The Solactive Latin America Real Estate Index (LAREPR) is +19% year-to-date but in mid October the Index was up over 32%. What happened? Well, Trump did, that’s what. Everybody knows that Mexico received a disproportionate beating from investors following the US election but the knee-jerk reaction increasingly looks like a gift instead of a disaster. Some broad perspective: the local benchmark is up over 50% since 2010 but the USD-denominated Mexico ETF is actually down 20% over the same period. And Mexico REITs are no exception as the basket is down over 20% year-to-date with the bulk of those losses occurring after the US election. So what’s an investor to do? Well, for one, pay attention to the fact that Mexican REITs now offer yields that are about 2x versus US REITs and they are growing revenue, funds from operations and dividend yields. US REITs? None of the above.
Brazil REITs took a hit too but not nearly as much as their Mexican counterparts. Notably, both Mexico and Brazil REITs now trade at comparable valuations but Brazil REITs carry zero debt so their yields are even more interesting in that they are unlevered.
As we’ve been saying for the last year, real estate yields in Latin America offer some of the most compelling risk-adjusted income opportunities which combined with fundamentally attractive growth prospects, suggest that LatAm real estate is an ideal vehicle for the long term investor.