CHICAGO (28 April 2008) – A growing middle class, employment growth and credit availability are contributing factors to Mexico remaining a good place for US pensions funds to invest in property, says LaSalle Investment Management (“LaSalle”). A US recession is not a unilateral negative on all of Mexico, with the economy south of the border decoupled from the US economy now more than ever. Investors looking at investing in Mexico should bear in mind the major economic link is between both countries’ industrial sectors and both are expected to continue growing although at a modest rate (vs. 06 & 07). And while the primary impact of the US slowdown will be on industrial assets, the effect will likely be limited. Additionally, the retail, residential and office sectors are driven primarily by domestic factors and should continue to do well.
In terms of risk and reward, relative to other opportunities in emerging markets, Mexico offers attractive risk-adjusted returns. The BRIC countries, for example, offer higher returns but also higher risk, especially with regard to real estate transparency. Additionally, the yield differential between Mexico and US real estate assets is around 250bps, which is around 100bps above country risk. Investors should also take into account that risk premium in the bond market is around 100bps while real estate offers an additional 200 to 300 bps when compared to the US. Overall, LaSalle believes the return premium makes up for the risk of investing in a foreign country.
Eduardo Guemez, Mexico CEO, LaSalle Investment Management, comments: “We have long been active in Mexico and our aim is to maximize client benefit with attractive investment returns on a risk-adjusted basis in comparison to established markets in North America and Europe. We take a long term view on Mexico and think it makes a lot of sense to be part of the ongoing modernization of Mexican real estate and strategically off-set risk. Through our Mexico Fund we are actively investing in all mayor asset classes throughout the country and remain firm in our belief that with Mexico’s stable currency, political environment and growing population, it is a good case for property investment relative to other emerging markets.”
“We’re also buoyed by the ongoing sophistication of the debt markets and the growth of single family mortgages in Mexico. One of the implications of a stable economy has been the increasing availability of consumer and mortgage financing in Mexico, primarily driven by low inflation rates. Credit conditions, primarily interest rates and maturity terms, have improved a lot in the last seven years and has translated into annual mortgage growth around 15% since 2000.”
WHY MEXICO?
-In 2006, Mexico was the most transparent real estate market in Latin America, according to the Jones Lang LaSalle Real Estate Transparency Index.
-A rapidly growing middle class is creating substantial demand for retail, industrial, and office spaces.
-Mexico is the second largest Latin American economy (after Brazil), and the 12th largest economy in the world.
-GDP grew 4.7% in 2006 and 3.3% in 2007. Despite the US slowdown the Mexican economy is expected to grow at an annual average rate of 3.1% from 2008 to 2012.
-The Mexican economy created more than 895 thousand jobs in 2006 and over 993 thousand jobs in 2007.The government has exhibited more than 10 years of stable fiscal policies.
-Mexican real estate values are appreciating in response to rising institutional investment interest.
Attractive investment returns are available on a risk-adjusted basis in comparison to established markets in North America and Europe.
###
About LaSalle Mexico Fund I
LaSalle Mexico Fund I is a value-add fund launched in 2007 with investment focus on high-quality development with broad diversification across all property types and markets across Mexico.
About LaSalle Investment Management
LaSalle Investment Management, Inc., a member of the Jones Lang LaSalle group (NYSE: JLL), is a leading global real estate investment manager, with $50.4 billion of assets under management. LaSalle Investment Management is active across a range of real estate capital and operating markets including private and public, debt and equity. LaSalle Investment Management is authorised and regulated for investment business in the UK by the Financial Services Authority. For more information, visit www.lasalle.com.