Since 2011, the Real Estate Investment Trusts have been operating in Mexico (fibers), which enhance the returns delivered to its investors through a key process: the choice of properties to acquire.
According to an analysis prepared by César Ruvalcaba and Abigail Pastelin, responsible for Corporate Finance and Investor Relations, respectively, for Fiber Mtywhen choosing a property to add to the portfolio, the cape rate or capitalization rate is one of the factors that determines the decision.
“This indicator allows us to estimate and compare the profitability or potential annual yield of a property.
“It is obtained by dividing the ION (Net Operating Income of the property or NOI for its acronym in English) of 12 months between the Cost of the Property”, it was explained in the report presented in a blog of the Mexican Stock Exchange.
The challenge of acquiring a profitable property
One of the ways to grow property portfolios is the acquisition of already built real estate, which implies taking into consideration elements that allow a purchase to be made that favors returns for investors.
For managers of Fiber Mtythe type of property, its location, the occupancy rate, the current rental contracts, the age of the building and even the possibilities of its reconversion or future commercialization, must be considered.
“Location plays a vital role in decision-making due to its ability to consistently generate flow and its long-term growth potential,” the report pointed out.
“The occupancy rate is very useful for projecting sales and thus calculating the value of a property.”
Regarding the existing lease contracts when acquiring a property, the suggestion is to review elements that allow the cash flow to be projected over time, for this the following must be analysed:
- Rent payment currency.
- Price per square meter.
- Credit quality of tenants.
- Contract expiration term.
- Rights and obligations stipulated.
“The factors explained above are decisive in choosing an investment property, and most of these are reflected in the Capitalization Rate or Cap Rate,” according to the document.
“In order for the purchase of a property to increase cash flows to investors, the Cap Rate has to exceed its cost of financing.”
Fibras or how to enter real estate
Fibras are a scheme that allows you to invest in a business focused on the acquisition, administration, operation and leasing of real estate in large volumes and, for the most part, high-end.
In Mexico, there are currently 15 trusts operating in the market, concentrated in the industrial, commercial, hotel and office property sectors. To a lesser extent, there are also operators of educational, health, mini-warehouses and other businesses.
- fiber one
- Macquarie fiber
- Terrafine
- Fiber Danhos
- Fiber Prologis
- Fiber Shop
- Fiber Mty
- Fiber Inn
- Fiber Hotel
- Fiber Plus
- fiber storage
- upsite
- Educational Fiber
- Nova fiber
- soma fiber
According to data from the Mexican Association of fibers Real Estate (amoefibre), as a whole, with data to 2021, these instruments gathered 1,878 properties with a gross leasable area of 25.9 million square meters, of properties either developed or acquired.
“A Fiber You can grow your property portfolio through two alternatives, 1) development or construction, or 2) through a purchase-sale transaction in the market. Both alternatives aim to increase the value of the Company and, consequently, the cash flow for investors”, reads the analysis presented.