Ron Blankenship on why Mexico offers investors substantial real estate opportunities

By Steve Bergsman

Ronald Blankenship is the co-chairman and a founder of Verde Realty and former vice chairman and chief operating officer of Security Capital Group, Inc. Prior to joining Security Capital, Blankenship was a regional partner at Trammell Crow Residential and was on the management board for Trammell Crow Residential Services responsible for development and property management activities in the Midwest region. Previously, he was CFO and president of office development for Mischer Corporation. He is currently a director of Regency Centers Corporation (NYSE: REG).

Verde Realty is a private REIT that mostly purchases industrial properties on both sides of the U.S. and Mexico border. What drove you to form this company and invest in Mexico?
We wanted to capitalize on substantial real estate opportunities created by economic and population growth along the border, particularly in Mexico, but real estate opportunities on one side of the border work hand in hand with those on the other side.

To date, Verde has invested in our industrial holdings more than in any of our other platforms. We have approximately 7 million square feet of space either built or nearing completion in the United States and approximately 4 million square feet in Mexico. Since Verde is focused on building industrial parks, we have an inventory of land. We have the land in 10 markets to build approximately 17 million square feet of space.

What is driving companies to do business in Mexico? Are there certain types of companies drawn to Mexican real estate?
As you might expect, Mexican real estate has a very international tenant base. We see Global 2000 companies and suppliers from Canada, China, Europe, India, Japan, Mexico and the United States. Many technology and computer companies have plants in Mexico, as well as such diverse manufacturers as Caterpillar, Hitachi and Corning.

Companies are locating to Mexico because of the cost of business. They also want access to the Mexican labor market and are focusing on distributing their products into the U.S. marketplace. Many companies have a factory in Mexico plus a distribution center in the United States.

Is the Mexican real estate market very competitive? Additionally, is there much risk when investing in the country?
The marketplace has become more competitive in the last three to four years. For example, ProLogis (NYSE: PLD) has a large presence in the country, as does GE Real Estate and Kimco Realty Corporation (NYSE: KIM). There are several developers, real estate management companies, money managers and financial advisors representing institutional money.

Since it is a different country, on the margin it is slightly more risky. Mexico is very consistent with activities and situations that we experience on the U.S. side of the border, so Verde Realty sees incremental risk.

Additionally, in terms of the legal system in northern Mexico, the way people deal with business activities is consistent with the United States, so we feel comfortable in that marketplace.

For real estate investors looking into Mexico, can you describe some of the key aspects to making successful property investments in the country?
When looking into Mexico, two key factors are knowledge of the country and operating on the ground. You can’t just construct a building anywhere and hope to be successful. We spend a long time studying each of the markets in which we invest.

A key distinguishing factor for Verde Realty is the large number of Mexican professionals working within our company. As a result, we are well-suited to handle any requirements that our customers might have.