Evolution in the Loan-to-Value (LTV) of REITs in Mexico

According to Fibra Analytics de SiiLA, LTV is calculated by dividing net debt by the total assets' value of the trust. This metric, updated quarterly based on FIBRAs' reports, reflects the interaction between debt and asset values. 

During the pandemic, some FIBRAs moderately increased their indebtedness in 2020 and 2021 due to lower rental income and ongoing maintenance and operation costs for their properties. However, they have generally returned to pre-legislation change levels, leading to a common trend of increased debt levels. Nonetheless, certain FIBRAs strategically reduced their debt, exemplified by Fibra Prologis (FIBRAPL), FIBRA Macquaire  (FIBRAMQ), and Terrafina (TERRA).

Fibra Prologis decreased from 29.35% (Q4 2020) to 18.31% (Q3 2023), reducing by 11 percentage points.

In addition to observing a decrease in LTV after the FIBRA regulations reform, the trend continues in the last quarter, as seen with:

●      FIBRA Macquaire, which decreased from 35.32% (Q4 2020) to 32.22% (Q3 2023), reducing by 3 percentage points.

●      Terrafina, which decreased from 40.51% (Q4 2020) to 32.87% (Q3 2023), reducing by 8.3 percentage points.

On the other hand, there are other FIBRAs that have taken advantage of the new legislation by exceeding the previous 30% limit. For example, FSHOP and FUNO, both with the highest LTV.

FSHOP  increased from 40.97% to 44.88%, 4 percentage points less, noting that its LTV was already high and has remained at those levels. Meanwhile, FUNO, in the third quarter of 2023, reported an LTV of 39.12%, 7 tenths below the maximum allowed at the time of the modification (when it was 39.97%). Despite this variation, it is still below the initial levels of 2020 when it exceeded 45%.

On the other hand,  DANHOS has maintained a low level of indebtedness, although it increased slightly, moving from 8.24% to 11.14%, almost 3 percentage points for the same period (Q4 2020 to Q3 2023). Meanwhile, EDUCA, which had an LTV of 0% in Q4 2020, now stands at 15.39%.

Maintaining a low LTV among Mexican FIBRAs offers numerous advantages, such as a reduced perception of risk, access to more favorable financing conditions, and the ability to participate in real estate investment opportunities securely and sustainably.

FIBRAs play a significant role in the development of the commercial real estate sector. For more information on this and other topics related to the industry, explore SiiLA REsource or contact us at contacto@siila.com.mx.