Fitch Rates Urbi's Proposed US$150MM Sr Notes Offering 'BB'.

CHICAGO -- Fitch Ratings has assigned an international scale rating of 'BB' to Urbi Desarrollos Urbanos, S.A. de C.V.'s (Urbi) proposed offering of up to US$150 million senior notes due 2016. Proceeds from the offering will be used to repurchase local Certificados Bursatiles issuances equivalent to approximately US$136 million (URBI03 and URBI05) and repayment of other loans. Additionally, Fitch has affirmed Urbi's 'A+(mex)' national scale rating. The Rating Outlook for all ratings is Stable.

The ratings reflect Urbi's strong market position, increasing geographic and customer diversification, significant land reserve, exposure to the developing Mexican mortgage market, and manageable financial profile. The company operates in the highly fragmented but rapidly consolidating Mexican homebuilding industry and is the third largest homebuilder in Mexico in terms of homes sold.

Urbi is well positioned to benefit from expected strong growth in the homebuilding market in Mexico. The company owns a significant amount of land, predominately in Baja California, Mexico City, and Guadalajara, providing the company with flexibility to meet growing demand for new homes. At the end of December 2005, the company had five years of land reserves based on the volume of homes sold in 2005. The acquisition of land reserve has been primarily achieved through seller-financed, deferred payments plans, which are on balance sheet and generally have a term of less than three years.

Urbi is operationally solid and continues to benefit from its strong revenue and unit growth. Over the last five years, revenues grew at a rapid 18.7% compound annual growth rate while units sold increased from 14,636 to 24,865. Over the same period, the company has been able to maintain stable EBITDA margins of approximately 24% by adhering to strict cost and expense controls and managing production with commercial cycles. In addition, the strategic alliance signed with Outinord (manufacturer of concrete molds) at the end of 2005, and the company?s technological platform (Urbinet) are expected to have a positive impact on operating performance, as a result of increased production and a decrease in construction time (days).

Urbi has increased its geographic and product diversification over the last several years. Urbi currently operates in seven states of the country and the Mexico City metropolitan area but remains geographically concentrated in the economically strong Baja California state. Further penetration in Mexico City, Monterrey, and Guadalajara should further increase geographic diversification. In addition, the company continues to diversify its product mix away from affordable entry level houses (i.e., low income), which represented 69.4% of houses sold and 50% of revenues, down from 93% of houses sold in 2000, to low middle-income and high middle-income homes. The company's sales mix provides flexibility to direct its commercial strategies according to market needs.

Urbi is exposed to liquidity risks and working capital constraints associated with the timing of government-related mortgage funding of low-income homes. Financial institutions providing such funding include Infonavit, Sociedad Hipotecaria Federal, and Fovissste. While virtually all of the low-income housing is pre-sold with pre-approved financing, low-income mortgages are only disbursed following home completion and delivery to the buyer, which typically takes two to four months. Also, the timing of disbursement may vary substantially depending on the location of the property (state), the financial institution's available funding allocation, and its backlog of pending funding. The continued development of Mexico's mortgage market, increasing alternatives of funding sources, and increasing availability of credit in Mexico are expected to somewhat lower these risks over the medium term and support industry growth.

Urbi's liquidity and financial position is adequate to manage these risks, and is consistent with the rating category. Total debt-to-EBITDA ended the year at 1.0 times (x) and has ranged between 1.0x and 1.8x over the last several years. The company's leverage position is expected to gradually improve as EBITDA grows and total debt remains at current levels. Urbi's liquidity is solid with a cash and marketable securities balance of Ps$1.8 billion and short-term debt of Ps$743 million. High levels of liquidity adds financial flexibility to the company given the high working capital requirements associated with the seasonality of the construction cycle and timing of receipts of low-income mortgage funding. The proposed debt offering would result in an extended maturity profile and further lower refinancing risks.

Urbi is one of the largest housing developers in Mexico. The company builds and sells houses mainly in the states of Baja California, Sonora, Sinaloa, Chihuahua, Nuevo Leon, Aguascalientes, Guadalajara, and Mexico City?s metropolitan area. Urbi specializes in affordable entry-level and low middle-income housing, although also participates in high middle-income and upper-income housing segments. In 2005 Urbi sold 24,865 houses and earned Ps$8,194 million in revenues.

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