Prudential Real Estate Investors

Prudential Real Estate Investors

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Prudential Real Estate Investors is the real estate investment management business of Prudential Financial, Inc. (NYSE:PRU). It operates an integrated real estate investment business in the United States, Europe, the Middle East, Asia and Latin America. With a global presence and a team of industry specialists, PREI® managed approximately $51.9 billion in gross real estate assets (approximately $34.6 net) as of September 30, 2012.

PREI has been investing in Latin America since 2000 and currently manages funds specializing in industrial, residential, and retail properties in Mexico, in addition to having transactions capabilities in Mexico, Brazil, Argentina, and Chile. PREI Latin America is one of the largest real estate investment managers in Latin America and has been investing in the region since 2002. As of September 30, 2012, PREI Latin America managed approximately $3.6 billion in gross real estate assets and had closed over 230 transactions involving approximately $7.9 billion in gross real estate assets.

Since 2003, PREI Latin America has acquired and developed an industrial portfolio of 158 industrial properties. This represents a collective GLA of approximately 21.04 million square feet and 17 land reserve properties. The Portfolio is well-diversifi ed both geographically and by tenant, and features locations in 25 cities and 16 states. These are located primarily in northern and central Mexico and are distinguished by the quality of their tenants.

PREI Latin America has maintained a team in Mexico City since 2003. It has extensive real estate investment management responsibilities including the acquisition, development and management through local property managers. This is something which has led to a deep knowledge of industrial real estate and robust local market intelligence.

Rodrigo Meza, who is the Portfolio Manager of Prudential Real Estate Investors in Mexico, explained it this way: "Our focus on industrial properties has positioned us to address and benefi t from a limited supply of modern industrial and logistics facilities in Mexico."

"We believe," Mr. Meza continued, "that a large proportion of industrial facilities in Mexico are outdated and unable to keep pace with the strong economic development anticipated in the country. So, we have developed and intend to continue developing properties with modern features such as wide column spacing, large fl oor plates, high ceilings, offi ce space, large depth loading docks and good vehicular access. We believe the quality of our properties coupled with our scale distinguishes us from our competitors in Mexico."

According to Meza, the Mexican real estate sector presents signifi cant market opportunities because of Mexico's strong underlying economic and demographic fundamentals, its excellent geographic location and relatively low labor costs. "Mexico", he explained, "is the secondlargest economy in Latin America and is experiencing rebounding growth following the global credit crisis."

In addition, according to the Prudential Real Estate Investors' Portfolio Manager in Mexico, positive trends in Mexican demographics, including increased per capita income, access to credit and expanded domestic consumption, together with a sustainable birth rate, opens things up for a sustainable demand for goods in the future. "A great number of the Mexican population is young," he points out, "and as this group ages and transitions into seeking jobs, buying homes and obtaining economic independence, dramatic increases in domestic consumption are expected."

Mexico's geographic location positions it as a natural hub for the U.S., its largest export market and there is the Latin American market which is currently one of the most attractive markets anywhere, given its demographics and growth prospects. As a result of rising fuel and freight rates, Mexico's location represents a more cost-effective option relative to other lowcost manufacturing countries with greater exposure to increasing transportation costs. In addition, over the past decade the Mexican federal government has increased its investment in infrastructure, including rail, highways and seaports. All this has certainly benefi ted the fi rm's properties.

This is what Rodrigo Meza also told MexicoNOW. "We believe," he said, "that the cost-effectiveness and quality of labor, including the high level of specialization and training in Mexico offers a competitive advantage to businesses operating there. We believe our properties in northern and central parts of the country are positioned to capitalize on what we view as the twin engines of economic growth in Mexico: domestic consumption and exports of manufactured goods."

The portfolio of PREI has diverse composition and strategic locations and is the third largest portfolio of industrial real estate properties in Mexico. Its scale helps to achieve revenue diversifi cation, offers the company cost-savings due and ultimately allows their tenants to expand across their locations as the tenant's business evolves. "We have amassed a substantial market share that is attractive," Meza added, "and this is something which we believe positions us to benefi t from the on-going economic expansion taking place in Mexico."

PREI's focus is on well-located, market- competitive industrial properties. This approach has positioned the Company to address the growth in demand for modern in-country industrial and logistics facilities. This has been done by developing competitive and fl exible properties with modern features such as wide column spacing, large fl oor plates, high ceilings, offi ce space, large depth loading docks and good vehicular access.

Their tenant base is well diversifi ed across a variety of industries, including automotive, electronic, consumer goods, industrial goods and logistics. PREI's manufacturing tenants typically engage in manufacturing and product assembly for export and targeted industries including the automotive, construction, electronics and electrical equipment, plus packaging and textile sectors.

Their distribution tenants, on the other hand, are primarily engaged in logistics related to warehousing and distributing imported goods. "Our tenants," Rodrigo Meza observed, "are well diversifi ed and operate across a variety of industries, including the automotive, electronic, consumer goods, industrial goods and logistics plus trade sectors, among others. We always try to target tenants," Meza emphasized, "that either benefi t from Mexico's proximity to the U.S. or distribute goods to Mexican consumers."

Over the past decade, the properties were acquired or developed as part of a strategic effort by PREI Latin America to own attractive assets within markets with long term growth prospects. This encompass favorable demographic and economic trends, robust infrastructure and communication networks, highly qualified labor and competitive locations for light manufacturing processes, in addition to dynamic logistics and trade sectors and state– of-the-art distribution warehouses.

The portfolio has a strong presence in the major industrial hubs in Mexico, including Cuautitlan Izcalli, Queretaro, Ciudad Juarez, Ramos Arizpe and Guadalajara. In this way, Mr. Meza explained: "We believe that many of our properties have the potential to achieve rental and occupancy rates equal to or above those typically prevailing in their respective markets due to their desirable locations within their sub-markets, as well as our hands-on management approach."

Within the metropolitan area, the properties are distinguished by their location in well-located industrial parks on or near airports and highways and include the NAFTA corridor. Many have direct railway access. PREI has worked under the belief that the geographic diversification within Mexico of their portfolio mitigates their dependency on any given area or regional economy.

Rodrigo Meza concluded with this insight: "We believe that having a good diversified portfolio with substantial scale allow us to receive a steady, long term and strong stream of cash flow minimizing the volatility risk in the future. This is achieved with a geographic diversification, solid tenants and experienced property managers" concluded Meza.