Deals

Terrrafina to buy Mexican industrial portfolio for $600m

Terrafina, the Mexican REIT managed by Prudential Real Estate Investors, will become the largest Mexican industrial real estate owner after it completes the acquisition from Kimco Realty and American Industries.

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In its first acquisition since being launched by Prudential Real Estate Investors, Terrafina, a Mexican real estate investment trust (REIT), has agreed to acquire an 87-property industrial portfolio from Kimco Realty Corporation and American Industries for $600 million.

This includes the value of the trusts that hold the buildings of approximately $294 million, as well as the assumption of $306 million in mortgage debt. Kimco holds approximately a 50.7 percent interest and American Industries holds the remaining interest in the buildings, which total approximately 11 million square feet.

Upon the close of the deal, which is expected during the third quarter, Terrafina will see its industrial portfolio grow by approximately 56 percent, from 19.8 million square feet to more than 30 million square feet of industrial space, and become the largest industrial property owner in Mexico in terms of gross leasable area.

Terrafina is executing its first acquisition two months after being launched by PREI – the real estate investment management business of Prudential Financial – in early March.  In rolling over 146 properties from two of its Latin American legacy closed-ended funds, PREI became the first private equity real estate firm to partially exit its holdings in the country through the launch of a Mexican REIT, known locally as a Fibra.

Mexico’s Fibra market has raised $2.7 billion to date in 2013, which already exceeds the $2.3 billion raised in 2013, according to PREI’s Latin American Quarterly Outlook released last month. This capital raising success is encouraging more entrants to the Mexican REIT market, with at least six Fibras gearing up for IPOs in the coming months, the report said.

Meanwhile, some private equity real estate firms, including Walton Street Capital and Clarion Partners, are said to be potential candidates for exiting their Mexican real estate holdings through sales to existing Fibras, which will mean more acquisition activity for Mexican REITs. Terrafina, for example, currently is evaluating a pipeline of 10 to 12 million square feet with a total value of more than $700 million.