Top headlines and news impacting Latin America, Africa and Southeast Asia commercial real estate.
Fibra NEXT, the industrial REIT spinout from Fibra UNO, Mexico’s largest and first REIT, is planning to raise as much as $1.5 billion in the Mexican IPO. This is good news for Mexico’s REIT ecosystem, however may indicate industrial is overvalued if Fibra UNO is willing to divest all its industrial now.
As the world begins to realize that America has removed its security guarantee, nations are going to have to carry some of the burden of keeping the world and shipping routes secure. Argentina was approved by America to receive 24 F-16s from Denmark who is upgrading to F-35s. Apparently, the failed Peronist government is also seeking American assistance to finance the purchase (please ask China or the IMF 🙏🏻). Lockheed Martin is receiving $177 million from Chile to upgrade its fleet and provide maintenance and training support.
The American manufacturer with a market cap of $125 billion is expanding its operation in the north of Mexico with the investment. It entered Mexico in 1936 and operates in the aerospace, productivity, safety and building segments.
The report finds that 38% of industrial space in Monterrey is occupied by Mexican companies, with Chinese firms at 23%, and American companies third at 19%. Monterrey’s industrial vacancy rate stands at an impressive 1.4% and rents continue to rise. 1.2 million m² (i.e., 12.9 million ft²) of new space is under construction in the city, representing around 10% of the city’s total industrial supply.
The goal is to add a dozen stores in the next five years to compliment this first store in Mexico. The American toy brand is launching in Mexico through a partnership with Liverpool, the nation’s top luxury department store brand. In America, Toys R Us expanded similarly through a Macy’s partnership. Toys R Us failed and went bankrupt because its private equity owner at the time overleveraged the business. [WSJ Chart is from 2017].
The African Growth and Opportunity Act (“AGOA”) provides duty-free access for qualifying African nations to the American market. 90% of the exports from Africa are oil and gas. The future of Africa and America relations will be unilateral deals between nations and only Kenya looks attractive. Nigeria and South Africa have abysmal governing and economic records the last 30+ years and wouldn’t have much to offer in exchange that isn’t available elsewhere.
The latest Venus discovery could prove to be a 2 billion-barrel find and in total the 11 billion reserve estimate puts Namibia on par with Angola, Africa’s largest oil producer. Shell and TotalEnergies plan to drill two more wells over the next 6 to 9 months tapping into a $250 million budget allocated so far for exploring the area. Namibia produces no hydrocarbons presently and South Africa has recently approved drilling requests overturning appeals from radical lobby groups wanting to deprive South Africa of much needed capital and energy security.
The African nation has received more greenfield FDI commitments this year than in any prior year. The $34 billion figure for 2023 so far surpasses the previous high of $15.8 billion in 2008. Large greenfield investments demonstrate investor confidence, and tend to be the most transformational forms of FDI for host nations. Much of the investment this year has been to grow automobile manufacturing capacity in the country.
The second largest property company in South Africa, just behind Growthpoint, says the nation’s property cycle has bottomed and 2024 will be the turning point when interest rates ease. Those cuts are expected as early as the first half of 2024. Maybe still drunk on optimism after the big rugby win?
Chinese and Philippines have rubbed ships against each other recently over territorial disputes in the South China Sea. The CCP surprised all observers when it recently claimed these and other territories for itself shortly after announcing the BRICS’ expansion. China has pledged previously $24 billion in infrastructure projects in the Philippines but nothing has been delivered. These are now off the table.
The concern is over China’s dominance of Indonesia’s Nickel, and other critical minerals. Signing a free trade agreement with Indonesia only strengthens China’s ability to game the system, and grasp of the critical mineral’s production and sale. Indonesia has become a major nickel producer only recently, now producing 37% of the world’s total. China is making similar moves investing in Mexico in order to receive benefits not intended for it under the USMCA. Expect future USMCA negotiations to address this situation.
The Singapore based real estate firm announced the partnership with Thailand property developer Pruska Holdings to invest and develop real estate for wellness and healthcare uses targeting Southeast Asia, specifically Thailand, Singapore and Malaysia. The commitment announced this week is for $256 million with the rest to be raised over time. Many poor Southeast Asian countries have rapidly ageing populations due to low childbirth rates and other factors. China’s antihuman one-child policy was a disaster and may have negatively influenced behaviors in the neighboring nations.
The fund reportedly will target real estate investments through an opportunistic strategy in Japan, Australia and Southeast Asia. $600 million has been committed to date, and the massive private equity manager is hoping to close the round by the end of 2024.
