Elliott Bross
Director General
Planigrupo
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View from the Top

Tapping the BMV for Strength

Wed, 11/01/2017 - 13:13

Q: What trends has Planigrupo identified in the Mexican market?

A: Mixed-use development, diversified retail experiences in tertiary cities and the presence of foreign tenants in the market are among the trends. Mixed-used developments are the result of the high cost of land due to its scarcity, so the creation of shopping malls in major urban centers like Mexico City, Guadalajara and Monterrey makes sense. This is also the case to a lesser degree in areas like Puebla, Merida and Tijuana. As for decentralized retail experiences, primary cities are areas like Monterrey, secondary cities are those like Puebla and Tijuana and tertiary cities are smaller and similar to Tulancingo, Hidalgo. This is important, because any city with over 150,000 people has the market potential for successful retail centers. Foreign players like H&M, Bed Bath & Beyond, Gap and American Eagle are entering the country and playing an important role in the market. These companies are creating a new need for retail space and ultimately reshaping existing shopping centers into a different type of experience.

Q: Why did Planigrupo’s trade in its CKD and list on the Mexican Stock Exchange (BMV) in June 2016?

A: Our business is divided between CKDs, glide paths, operational companies involved with construction and management and minority interests in several commercial centers. We consolidated all our areas into a single platform and grew to the size of similar larger Fibras. This change along with our IPO should allow us to raise capital in terms of equity and debt while leveraging our strength to not only match the Mexican standard but also be able to compete on the regional level with Central and South America. CKDs are successful but the problem is that they can be invested for a maximum period of three to seven years, when real estate requires a more medium to long-term period. The company was looking for more stable options and ended up opting for CerPis as Fibras have too many restrictions that affect our business. As developers, Planigrupo wants to reinvest the revenue into further development but Fibras prohibit this by demanding revenue distribution. Fibras only allow the acquisition of Mexican property, which impacts our plan to expand into Latin America.

Q: What regions are primed for investment and how does Planigrupo approach each development?

A: Many cities are just starting to enter the real estate radar, such as Tehuacán in Puebla and Valladolid, Yucatan. One popular area is the Bajio region, especially the SaltilloMonterrey corridor, which is extremely prosperous thanks to the automotive industry. The depreciation of the peso also has strengthened the region as many entities here are foreigners. We are strategically opportunistic and base our strategy on the goals of our tenants. Planigrupo is the only completely national retail development company, with a presence from Tijuana to Cancun and Jalisco to Ciudad del Carmen. We have built projects in 28 of 32 states. Of the larger companies, we are the only one that is 100 percent integrated. We take care of an entire project from beginning to end, including site selection, brokerage services, construction and acquisition.

Q: What is Planigrupo’s strategy to maintain growth?

A: Our company stays ahead of the curve. We were the first to tap international funds, for instance. Providing results for our investors, tenants and customers at our retail developments is the most important element for us. We are in constant communication with our tenants to understand their needs because their vision is our biggest driver. Planigrupo maintains an occupancy level of 94 percent and while the company may still be recovering from the 2008 financial crisis, we are repositioning certain shopping malls in Monterrey and Juarez to get back on solid ground. The retail centers developed by Planigrupo already have about 130-140 million visits a year. We will continue to strengthen partnerships with retail clients and investors. We also have a duty to help this country and we are proud of the more than 90,000 permanent jobs in the country we have created. The company will continue to invest in Mexico as long as it is able to do so.