Prudential Real Estate Sees Mexico as ‘How’ for Succes; ‘Positive’ on Outlook
Prudential Real Estate Investors has been investing in real estate on behalf of institutional clients since 1970, with gross assets under management of US$48.2 billion or US$30.3 billion in net asset value as of June 30, 2011.
Investment products are structured primarily as open and closed-end commingled funds for institutional investors. Their funds pursue core, value-added, opportunistic, and specialized real estate investment strategies. In late 2010, Prudential Real Estate Investors reported it would launch an investment fund in Mexico to tap opportunities in industrial real estate using a new vehicle aimed at local pension funds.
“In this way” Rodrigo Meza, Industrial Portfolio Manager of the Prudential Real Estate Investors in Mexico, explained: “…PREI® has 23 fund management centers worldwide, managing assets for institutional clients from all over the world. Now we proudly say we have Mexican institutional investors among them.” Mr. Meza explains that since the year 2000, PREI® has invested foreign resources in Latin America through four investment programs in the industrial, residential, retail and office assets in markets including Mexico, Brazil, Chile and Argentina.
“Currently,” he points out, “PREI has a team of more than 100 professionals at their Mexico City, Rio de Janeiro, Sao Paulo, Santiago and Miami offices managing more than US$3.5 billion dollars in gross assets or more than US$2.3 billion dollars in net assets as of September, 2011.” “We are very excited with the recent involvement of national players, like Afores and other qualified investors, in our investment options,” Meza said. “The first investment option was through Development Capital Certificates (CKD). These are investment funds that quote on the Mexican Stock Exchange and are specialized in infrastructure and real estate projects. Towards the end of 2010, PREI Latin America placed a CKD fund called PRUMEX INDUSTRIAL III for the domestic market, where qualified investors invested $3,695 million pesos. This fund has a positive perspective because there is an unmet need of quality industrial space in Mexico.” PREI Latin America has been active in the Mexican market since 2003. Since then, PREI has had partnership with strong, local, solid and active developers. These partners have worked along closely with the investment program and are an integral part of the portfolio’s growth.
Their business strategy is to reach synergies and additional value by aligning the interests and experience of the best partners, developers, contractors, operators and leasing agents in Mexico. These are then combined with their indepth institutional global portfolio management expertise into success for the benefit of their clients. Today, with more than 20 million square feet of leasable space under management they have reached significant enough size to accomplish very real positive economies of scale. In upcoming years Prudential Real Estate Investors wants to consolidate their presence in major industrial markets while increasing their presence in future expanding markets, and at the same time take advantage of their partners’ network and local presence.
“Our partners,” Meza pointed out, “Amistad, O’Donnell, RMSG and Marhnos have developed such expertise and local insight that they recognize markets at their peak or on the path of growth. There is room for speculative buildings in these blooming markets where local presence and institutional management really matter and our partners are benefitting from them.” Rodrigo Meza explained that the Mexican industrial real estate sector is mostly denominated in U.S. dollars. This makes it comparable to the market in the U.S. and is naturally leveraged in the same currency. “This asset class is attractive to foreign lenders at an attractive financing cost,” according to Meza, “when they trust in how the manager handles diversification and debt coverage risks. As an example, our footprint in Mexico covers more than 25 cities and more than 130 tenants. All this provides a geographic, tenant, industry and country of origin diversification that is attractive to any lender.” He went on explaining his opinion for his outlook on Mexico’s industrial and distribution real estate markets in 2012-2013.
Mr. Meza concluded: “It seems positive. Mexico has a strong investment framework to attract any foreign investor to establish operations in the country. Global economic recovery,” he added, “is fundamental, especially in the U.S. in order to accelerate absorption rates. But, Mexico can compete in this turbulent environment by offering near-shoring featuring lower costs and increased speed to the market. We are not only close to the U.S., but we share the same business understanding and competitive technical skills. Companies need to compete globally in this era and Mexico can help in that matter.”
Andres Bello #10, 11th floor
Col. Polanco, Mexico D.F. 11560
Phone: +52 55 5093 2770
Fax: +52 55 5093 2789