FIBRAs: The View From New York

Transcription

1 FIBRAs: The View From New York 6 September

2 FIBRAS: The View From New York How FIBRAS were created and the current market Comparing FIBRAS to the structure and market for US Real Estate Investment Trusts ( REITs ) International perspective and trends A look into the future of FIBRAS 2

3 Overview of FIBRAs A FIBRA is an investment trust vehicle under Mexican law dedicated to the acquisition and development of real estate assets in Mexico Transparent for Mexican tax purposes First introduced into Mexican legislation in 2004 Reforms made over several years to make product more commercially viable One of the key reforms was an adjustment to the investment regime of AFORES, permitting the investment in FIBRAs by Mexican pension funds 3

4 Overview of FIBRAs Among other requirements, a FIBRA must: Be organized as a Mexican trust Distribute annually at least 95% of its net taxable income At least 70% of its assets must be invested in real estate assets (or rights derived therefrom) that are held for lease or under development It may not sell such properties for 4 years 4

5 International FIBRAs First FIBRA IPO and listing on the BMV in 2011 Current international FIBRAs Fibra Uno Fibra Hotel Fibra Inn Fibra Terrafina Fibra Macquarie Fibra Shop Since 2012, there have been 9 IPOs and follow-on offerings for FIBRAs raising over US$6 billion This accounted for a significant percentage of the total capital raised in Mexican IPO and follow-ons for the same period 5

6 FIBRAs A Game Changer FIBRAs have the potential to transform the Mexican real estate market for both property owners and investors Impact on Sponsors FIBRAs have created a path to liquidity for both domestic and international owners of real estate in Mexico, whether through the creation and IPO of a FIBRA, or the sale of assets to an existing FIBRA Tax efficient way for real estate owners to transfer properties Opportunity to raise capital through public markets Creation of a natural buyer for properties Opportunity to earn management fees International owners have taken note, as evidenced by recent transactions 6

7 FIBRAs A Game Changer Impact on International Investors "The attraction at the heart of the FIBRA is the ability to invest in property without having to buy a building." Andre El-Mann, CEO of Fibra Uno Tax efficient vehicle through which investors can gain access to Mexican real estate through the ownership of a liquid security with a readily identifiable market price Diversification asset type geography Local market knowledge and expertise; experienced management teams 7

8 US REITs Created in 1960 through U.S. Federal income tax law, a REIT is "any corporation, trust or association that acts as an investment agent specializing in real estate and real estate mortgages" that meets the requirements set out under Internal Revenue Code section 856 To qualify as a REIT for U.S. tax purposes, an entity must satisfy: Organizational Requirements Quarterly Asset Requirements 75% Quarterly Asset Test Annual Income Requirements 75%/95% Annual Income Test Annual Distribution Requirement Must distribute 90% of Income REITs are not taxed at the entity level Except any subsidiaries that are Taxable REIT Subsidiaries ( TRS ) because their income and assets would not qualify under the REIT rules 8

9 The US REIT Market When the REIT Index began in 1971, there were 34 REITs with a total market capitalization of US$1.5 billion At the end of 2012 there were 172 REITs in the index with a market cap of over US$600 billion 139 of those REITs were equity REITs and 33 were mortgage REITs That US$600 billion is almost double the total REIT market cap from 2007 and more than 3x the market cap from 2008 In 2012 there were 8 REIT IPOs which raised over US$1.8 billion Secondary equity and preferred equity offerings raised over US$45.7 billion As of July 31, there have been 13 REIT IPOs in 2013 which raised over US$3 billion 9

10 Two Basic Types of US REITs Equity REITs Own direct interests in RE Internal management UPREIT structure for RE contributions Mortgage REITs Own individual mortgages or mortgage-backed securities ( MBS ) External Management May use extensive leverage 10

11 Equity UPREIT Structure REIT Shareholders REIT Operating ( Umbrella ) Partnership Limited Partners Properties TRS 11

12 Mortgage REIT Structure External Manager REIT Shareholders REIT Mortgages and MBS 12

13 FIBRA Structure Control Trust (Sponsor and Key Holders) CBFI Holders Advisor Advisory Agreement MX FIBRA Trustee Property Management Agreement Trust Real Estate Portfolio Management Subsidiary 13

14 The International Perspective on FIBRAs International investors are attracted to FIBRAs and optimistic about the sector International demand in offerings Exposure to Mexico's macroeconomic fundamentals Room for growth in rents compared to other LatAm countries Emerging middle class Support from Afores Opportunity for total return through distributions and capital appreciation 14

15 The International Perspective on FIBRAs Factors and Trends Capitalization rates compressing; supply of high-quality properties Impact of QE and increases in interest rates Management Fees Corporate Governance and Conflicts of Interest 15

16 The Future of FIBRAS Additional FIBRAs coming to market How will new FIBRAs differentiate themselves? How will existing FIBRAs respond to a more competitive environment? Investors have options; may become more discerning Standardization of the FIBRA market A FIBRA index Listing on a US Exchange Evolution of regulatory framework to enable innovation 16

17 The Future of FIBRAS As the FIBRA market matures, it will continue to evolve In the United States, regulatory guidance has cleared the way for alternative real estate assets Recent US IPO filings for REITS investing in: Cell-phone towers American Tower Infrastructure/Energy Efficiency assets Hannon Armstrong Billboards/Outdoor Media CBS Outdoor Data Centers CyrusOne, QTS A number of these new filings represent companies spinning off REITable assets 17

18 The Future of FIBRAS Asset Class US REIT Mexican FIBRA Industrial Retail Shopping Center Office Lodging Mortgages Single-Family Residential Apartments Medical Office Building Gaming Cell-phone Towers Data Storage / Self Storage Billboards / Outdoor Media Marinas Renewable Energy / Energy Efficiency Farmland Stadiums / Sports Arenas 18

19 The Future of FIBRAS The Next Chapter Mexico has created a commercially viable product that has been validated by the market New entrants to the market Expansion of existing FIBRAs New products and structures designed to unlock the value of real estate assets Additional inflows of international capital 19

20 FIBRAS: The View From New York 6 September