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Last Week GlobeSt.com spoke with Gene Reilly, AMB Corp.’s president, the Americas, about the company’s new alliance with Brazil’s Cyrela Commercial Properties SA Empreendimentos e Participações. This week we talk to him about San Francisco-based REIT’s acquisition of Mexican developer G. Accion SA de CV. AMB entered Mexico in 2002 with the Mexico City-based company as its development partner. Through a tender offer in 2005, AMB affiliates acquired a 39% interest in G. Accion. This June the affiliates acquired another 19%, and in July they picked up the the final 42%, creating a new subsidiary, AMB Property Mexico, with Luis Gutierrez, former CEO of G. Accion, serving as managing director for the Mexico region. As of June 30, the company’s Mexican portfolio totaled approximately 9.2 million sf existing facilities and scheduled development, as well as land capable of supporting approximately 6.8 million sf of future development.

GlobeSt.com: Why did you purchase G. Accion rather than retaining the previous relationship?

Reilly: The acquisition of the remaining piece is a pretty natural transition. It’s accompanied by an increased optimism on our part for the industrial business in Mexico. Higher fuel prices and currency fluctuations have improved the country’s manufacturing prospects, and we wanted to take advantage of that.

GlobeSt.com: Does that mean you will focus more on manufacturing than distribution in Mexico?

Reilly: In the future we may move more into the manufacturing sector, but we’re still focused on distribution due to the country’s impressive consumer expansion. But the consumer expansion is being driven by the manufacturing expansion, which is creating jobs and wealth. Mexico’s consuming class is growing faster than its GDP. Obviously a healthy manufacturing environment is very important in that.

GlobeSt.com: What are Mexico’s greatest attractions for AMB?

Reilly: We think GDP growth in Mexico will be slightly higher than in the US, and we see growth in our business in Mexico being higher than the GDP growth. They’re creating their supply chain from scratch. There’s very little existing product but a lot of demand. There’s a lot of work to do. For example, two thirds of Mexico City’s product is functionally obsolete. That market alone serves 22 million people. That’s more people than live in Southern California.

GlobeSt.com: Which markets will you focus on?

Reilly: In addition to Mexico City, we’re in Guadalajara, Queretaro, Tijuana and Monterrey. For the time being, those markets are going to keep us active. We’re focused on the consumer market, so we’ve tended to stay away from border towns. We are in Tijuana, but with distribution facilities. I feel better about border markets like Juarez and Reynosa than I did in the past because I think you’re going to see a major manufacturing rebound in the north of Mexico. But again, our focus is on the internal distribution market, not distributing Mexican manufactured goods to the US.

GlobeSt.com: How much activity do you have planned?

Reilly: We have about $120 million of development starts there this year. We’ll be ramping up in ’09 to about $175 million. The US is slowing down a bit. We see Mexico as probably the leading the charge for us over the next couple years.

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