Jaime Roberts – President AMPIP

WHAT WERE THE MAIN DEVELOPMENTS IN 2012 FOR THE AMPIP MEMBERS?

Although the economic outlook worldwide was not very pleasing –due mainly to the debt crisis in Europe–, in Mexico the economy and specifi cally the arrival of new investments registered a moderate, but still positive growth. This optimistic scenario for the country was refl ected in the development of new industrial parks, especially in the center of the country, in particular in Querétaro, Guanajuato and Aguascalientes, to attend the occupancy demand of new automotive and aerospace assemblers in the region. At the same time, in Nuevo León and in the North of Mexico City, we also saw the development of new distribution projects.

WHAT IS THE AMPIP AGENDA WITH THE NEW FEDERAL ADMINISTRATION?

The AMPIP has always been very active with the federal government, as a part of our mission to represent the interests of our members. Part of our activities has been focused to educate the new authorities about factors that inhibit the growth of industrial parks in Mexico. In December 12, 2012, I personally had the opportunity to meet President Enrique Peña Nieto, to present AMPIP's 2013-2018 agenda, based in a study related to industrial parks competitiveness, elaborated by experts from the fi rm De la Calle, Madrazo, Mancera, S.C., in collaboration with the National Council for the Export Maquiladora Industry (INDEX).

This agenda considers six main public policies to reinforce industrial parks developments and also the maquiladora export industry. The fi rst one is legal certainty in the tax system, permits and procedures, ownership of land, and in contracts for electricity and water supply. The second one is the reinforcement of domestic production chains to the export industry. The third one is the access to competitive prices of energy and natural gas. The fourth one is the necessity to have a National Logistics Platforms Strategy which includes industrial parks. The fi fth is the strengthening of current programs for workers training; and the sixth is the elaboration of a systemic National Strategy for Investment Promotion.

Few days later, the AMPIP Board of Directors had a meeting with the new Secretary of Economy, Ildefonso Guajardo, to discuss specifi c aspects affecting the government attention to industrial parks. Basically we asked to have a counterpart in the Secretary, to be in charge to create, execute and follow up public policies for industrial developments in the country. We also highlighted the importance of the Mexican Industrial Parks Standard NMX-R-046- -SCFI-2011, as a strategy to promote the quality and certainty of industrial parks in Mexico. Another commitment between AMPIP and the Secretary of Economy was to create a data base of all industrial parks in the country which comply with the criteria of the standard, in order to have offi cial statistics on the sector.

Finally, we insisted in the importance of investment promotion abroad. There is a close correlation between industrial parks and foreign direct investment infl ows. This explains why more than 60% of our members' tenants are foreign companies. Since promotion is a critical task for industrial parks, AMPIP has also been very active with ProMexico. Secretary Guajardo ratified the participation of AMPIP with a seat as an external guest, in ProMexico's Technical Committee, which was given to the Association by the past Administration in November 2012, as a result of the lobbying we have made to be included in the National Promotion Strategy.

Although fi nancing was not explicitly included in the sixth public policies proposed by AMPIP and INDEX, it is important to mention that the AMPIP has been very close to BANCOMEXT. We approached the bank for the fi rst time in 2009, during the global economic crisis, demanding support to our sector. In the past, industrial developers were not considered as potential benefi ciaries of resources from Mexican developing banks. Thanks to the permanent relation we have achieved with this fi nancial institution, today, BANCOMEXT has channeled about $360 million USD to AMPIP members, mainly to reinforce the growth of industrial buildings. We hope this program will continue with the new administration. Therefore, we look forward to meeting soon the new Director General, Mr. Enrique de la Madrid Cordero, because we believe that these kind of success stories must continue in our sector.

HOW IS THE INDUSTRIAL AND DISTRIBUTION MARKET OUTLOOK FOR 2013 AND BEYOND?

As I have mentioned before, the industrial parks market outlook in Mexico is closely linked to foreign direct investment (FDI) infl ows to the country. According to the UNCTAD (United Nations Conference for Trade and Development), there will be a moderate rise of global FDI in 2013, reaching about $1.8 trillion. If this prediction is true, Mexico will be defi nitely benefi ted, as it is still one of the main favorite location sites of investors, thanks to its vicinity to the US market, apart from other competitive considerations.

For September 2012, FDI in Mexico amounted about $13 billion USD, from which 35% where addressed to greenfi eld projects, and more than 40% to the manufacturing sector. As we know, the automotive industry was the one with the most presence in the country. We learned that global automakers announced new direct investments of around $15 billion USD, at the time auto parts manufacturers invested almost $7 billion in new operations in Mexico, as per the fi gures of the INA (National Autoparts Institute). To a lesser extent but equally important, the aerospace sector was also very active in the country, and today, there are 250 foreign companies operating in Mexico, according to FEMIA (Mexican Aerospace Federation).

New FDI projects in Mexico are translated in more occupancy of industrial buildings. In its more recently Industrial Outlook Report, the fi rm Jones Lang LaSalle stated that the most dynamic industrial markets in the country, during the third quarter of 2012, were Guanajuato, Guadalajara, San Luis Potosí, the North of Mexico City, Puebla, Toluca and Querétaro; specially due to the landing of Audi, Mazda, Nissan, Ford, GM, Honda and VW, as well as Eurocopter and Bombardier; all of them attracting at the same tie Tier1 and Tier2 suppliers for the assembling operations.

Regarding occupancy rates, according to CBRE Mexico, from a total of 31 million of constructed SqM, Mexico's available space rate of class A industrial buildings is on average 6.9%, with a leasing average price of $4 USD per SqM.

We can conclude about the market outlook, that although new investment projects will continue to arrive, our government will need to work stronger in improving the bad image Mexico still has abroad, which defi nitely affects investment. Besides, we have to pay attention to the US economy. We know that any deceleration of our neighbor market will defi nitely impact the Mexican economy, and hence, the FDI.

WERE THERE ADDITIONAL INDUSTRIAL PARK CERTIFICATIONS IN 2012?

The AMPIP started the Third Edition of the "National Program for Industrial Parks Certifi cation" at the end of 2011, which basically consists in supporting with a subsidy from the Ministry of Economy, the process to verify an industrial park, according to the Mexican standard NMX-R-046-SCFI-2011. This time we received about 40 applications. Up to December 2012, 32 industrial parks accomplished the certifi cation, which means that they were able to comply with the standard criteria (permits and licenses, availability of utilities, appropriate architectural and engineering design, and the ownership title of land).

For the AMPIP, the Mexican Industrial Parks Standard is a very important promotion tool, as it allows developers to differentiate their industrial projects from competition, and at the same time, it provides certainty to potential tenants.

One of the topics we agreed with the new Secretary of Economy, Ildefonso Guajardo, was precisely to upgrade the positioning of the Standard, as a requirement for any industrial park in the country, to benefi t from the different government programs, addressed to fortify the industrial infrastructure in the country. As a matter of fact, some municipalities, such as Mexicali and San Luis Potosí, have already included the Standard as a condition for tax incentives.

WHAT IS THE SIGNIFICANCE OF THE RECENT REAL ESTATE DEVELOPMENTS IN THE CAPITAL MARKETS SUCH AS THE NEW FIBRAS?

The reactivation of fi nancial fl ows for industrial projects is a good symptom of the market outlook. This means that bankers and investors foresee an increasing demand for industrial spaces, a market opportunity that they will try to capitalize at the maximum level. On the other hand, the oversupply of fi nancial options in the market, has allowed developers to access new and innovative resources, beyond traditional debt and equity. At the end of the day, a key success factor in the business model of industrial developments is the fi nancial engineering that owners achieve for the long term.

In Mexico, fi rst we saw, in March 2010, the listing in the Mexican Stock Exchange Market, the equity-linked structured notes, known as CKDs, for the development of new industrial and logistics real estate projects in the country, from AMB Property Mexico (currently Prologis), Promecap from PREI and more recently for FINSA.

Then the appearance of REITs, known in Mexico as FIBRAS, which in the past it was something unthinkable in Mexico, because certain tax procedures where still complicated and were not resolved yet. It took a period of more than 6 years discussion, to see the first Mexican REIT in 2011, with the arrival of FIBRA1, with a listing value of $3.6 billion pesos and with assets oriented to shopping centers, offices and industrial buildings, and later the FIBRA HOTEL in December 2012, placing about $4.1 billion pesos.

We also witnessed the IPO of Vesta, with a listing of $255 million USD, and more recently, the third Mexican REIT, FIBRA MACQUARIE at the end of 2012, with a global listing value of $14.7 million pesos, with an initial portfolio of 244 industrial properties, subsidiaries of GE Capital Real Estate Mexico and Corporate Properties of the Americas.

The possibility to have all these new innovative sources of financing in Mexico, also means that our market has achieved an important level of maturity, and has therefore become a very attractive market for global investors, even more than Brazil. 

BESIDES AUTOMOTIVE, WHAT ARE THE MAIN OPPORTUNITY INDUSTRIAL SECTORS FOR INDUSTRIAL PARK DEVELOPERS IN THE NEXT FEW YEARS?

There are certain industries in which Mexico is even more competitive than China, due to lower transportation costs and rising wages in China. These industries, among others, are medical equipment, large appliances, pharmaceutical and food processing, besides logistics. These are precisely the other industries, besides the automotive and aerospace, that we see more active as tenants in industrial parks.

WHAT ARE THE MAIN INFRASTRUCTURE ITEMS THAT AMPIP SEES AS FUNDAMENTAL FOR MEXICO?

It is well known that for any country, a competitive national infrastructure is necessary to ensure the functioning of the economy, and that this must be effi cient and extensive, to reduce the effect of distance between regions, integrating and connecting markets at a competitive cost.

In this context, the AMPIP position regarding infrastructure, is that the government must consider industrial parks as a part of the country's strategic infrastructure and logistics national system, because infrastructure is not only highways, maritime ports or railways. A great number of companies moving goods along the country are located within an industrial park. Therefore we believe that our sector must be included in any national plan addressed to reinforce the infrastructure.