Exploring Mexican REITs. A Detailed Look at the EBITDA Record Margins of 2023

Mexican Real Estate Investment Trusts, or FIBRAs, are stable investment vehicles with high profitability margins and operational efficiency. According to SiiLA, in the second quarter of 2023, the FIBRA sector achieved a significant milestone by recording an EBITDA margin of 72%. This achievement marks one of the highest levels in the past five years, surpassing even the quarterly average of 70%.

In the commercial real estate market, investors and analysts use the "EBITDA margin" to assess a company's profitability and operational efficiency and compare companies within the same sector. This indicator is expressed as a percentage and tells us how much money a company has left after covering its operating expenses, excluding financial costs (such as taxes and interest) and accounting costs (such as amortization and depreciation).

The EBITDA margin is a tool that helps us understand how a company manages its costs. It is calculated by dividing EBITDA (earnings before interest, taxes, depreciation, and amortization) by operating income. For example, if the EBITDA margin is 72%, it means that for every 100 pesos the company generates in sales, it has 72 pesos available (before considering financial and accounting expenses). Consequently, a high EBITDA margin implies that operating costs are low relative to operating income.

This is not the first time the REIT sector has recorded an EBITDA margin equal to or greater than 72%. This level was also reached in the first quarters of 2020, 2021, and 2022. However, the current situation reaffirms the upward trend of this indicator in the REIT sector since 2018.

REITs with the Highest EBITDA Margins

In the second quarter of 2023, industrial REITs had the highest EBITDA margins (85%) compared to trusts focused on commercial (75%), mixed (67%), and hotel (27%) properties. This is partly because some industrial properties have lower operating costs, often passed on to tenants through agreements such as triple net leases (NNN). Additionally, the over-demand for industrial spaces, driven by nearshoring, has strengthened and/or stabilized the operating income of these properties. In contrast, commercial, office, and hotel real estate markets have experienced more significant fluctuations in demand and generally do not pass on operating costs to tenants.

According to data from SiiLA FIBRA Analytics, the real estate trust with the highest EBITDA margin in the second quarter of this year was the industrial FIBRA Nova (93%), followed by other industrial REITs such as FIBRA Monterrey (86%), FIBRA Macquarie (84%), FIBRA Terrafina (82%), and FIBRA Prologis (79%), as well as the infrastructure education specialist, FIBRA Educa (86%).

Following them were some trusts with mixed portfolios, including FIBRA Plus (79%), FIBRA Uno (79%), FIBRA Danhos (63%), FIBRA Soma (58%), and FIBRA HD (56%), as well as the retail property specialist, FIBRA Shop (75%). Finally, hotel trusts FIBRA Hotel (28%) and FIBRA Inn (25%) had the lowest EBITDA margins.

Despite the differences among trust funds, the REIT sector continues demonstrating its ability to maintain high profitability and operational efficiency. The second quarter of 2023 results indicate solid management of property portfolios, reflecting investors' confidence in these institutional players in the real estate market.

For more information on investment trends and the performance of real estate actors and assets in Mexico, explore SiiLA REsource or contact us at contacto@siila.com.mx.