Titleco and the subsidiary silo model

Titleco is the entity layer beneath every Direct-Hold Solution: legal title to each property is held by its own Titleco subsidiary, not by the vehicle directly. The vehicle is the beneficial owner of each Titleco in the structure; the Titleco itself holds the legal deed to one property and no other. This is a property-level layer beneath the vehicle-level isolation covered in Asset Vehicle Isolation. This article covers how legal title is held, the Mexican tax rationale behind the Subsidiary Silo structure, the Canadian partnership's title-flexibility clause, and the fee-capped third-party manager each Titleco retains.

Key takeaways

Each property a Direct-Hold Solution holds sits behind its own Titleco subsidiary, beneficially owned by the vehicle, holding legal title to that property alone.
Professional Centres Mexico FIBRA names this the Subsidiary Silo model, adopted to develop raw land without triggering Mexico's 30% corporate tax under Article 188 of the Ley del Impuesto sobre la Renta.
Each Titleco must retain a third-party property manager whose fee is capped at 6% of that Titleco's own gross income — a cap set per property, not pooled across the vehicle's portfolio.

The Titleco layer

Each Direct-Hold Solution vehicle — the Partnership in Canada, the Trust in Mexico, and their planned counterparts in the United States and Spain — is the beneficial owner of every property it holds. None of them registers legal title to a property in its own name; instead, each property sits behind its own Titleco: a nominee subsidiary, beneficially owned by the vehicle, that holds the legal deed to that single property and no other.

This keeps legal ownership and beneficial ownership deliberately separate at the property level. An investor's economic interest in a property runs through the vehicle to the Titleco; a lender, tenant, or judgment creditor of that property deals with the Titleco as the entity of record. The vehicle's own name does not appear on the property's title.

What it replaces

A real estate vehicle can register title to every property it owns directly in its own name. Under that approach, every property sits on the same legal entity's balance sheet, and the vehicle itself is a party to every mortgage, lease, and contract touching any of its properties. A liability arising from one property — a construction claim, a tenant lawsuit, an environmental finding — becomes a liability of the vehicle as a whole, exposed to the same creditors as every other property it holds.

The Titleco layer removes that exposure at the property level. Because each property's legal deed sits in a dedicated subsidiary, a claim against one property's Titleco reaches only the assets of that Titleco — the single property it holds — not the other properties the parent vehicle owns through separate Titlecos.

Mexico's Subsidiary Silo and the Article 188 tax rationale

Professional Centres Mexico FIBRA describes this structure by name as the Subsidiary Silo model, and ties it to a specific Mexican tax provision rather than to liability protection alone. To develop raw land without triggering Mexico's 30% corporate income tax, the Trust relies on a Subsidiary Silo model that complies with Article 188 of Mexico's Ley del Impuesto sobre la Renta (LISR), the federal income tax law.

Under this structure, the Trust acts as the Master Holding entity: it holds the capital, issues the CBFIs — the FIBRA's investment certificates — and sets the governing rules through the Prospectus. The Trust then buys or incorporates 100% of the shares of specific Sociedades de Responsabilidad Limitada (S. de R.L.), Mexican limited-liability companies, and each S. de R.L. holds the legal deed to one specific Development Site. The FIBRA's own governing materials describe the resulting liability isolation as a hard legal barrier between projects: a risk event at one Development Site does not reach the Master Trust or the FIBRA's other assets.

This Article 188 tax rationale is specific to the Mexico vehicle's development-stage financing. The established Canadian vehicle applies the same Titleco mechanism for title-holding without relying on this Mexican tax provision, and the planned United States and Spain vehicles are intended to use the same title-holding structure once formed.

Title flexibility under the Canadian partnership agreement

Professional Centres Canada LP's governing partnership agreement requires the General Partner to ensure that title to each Property is held in the name of a separate Titleco, for the use and benefit of the Partnership. That requirement is not fixed for the life of the partnership. The agreement lets the General Partner later determine that a property should be held or registered in the Partnership's own name, in the name of another nominee, or otherwise, once it judges that appropriate or advisable.

Holding a property through a Titleco in the meantime does not change who owns it economically. The partnership agreement is explicit that using a Titleco does not prevent the Partnership's legal and beneficial title from vesting in the manner and at the time otherwise provided for in the agreement. The Titleco is a title-holding convenience, not a transfer of the underlying ownership interest.

Third-party property management and the fee cap

The vehicle-level Advisor and the property-level manager are two separate roles under the Canadian partnership agreement. The General Partner retains an Advisor to provide development and management services to the Partnership as a whole; separately, each Titleco must require that Advisor to retain a third-party manager, experienced in commercial real estate, to manage the specific Buildings that Titleco owns.

The fee payable to that third-party manager is capped by Titleco, not by portfolio: the agreement limits it to no more than 6% of the gross income that particular Titleco derives from the Buildings it owns. Because the cap is set against each Titleco's own income rather than the vehicle's combined income, a well-performing property cannot be used to justify a higher management fee on a weaker one. The cost of managing one building is never subsidized by the income of another.

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