Four Mexican RE funds to tap local pensions for $1bn

Mexico’s state-backed infrastructure fund, Fonadin, has green-lighted four real estate funds to raise capital on the stock exchange via Capital Development Certificates (CKDs), a form of trust fund security created by the government to help finance infrastructure projects.

CKDs have also been used to channel the capital of Mexican institutional investors into private partnerships, such as private equity funds.

The new real estate funds will seek to raise up to MXN16.3 billion (€990.58 million; $1.28 billion) on the Mexican Stock Exchange between the end of this month and September. State-backed infrastructure fund Fonadin, which authorised the new vehicles, said it will invest MXN3.26 billion in the funds with the rest expected to come primarily from local pension funds.

Real estate group AMB, Artha Capital, Mexico Retail Properties and Prudential Financial’s Mexican unit will each launch a local fund targeting industrial developments and infrastructure with debt and capital.

AMB’s MXN3.3 billion industrial development fund, first reported on PERE's sister magazine Infrastructure Investor in February, is set to complete its listing by July 27. AMB will invest MXN825 million in the fund, equivalent to 20 percent of its value.

The vehicle will focus on acquiring logistics platforms in Mexico City, Guadalajara and Monterrey – the country’s three biggest cities – and in other cities where AMB is already present, such as Tijuana, Reynosa, Toluca and Querétaro. AMB says it has identified a demand for logistics platforms in these markets and intends to capitalise on Mexico’s proximity to the US. It will also target other industrial development projects over its 10-year life-cycle.

The second fund to list will be Prudential Financial’s Prumex Industrial III, to be managed by Prudential Real Estate Investors, which will seek to raise MXN6.5 billion by the second week of August. The vehicle will have a 12-year maturity and will also target logistics platforms and other industrial projects across Mexico.

I Cuadrada, sponsored by Mexico Retail Properties, is aiming to raise MXN4billion on the stock exchange by September 10 to invest in transport infrastructure, social accommodation, healthcare projects and water and wastewater opportunities across Mexico. It will have a 15-year life-cycle and will receive a MXN200 million seed investment from Mexico Retail Properties.

The smallest of the funds – Artha Capital’s Artha – will seek to sell MXN2.5 billion of CDKs on the stock exchange also by September 10. The vehicle will invest in real estate and industrial infrastructure over its 10-year duration. Artha Capital will contribute a seed investment of MXN125 million, about 5 percent of the fund’s value.

The four new funds, alongside Macquarie’s Mexico fund, already in operation, will bring MXN31.3 billion for infrastructure investments in Mexico. They are part of Mexican president Felipe Calderon’s plan to tap into the country’s MXN1.28 trillion in pension reserves to help develop Mexican infrastructure.