Unprecedented Real Estate Deals in Mexico: FIBRA Monterrey and Grupo Mexico Shake Up the Market

In 2023, Mexico's real estate market experienced a highly active start to the year in terms of investment, marked by two historic transactions: the purchase of the Zeus Real Estate Portfolio by FIBRA Monterrey, and Grupo Mexico's acquisition of 95.5% of the shares of Planigrupo. Both transactions involved the sale and purchase of over 2.3 million square meters of industrial and retail properties nationwide, with an estimated investment of $914 million, according to data from SiiLA Market Analytics.

To contextualize the size and importance of these transactions, it's worth mentioning that the area acquired by FIBRA Monterrey, including industrial properties and land for future developments, is twice the average area of new inventory delivered each quarter over the past four years in the Mexican industrial market. In the case of Grupo Mexico, the acquired area is similar to the average area of new quarterly deliveries nationwide during the same period in the retail sector.

The Zeus Portfolio consists of 46 industrial properties covering an impressive 822,052 square meters and a land reserve with an approximate total area of 882,723 square meters. This acquisition solidified FIBRA Monterrey's position as a major player in the industrial real estate sector, as, according to SiiLA, their industrial inventory shifted to predominantly consist of industrial properties, increasing from 76% to 89% as a proportion of the total area managed by the trust.

On the other hand, the real estate portfolio that now forms part of Grupo Mexico's investments includes 27 retail properties with a gross leasable area of 615,000 square meters. Grupo Mexico's entry into the retail sector through the acquisition of Planigrupo was a strategic decision to diversify their investment portfolio. With a significant presence in the mining, infrastructure, and transportation sectors, Grupo Mexico recognized the potential of retail properties, particularly community centers. This investment reflects the growing trend of investing in medium and small-sized shopping centers in prosperous areas nationwide.

It is worth noting that transactions of this magnitude are not common in Mexico. In fact, the only somewhat similar occurrence took place in 2020 when FIBRA Uno (FUNO) acquired the Titan Real Estate Portfolio for $822 million, consisting of 74 industrial and office properties, as well as a land reserve of approximately one million square meters. A similarity between FUNO's transaction and those of FIBRA Monterrey and Grupo Mexico is that, in all three cases, the majority of the properties are located in the Northern and Bajio regions of Mexico.

The investments made by FIBRA Monterrey and Grupo Mexico reflect the confidence of developers and investors in the industrial and retail sectors. These investments present great opportunities for the market, as the cap rates align with the expectations of major real estate developers in Mexico. According to SiiLA data, the cap rate for the Zeus Portfolio is 8.05%, while Planigrupo properties boast a cap rate of 9.15%. These figures are favorable compared to industry expectations, as SiiLA’s Investors Survey, which comprises financial indicators obtained directly from the industry's top executives, indicates an estimated cap rate of 9.8% for the retail sector and 7.6% for industrial assets.

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