Mexico's REIT Market Set for Massive Growth

MEXICO CITY-The market for REITs in Mexico should eventually see “exponential” growth, the head of corporate strategy for the Mexican Stock Exchange Alejandro Reynoso del Valle says. Last week, the exchange received a request from local sports club owner Grupo Impulsa to issue the country’s first REIT, and Reynoso del Valle says that several other companies have expressed interest in doing such deals.

“What we’ve seen is that the learning process is slow,” says Reynoso del Valle, discussing recent changes in the law that make issuing and trading REITs much easier and more attractive from a tax perspective. He predicts there would be just a handful of deals a year in the first few years. “We’re going to see the first transactions, and afterward we’ll start to see exponential growth.” He added that the US market started slowly but has more than doubled in size to more than $320 billion.

The exchange has also been in talks about possible REITs involving office buildings, university campuses and industrial properties. Reynoso del Valle also suggested that there could be a market for REITs comprising government properties. A report by Colliers International estimates that about $11.25 billion of industrial and office buildings in Mexico City, Monterrey and Guadalajara are of sufficient quality to be securitized.

The market’s main participants are likely to be pension funds in Mexico and the US, says Reynoso del Valle, but he said the instruments also provide an opportunity for anyone to “participate with small investments in big housing projects.”

The country’s $60 billion in pension funds that are regulated by the government, known by their Spanish acronym Afores, will also be allowed to invest in REITs once their regulations are modified. The stock exchange is working with Mexico’s pension regulator to make the necessary changes, says Reynoso del Valle.