Francisco Martin del Campo
Founding Partner
View from the Top

Consider Social Factors When Developing Cities

Tue, 11/01/2016 - 12:15

Q: What trends do you perceive in the Mexican market when it comes to residential purchases?

A: The Mexican market is growing rapidly for both residential renting and property purchases. Despite the trend of renting among millennials, there are still many people who are willing to purchase homes. In some cases, certain investors prefer to own heritage buildings over renting them out, whether it is for office, commercial or residential use. Landowners are even becoming associates to receive a percentage of the profit in a manner that is similar to Fibras, where they become shareholders. Foreign funds also are increasingly attracted to Mexican real estate.

Mexico City has immense economic potential. As long as projects are created near efficient public transportation, the market will easily accept them. Arquitectoma focuses on midrange residential housing or high-end projects. We strive to optimize space according to lifestyle trends. People are usually not at home and many prefer to pay less for smaller living areas in developments with amenities like gyms and business centers.

Two years ago, we executed a market research program to build our Ruben Dario project and found that prices in the area were between US$4,500-6,000 per square meter. Just three months after finishing the project, prices surged drastically in the neighborhood. The unit owners ended up gaining back their investment as they bought at a much lower price than the current value. The cheapest price in Ruben Dario at the moment is US$10,000 per square meter.

Q: What are the trends in the way people are purchasing their homes?
A: Around 30 percent of what we sell goes through INFONAVIT, another 30 percent is through FOVISSSTE and the remaining 40 percent through bank loans. There is a trend in the middle income segment in which people are moving away from using INFONAVIT loans and toward bank loans as they are the least expensive. We have products in Mexico that are competitive compared to other parts of world. These include fixed payment terms of 25 or 30 years in pesos with low interest rates. Interest rates for loans and mortgages have not yet increased despite the fact that reference interest rates have risen.

Q: How do you fund your housing developments?

A: We used to have private investors who fund projects individually. About five or six years ago we decided to start private funds with private investors. These investors were high net-worth individuals and family businesses who invest in funds that we manage and use across different projects. That is our equity source, with which we buy land and pay for the zoning. For construction expenses, we work with 13 financial institutions that provide us debt, including Santander, BBVA Bancomer and Banorte. We purchase the land, carry out the zoning and pay the  pre-development costs before obtaining a bridge loan from a bank to carry out the construction. We are highly underleveraged as we seldom use more than 40 percent of the bridge loans that we sign because our projects are developed in stages.

Q: Why did you decide to integrate eco-friendly materials into your projects and what benefits do you see?

A: Mexico City is highly populated and dense so we have to deliver projects that help deliver a sustainable city. By relocating people that would otherwise live on the outskirts of cities back into the cities, we increase their quality of life as they will drive shorter distances, use less gasoline and create less carbon dioxide. We must build more intelligent buildings to develop more intelligent cities. We collect rainwater for the restrooms in our apartments. We try to orient our apartments east to west to reduce the use of light and air conditioning, we try to use water- saving valves and we use electricity-saving bulbs. It is part of our mantra to build projects as sustainably as we can. All our projects can qualify for Ecocasa, a program run by the Federal Mortgage Society (SHF) and a development bank. Through this program we receive subsidies as interest rates for our bridge loan due to our reduction in the carbon footprint of the projects we are building.