Carlos Rousseau
Senior Partner, President and CEO
Orange Investments

Right Information Makes a Difference

Tue, 11/01/2016 - 12:30

Real estate is cyclical by nature, so the probability of a bubble forming in the Mexican market is increasingly more probable, says Carlos Rousseau, Senior Partner, President & CEO of Orange Investments, a business intelligence and real estate development firm. “If we base it on historical data, the time is getting close.” It can, however, be avoided. Investors, developers and industry players in general should learn from past mistakes and carry out the appropriate due diligence before engaging in new developments, he says. “It is a matter of investing with solid fundamentals and not pushing the boundaries too far. It is about understanding every market well and building with responsibility. We have learned that the right information makes all the difference in achieving a successful project.”

Rousseau maintains that in developing countries like Mexico, new asset classes will begin to join the real estate industry in an institutional manner. “We are starting to see the beginning of multifamily real estate developing in Mexico, whereby multiple separate residential houses are contained within one complex,” he says. “Also, we will continue to see more master-planned communities, mixed-use urban projects, the introduction of senior living, student housing and the growth of self-storage.”

He believes in having both the public and private sectors working together, understanding the different markets and asset classes needed in Mexico and acting accordingly. “The public sector must understand where cities and municipalities require growth and create the right platforms,” he says. “It must keep up with market dynamics and changing regulations to ensure smart development. The government needs to offer better services, create more opportunities in urban areas and invest its resources in smarter ways. The private sector should plan to create better communities that provide safer environments, are economically sustainable and that constitute higher living standards for its people.”

The projected rise in mortgage rates is bound to slow down the sector, says Rousseau. Nevertheless, he still sees profitability in the segment for the foreseeable future. The company’s real estate fund, Orange Capital 0I, targets long-term risk-adjusted returns, preservation of capital and diversification. “Investing in real estate has been proven to be a great investment alternative,” he says. “At Orange, we have a big pipeline of opportunities selected by our proprietary intelligence methodologies. Having a private equity fund gives our clients the opportunity to tap into these investments and thus achieve great return on their equity.”

Orange Investments sees possibilities all across the country. “As with any business, it depends on the opportunities that appear in different markets and how one reacts to them,” says Rousseau. For example, the office market in Mexico City or Monterrey differs greatly to those in second and third-tiered cities like Puebla, Queretaro, Leon and Tijuana. Equally, the hospitality industry in Riviera Maya or Los Cabos cannot be compared to select service hotels along the auto corridor. “What we know for sure is that real estate in general is underserved in Mexico and there is still plenty of room for it to develop,” he says. “We are seeing a big increase in the price of land in urban areas such as Mexico City, Monterrey, Queretaro, Guadalajara and others. This is mostly due to the fact that people are giving more importance to living closer to their work and general life activities.”

Rousseau believes there are three key areas for development in Mexico’s real estate industry. Firstly, strategic planning processes between local governments and local actors should define the different priorities of cities. Secondly, he highlights the value of increasing social inclusion in city plans with the right infrastructure to satisfy the community’s needs. Finally, the development of infrastructure for transport and public services can promote community interactions. “In Mexico, we have the problem that every time a major shift occurs, in federal or local government agencies, plans are changed or discarded,” he says. “Infrastructure needs to keep up with the market dynamics in every way and promote new urban planning trends such as the use of transportation alternatives.”