Mexican hotel real estate investment trust Fibra Inn disclosed a new business model to anchor its future growth, which includes focusing on luxury and upper upscale hotels.
Under the Hotel Factory model, the company will provide up to 50% of the capital for a chosen investment property and source the remaining funds through third-party partners. Fibra expects an internal rate of return of more than 20% and development cap rates of 13% to 14% from the new hotel focus, including fees from the Hotel Factory model, as compared to a 12% return from traditional hotel real estate developments.
Fibra Inn may receive fees from project structuring, development management, supervision of development and asset management. According to the REIT, the Hotel Factory model is only possible due to the company's management internalization in 2016.
The company has already signed a joint co-investment deal with an undisclosed third party associated with an institutional fund, who will become the first strategic partner under the Hotel Factory model.
The agreement covers an undetermined number of future hotels and includes the JW Marriott Monterrey and Westin Monterrey Valle. The two properties will be managed by a Fibra Inn unit and the company will retain an option to acquire the remaining stake.
Fibra Inn currently has a pipeline of more than 15 properties worth more than 10 billion Mexican pesos under negotiation. These properties are spread across Mexico City, Guadalajara, Monterrey, the central territory of Mexico, Cancun, Riviera Maya, Los Cabos and Riviera Nayarit, among other locations.
As of May 22, US$1 was equivalent to 19.74 Mexican pesos.
