Casas Beta has become Mexico's first housing developer to earmark a portion of ABS proceeds for the purchase of land. With housing demand buoyant and land increasingly precious, the competition for terrain among developers is fierce. "Land is a scarce resource right now," said Camilo Mendez, associate

analyst at Moody's Investors Service. "Take-out providers will have an [annual] budget per state and developers will be competing for that."

Initial issuance off the Ps800 million (US$70 million) program will be Ps400 million (US$35 million) and the maturity is seven years. IXE Casa de Bolsa is the arranger and Romo, Pailles, & Guzman is the legal counsel. Moody's de Mexico and Fitch Ratings have rated the transaction Aa2.mx' and AA', respectively.

Casas Beta is allowed to use up to 24% of the proceeds to buy land. To do so, the property must fulfill certain criteria, such as certificates from utility providers stating they will provide services to a specified number of users and geographic concentration limits. In addition, the land purchase must take place within the first two years of the deal in order to ensure that the future housing projects on the property will be completed with ample time to generate flows for bond payments.

The deal is revolving. The proceeds trapped in the trust are released to Casas Beta as it builds houses on the pledged land. For construction, it receives 65% of the projected value of the property flows.

A cash reserve of 25% of the proceeds adds further enhancement and the land itself, even undeveloped, provides collateral. Housing agencies Sociedad Hipotecaria Federal (SHF), Infonavit and Fovisste, as well as private-sector financers, provide individual mortgage take-out financing. On the sale date of the home or project, the take-out providers in the Casas Beta transaction will deposit the funds for the mortgage directly into the trust.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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