican Stock Exchange was Fibra Uno Administracion SA (FUNO11.MX), which has
executed two follow-on offerings since it first sold certificates in March 2011. Nearly a half-dozen more Fibras have
come to market since Fibra Uno, with several others in the pipeline. Fibra Uno has gained more than 100% since its
initial offering, according to Mexican brokerage Ve por Mas, versus a rise of around 27% for the IPC index of Mexico's
most-traded shares in the same period.
Ve por Mas said in a note this week that a recurring question among its clients and colleagues is whether too many
Fibras are coming to market, and in which Fibras they ought to invest. Several Fibras specialize in specific types of
real estate, such as hotels or commercial property, offering investors variety. Just last week, Fibra Inn, a Mexican
REIT backed by revenue from hotels, raised MXN3.96 billion through a global offering on the Mexican Stock Exchange.
Wealthy individual investors typically allocate between 15% and 20% of their portfolios to real estate, Ve por Mas
says, figuring that at the high end of that range an investor might accommodate five Fibras.
Mexican REITs by law must return 95% of their profit to investors, setting the instruments up for follow-on offerings.
The Fibras pay investors quarterly dividends from the rents they collect.
Ve por Mas said that in addition to the novelty of the instruments, heightened global investor interest in Mexican
assets and the country's relatively low real-estate valuations also favor the Fibras. The brokerage says rents are 40%
cheaper in Mexico City than in Sao Paulo and between 10% and 15% cheaper than in Bogota, Colombia, or Santiago, Chile.
In an interview this month with Dow Jones Newswires, the president of Mexico'sBanking and Securities Commission,
Jaime Gonzalez Aguade, called the Fibras a success.
As with any new instrument, Mr. Gonzalez said, the market is getting familiar with the Fibras and investors are
studying the various offerings carefully.
Write to Amy Guthrie at firstname.lastname@example.org
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