Fibras Adopting REIT Best Practices, Analyst Says
07/01/2015 | by Allen Kenney

David de la Rosa, vice president with Green Street Advisors, joined REIT.com for a video interview during REITWeek 2015: NAREIT’s Investor Forum, held in New York.

De la Rosa offered some insights into the growing fibra market in Mexico. Fibras, the country’s version of REITs, were introduced in Mexico in 2004. The first fibra listed in Mexico in 2011. The country is now home to nine listed fibras with a total market capitalization of $18 billion.

“Despite the rapid growth in the sector, the fibra market is still relatively small compared to the U.S.,” de la Rosa said. “But, to put things in perspective, the entire real estate market in Mexico is about half of a trillion dollars in size versus about $7 trillion in the U.S., so it has grown quite rapidly relative to its market size.”

Although capital raising has been “a little bit slow this year,” according to de la Rosa, the fibra market is projected to double in size “in the near future.” De la Rosa noted that fibra management teams are adopting U.S. REITs’ best practices, helping to grow the industry.

De la Rosa cited Mexican pension funds as some of the key investors in the fibra market. The income streams from fibras appealed to the defined benefit funds and generated even more interest by outperforming the broad stock market from 2011 to 2014, he said. Emerging market funds have also put capital into fibras, according to de la Rosa.

The majority of fibras have external management, which has led to high management fees, according to de la Rosa. However, he said investors’ vocal opposition to the fee structures have pushed fees lower.

“Green Street believes the fee structures will continue to become more shareholder-friendly, but in the long run, we think that the fibras will eventually become internally managed,” he said.