White Paper Mexican Residential Real Estate
Toronto, Canada April, 2017
1 Table of Contents
Investment Thesis
Why Invest Capital in Mexican Residential Real Estate? o Strong Demographics will Drive Growth o Growing Middle Class = Favorable Demand Dynamics o Supply Shortfall (The Opportunity) o Government Support o Evolving Mortgage System
Residential Market Overview o Product Segmentation o Housing Market Results 2015 o Housing Market Projections o Final Thoughts
Barnhart Asset Management Corporate Overview
2 Mexican Residential Real Estate
Investment Thesis
Due to a young population in their early household formation years, low unemployment, strong economic growth and a government supported mortgage market, sustainable demand for housing in Mexico is anticipated for years to come.
From a supply perspective, a fragmented home builder industry, a non competitive lending community and a non existent apartment rental sector has created a persisting housing deficit year over year.
As a result of the supply and demand imbalance, BAM sees an opportunity to make significant risk adjusted returns by partnering with small and mid- sized local developers to provide new housing alternatives for the emerging middle class of Mexico.
3 Strong Demographics Will Drive Growth
4 Wealth Creation and Emerging Middle Class
• Mexico has the 6th largest GDP per capita in the Americas with significant room for growth in the years to come.
$60,000 GDP per Capita PPP $USD
$50,000
$40,000
$30,000
$20,000
$10,000
$-
Argentina Brazil Canada Colombia Mexico United States
Source: International Monetary Fund (IMF), World Economic Outlook Database, April 2016. 5 Wealth Creation and Emerging Middle Class
• Between 1992 and 2010, 42 million people became part of the Mexican middle class (annual income US$18-$50,000). Mexico is home to the largest middle class in Latin America. Size of the Middle Class as a % of Population
Source: Council on Foreign Relations 6 Demographic Bonus
• In what is commonly called the “Demographic Bonus” the country will have the largest working age population in its history between 2015 – 2035.
Mexico Canada 127 million people in 2015 36 million people in 2015
Source: CIA World Factbook 7 Growing Working Class
• Population aged between 25 and 65, the group demanding the largest portion of housing, represented 47.4% of the population in 2015. It will continue to grow until 2030.
Population and age groups 1970-2030
100%
90%
80%
70%
60% 65+ 50% 25–64 40% Population 0–24 30%
20%
10%
0% 1970 1980 1990 1995 2000 2005 2010 2015 2020 2025 2030
Source: Softec 8 Growing Working Class
• From 2005-2020, about 43 million individuals will be added to this group. • It is estimated that this market will drive a housing demand of approximately 6 million new homes by 2020.
Population aged 25-64 1970-2030
54% 64,996 2030
53% 63,251 2025
52% 59,992 2020
50% 55,677 2015
47% 50,747 2010
population 44% 45,564 2005
32% 39,964 2000
31% 35,115 1995
28% 28,741
1990 and % of total of % and
26% 22,394 1980
Year 28% 11,937 1970 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Population '000)
Source: Softec 9 Urban GDP Growth
• 16 cities will represent 50% of this growth doubling their combined GDP by 2025.
Source: Softec. 10 Low Unemployment
• Consequently, Mexico has one of the lowest unemployment rates in the region, historically ranging between 4.5%-5.5%.
Unemployment rate 25%
Projected
20%
15%
10%
5%
0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Argentina Brazil Colombia Mexico Canada United States
Source: International Monetary Fund (IMF), World Economic Outlook Database, April 2016. The IMF estimates final figures for 2016 and forecasts thru 2019. 11 Growing Middle Class = Favorable Demand Dynamics
12 Strong Demand Dynamics
• Mexico has a growing middle class with an increasing purchasing power. It is expected that Mexico’s annual housing demand will increase by approximately one million homes per year.
Source: Dent Research 13 13 Increase in Household Formation • A majority of this demand will come via household creation. For decades, household formation has been a major driving force behind the growth of cities. Yearly household formation was above 815K in 2015, and is expected to reach 830K by 2030.
.
Source: GEA 14 Increase in Household Income • Although segments D, E and D+ represent the majority of households in the Mexican economy, segments C and C+ have the highest growth projections due to the increasing middle class.
Household by income levels 35,000,000
30,000,000 D/E 25,000,000 D+ C 20,000,000 C+
15,000,000 A/B
10,000,000
5,000,000
0
D/E = annual household income US$3-9,292: D+ = annual household income US$ 9-$18,584: C = annual household income US$18-$43,926: C+ = annual household income US$43-$109,815: A/B = annual household income >US$109,815
Source: Softec 15 Supply Shortfall (The Opportunity)
16 Residential Market – Supply Shortfall
• In 2009, subsequent to the financial crisis, the Mexican real estate market suffered a major economic shock.
• The number of subsidized developers decreased by 40%.
• Due to financing restrictions worldwide, by 2010 the homebuilder market found it difficult to obtain financing for new projects and bridge loans had become scarcer; the balance of bridge loans contracted by 38%.
• In result, housing production decreased leading many developers of all sizes to file for bankruptcy.
Sources: Infonavit, Conavi 17 17 Fragmented Supply
• Due to the large shock suffered in 2009, the housing market has become highly fragmented and regionalized. No single developer has a market share greater than 10%.
Main players in the mexican housing market (unit sales) 2015 estimated
Otros Casas Javer RUBA desarrollos 31% 34% Consorcio ARA Hogares Unión INFONAVIT vivienda Reasignada Grupo Garza Ponce Grupo Sadasi CADU inmobiliaria 4% 18% 3% GIG Desarrollos inmobiliarios 2% 1%2%2% Empresas Medianas 1%1%1% Empresas Pequeñas
Sources: Softec 18 18 Residential Market – Supply Shortfall • Thus in result, the emerging middle class combined with the decrease in housing production has led to a significant supply shortage.
Potential & Estimated Market for Homes 2005-2020 1,800,000
1,600,000
1,400,000 Potential 1,200,000 Market
1,000,000
Units 800,000 Softec Estimate 600,000
400,000
200,000
0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Potential Market = those who need or want a house and can afford to do so Estimated Market = housing purchase transactions or constructions in Mexico
Sources: Infonavit, Conavi 19 19 Government Support
20 New National Housing Policy
Starting in 2014, in an effort to combat the housing deficit, the Mexican government implemented a new National Housing Policy with an aim to boost access to home ownership and bring much needed long-term sustainability to the sector.
• The President aimed to lift housing by triggering close to US$25 billion in investment in the construction of 500,000 homes and the development of 1 million acres of land.
• This reform will have the goal to incentivize developers to build, providing them with much needed liquidity and cash flow all the while implementing a subsidized mortgage program to further ease the access to affordable financing for the entire Mexican population.
21 Increase in Government Subsidies • In result, In 2014 the Mexican subsidy budget increased by 33% reaching MXN $10.6 billion. • In 2014, Conavi, the Mexican Housing Commission, increased the upper limit for subsidy eligibility from 2.6x to 5.0x the minimum wage, resulting in 1.7M additional subsidy eligible workers.
Federal Subsidies for New Home Acquisitions $12,000
$10,000
$8,000 M$ Pesos M$
$6,000
$4,000
$2,000 2010 2011 2012 2013 2014 2015 2016 E
Sources: Infonavit, Conavi 22 22 Increase in Housing Inventory • Starting in May 2014, registered housing supply showed signs of recovery, however current housing supply is still insufficient to meet demand. • Due to the continued downwards pressure on the price of oil, In 2016 Mexico announced a cut in government subsidies. Estimated units titled for the coming years are expected to be in line with 2014 levels, despite increasing demand.
Annual Registered Housing Inventory (Thousands of Homes) 700
600
500
400
300 Units
200
100
– 2008 2009 2010 2011 2012 2013 2014
Sources: Infonavit, Conavi 23 23 The Evolving Mortgage System
24 Mexican Mortgage System
• In light of the national housing program, progress has been made and mortgages have become easier to find. The challenge however remains in the increase of funding and coverage.
• The release of the programs announced for housing in 2013-2018 have the potential to reactivate the market by taking advantage of the growth of existing demand led by the emergence of the middle class over the last ten years.
• In order to bridge the housing gap, it is imperative that the government continues its effort in providing accessible and affordable financing options to the “bottom of the pyramid” as it is the largest group in terms of volume and also the least penetrated.
25 Main Mortgage Providers
Source: Softec 26 26 Main Mortgage Providers
• With over 50% of the market share, INFONAVIT is the largest mortgage provider in Mexico. • In an effort to further widen its scope, In 2014 INFONAVIT increased its maximum mortgage amount from MXN$453,000 to MXN$884,000. Mortgage Portfolio 2015 $80,000
$70,000
$60,000
$50,000 USD USD
$40,000 Million
$30,000
$20,000
$10,000
$0 Infonavit Banks Fovissste Bohris & Bonhitos Source: Softec 27 27 Main Mortgage Suppliers – INFONAVIT In 2016, INFONAVIT remains the leader in mortgage loan placements in Mexico, with a 73% market share providing loans to that aforementioned “bottom of the pyramid”.
• 62% of the mortgage loans originated were for workers with income levels of up to 4 times the minimum wage, 38% were for workers with incomes of over 4 times the minimum. • Prior to 2007, INFONAVIT would qualify its clients based on the price of the home. As of 2008, client classification is based on income level. • The lending system is finally concentrating on the borrower’s income level.
INFONAVIT Unit Loan Origination 1983-2015 700,000
600,000
500,000
400,000
300,000 Originated 200,000
Loans 100,000
0
1998 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Credits fund only by INFONAVIT Cofinancing Source: Softec 28 28 Main Mortgage Suppliers – FOVISSSTE
FOVISSSTE targets the slightly wealthier segment of the population.
• 60% of borrowers are women & FOVISSSTE borrowers have a greater job stability than the national average. • With 3 million depositors, FOVISSSTE should be in a position to consistently operate a program of over 90,000 new mortgage loans per year.
FOVISSSTE Unit Loan Origination 1983-2015
120,000
100,000
80,000
60,000
Originated 40,000
20,000 Loans
0
1991 2010 1983 1984 1985 1986 1987 1988 1989 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 Credits fund only by FOVISSSTE Cofunding & improvements
Source: Softec 29 29 Main Mortgage Suppliers – Banks
Banks have historically concentrated on the middle to high sectors of the market
• The mortgage market leaders in terms of total portfolio by bank are: BBVA Bancomer with 27%, Santander with 19% followed by Banorte with 16%, Citibanamex with 13% of the total market share. • Banks’ target market are buyers of housing worth US$75-$350,000. Income levels for this market are in excess of US$4,000 per month. Number of loans are expected to continue growing due to the emergence of the middle class.
Bank Unit Loan Origination 1983-2015
160,000
140,000
120,000
100,000
80,000 Originated 60,000
40,000 Loans 20,000
0
1983 1993 1984 1985 1986 1987 1988 1989 1990 1991 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Sources: Softec 30 30 Still Room for Growth
• The estimate for inhabited homes in 2016 is roughly 32.6 million. It is important to note that less than 30% of all homes have ever been mortgaged in Mexico, and only 20% are currently mortgaged.
• The country’s home ownership rate is among the highest in the world at 80%. This means that 70% of all homes (22 million) are 100% equity owned.
• The total mortgage portfolios of the main lending institutions totals US$125 billion. This represents roughly 6.5% of the total value of the housing stock.
• With such a small percentage of homes mortgaged, the mortgage market is one of the least penetrated in the industry with possibly the highest growth potential.
• The equity loan available to home owners can prove to be an instrument used to capitalize the industry consequently initiating the new ventures Mexico desperately needs.
Source: Softec 31
31 Residential Market Overview
32 Mexico Real Estate Market Product Segmentation
Price Range Household Annual Income Economic (E)
Popular (P) US$16,613-$28,158 US$3-9,292 Traditional (T) US$28,158-$49,276 US$9-18,584 Middle (M) US$49,276-$105,591 US$19-43,926 Residential (R) US$105,591-$211,182 US$44-109,815 Residential Plus (RP) >US$211,182 >US$109,815 Vacation (V) >US$377,312 >US$109,815 Sources: Softec 33 Housing Market Results 2015 34 2015 Market Results – Value of Sales US$ • Sales value totaled US$13.4 billion. Led by the growth in the working class, Middle leads the pack with roughly US$3.0 billion in sales. Going forward, lower interest rates, credit access, and a broader product range make sales conditions more favorable for the M market. DIME Market results 2015 value of sales US$ $3,500 $3,000 ) $2,500 E P $2,000 T thousands M $1,500 R $1,000 RP V Sales in US$ ( US$ in Sales $500 $- E P T M R RP V *DIME Market is composed of the 40 most important cities in Mexico Sources: Softec 35 2015 Market Results – Unit Sales & Inventory • Between 2014 and 2015, the Residential market grew 9.8% in volume, from 16,580 units sold in 2014 to 18,202 in 2015. In the same period, the Residential Plus market grew 14.9% in volume, from 7,744 units sold in 2014 to 8,896 in 2015. This growth can again be attributed to the growth of the middle class. DIME Market results 2015 unit sales & inventories 250,000 200,000 150,000 Units 100,000 50,000 0 E P T M R RP V DIME Cities sales Inventories *DIME Market is composed of the 40 most important cities in Mexico Sources: Softec 36 2015 Market Results - Price per Square Meters • Prices per m2 increased between 2014 and 2015 in the P (1.8%), T (2.7%), M (2.3%), R (6.4%), RP (13.0%), and V (4.1%) markets, whereas the E market showed a 2.5% decrease. Home prices per m2 in US$ US$3,000 US$2,500 US$2,000 E P US$1,500 T per m2 in USD$ USD$ in m2 per M US$1,000 R price RP US$500 V Home Home US$0 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sources: Softec 37 Geographic Regions Gulf & Southeast Metro Area North, Pacific & Border Central Area Sources: Softec 38 Sales Per Region – Metro Area • In the 5 cities in the Metro Area, DIME® recorded 147,437 units sold with a value totaling US$9.7 billion in 2015. Mexico City remains the largest market for new housing; in terms of value, it stands for 52% of the market. Metro cities unit sales Metro cities sales US$ 60,000 $6,000,000 50,000 $5,000,000 V V 40,000 $4,000,000 RP RP 30,000 R $3,000,000 R Units M 20,000 $2,000,000 M Sales in US$ US$ in Sales T T 10,000 $1,000,000 P P $- 0 E E ZMCM Puebla a ZMCM Puebla Monterrey Querétaro Monterrey Querétaro Guadalajar Guadalajara Sources: Softec 39 Sales Per Region – North, Pacific & Border • DIME® recorded sales of 35,582 units worth US$1.3 billion In the North, Pacific, and Border Area. The leading market in terms of sales value is Tijuana. North, Pacific & Border unit sales North, Pacific & Border sales in US$ 8,000 $400,000 7,000 $350,000 6,000 $300,000 V V 5,000 $250,000 RP RP 4,000 R $200,000 R Units 3,000 M $150,000 M Sales in US$ US$ in Sales 2,000 T $100,000 T P P 1,000 $50,000 E E 0 $- Saltillo Saltillo Tijuana Tijuana Torreón Torreón Mexicali Mexicali Culiacán Culiacán Reynosa Reynosa Hermosillo Hermosillo Cd. Juárez Cd. Chihuahua Juárez Cd. Chihuahua Source: Softec 40 Sales Per Region – Central Area • DIME® recorded sales of 39,403 units totaling US$1.6 billion in 2015 in the Central Area. The leading market in value terms is Toluca followed by Leon and Aguascalientes. The strategic location of these cities has enabled them to grow stronger and allowed them to create opportunities in various sectors. Central Mexico unit sales Central Mexico US$ sales 8,000 $500,000 7,000 $450,000 6,000 $400,000 $350,000 5,000 V V RP $300,000 4,000 RP $250,000 Units R 3,000 R M $200,000 Sales in US$ US$ in Sales M 2,000 T $150,000 T 1,000 P $100,000 P 0 E $50,000 E $- León Toluca Celaya Morelia Irapuato León Pachuca Zacatecas Toluca Celaya Morelia Irapuato Pachuca Zacatecas Aguascalientes San Luis Potosí Luis San Aguascalientes San Luis Potosí Luis San Source: Softec 41 Sales Per Region – Gulf & Southeast • DIME® recorded sales of 18,596 units worth US$799 million in 2015 in the 5 cities comprising the Gulf and Southeast Area. Merida leads the pack, followed by Veracruz and Villahermosa. Gulf & Southeast unit sales Gulf & Southeast sales in US$ 9,000 $400,000 8,000 $350,000 7,000 $300,000 6,000 V $250,000 V 5,000 RP RP $200,000 R R Units 4,000 M $150,000 M 3,000 US$ in Sales T T $100,000 2,000 P P 1,000 E $50,000 E 0 $- Mérida Mérida Xalapa Xalapa Tampico Tampico Veracruz Veracruz Villahermosa Villahermosa Source: Softec 42 Housing Market Projections 43 Housing Market Projection • Mexico’s main cities have shown a divided performance. For the affordable segments, market volumes and values are expected to keep decreasing in 2016 through 2018 only expecting a rise in sales volume in 2019. • On the other hand, as for the Middle and Residential segments, an upward albeit limited trend is expected during that same period. • Demand dynamics, influenced by household formation and migration flows in search of better employment opportunities and quality of life will continue to drive growth in the housing stock in the Middle and Residential segments. Source: Softec 44 Housing Stock Growth Projections • Overall, job creation, a betterment in families’ median income levels and more affordable mortgage lending has created adequate conditions for the housing stock to grow. • It is estimated that from 2016 to 2030, each year an average of 1.03 million new units will be added the housing stock in Mexico. Housing stock growth and developers share 1,200 1,000 800 600 ('000) 400 Growth 200 Unit - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Traditional Developert 481 539 512 500 404 367 396 388 348 378 361 357 357 357 368 381 392 403 407 412 416 Housing Stock Growth 755 775 795 815 836 857 881 892 904 915 928 940 952 965 978 991 1,005 1,019 1,033 1,047 1,062 Source: Softec 45 Unit Sales Projection for 2016 per Region • In all the market segments, the demand in the metropolitan areas (Metropolitan Area of Mexico City, Guadalajara, Monterrey, Puebla, and Queretaro) is expected to have the broadest share in comparison the other geographic areas of the country (43%). Estimated housing stock growth by region in 90 cities - 2016 (units) 350,000 300,000 Residential Plus 250,000 Residential Middle 200,000 Traditional Units 150,000 Popular Economic 100,000 50,000 - Metro Zones Border Center Gulf North Pacific South Tourism Source: Softec 46 Segmented Market Unit Sales Projection 2005-2025 • The most significant growth in sales will be seen in the Middle, Residential & Residential Plus markets. Segmented market sales 2004-2030 (US$ billion) $35.0 $30.0 $25.0 Type Vacation Home Type RP Housing $20.0 Billion Type R Housing $15.0 US$ US$ Type M Housing Type T Housing $10.0 Type P Housing $5.0 Type E Housing $0.0 2005 2028 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2030 Source: Softec 47 Affordable Entry Point Unit Sales Projection 2005-2025 • Performance in 2016 should be lower due to budget cuts affecting some financing programs and inventory levels. Affordable Entry Level (E, P &T) market 2005-2025 450,000 400,000 350,000 Type T Housing 300,000 Type P Housing Estimate Type E Housing 250,000 Sales Sales 200,000 Unit 150,000 100,000 50,000 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Softec 48 Middle Market Unit Sales Projection 2005-2025 • Urban consolidation, improved mortgage products and upward mobility have created favorable conditions which will improve sales and price performance in the Middle segment. Middle (M) market 2005-2025 120,000 100,000 80,000 Estimate 60,000 Sales Sales Unit 40,000 20,000 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Softec 49 Residential Market Unit Sales Projection 2005-2025 • Finished new housing in the Residential market will experience similar conditions. In 2015, the sector’s performance also reported improvements mainly in medium-sized cities. Residential (R) market 2005-2025 30,000 25,000 20,000 Estimate 15,000 Sales Sales 10,000 Unit 5,000 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Softec 50 Residential Plus Unit Sales Projection 2005-2025 • The best sales performance in the Residential Plus (RP) segment should be present in the Metro Area. In addition, the purchasing power of cities in the Center area, specifically in the Bajio corridor, will also experience a significant uptick in the development and sale of Residential Plus housing. Residential Plus (RP) market 2005-2025 14,000 12,000 10,000 8,000 Estimate 6,000 Sales Sales 4,000 Unit 2,000 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Softec 51 Second Home Vacation Market Unit Sales Projection 2005-2025 • The markets with the greatest interest from both international and national tourists are the ones with the highest sales volume of vacation homes. Cancun, Puerto Vallarta, Riviera Nayarit, Los Cabos, Acapulco, and Mazatlan are the targeted cities for this type of housing. Vacation Home market 2005-2025 14,000 12,000 10,000 8,000 Estimate 6,000 Sales Sales 4,000 Unit 2,000 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Softec 52 Final Thoughts • Continued government support will be crucial in the effort to narrow the housing market gap. Despite the decrease in government subsidies in the recent year, it is important to note that significant progress has been made. • Although we can expect a slowdown in the lower part of the market spectrum, the Middle, Residential and Residential Plus segments are poised for significant growth for years to come due the emergence of the middle class, metro migration and easier access to unsubsidized mortgage loans. • Finally, In light of the election of Donald Trump, we can expect continued volatility in the peso as well as international and domestic capital remaining on the sidelines until the investment community receives more clarity on the President Elect’s future policy plans. • It is important to note however that since reaching an all time low of 16.59 vis a vis the CAD on January 11th, the Mexican Peso has gained 16% in value, reaching 13.96 in early April. 53 54 Barnhart Asset Management BAM Deep local relationships Superior market intelligence Barnhart Asset Management is a BAM’s management team has BAM monitors the capital markets, real estate boutique real estate private equity experience investing in Mexico markets, and real estate companies using: firm headquartered in Toronto, since 2001, and has developed public source data, private third-party data it Canada. BAM was founded in 2011 significant relationships within the has purchased, and combines it with with the objective of creating real local market. proprietary research methodologies. estate investment vehicles designed to capitalize on market Local market experience Canadian Oversight inefficiencies in both Canada and Members of the GP have had Having control over the direction and the Americas. Target investors significant experience in acquiring, execution of the fund, BAM provides include pension funds, managing and realization of real significant oversight and governance to the endowments, and high net worth estate assets. BAM executives Canadian capital partners. clients. The philosophy of the firm spend an average of one week is based on the key principals of per month in Mexico, and BAM creating strong alignment of has recently rented an apartment interest between Investors and the in Mexico City, further establishing firm and performance based its presence in Mexico. compensation. BAM has offices in Toronto and Mexico City and a full-time Mexico Institutional management Head, an executive with more Significant pension fund investing than 15 years experience in experience enables BAM a strong Mexican Real Estate. understanding of the needs and internal & external hurdles faced by LP investors. 55 Barnhart Asset Management Boots-on-the-ground Philosophy By understanding the strategic objectives of local real BAM provides strategic investment solutions to estate players, BAM is able to select and source institutional real estate investors and companies that opportunities that exceed the risk/return targets of its operate or invest in Mexico. institutional clients. BAM focuses on the creation of long-term value for its BAM is able to deliver risk-adjusted returns across the clients, by aligning the strategic objectives of institutional different real estate sectors through active asset investors with local partners. BAM implements its management and partnership with local partners. Our strategies based on the experience of its principals, local approach places our executives close to the interests relationships, and research driven methodologies. of our clients, while our Canadian base ensures real time access and performance reporting enabling By closely monitoring real estate activity in three key informed timely consultation and decision-making. markets—Canada, USA and Mexico - BAM is able to identify mispricing and trends leading to opportunities for BAM measures investment performance against obtaining attractive risk adjusted returns, as well as being benchmarks in the local capital and real estate able to bridge the cultural gap that can exist when markets. BAM provides continuous monitoring of the investing in foreign markets. local markets. 56 57