Mexico has long been a popular choice for Americans looking to buy a second home or investment property, but dollars flowing the other way have been somewhat tepid. Despite being our southern neighbor, Mexico has been a relatively minor player in the U.S. commercial real estate market over the past three years. A single hotel-portfolio deal late in 2019, however, boosted the nation’s rankings among world players.
Mexican investors were full or partial investors in the acquisition of 54 U.S. properties totaling $755.6 million during the 12 months ending in June 2020. This volume was up 167% year over year, Real Capital Analytics (RCA) reported.
Mexico also accounted for 1.7% of foreign investment in U.S. commercial real estate during this period, ranking No. 15 among foreign sources of capital, RCA reported. During the previous two years, Mexico ranked No. 18 and No. 19.
Deal volume in the U.S. fell steeply after March 2020 due to the onset of COVID-19, and Mexico’s activity slowed along with it. Capital inflows into the U.S. also were likely hampered by a weakening economy in Mexico. The nation’s gross domestic product (GDP) growth was near zero at the end of 2019 and, compared to the U.S., its economy was hit nearly as hard by the pandemic. Mexico’s GDP growth dropped by 17.3% on a quarterly basis and by 18.9% year over year in second-quarter 2020.
Mexican investors were involved in only two U.S. commercial real estate deals during the first half of last year, and only one deal closed after the emergence of COVID-19 in March, RCA data suggests. Much of the 12-month investment volume was driven by single purchase. In December 2019, Mexico City’s Sora Capital joined two other investors in buying 45 Wyndham hotels around the country for $215.5 million.
Mexico City-based Hasta Capital was involved in three apartment acquisitions, including the most recent transaction involving Mexican-based investors. In May 2020, the company bought a 378-unit apartment complex in Houston for $74.8 million. In December 2019, Hasta also bought a 253-unit apartment complex in the Washington, D.C. suburbs for $126 million. In July 2019, the company purchased a six-story, 87-unit apartment building in downtown Fort Lauderdale, Florida, for $23.3 million.
Mexico’s Aztec Fund also was an active buyer in office properties during the pre-pandemic period. In November 2019, the company purchased two office buildings facing a 40-acre lake near the Music City Mall in the Dallas area. In September 2019, Aztec also purchased a two-building, 134,000-square-foot office complex in the Atlanta suburbs for $23.6 million.
Another active investor during this period was Agave Holdings, which is linked to the majority owner of the José Cuervo liquor brand. In January 2020, Agave purchased a 42,000-square-foot hotel in Rochester, Minnesota, for $18.2 million. In October 2019, the company also bought a 155-unit senior-living facility in Miami for $16.5 million. ●