The real estate market in Mexico continues to break new ground. Having cut its teeth in the sector with an issue for housing finance company Hipotecaria Nacional only last December, Santander Investment last week led a deal that is being touted as the peso market's first structured bond in commercial real estate. The seven-year Ps620 million (US$56 million) deal priced at 180 basis points over three month Cetes, with March 12 slated as the close. Corporativo en Finanzas structured the bond and Value was co-manager.

Backing the deal are lease contracts from three shopping malls run by originator GICSA. Standard & Poor's and Moody's Investors Service have rated the transaction mxAA+' and Aa1.mx' on the national scale, respectively.

Apart from its novelty, the structure is unusual in the diversity of its asset pool. The participating shopping malls - Las Plazas Outlet Lerma, Punta Langosta and Forum Culiacan - are located in different areas of Mexico. As such, Corporativo faced the challenge of negotiating legal risks that differ between states.

Outlet Lerma is located in the state of Mexico and began operations in winter 2001. It features 145 stores, including Zara and anchor store Palacio de Hierro, according to the deal prospectus. Punta Langosta is on the island of Cozumel, an international tourist mecca. The center is adjacent to a dock that receives cruising ships. Among its locales are Sr. Frogs, TGI Fridays and Ultrafemme. Lastly, Forum Culiacan is situated in Culiacan, the capital city of the northwest state of Sinaloa. In addition to international names like Hugo Boss and Dolce & Gabbanna, the mall has a store called Sexy Jeans. Culiacan benefits from its proximity to two of the city's leading hotels.

The trust will trap all the flows from the leases, as well as hold rights to the insurance policies attached to those leases. The trust also has the right to receive flows from a mortgage held by Outlet Lerma, the largest of the three centers.

S&P also cited the experience of GICSA in this business line as a further support to the transaction's creditworthiness. All together, the company manages 370,000 square meters of real estate. GICSA caters to the high-end market and has recently ventured into the Miami real estate market.

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