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Clarion sells Mexican portfolio stake for $300m

The New York-based real estate investment manager originally acquired the interest through its 2007 Lion Mexico Fund.

Clarion Partners has sold its 50 percent interest in a 3.17 million-square-foot retail portfolio in Mexico to Frisa, its current joint venture partner and one of the largest retail real estate companies in the country. The real estate investment manager sold its stake of the approximately $600 million portfolio for approximately $300 million. The prices are understood to be gross asset values, not equity values.

“This investment and joint venture relationship affirm the investment rationale with which we initiated our Mexico investment platform in 2006: projected GDP growth above historical average in a country with an expanding middle class and increasing levels of disposable income should translate into strong retail investment opportunities,” said Onay Payne, director at Clarion, in a statement. “We believe that rationale holds true today.”

The joint venture with Frisa, called LMF-Frisa Comercial, was one of the first deals that the New York-based firm executed in Mexico. The venture, which initially involved the contribution, sale or development of six shopping centers in and around Mexico City, was formed in June 2006, the second transaction under Clarion’s Lion Mexico Fund, according to a May 2010 filing with the US Securities and Exchange Commission. Clarion purchased its interest in the portfolio for $122 million, including $78.4 million in cash and $43.6 million in debt, the filing noted. 

The Frisa portfolio encompasses nine Class A shopping centers in the Mexico City area, Acapulco, Cuidad Madero and Tampico. The properties include six fully stabilized and mature assets, with a total average occupancy of 96.4 percent, and three assets in the lease-up stage, with an average occupancy of 77.9 percent.

The sale of the portfolio stake represents Clarion’s latest exit of a Lion Mexico Fund investment. Last October, the investment manager announced the sale of a 22-building industrial portfolio, along with 67 acres of land reserves, to Mexican real estate investment trust FIBRA Uno for $202 million.

As of March 31, the Lion Mexico Fund was generating an internal rate of return of -3.2 percent and a total value multiple of 0.86x for the Oregon Public Employees’ Retirement Fund, which committed $100 million to the vehicle in 2007, according to documents from the state pension plan. Clarion currently has approximately $700 million of assets under management in Mexico.