A real estate investment trust ('FIBRA' in Spanish) is a real estate investment vehicle that can be managed through a stock exchange trust. This stock exchange trust issues trust certificates to the investing public and the funds obtained are used for the purchase of or construction of improvements on real estate. The holders of trust certificates receive periodic returns from the income earned by leasing the real estate and may also derive capital gains from the difference between the acquisition price of the trust certificate and the sale price, due to the appreciation in value of the real estate.
FIBRAs are governed by Articles 223 and 224 of the Income Tax Act, which state that this investment vehicle is a trust intended for the acquisition of or construction of improvements on real property intended for leasing, or for the acquisition of the right to receive income from leasing such real estate, and to provide funding for these purposes.
A FIBRA must meet the following requirements:
- It must be a corporation or trust created under Mexican law.
- Seventy percent of its assets must be invested in real estate.
- It must be engaged in the construction, lease, purchase or sale of real estate.
- The trustee must distribute among the holders of the trust at least 95% of the trust income from the previous year.
- The real estate may not be transferred within four years of its acquisition or completion of the construction of improvements.
Three FIBRAs are currently listed on the Mexican Stock Exchange:
- FIBRA UNO (FUNO);
- FIBRA Hotel (FIHO); and
- FIBRA Macquarie (FIBRAMQ).
FUNO has made three public placements, with a total value of approximately $2.27 billion.
The FIHO public placement was made on November 30 2012 and was the second to be listed on the Mexican Stock Exchange (after FUNO). The trust is intended to develop, acquire, own and operate urban business hotels throughout the country. According to the prospectus, the FIHO obtained a value of approximately $299 million.
The FIBRAMQ public placement was made on December 21 2012. It is the third of its kind to be listed on the Mexican Stock Exchange and it is focused on real estate assets related to the industrial sector (in particular, manufacturing). According to the prospectus, FIBRAMQ obtained a value of $1.16 billion, of which 70% of the trust certificates were placed in international markets with the remaining 30% in Mexico.
The FIBRA has been well accepted in the Mexican capital markets, as it has been used as an effective instrument to promote investment in the real estate sector. The outlook for further FIBRA development in Mexico is highly favourable, due to increased interest from both domestic and foreign investors seeking to diversify their portfolio risks. Also, due to the federal government's promotion of infrastructure projects, there are high expectations for the increased use of FIBRAs in Mexico by offering competitive profits.