Consorcio ARA, the most profitable housing developer in Mexico, is a financially solid public corporation with great vision, creativity and future. The company has taken advantage of financial opportunities and scale economies to achieve high quality at low cost. Susana Baumann reports.
Almost three decades of experience in helping over 160,000 Mexican families own their homes has proven the vision, creativity and financial energy of Consorcio ARA. Founded in 1977 by Germ n and Luis Felipe Ahumada Russek, the company went public in 1996, offering 48 percent of its stock at the Mexican Stock Exchange and as an ADR level 1 in the New York Stock Exchange.
“Our company’s stock is offered in medium and long term investment portfolios because of its financial strength, experience and business solidity,” said Jaime del R¡o, director of investors relations. “ARA’s greatest achievement has been to change the paradigm of social responsibility versus profitability. We have demonstrated that a company can work for the underprivileged and still be profitable and financially sound.”
CHANGING THE RULES
Consorcio ARA has developed diverse solutions for the country’s housing problem. “We work with all federal agencies, the INFONAVIT, the FOVISSSTE, the national institute that provides funding for state employees, the SOFOLES, which are non-bank institutions licensed to lend money for specific purposes, and even private banking,” said del R¡o.
The company provides progressive housing, low-income and medium-income housing, residential, resorts and lately, many services. It also offers plans for three-, six-, 12- and 18-month financing, and adjusts its sales goals according to these programs.
Diversification not only is offered on the financing and the type of home, but also in the housing projects’ geographical locations. Consorcio ARA has developments in 16 states and land reserves in 17, which will increase the coverage to half the country. “Acquiring strategic land reserve is instrumental in the company’s expansion, as it creates areas of potential urban growth that will benefit the local communities. Presently, the company has a reserve of 25 million square meters, mostly bought in cash, enough to build approximately 130,000 low-income houses,” del R¡o explained.
Consorcio ARA has built 47 urban developments in 16 states including cities of Monterrey, Guadalajara, Canc£n, Tijuana, Puebla, Le¢n and Toluca. The company has also expanded in the northern region of the country, the baj¡o, a region of central Mexico that includes the plain south of the Sierra de Guanajuato, in the state of Guanajuato and the southeast resort area.
Approximately 18 percent of the company’s projects include progressive housing, a system that allows the home to grow with the family. Fifty to 55 percent of developments are low-income housing while 21 percent is for middle-income families. Five percent is residential and the balance makes for lots with services, a solution that allows families to build their own home. The company has also built other public and private projects, such as malls and infrastructure facilities throughout 17 Mexican States.
NEIGHBORHOODS WITH A HEART
Low and medium-income homes are usually 40 to 70 square meters built on 60 to 120 square meter lots. These homes’ prices range between M$231,000 to M$390,000 (approximately $20,000 to $35,000)
“Our sales advisors work with prospective clients in helping them find the best financing available for their particular situation,” said del R¡o. Consorcio ARA’s sales teams are knowledgeable of all potential resources and variables such as age, salary and employment seniority to aid families qualify for the best option possible and assist them in processing the loan.
The company works with a variety of mortgage financing schemes. In some locations, where the scale economy is based on informal employment, the company has developed programs for underprivileged families to access their own house. Presently, more than 750,000 Mexicans live in an ARA house.
FOR THE “NOSTALGIA” MARKET
For Mexicans living abroad, Consorcio ARA has sales offices in New York and Chicago, and will open a new bureau in California this year. Presence in the United States’ Hispanic market revolves around active adults, buyers who purchase property for families left behind, or small investors working and living out of the country. “Buying a home through Consorcio ARA gives them the opportunity to build assets and contribute to the economic growth of their local communities,” said del R¡o. Affordable sales plans with mortgage financing and preferential conditions to Mexican workers in the United States allow them to handle the whole procedure from their place of residence. Homes can be acquired in any of the 14 Mexican states in which the company does business.
CONSTRUCTION THAT MAKES SENSE
One of ARA’s strongest legs is the use of construction techniques that produce a two-story affordable low-income house in approximately 30 days. The system is based on a mold that builds walls and floors with a simultaneous casting system. “The system allows careful planning procedures that diminishes inventories, improves delivery capabilities, and increases construction quality at a low cost,” del R¡o explained.
The company is vertically integrated and is mostly self-sufficient in construction supplies and concrete manufacturing. Most casting systems, which comprise over 410,000 square feet of mold and construction equipment, is designed, built and maintained by ARA’s engineering department. Through its subsidiary COMACI, ARA provides maintenance for over 450 construction equipments, 15 concrete production plants and more than 120 concrete mixing pots. ARA is considered a leading company nationwide regarding its concrete and mold producing capabilities.
Residential developments can include from 50 to 150 residential units but some projects might include 2,000, 4,000 or as much as 13,000 in Las Americas, located in Ecatepex, or 26,000 units in San Buenaventura, in Ixtapaluca, both in the state of Mexico.
San Buenaventura is a low-income development financed by the Sociedad Hipotecaria Federal, INFONAVIT and FOVISSSTE, with social infrastructure that consists of kindergarten, elementary school, high school, commercial and recreational areas, two supermarkets, sports fields and utilities including water, electric, sewer, phone, and cable. The complex high levels of security, with private courts and gates and an exclusive police booth that guards the development’s main access, ensure total safety for its homeowners. A church and a medical unit with 24 doctors’ offices have also been included in the plan.
Las Americas, said del R¡o, is directed to middle-income families, with financing from federal agencies and the same urban infrastructure as San Buenaventura regarding schools, church, stores, recreation and sports.
Within residential developments in resort areas, the company’s highlight is the Playa Diamante, a set of villas with club house,
paddle and tennis courts, swimming pool and outside bar and beach club. The complex has all utilities services, is a gated community and is located 50 meters from the Pacific Ocean in beautiful Acapulco.
The company has also entered the arena of promotion and development of commercial centers since 2002, in a co-investment agreement with O’Connor Capital Partners. Through its Promotora y Desarrolladora de Centros Comerciales subsidiary, the company operates, administers and develops commercial malls such as Centro San Miguel mall in Cuautitl n Izcalli and Centro Las Am‚ricas mall in Ecatepec, state of Mexico. Moreover, Consorcio ARA is the only Mexican developer to include high-quality commercial centers inside the communities it builds.
The company has historically maintained growth and forecasts its 2006-2007 cycle in the 20 percent range. “Consorcio ARA has been recognized for its transparency, efficiency and intelligent administration, which resulted in accomplishing our profitability commitment with our stockholders since the company went public in 1996,” del R¡o said. “We are proud to say that Consorcio ARA is today the company with best gross margin in the industry, lowest debt, best product sale price and highest payment efficiency. Its liquidity, constant cash flow, strong financial position and flexibility allow the best response to the Mexican market needs with the possibility of increasing its key land bank,” del R¡o said.
Along with its continuous reinvestment on land bank in strategic locations, which currently guarantees Consorcio ARA’s operations for at least 5.5 years, the company’s financial solidity allows the allocation of developable land, and design and construction of high-impact projects in home building and major com-
The benefit is not only for stockholders and homeowners, but Mexican society in general. By creating employment opportunities, generating over 700,000 direct and indirect jobs in over three decades, ARA has more than paid its dues to the communities it serves. It has become an important source of employment and stability, which in time feeds the cycle of home ownership that is keen to most Mexican natives.
“Our company’s mission is to become the most trusted, profitable and innovative homebuilder in Latin America. However, we believe our mission cannot be achieved without the corresponding social responsibility initiative, nurturing the same society that has allowed us to grow and become the successful company we are today. We changed the concept of profiting from our community to mutually benefiting from and to our communities but taking care of our best asset, the people we work for,” del R¡o concluded.