Colombian Targets REIT Sequel

Improving issuing conditions have Colombia’s Terranum Inversion planning to quicken the pace of share sales from its Patrimonio Estrategias Inmobiliarias (PEI) domestic real estate income trust, and follow up a recent $88m-equivalent sale with another this year, Terranum’s CEO says. “About $75m-$100m should come on line by the end of the year. Clearly there is a lot of appetite, but not a lot of product,” Jose Ignacio Robledo tells LatinFinance, noting that PEI remains the only REIT in Colombia. Normally, PEI would only issue once a year. The trust started in 2007 now stands at $450m-equivalent following a COP155.13bn ($88m) sale, its fourth tranche, last month. All but just over $10m-equivalent was sold to existing investors exercising their rights, he says, with about $900m-equivalent in demand for the small portion that remained for the open market. Participants included institutional investors and family offices, Corredores Asociados managed the sale. Despite the demand, there have yet to be other REIT imitators in Colombia, at least with the US market-inspired REIT structure that Terranum uses. Part of the challenge is finding single-ownership assets, as opposed to the multiple-owner format traditionally favored in Colombia, Robledo says. The former is better suited for a sale-leaseback deal and inclusion in the fund, and gettingg large corporations to do this has not been easy. The trend is positive however, improving from 5 years ago when companies needed to be convinced that owning all of their real estate assets made little financial sense. Retailer Exito is an example of a large corporate landowner that has seen the value of sale leasebacks, he says. The government implementing regulation defining a standard for REITs in Colombia would also help stimulate the asset class. With average returns around 15%, Terranum’s fund invests in corporate and retail centers in Colombia’s major cities, but is looking to branch out to more of the mid-sized cities. “Clea