With the emergence of Fibra Uno (FUNO) in March 2011, the Mexican REITS (Fibras) celebrate six years since they first appeared on the Mexican Stock Exchange. In these six years, we have seen 10 issues of Fibras which, according to the firm Vector, at the end of the first quarter have nearly 1,400 properties in total, of which roughly 500 belong to FUNO. Amongst the FIBRAS, one might find not only diversified ones but also specialized ones in sectors such as commercial, industrial, offices and hotels.
A Fibra is an investment vehicle dedicated to the acquisition and development of real estate in Mexico with the intention to lease (or potentially sell) such properties. A Fibra is similar to an investment trust real estate (“REIT” for its acronym in English) in the United States.
The Fibras have given liquidity to an illiquid market. During these six years, they have continued to increase their assets (through follow ons / subscriptions) and issuing debt, to also increase its investment portfolio, leverage their expertise and gain economies of scale.
Other investment vehicles that are considered Fibras but are really a different vehicle include VESTA, GICSA or Fideicomiso Hipotecario, FHIPO, among others. The case of FHIPO is perhaps the clearest example because although the company is considered as Fibra, some analysts place it in the financial sector.
The 10 Fibras manage assets worth just over 15.7 billion dollars, as of end of April. FUNO (with 48% of this) represents almost half the market value. The second largest Fibra is DANHOS with 20% of the market; and Fibra Macquarie (FIBRAMQ) and TERRA (7% respectively), are in the third and fourth place.
While this market does not represent even 2% of the Afores, or Mexican Public Pension’s AUM, between March 2014 and March 2016 Fibras holdings by the Afores increased 1.6 times. Afores now own the equivalent of 2.9 billion dollars in Fibras, or roughly 20% of all Fibra issuings. Considering that the investment regime allows the Afores to have 92% of the total outstanding issue of Fibras, which at today’s levels barely reach 10% of their assets, there is still some ways to go.
Fibras have two components that give investor returns: The first is the equity gains and the other the dividend.
The major change in the share price (in pesos) since the IPO untill April, has come from FUNO (2011) Fibra which has gained 110%, followed by DANHOS (2013 ) 48%; TERRA (2013) with 13% and Fibra Monterrey (FMTY in 2014) with +7%. Fibras which price today is below their IPO are Fibra Inn (FINN in 2013) with -23%; Fibra Hotel (FIHO in 2012) with -15%; Fibra Macquarie (FIBRAMQ in 2012) and Fibra Shop (SHOP in 2013,) both with -5%. Fibra Prologis (FIBRAPL in 2014) and FIBRAHD (2015) are at IPO price.
Volatility in the equity price, shows risk vs returns. The Fibras with the highest volatility in the last 12 months were: FUNO, FIHO and FIBRAMQ.
The other component is the dividend. So far, the Fibras have generally adopted a quarterly distribution (although it could be annual). This year FIBRAHD adopted a policy of paying monthly. For a fiscal issue, the dividend is at least 95% of taxable income for the corresponding period.
The first quarter of 2016 the average Fibras dividend is at 6.55%. Fibras with higher dividends are FIBRAHD with 9.65%; FIBRAMQ with 7.47% and 7.10% FMTY.
The perspective of this industry is promising, so surely, we will see the Fibras growing in assets as well as new participants.
Column by Arturo Hanono