Mexico Infrastructure & Sustainability Review 2018

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DEVELOPER POSITIONING FOR AFORE INVESTMENT EDUARDO OROZCO Managing Director Latin America of Greystar

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Q: As a multifamily property developer and manager, what

Q: What are the challenges in Mexico City’s regulatory

market characteristics do you look for when deciding where

framework for developers?

to develop?

A: For the first time, the new Federal Housing Law includes

A: The ideal characteristics we look for are comparable around

rental properties as part of its scope. Previously, the focus

the world: we focus on large cities with rapid employment

of public policy was on the volume of people who could be

growth, a young population and a demographic shift. Many

placed in housing rather than on the quality of that housing.

cities are growing quickly and the infrastructure is falling

There are large regions on the outskirts of Mexico City that

behind, which creates a great number of challenges from an

resemble ghost cities because it makes no sense for anyone

urban standpoint. This results in challenges to quality of life.

to live there given the working demographics and geography.

We are interested in at least 12 major cities in Mexico that are highly concentrated in the services industry, which tends to

One of the most encouraging signs as developers and

attract the younger demographic and millennials.

operators is SHF’s strong program for providing financing for multifamily developments. Commercial banks are still

At the same time, we see a complex infrastructure

trying to understand the product in Mexico, whereas it is

situation. Take for example Santa Fe, where almost

well-established in countries like the US. Every institutional

200,000 people work every day but there are less than

investor has massive exposure to multifamily development,

15,000 residential units. Between 100,000-150,000 people

which are the second-biggest asset class owned by REITs after

come and go to Santa Fe through two points of access.

retail developments. From a local government perspective,

This opens an opportunity for our market to provide

there have been several changes introduced by Mexico City’s

really high-quality residential developments with many

new Constitution. We are concerned about the repercussions

amenities and a high level of services for a demographic

from the constitutional changes that make Mexico City a state

with a real housing need and a lifestyle problem.

rather than a special district. Traditionally, we have witnessed that decentralization is not very conducive to transparency or accountability. As an institutional investor that has been present in Mexico for five years, we are committed to the market and we want to participate as much as possible in

There is a requirement for 40-60% more houses because people are living alone or with roommates

the dialogue. Q: Why did Greystar choose a CKD over other financing instruments like CerPis? A: As an experienced asset manager, we are raising and deploying funds from various global investors, including

In a pattern similar to the US in the last five years, we are seeing

insurance companies, pension funds, sovereigns, endowments,

a new preference in Mexico for renting rather than owning.

institutions and family offices. When we first came to Mexico,

There is a much greater drive toward lifestyle and the 24-

we started by investing a dedicated account from a Canadian

hour city wherein people want to be closer to work and have

pension fund and we were successful in deploying that capital

more convenience. The population is more mobile and less

into some landmark projects in Guadalajara and the Mexico

willing to commit, there are more single-person households,

City areas of Periferico Sur and Bosque de las Lomas.

people delaying marriage and parenting and similar trends. As a result, for the same population, now there is a requirement

When looking at the asset class, it makes sense to have the

for 40-60 percent more houses because people are living

returns denominated in the same currency as the investment.

alone or with roommates rather than in large family units.

The rents in Mexico are and always will be in pesos because


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