Mexico's $2.7 Billion Homebuilder Nightmare Fades as IPOs Surge

  • Corpovael and Javer have sold shares since early December
  • The industry is showing signs of life after 2013 meltdown

Mexico’s homebuilding business is staging a comeback less than three years after the industry’s biggest companies saddled investors with losses from collapsing share prices and $2.7 billion in bond defaults.

Builders are dominating the new issuance market, with Corpovael SAB and Servicios Corporativos Javer SAB selling shares since early December and a third company seeking to raise money later this year. They’re among the competitors that rushed to fill the gap left by the largest three builders, which were forced to downsize following their failures in 2013.

Pent-up demand for new homes hasn’t gone away since housing policy changes by President Enrique Pena Nieto helped lead to the collapse of Urbi Desarrollos Urbanos SAB, Desarrolladora Homex SAB and Corp. Geo SAB. While Homex and Geo resumed trading last quarter following restructurings and Urbi moves to conclude a deal, it’s the smaller companies that are driving a resurgence in an industry that until recently was given up for dead by foreign investors.

“It’s a good sign that it would seem the sector is coming back to life,” said Jorge Unda, who oversees about $35 billion as chief Latin America investment officer at for BBVA in Mexico City. “The companies that were able to stay in have been more cautious.”

Share Sales

Javer raised 1.8 billion pesos ($99 million) in an initial public offering on Jan. 12, saying it would use the proceeds to repay debt. A month earlier, Cancun, Mexico-based Corpovael, known as CADU, raised 2.4 billion pesos in its share sale. The industry’s resurgence has provided a bright spot in Mexican markets, which have been pummeled by a global selloff of higher-yielding assets.

Javer and Urbi declined to comment. Officials from Corpovael, Geo and Homex didn’t respond to requests for comment.

The homebuilders are trying to profit from what a top Pena Nieto housing official calls “a new phase for the housing industry.” Mexico has posted 17 straight months of increases in residential construction investment, Land Development Minister Rosario Robles said in a speech last month at the Mexican stock exchange.

Bank Lending

That streak started after Pena Nieto adopted policy changes to promote construction closer to city centers. The shift torpedoed the value of land held by Homex, Geo and Urbi, helping to push them into default.

The pace of homebuilding has rebounded enough that the number of families lacking adequate housing fell 8.2 percent in the past three years to 8.9 million, according to a statement last month by Canadevi, the trade group for Mexico’s homebuilders.

The peso declined 0.2 percent to 18.2096 per dollar at 11:17 a.m. in Mexico City on Thursday.

Construction is being fueled by Mexico’s growing middle class and a greater willingness by banks to lend, Sergio Leal, chief executive officer of Vinte Viviendas Integrales SAB said in an interview last month.

The company, which offers more expensive homes, is looking to follow in the footsteps of Javer and Corpovael with an initial public offering of its own this year as industrial investment, bank lending and tourism expand in Mexico and bolster the middle class.

While Vinte said Wednesday it’s delaying an IPO previously planned for as soon as next week due to market conditions, international investors “have shown themselves to be very interested in the housing market in Mexico” in recent meetings, the company said.

“All of this means that the country and my sector do much better,” Leal said in the interview last month.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE