The Tijuana industrial real-estate market is one of the most active in Mexico.

Tecma Group of Companies:

Hello and welcome to another installation of Tecma Talk podcasts. If you are a regular listener to these recordings, you know that they are centered upon issues that have to do with manufacturing in Mexico, or manufacturing in Mexico itself. Today, we have the pleasure of having JP de Kervor with us. He is from a company called Maquila Properties. JP please introduce yourself and tell us a little bit about your company before we get into the questions that are on the subject of what is going on today in the Tijuana industrial real-estate market. Welcome JP. How are you today?

Jean Paul de Kervor:

Excellent. Thanks. Since 1988, I have been involved in the Tijuana industrial real-estate market focusing on tenant representation and new start-ups in the high tech industry. I started out in manufacturing, working for a company called California Chemical in setting up a company in Mexico. As a result, I have a lot of experience on the operations side of things. Over the course of the project, I realized that the real-estate broker was making more money than I was, and decided to switch over pretty quickly to real-estate back in 1989.

Tecma Group of Companies:

That sounds like it was a smart move. Can you tell us a little bit about Maquila Properties, and its place in the Tijuana industrial real-estate market?

Jean Paul de Kervor:

Maquila Properties has done in the area of one hundred million square feet of transactions in the Baja region, as well as a few things in San Diego and Monterrey, and Juarez, but, really, we are focused upon the Tijuana industrial real-estate market. We have done some major transactions. For instance, we recently sold the Snapple building to Cerveceria Mexicana. This was a 170,000 square foot building on fifty acres. We have also done a lot of work in the medical field, which happens to be to be one of the hot areas in the Tijuana region. We have done really well with it over the last few decades.

Tecma Group of Companies:

It’s good to hear that. From what we read and see, in terms of industry trends, there is a lot of interest in the Tijuana area. As you may know, Tecma recently acquired a shelter company in your area called Made in Mexico, Inc. It is a pleasure getting involved in the market over there, and having the opportunity to speak with people like you that understand it.

You mentioned that you started in the Tijuana industrial real-estate market in 1989. Can you provide some insight into what is going on in terms of industry in Tijuana today, and how does that compare to what things look like when you first started out in 1989?

Jean Paul de Kervor:

There are a lot of similarities. I actually did my MBA thesis on how to finance maquiladoras. When I first began in the Tijuana industrial real-estate market all the manufacturers would come down to the border, and then as soon as they got there they would say, “how am I going to finance this move? I’d like to buy a building, and I’d like to move my equipment to Mexico.” They quickly found out, back in 1989, you lose your UCC-1 filing and, guess what, your bank doesn’t want to use it as assets against collateralized lending and, not only that, they don’t do real-estate in Mexico.

So, this was a serious question. At the time, GE Capital was pretty much the only game in town for any kind of financing, and there were a few Texas banks doing some financing with the proper US guarantees. That being said, because of the limited avenues for financing at that time, the entire Tijuana industrial real-estate market was eighty to ninety percent controlled by five families, i.e., the Bustamantes, the Fimbres and others. I know that in El Paso and Juarez that a similar, close knit situation exists. Back then we were getting a sixteen to twenty percent cap rate on most of our buildings, and the vacancy rate was at fi[...]