REIT Investors Chase 14% Yield on Mortgages in Mexican Housing Recovery Ben Bain - Bloomberg
go to original December 28, 2014

Foreign investors have poured into Mexico’s first mortgage real-estate investment trust, which is using some of the 8.625bn pesos raised in a share sale last month to fund purchases of inflation-adjusted mortgages. Investors in the REIT, known as FHipo, benefit from an interest rate of at least 8.5% on the mortgages, an inflation adjustment that boosts the principal and exposure to a resurgent market.

“We found mortgages which we believe are more appealing than the mortgages you can buy in the US,” said Carlos Vara, a shareholder and former chairman of Mexico City-based Concentradora Hipotecaria SAPI, which manages FHipo. “Mortgages do not grow by book value typically on a yearly basis. However, in our case, they do.”

Government-backed Infonavit, Mexico’s largest mortgage lender, sought to protect itself from inflation starting in 1987, when the rate soared to more than 159% from 64% in 1985. Infonavit began issuing mortgages in which the loan principal would increase annually based on the growth of the minimum wage, which the government adjusts with inflation.

FHipo is funding loans under a program called Infonavit Total. The average interest rate is about 9% for the 1.6bn pesos of mortgages that the REIT has purchased so far.

About half of them are held by borrowers earning more than $16,800 a year. That’s more than one and a half times the $10,307 per capita gross domestic product the World Bank estimates for the country.

Read the whole story at Bloomberg

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