New Fund Types to Draw Foreigners to Mexico Hotel investment Sector

Leading international real estate company Jones Lang LaSalle is predicting strong growth in Mexico hotel investment in the next 2 years, due to the introduction of new financial vehicles in the country and the sector.

Leading international real estate company Jones Lang LaSalle is predicting strong growth in Mexico hotel investment in the next 2 years, due to the introduction of new financial vehicles in the country and the sector.

Locals have long dominated the Mexican hotel investment market, but foreigners are set to be allured by the introduction of Fideicomiso de Inversión en Bienes Raíces (FIBRAs) according to JLL.

FIBRA is a new Mexican equivalent to Real Estate Investment Trusts, which are real estate specific investment funds offering an easy way to invest in quality properties as well as tax advantages.

Two FIBRA focused on Mexico hotels were formed last year--FIBRA Hotelera Mexicana and Fibra Inn--and more FIBRAs are expected this year, JLL reports.

"FIBRAs offer a strong investment play for the hotel investment market in Mexico," said Clay Dickinson, executive vice president of JLL's hotels & hospitality group. "More capital means hotel asset prices will likely increase fuelling more transaction activity through FIBRAs, while freeing up banks to redeploy capital as these loans are repaid."

(Note: FIBRAs are different than the fideicomiso used by foreign buyers to purchase residential property along the coast.)

Another financial vehicle set to bring more foreign investors into Mexico is the Certificados de Capital de Desarrollo (CKDs). CKDs are "comprised of securities that allow investors to participate in private equity projects through long-term public funds," which will be used for both investing in existing hotels and developing new ones, JLL reports.

The new demand is expected to be focussed on Mexico City at the outset, before spreading out into Cancun and the River Maya region according to JLL. The Cancun and Riviera Maya region has traditionally attracted the most investor interest, generating $900 billion in transactions in the last decade. Mexico hotels are reporting steady growth in revenue per room and average daily rates, JLL reports. In Cancun the revenue per average room increased 12 percent in 2012 and is up 15 percent in 2013.

- Friday 28 June 2013

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