Fibra Danhos is a Mexican trust constituted primarily to develop, own, lease, operate and acquire iconic and premier quality real estate commercial assets in Mexico. Its commercial portfolio is among the fastest-growing in the country. At the opening of its latest Parque Las Antenas in June, Mexico Infrastructure & Sustainability Review sat down with Elías Mizrahi, the fund’s Director of Investor Relations to get his insights on the latest trends shaping real estate in Mexico.
Q: What role do commercial real estate developers in general and Fibra Danhos in particular play in shaping Mexico’s cities?
A: I think developers in Mexico City, and especially Fibra Danhos, see ourselves as community builders rather than just developers. One of the main things that differentiates Mexican shopping malls from those in the US is that in Mexico there is a lack of public recreational spaces and a lack of entertainment, security and public transportation. When all those factors are combined in a city like Mexico City, this can make life chaotic for its inhabitants.
As developers, we try to make the lives of people within the communities in which we invest much easier. We create shopping malls as community centers where we include stores, restaurants, cinemas and services. We invest a lot in safety and architecture and design. One of the reasons we call our shopping centers “Parques” is that we see Fibra Danhos as the city’s park developer. Unfortunately, there is a lack of parks and green spaces in the city, and by incorporating this aspect into our shopping centers we can really make an impact on the community.
Q: What were the main factors that attracted the company to the Parque Las Antenas project in Iztapalapa project?
A: There are two main things we always evaluate when constructing a mall. The first factors are very basic, such as security, safety, architecture and clean design. Then there is the second set of factors that make the shopping malls very particular. We look at it population density, consumer spending and the availability of other malls in the area. In the case of Parque Las Antenas, this is one of the last areas in the city where there was almost a complete lack of shopping centers in the area. This was compounded by the lack of public spaces, entertainment and cinemas.
We called the shopping center Parque Las Antenas because this was a huge plot of land where there used to be radar-transmitting antennas. Because of the technology, they became obsolete, so the land was sold and the antennas were removed. What remained was a plot of land in the heart of Iztapalapa, which is Mexico City’s largest borough and home to over 2 million people. Despite official figures that suggest Iztapalapa is not one of the most affluent neighborhoods, informal labor in the borough is very common, meaning the official figures do not accurately reflect the purchasing power of the people living there.
We have another investment in Iztapalapa called Parque Tezontle, which is a shopping center that is credited with the highest spend per person compared to the rest of our portfolio. Sometimes people underestimate the consumption capacity of people in this area. So, when we saw the characteristics of the project, for us it was a no-brainer to increase our reach in Iztapalapa and bring more services to those living in the borough.
Q: Toreo Parque Central (13.6 percent), Reforma 222 (12.8 percent) and Parque Tezontle (12 percent) experienced some of the highest increases in commercial space rents in 1Q18. To what do you attribute the success of your centers?
A: Something we take a lot of pride in is really taking advantage of the scale of the portfolio. At Fibra Danhos, we do not view the portfolio as a whole but rather with an asset-by-asset approach. The mix of tenants in each mall needs to be tailored specifically toward each area. We try to incorporate uniqueness into each of our developments. For example, in the case of Tezontle, it is the only location in Iztapalapa that provides a terrace with restaurants. Reforma 222 is one of the only open areas on Paseo de la Reforma, a street with a lot of office buildings. It is really about viewing each project as a standalone asset and identifying what adds the most value in that particular location.
Q: Outside of Mexico City, where are you placing a foothold and what do you look for in those secondary cities?
A: Danhos is a sharp-shooter so we do not intend to be everywhere in Mexico. For a shopping mall like Parque Las Antenas, we need a certain demographic potential, so it would not be viable in a city without at least 2.5-3 million people. We look at major metropolitan areas that have the dynamics to transform themselves into cities like Mexico City. Mexico City is still our largest development area and we still see a great deal of opportunity for expansion within Mexico City. Cities that match our requirements would be Puebla, Queretaro, Monterrey, Guadalajara and Toluca. For us, there will only ever be five or six cities.
We intend to be in the highest-potential metropolitan areas and I would even say that today, 95 percent of the opportunities we are looking at are still in Mexico City. Twenty percent of the country’s entire population lives in Mexico City, 20 percent of the country’s GDP is generated here, more women are in the workforce, the population is generally more educated, there are more cars and the dynamic is different in that people live outside their houses more. Also, in Mexico City there is a greater focus on fashion so demand for clothing is higher.
This is an exclusive preview of the 2019 edition of Mexico Infrastructure & Sustainability Review. If you want to get all the information, plus other relevant insights regarding this industry, pre-order your copy of Mexico Infrastructure & Sustainability Review 2019 or access the digital copy of the 2018 edition.