FIBRA Upsite, a real estate investment trust (REIT or FIBRA) specializing in industrial properties in Mexico, signed an agreement in March with Actinver Casa de Bolsa to launch a buyback program for its stock certificates (CBFIs), with a maximum investment of 112.5 million pesos (around 6.6 million dollars) during 2024. This program, approved in November 2023, aims to improve the liquidity and price stability of the CBFIs, thus facilitating their buying and selling in the market.

According to data from SiiLA FIBRA Analytics, FIBRA Upsite's maximum CBFI repurchase investment could buy about 4.2 million CBFIs at an average price (between the fourth quarter of 2022 and 2023) of 30.12 pesos (nearly 1.8 dollars) per certificate. This means that the trust could acquire up to 7% of its certificates listed on the Mexican Stock Exchange (BMV).

The repurchase implies a reduction of certificates in the stock market. By withdrawing a portion of the available supply, FIBRA Upsite would seek to boost stability in the price of its CBFIs, as reducing supply without a proportional decrease in demand tends to increase or stabilize the price. Additionally, by acting as an active buyer, the trust would provide investors with an additional mechanism to sell their certificates, increasing their liquidity and facilitating buying and selling processes without causing significant fluctuations in the price of the CBFIs. With this strategy, FIBRA Upsite could strengthen its market position by demonstrating confidence in the value of its assets and proactive management with a long-term vision, which could increase investment attraction.

At the end of 2023, FIBRA Upsite had 56,257,365 CBFIs listed for 27.05 pesos (almost 1.6 dollars) per certificate. The repurchase strategy occurs in a context where the value of the trust's certificates decreased by 15% in the last year, according to data from SiiLA. Currently, the company's market value is close to 1,522 million pesos (around 89.8 million dollars), a figure 50% lower than the net asset value (NAV), which exceeds 3,000 million pesos (up to 176.9 million dollars).

When the market price of CBFIs is traded at a significant discount relative to the NAV, it is said that the REIT's assets are undervalued in the market. In this sense, the repurchase of CBFIs at low prices can contribute to improving the cost of the certificates and beyond the immediate financial benefits, this strategy implies that the trust is confident in the value of its assets and is willing to act to correct discrepancies in market perception, reducing the number of CBFIs in circulation with the expectation that their unit value will increase.

Although FIBRA Upsite's repurchase strategy may be a response to the undervaluation of its assets, it may also be a measure that anticipates market dynamics in a context of economic uncertainty. Mexico's industrial sector is caught between extensive development driven by nearshoring and challenges arising from the global reconfiguration of supply chains.

For more information on the performance of REITs and trends in Mexico's commercial real estate market, explore SiiLA REsource or contact us at contacto@siila.com.mx.