The Mexican government could soon receive a windfall of as much as US $1 billion through the sale of a piece of real estate.
According to a report by news agency Reuters, the federal government is preparing to sell a 125-hectare military site in Mexico City that is one of the last remaining large parcels of developable land in the central area of the megalopolis.
Reuters said the government quietly announced the possible sale in a document published in its official gazette in January, and its inquiries confirmed that “plans for the sale are now under way.”
The site, which according to the government document is no longer needed by the military, is located between the upmarket business district of Santa Fe and the affluent Lomas de Chapultepec neighborhood.
That location, along with its ample green space, would make the site very attractive to real estate developers and investors in a densely populated city where land is at a premium.
“It would be the most important development project in Latin America by far,” the chief operating officer of Mexican private equity firm Hasta Capital told Reuters.
“This is going to present a once-in-a-generation opportunity to do a neighborhood from scratch,” Rodrigo Suárez explained.
The base price for the site would be set by Mexico’s Appraisal Institute but real estate experts believe that it could reach as high as US $1 billion.
However, they explained that accurately measuring the true value of the property will be difficult until the government announces what kind of construction will be allowed.
If high-rise, luxury construction is given the green light it could significantly increase the land’s value and attract attention from institutional investors such as U.S. pension funds and sovereign wealth funds, the real estate experts said.
If a $1-billion sale materializes, it would be the most lucrative sale in Mexico ever and one of the largest in Latin America. Proceeds would go to the federal treasury.
According to four Mexico City real estate professionals, the government intends to hire international brokerage Jones Lang LaSalle to market the site.
However, a spokesman for the federal agency that would manage the sale said no timeline has yet been set for the sale nor has it determined the manner in which it will be sold.
The process to determine land use zoning will take time and any large-scale development is also likely to face stiff opposition from residents of a city that is already facing significant strains on its infrastructure.
However, there is considerable incentive to move quickly. Mexico will hold its presidential election on July 1 and President Enrique Peña Nieto will leave office at the end of November.
The ruling Institutional Revolutionary Party (PRI) will likely be keen to finalize the sale before any possible exit from government, which according to current polls is probable.
In contrast, current frontrunner Andrés Manuel López Obrador “might not be amenable to a massive new real estate venture,” Reuters said.
The leftist Morena party leader has already indicated that if he wins the election he may move to cancel construction of the new Mexico City airport to save money.
Source: Reuters (en)