Since 2011, investment instruments known as FIBRAs (Mexican Real Estate Investment Trusts) have allowed anyone to invest in real estate with less capital than required to buy a property outright in Mexico. But what are FIBRAs and how do they work?

In short, FIBRAs are a type of investment that enables a company to obtain money to finance new real estate projects. This money comes from investors, whether they are public or private, who receive a fixed or variable income for lending money to the company through the trust.

FIBRAs acquire and manage properties on a large scale in various real estate sectors, such as offices, industrial warehouses, shopping centers, hotels, and more. The properties are managed by a team of professionals who are responsible for their maintenance, operation, and improvements to meet the needs of tenants and generate value and returns for investors.

According to data from FIBRA Analytics of SiiLA, the market value of FIBRAs at the end of 2022 was 373,945 million pesos. The most valuable real estate FIBRAs are FIBRA Uno, FIBRA Educa, and FIBRA Prologis, which together account for 56% of the total market capitalization value of FIBRAs.

The objective of FIBRAs is to be a source of liquidity for developers, promoting real estate development in Mexico. In addition, they contribute to the diversification of investment portfolios in a regulated market, promoting financing for various business segments.

To form a FIBRA, a company or group with real estate assets transfers or contributes its properties to a trust that acts as the property manager. This instrument operates under the supervision of securities authorities, such as the National Banking and Securities Commission (CNBV), the Mexican Stock Exchange (BMV), and the Institutional Stock Exchange (BIVA). One of the essential requirements for setting up a FIBRA is that the commercial company or real estate trust has at least 70% of its assets invested in real estate, which must be leased for at least four years from the end of their construction or the date of their acquisition.

Once the trust is established, it issues certificates through a public offering in the securities market (BMV or BIVA). With this operation, investors finance the trust, and in exchange for the loan, the trust undertakes to pay periodic interest and dividends to the investors.

The proceeds from the issuance are destined for the company that transferred its property to the trust, so that it can invest the money in expanding or improving its portfolio of leased properties.

Periodically, due to its investment, the trust must pay returns to its investors. One proportional to the flow of rents from the properties, and another corresponding to the increase in value resulting from the revaluation of the properties. In general, the Income Tax Law stipulates that cash distributions to FIBRA investors may not be less than 95% of the fiscal result (income minus taxes and fees) for each year.

To invest in a FIBRA, anyone can buy stocks (CBFIs) through a brokerage house. CBFIs are similar to share certificates, as each holder of CBFIs is considered a shareholder of the FIBRA.

Investing in the stock market can be challenging, especially in today's increasingly complex global economic landscape. However, FIBRAs have emerged as a popular investment vehicle for both small and large investors who are looking to boost their returns. These investors see the real estate sector as an attractive and low-risk option to invest their funds.

At SiiLA, we understand that making informed decisions is crucial for our clients. That's why we offer comprehensive and real-time information and analysis on stock prices, dividend yields, market margins, and much more through our FIBRA Analytics platform. If you're interested in making informed investment decisions, head to SiiLA's FIBRA Analytics.

For more information and insights into Mexico's commercial real estate market, visit SiiLA or write to us at contacto@siila.com.mx.