Inflation and high interest rates challenges to be overcome by the Fibras
Econohabitat | June 23, 2022 |

For real estate investment trusts (fibras), the increase in reference rates and the level of inflation represent challenges that have directly impacted the profitability they offer.

According to the S&P/BMV Fibras Index, the performance of the last year registered a fall of 9.15%, while in the last three years its reduction is 3.24% accumulated.

Given this scenario, Carlos Gómez, an analyst at Intercam, pointed out that the negative effect responds to the global pressures derived from the war between Russia and Ukraine, which has not only affected real estate trusts, but also investments in general.

In this context, Gómez stressed that due to the increase in bank rates, investments in fibers could lose attractiveness compared to fixed income bonds.

“Fibrasr would have to pay annual dividend rates of around 10%”, detailed the Intercam analyst.

"Suddenly, in fixed income, yields become higher and they are a low-risk instrument. Many times, people who need flow generation, instead of looking at the Fibras, they will go for the bonds."

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The specialist ruled out significant reductions in the prices of the certificates; however, he noted that there will possibly be fewer investment flows. On the other hand, he indicated that since the increases in income are related to the level of inflation, this factor can even benefit income, as long as the economy in general is not impacted.

Salvador Daniel Kabbaz Zaga, general director of Fibra Danhos, considered that although inflation affects all economic segments, including real estate portfolios, which can be a determining factor against the rise in interest rates, it cannot be considered which are investment products that compete in performance.

For the director, it will be the investors less knowledgeable about the real estate sector who decide to sell their certificates in the face of the increase in reference rates, since the capital gains of the trusts are defined in the long term.

He even considered that far from being seen as a reduction in profitability, the drop in the prices of fiber certificates should be seen as a buying opportunity.

"The knowledgeable, more sophisticated investor understands. It is a safe investment, which is at a ridiculous discount level, which is why today there is an opportunity to enter at a discount rate of 40 or 50%, which will soon be reflected in the sector," said Kabbaz Zaga.

He pointed out that in the case of Fibra Danhos, institutional investors have maintained possession of their papers, even in times of greatest economic uncertainty.

"The big capitals have stood firm, the people who don't understand them get scared and have left, but they leave a great opportunity," he explained.

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"It is much better to have a piece of paper from a fiber than to have a rental property, because if it is emptied you stop having income; the fiber makes up a group of properties and not all of them are going to be emptied, it always allows you to have income from constant yield.

Between the launch of Fibra Storage in 2018 and the debut of Fibra Soma in February 2021, the last one to be listed on the stock market, there was a period without new trusts that were added to the current 15 instruments, which was also not receive in the short term.

For Kabbaz Zaga, the main reason responds to the complex economic context, coupled with the destabilizing scenario brought about by the pandemic.

However, for the manager, possibly in the medium term new trusts will be added or the fibers that currently operate will increase their investments.

"The pandemic stopped us all, a very complicated circumstance in the world, not only in Mexico," he explained.

Since last year, two fibers specialized in rental housing, FibraHaus and Fibra Multifamily, had expressed their intention to go public; however, so far it is unknown if this will be in the short term.

In Solili you can consult industrial  warehouses and offices in Mexico City

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