Until recently, Latin American companies in the industrial sector that needed to build new facilities to expand their operations had to resort to capital expenditures (CapEx), often straining their finances in the medium and long terms.
Currently, the most common method of facility delivery is for project owners to work with development companies under a “Build to Suit” modality within existing industrial parks. This approach allows the industrial-sector tenant to rent their facilities, which could mean considerable savings.
However, this “custom shell” construction method presents some disadvantages, as well, for companies with manufacturing processes.
- In advanced manufacturing and production sectors such as food and beverage, aviation and aerospace or biopharmaceutical, developers often lack the experience necessary to comply with regulatory requirements of organizations such as the Norma Oficial Mexicana (NOM), U.S. Food & Drug Administration (FDA), U.S. Department of Agriculture (USDA), AIB International, Food Safety Modernization Act, among others.
- Developers are generally owners or allies of industrial parks, so in many cases, outside Architectural, Engineering and Construction (AEC) companies are not allowed to participate in construction, even if they are more competitive and of greater benefit to the client.
- Limited space within the facility footprint or within the industrial park may restrict expansion, creating the possibility of future relocation costs.
- Companies must adapt to the geographic presence of industrial parks rather than locating in a more suitable location.
An Integrated Solution
Through its Latin American subsidiary, Haskell has formed an alliance with TC Latin America Partners to offer a new facilities solution that integrates technical, sustainable and financial services. Haskell furnishes its vast architectural, engineering and construction expertise in industrial and manufacturing sectors. TC Latin America Partners, an institutional administrator of investment funding, contributes its experience in capital, management investments, investment portfolios and real estate assets, and provides funding capital.
Andrés Lee, who assumes the position of Project Development Director at Haskell for Latin America, explains how the need for this solution arose.
“Haskell has a portfolio of strategic clients, most of whom have advanced manufacturing processes,” Lee said. “These clients sometimes require design and construction services but face budget constraints that present project delays or cancellations that affect their operational efficiency. Through the new alliance, Haskell designs the project and, with the support of its preconstruction professionals, creates a budget estimate.
“Once the project and a competitive budget are at hand, TC Latin America Partners performs an analysis of the project to confirm its financial viability and requests the corresponding financial resources. At the same time, a financing plan is tailored to each client.”
The operational process to ensure the viability of the projects requires five steps:
- The potential client presents its construction needs to Haskell.
- Haskell analyzes the project to determine design and construction feasibility.
- If Haskell approves the project’s constructability, TC Latin America Partners assesses the financial viability.
- If the project meets financial benchmarks, funding is arranged and released to Haskell to begin work.
- When finished, the project is delivered to the client, which rents the facility.
“It really is a marvel,” Lee said. “TC Latin America Partners funds the investments and, through multiple financial options tailored to each case, the client makes use of these new facilities without resorting to CapEx. Instead, with contracts specially designed in the lease agreement, companies can focus their short- and medium-term resources on their core business needs, such as research and development.”
TC Latin America Partners owns the real estate asset, but the client uses it as their own through the leasing arrangements. At the end of the agreed-upon term and by means of a sale contract stipulated from the beginning, the client may acquire or reacquire the property.
This integrated funding and project delivery method currently is available to $15 million to $50 million projects in Mexico and Colombia.
“We are very excited to materialize this alliance with Haskell as it represents an additional step in our diversification process towards leasing-generating assets,” said Gregorio Schneider, founding partner of TC Latin America Partners. “Additionally, we believe that because of its technical experience and knowledge of the market, Haskell is the ideal partner to make this idea a reality.”
A Solution with Multiple Benefits
This financing option is designed to support companies in the development of new industrial plants (greenfield), modifications to existing plants (brownfield), design or adaptation of production lines, process engineering, among other services. Available delivery methods include Design-Build (DB), Engineer Procure Construct (EPC) and general contractor (GC).
Potential markets include the following.
- Logistics or distribution companies that need to lease long-term facilities in various locations outside of industrial / logistics parks.
- Small and medium-sized industrial companies that need technical and financial support to fund their expansion plans.
- Medium to large industrial companies that need expansion in their own facilities and are unwilling or unable to make CAPEX investments and need to lease.
The benefits of the solution created by Haskell and TC Latin America Partners are many. The growth of various stakeholders – the client (end-user and tenant), TC Latin America Partners (financial partner) and Haskell (technical partner) – is advanced. Most of all, entire communities can be benefit from the regional economic benefits of significant investment and development.
About TC Latin America Partners
TC Latin America Partners is an Institutional Manager of Investment Funds founded in 2012. During the last decade, the firm has evolved from investing exclusively in low-income and middle-class housing projects to a regional platform that invests in different real estate assets, including commercial, industrial / logistics, health and digital infrastructure, among others. The company is headquartered in New York and has made investments in Mexico, Colombia, Peru and Chile. TC Latin America Partners is an investment advisor registered with the SEC in the United States and in 2020 became a signatory to the Principles of Responsible Investment (PRI), an organization endorsed by the United Nations that aims to promote responsible investment by incorporating environmental, social and corporate governance principles in decision-making.
