Kimco, American Industries Sell Mexican Industrial Portfolio for $600M

By Barbra Murray, Contributing Editor

Kimco Realty Corp. has just taken a big step in its strategy in Mexico. The REIT and joint venture partner American Industries have entered into an agreement to sell their interests in an 11 million-square-foot portfolio of industrial properties in the country to Terrafina, a Mexican REIT advised by Prudential Real Estate Investors, for $600 million.

It’s all about timing. “There’s been a lot of investor capital flowing into Mexico,” a Kimco official told Commercial Property Executive. “And with the new FIBRA structures, or Mexican public REITs, there have been a number of IPOs that have taken place and raised a lot of investor capital, and as a result, they need to buy properties.” Mexico’s first public Fideicomisos de Inversión de Bienes Raíces, FIBRA Uno, raised $300 million with its initial public offering in 2011 and commenced its second follow-on offering, valued at $1.7 billion, in January 2013.

Kimco is giving the hungry investors in Mexican real estate what they want. The REIT and American Industries will sell Terrafina a collection of 84 properties featuring locations throughout Mexico and an occupancy level of roughly 92 percent. The tenant roster consists of a bevy of multi-national businesses with light manufacturing needs in the automotive, aerospace and consumer goods industries.

Per the terms of the sale agreement, Terrafina will pay American Industries and Kimco, which owns a 50.7 percent interest in the portfolio, approximately $294 million and assume $306 million in existing debt on the assets. Kimco anticipates that the transaction will close by the third quarter of this year.

The Terrafina deal comes on the heels of Kimco’s completion of the joint venture disposition of a 2.6 million-square-foot portfolio of nine shopping centers in Mexico, for $271 million. It’s the same story, in terms of the current state of the real estate market in the country.

“There’s a need for properties and Kimco has a nice, strong quantity of shopping centers properties down in Mexico,” the Kimco official said. “As a result of that increase in capital coming into Mexico, cap rates are falling and retail real estate prices have risen dramatically over the last year. So as a result, Kimco has been selectively considering and looking at opportunities to reduce its exposure in Mexico.”