Since teaming up with a major US pension fund in 2002, Corporate Properties of the Americas (CPA) has been focused on generating stable, long-term, high quality income streams from the development and acquisition of industrial real estate in Mexico. For nearly twenty years, CPA has been providing its multinational clients with high quality warehouse and light manufacturing facilities throughout Mexico. Here Chief Executive Officer, Jaime De la Garza, shares some invaluable insight into the company’s success together with a few thoughts on the future of industrial real estate in Mexico.
“Although we have had opportunities to pursue development in other countries in Central and South America, as well as to expand into other real estate markets in Mexico, our pension fund partner has a global perspective and very specific goals for each of its operating platforms. Corporate Properties of the Americas (CPA) goal is to continually optimise its Mexican industrial portfolio and generate consistent above-market returns for shareholders. We interface and share best practice with other platforms, supported by the same pension fund but our mandate does not vary.”
When CPA began, the burgeoning industrial real estate market in Mexico had little to offer multinational clients who were seeking a developer and/or a reliable landlord who could support and execute a professional property management service for them. The CPA founders recognised that there was a need to hire and train an integrated operating team that could serve clients, offering knowledge that extended from site selection to build-to-suit construction and management of the end product. This team approach helps CPA to support the longevity and high performance of these assets.
“CPA does not have a strategy of selling core assets,” says Mr De la Garza. “Therefore, we must live with what we develop, and the only way to ensure long-term quality is to construct with exacting standards and encourage disciplined maintenance. Our clients know that the same company that helped them choose the right location and refine the building layout and specifications, will own that asset during and beyond the initial lease term. The client does not need to rely on third parties; their landlord is local, with on-site property managers and accessible executives, all seeking to exceed the client’s expectations and generate follow-on opportunities for growth.”
The focus is all about developing a strong, well-trained and well-supported team. Nearly 100% of CPA’s staff are Mexican citizens, most are bilingual (some multilingual), and few had any prior real estate experience. “All of our key executives are fluent in the important client-focused areas of the business,” explains Mr De la Garza. “I served as chief financial officer (CFO) before becoming Chief Executive Officer (CEO); our current director of asset management grew up in the leasing side of the business; and our investments group is closely involved in business development and portfolio management. The average tenure of our managers is 12+ years, giving rise to an extremely experienced team which has worked effectively together through a variety of real estate cycles. CPA is not a US company doing business in Mexico: we are a Mexican company serving clients from around the globe.”
“Even in the depths of the crisis, we were reluctant to cut staff, knowing that our clients would continue to require excellent service and perhaps space for growth when the economy recovered. As a result, we enjoy best-in-class tenant retention rates, and we serve many clients in multiple markets. To me, that is the hallmark of a successful business.”
Despite facing the global financial crisis and various Mexico-specific challenges such as currency fluctuations, drug trafficking-related violence, and the vagaries of the US Department of Homeland Security, CPA has thrived and grown. Mr De la Garza attributes this to a few key advantages: “Our pension fund partner has a very long-term investment horizon, giving us unparalleled access to patient capital. They also have an appetite for measured risk, which has allowed CPA to take significant land positions in core markets and execute an aggressive programme of speculative building development. Finally, we decided early on that CPA would remain at the premium end of the market, where clients always knew to expect quality performance and a consistent presence.”
All CPA buildings are built to meet LEED Core & Shell specifications and higher level qualification is available, depending on client needs. Several CPA industrial parks are located in areas where the community has benefitted greatly from the employment opportunities created by the tenants. “In Mexico City, we redeveloped a brownfield site that had been vacant and an eyesore for many years, creating one of our most in-demand logistics centres in the country,” says Mr De la Garza. “We take the responsibility of being stewards of pension fund resources seriously, as well as our obligation to be a good corporate citizen of Mexico. In 2014, Corporate Properties was certified as a Great Place to Work and part of our qualifying profile was related to how we interact in the community. All of our stakeholders benefit from this approach to business.”
In the recently published Business Worldwide Magazine (BWM) CEO Awards 2015, Mr De la Garza was winner of the Real Estate CEO of the Year, Mexico 2015, and with his continued leadership, it is obvious that CPA will continue to develop as a leading global player in the real estate business. Looking to the future, Mr De la Garza predicts that Mexico will continue to develop as a preferred destination for global manufacturers, with an improving economic and demographic profile. “Mexico’s energy industry reforms should attract significant foreign investment and result in more favourable employment opportunities for the country’s citizens. While the recent fiscal reforms have caused some short-term disruption, we believe that increased government support for education, infrastructure, and security, will result in a more positive environment in the future. Corporate Properties will continue to grow along with Mexico and we are confident in the country’s direction and our opportunity for market success.”