Industrial Real Estate to Suit the Automotive SectorMon, 09/01/2014 - 10:35
Q: What have been the major milestones in Vesta’s growth over the last 15 years, including its IPO in 2012?
A: In our first plan of action, we set out in what regions and sectors we wanted to operate, including our commitment to corporate governance. Our original portfolio in 1998 was 50,000m2. In 1999, we then obtained our first loan from GE Financial for US$9 million. In 2000, when Vicente Fox won the presidential election, the perception of Mexico as a true democracy rose considerably. In 2004, the largest pension fund in the world at the time, CalPERS, was allowed to invest outside of the US for the first time, and it was approved to invest in Mexico as part of the NAFTA region. At that time, CalPERS purchased 49% of our company, an investment of US$50 million, to be deployed over five years. All of that equity was actually deployed in 18 months. We bought two large distribution centers for Nestlé, which is now our largest client. However, we then experienced a deadlock with CalPERS as it did not want to invest anymore at that time, so we bought out its share. The partnership with CalPERS was very good for both sides as we both gained a lot of experience. Afterwards, three other investors came on board and we grew consistently from then on. We were one of 22 developers that were chosen to bid for the first aerospace cluster in Queretaro, which we won. Even though we did not have the US$100 million needed to invest in that project, we ended up entering into a joint venture with GE. In 2012, we needed to look for more equity, which is why we went for the IPO. That was a great success, as we raised US$200 million from institutional investors. Vesta’s success is a real representation of Mexico’s strength as a logistical and industrial investment hub. In June 2013, we did a followup listing which raised close to US$200 million.
Q: What significance does the automotive industry hold for VESTA in terms of its investment strategy?
A: We liaise with the government to establish where multitenant buildings are needed. These can host one to five companies based on their specific needs, we do not build units without knowing that there will be tenants to occupy them. This makes up one-third of our business. The other part consists of build-to-suit units that can be built to the exacting specifications of the client. For such developments, it is crucial that they can be used for alternative purposes should the tenant end up leaving the building. The third concept we have developed is a park-to-suit, which is concentrated on setting up parks dedicated to a single industry.
The automotive sector represents 22% of our portfolio. Nissan invited us to bid for a Douki Seisan Park (DSP) in Aguascalientes last year, which presented a new opportunity for us. We discovered that Nissan was looking for a company that could work with a competitive budget, had the right experience, and already had the funds in place. Since Nissan Mexico produces more cars in Mexico than the company does in the US and Japan, the local supply base is essential and timely delivery is absolutely imperative. After showing Nissan that we had the right systems, project managers, and auditors in place, we signed a definitive agreement for the development of this supplier park in close proximity to Nissan’s automotive plant.
In the history of the world, it has been very rare to see so many players from one industry entering a country at the same time. Now, rarely a week goes by without news about an OEM with investment plans for Mexico. However, the reality is that those big OEMs are very self-sufficient in terms of establishing their presence here, so the real opportunities for us are in the supply chain.
Q: Why did you decide to focus on the Bajio region?
A: Firstly, it is necessary to point out that Vesta has done many things differently to its competitors. We decided to go public, while most of our competitors use the Fibra REIT concept. Many companies have taken the approach of keeping the management separate from the general operations of the company, but we decided to integrate these activities in order to align interests between employees and shareholders, which has been very well-received. Many competitors entered the retail and commercial fields, but we have decided to remain in our niche as industrial developers. This different approach has also been applied to our geographical focus. We decided to concentrate on the central region early on, even though all the activity was still in the border region at the time. Staying strong in central Mexico gave us many advantages, and 70% of our portfolio is now in Mexico City and the Bajio region.