Fibra UNO

Thank you very much, Luis. Good morning, everybody.

Thank you for being on our call. We are very happy to deliver these results.

We just posted yesterday our results for fourth quarter 2024 and the full year of 2024, and we are very excited about the results. I'm very happy with the performance of the company.

I think you had the time to review the results. We are very excited about what we delivered yesterday.

Also, this is a moment of a complete happiness and excitement to all of us here at the management of Fibra UNO because we finally got in these recent weeks, the confirmation, the federal confirmation criteria to move forward with the Next Fibra – Fibra Next, which has been announced for many, many months, and we finally got the approval of the tax authorities in Mexico, which makes us very, very happy to deliver this information to you today. Despite all the delays on the plans of carving out the industrial assets, we will focus also on delivered results on all across the board on our properties.

And I'm very happy before I pass the mic to Jorge Pigeon, I am very happy to tell you that in the retail segment we grew the occupancy for 190 basis points in the year. We had 500 points of leasing spreads in our contracts and our revenue grew over 10% during the year, year-on-year basis.

So we are very happy on the retail side, again, and we see a lot of opportunity in the coming months for the retail side also in our portfolio. I think that the design of the company, again, and I've said this in previous calls, the design of our company is paying, is paying us in the bad times that we endure the last four or five years, and is paying us in good times, which we are today harvesting everything we see that years ago.

I am also very pleased to share with you the performance of the Office segment. The Office segment has been an issue that has worried a lot of investors, and we have never been worried about this.

We know that we have a very good product that Mexico is still underserved in that particular segment. And we knew, and I said this again before, many, many times, that the occupancy will have a time to recover.

We are today all above pre-pandemic level. So we are very happy about that.

And the pricing is going to recover in the next coming months. I think that preview to the recovery on the prices, and we are seeing just how the pricing is starting to show a little bit of recovery.

Last year, we grew 7.1% the rents, which means a good 200 or 300 basis on the – on the leasing spread, which makes us very happy. It's the first time since before the pandemic.

So we are very happy to announce that. And also very happy to announce that we reached almost 84% of occupancy level, which is way above we had pre-pandemic.

So we are seeing the recovery. We are feeling it, and the portfolio is performing extremely well.

Regarding the Industrial segment, of course, everybody is very happy about the Industrial segment. I am very, very happy and very excited to tell you that all of our predictions became reality.

Our predictions in terms of we are in the right segment of the sector, a prediction in terms that the occupancy in the metropolitan area of the primary cities of the country is different than the border. We are inclined to be in the metropolitan area of the primary cities much more than the border.

We’ve talked about this earlier. We said this in previous calls, and I’m very happy to now show that it has been turning to us in favor of the portfolio and the design of the company, and we are very happy to say that we are standing at 98% occupancy level with a 15.1% growth year-over-year on the rent and 12.3% in the growth in the revenues.

So, we are capturing what we have been lagging in terms of the rent. And we think that this trend will continue in the coming quarters.

We are very happy about that. Before Jorge goes in depth on the numbers, I just want to tell you that we finalized the refinance of the 2026 bonds.

The next amortization in dollars that we have is in 2030. So that brings us a very favorable environment in our financial front.

Also, Jorge will tell you about the lead 35 square meters that we have in Mexico, and Ana Karen, our Director of Sustainability has been making a rockstar job, and we are very happy to announce to you the leadership that we have achieved in the market in Mexico, in all of the industries, not only the [indiscernible]. So we are very happy.

I expect Jorge to give you. This is a time of happiness and celebration for us, and we look forward to the future with very high expectations.

And the only reason that we are standing here is the design of the company that has proven to be reliant – resilient and also the hard work of all the people working in Fibra UNO. I only have a gratitude for all of them.

And again, I will tell you the best is yet to come. So please, Jorge, you may.

Thank you very much, André. Thank you, everybody, for joining our quarterly results on the end of year 2024 results.

I will dig now into the MD&A, starting with the revenue line, total revenues increased by MXN368 million or a 5.1% quarter-over-quarter increase to reach MXN7.5 billion. This is mainly attributable to a combination of factors, an increase in the portfolio’s occupied gross leasable area of 30 basis points on a consolidated basis.

Rent increasing resulting from the pass-through of inflation in the active contracts. As you know, 100% of our contracts are indexed to inflation, whether it is in dollars or in pesos.

Also rent increases on lease renewals, what we familiarly call the leasing spreads that André was mentioning in all the different sectors. We also had the peso-dollar exchange rate depreciation and its effect on the U.S.

dollar-denominated rents when translated to pesos has obviously a positive effect. And we also had the reversal of some of the reserves that we had created to provide support to tenants from the Otis hurricane.

We ended up not needing those reserves, so we reversed them. And that also helped us.

So, part of the prudence – financial prudence of the company in the past has always been part of the design of how we operate, and we’re happy to see that we did not require those reserves. Now focusing on the occupancy, on a consolidated basis, we are 95.6%.

That’s 30 basis points higher than the previous quarter. As you know the objective of the company is to be around 95% occupancy.

So, we are right there where we would like to have our portfolio Obviously, the industrial portfolio remains extremely solid with 98.2% occupancy, 20 basis points below the previous quarter. This is just normal part of the operating business.

The business remains, as André mentioned, extremely solid, and we’re very pleased with the performance of our portfolio, especially in light of what we’ve seen in some of the other markets, particularly border markets which have been more affected than where we are. We continue to see an extremely solid supply/demand dynamics and positive trends for rental markets in our core markets.

The retail portfolio, as Andre mentioned, also reached 93.7% occupancy 100 basis points above the third quarter of 24% and to almost 200 basis points year-over-year. So we continue to make gains in the occupancy of the retail sector as well as increases in leasing spreads, increases in contract renewals.

So we see a very favorable trend for the retail sector. And as we have mentioned before in previous quarters, I think we've always said that the retail sector was going to surprise people because it was coming in very strong.

And we're starting to see exactly that the retail sector indeed is very solid. We are very happy to share with you the performance of the office portfolio with an 83.7% occupancy.

That's 20 basis points above the previous quarter, and we continue to see the possibility to continue to gain occupancy in this sector. And we're obviously extremely happy to see that we are starting to see some pricing tension, some pricing gains in our portfolio.

Having said that, we remain comfortable with the idea of not expecting rents to increase significantly or, let's say, not expecting rents to increase in the market overall still for a few more months to come. But we are starting to see some indications of initial pricing tension in the office sector.

So we're very pleased with that performance. And lastly, the other portfolio remains very stable, 99.2% occupancy, stable versus that of the previous quarter.

In terms of operating expenses, property taxes and insurance, we did get an increase of MXN127.2 million or almost 15% compared to the third quarter of 2024. This is more than anything a seasonal effect.

We tend to have an increase in the expenses during the fourth quarter of every year. And as we've mentioned before, there's been significant above inflation pass-through in a lot of the operating expense lines that we have.

Specifically regarding taxes, we continue to see taxes increase at a high pace, property taxes, I mean, in particular, and we saw an increase of MXN10.4 million or 5% quarter-over-quarter. And insurance expenses remained stable compared to the previous quarter, but we do also expect to see increases in the expense line that relates to insurance once we end up renewing the policies sometime down the road.

The effect of all of the above on our net operating income meant an increase of MXN164.6 million or 3% compared to the previous quarter to reach almost MXN5.6 billion. NOI margin calculated over rental revenues was 81.5% and 74.1% compared to total revenues.

Moving to interest expense and interest income. This line increased by MXN138.8 million or 5% compared to the previous quarter.

This was mainly due to the exchange rate depreciation from MXN19.62 to MXN20.26 per U.S. dollar.

And obviously, the effect that this has on the interest expense line in the quarter, we also obviously see a similar increase in revenues on the revenue side. Also important to note that we had a reduction in the capitalization of interest for MXN283 million.

And there's also included in this line the impact of the different derivative financial instruments that we have. This results in the funds from operations or FFO for the quarter that includes a decrease in the non-controlling FFO derived from the Helios acquisition.

So FFO controlled by FUNO increased by MXN230.8 million or 10.1%. So you're starting to see the accretion resulting from the acquisition of the Helios CKD in that growth.

So the FFO for the quarter reached a little over MXN2.5 billion. Adjusted FFO obviously increased by MXN230.8 million, 10.1% compared to the third quarter of 2024.

On a per CBFI basis, we did do some acquisition of CBFIs. If you recall, the previous quarter, we sold an industrial property, and we used part of the proceeds of that sale to buy back some of our CBFIs post quarter.

This is not something that happened during the quarter, but post quarter is something that you did see and that ended up affecting the distribution CBFIs outstanding. So FFO and AFFO per CBFI for the quarter were MXN65.80 per share or 10% increase compared to the previous quarter.

As I was mentioning compared to – talking about the quarterly distribution for the fourth quarter, we distributed MXN2.1 billion or MXN0.5513 per CBFI. Of this MXN1.87 billion was fiscal capital reimbursement, sorry, and MXN229 billion or MXN0.6 per CBFI corresponds to the fiscal results.

And this is an AFFO payout of 83.7%. In terms of accounts receivable, for the quarter, we totaled MXN2.66 billion, a decrease of MXN43 million or 1.6% below the previous quarter, part of the normal operating of the company.

In terms of investment properties, the value of our investment properties, including financial assets, which as you call the Memorial portfolio as well as investments in associates increased by MXN3.1 billion or 0.9% compared to the third quarter of 2024. Basically, the result of the fair value adjustment to our properties, financial assets and investment in associates.

Normal processing construction, we still have a couple of projects ongoing in which we are investing in CapEx as well as some of our operating procedures and CapEx invested in our operating portfolio. Moving on to the debt as of the fourth quarter of 2024, the debt stood at MXN149.2 billion compared to MXN145.8 billion recorded in the previous quarter.

The variation is primarily due to the exchange rate depreciation of the peso, which went from MXN19.63 or MXN19.629 the previous quarter to MXN20.2683 per dollar at the end of this quarter as well as a small increase in bilateral line of credit for MXN600 million. The effect of all of the above in the total equity, we had a decrease of MXN4.8 billion or minus 2.5%, including the participation of controlling and non-controlling interest and this is a combination of the net income generated in the quarterly results, the derivatives valuation, share distribution as well as the ECP or employee compensation plan.

Moving to the operating results. We’re extremely pleased with the operation of the portfolio overall.

We believe that the diversified strategy has definitely paid off in the past continues to pay off today, and we’re happy to share that we had 16.7% or 1,670 basis points in the Industrial segment, 830 basis points in the Retail segment and almost 3% or 290 basis points in the Office segment. In the dollar denominated lease renewals, we were 14.4% above in dollar terms in the Industrial segment, 5% or 530 basis points in the Office segment.

So very pleased with the performance of the office portfolio, as André was mentioning, and 470 basis points in the Retail segment as well. So we're very pleased with the leasing spread performance that we are seeing in our portfolio.

In terms of the constant property performance, rental price per square meter in constant properties increased by almost 10% compared to the weighted annual average inflation of 4%. So as you can see, we are delivering on that almost close to double-digit growth that we are expecting.

So again, very pleased with the very solid performance of the portfolio. On a sub-segment level, the portfolio's total annual rent per square foot increased from 11.1% to 11.5% or 3.4% compared to the previous quarter, mainly due increases in current contracts and some renewals as well as the FX appreciation effect on the dollar rents.

The NOI at property level for the quarter increased 5.7%, almost 6% compared to previous quarter. Variations mainly due to the following: If we look in the Industrial segment, Logistics NOI increased by 5.6%.

Live manufacturing NOI increased by 4% and business parks increased by almost 5%, 4.8%, mainly due to rent increases as well as FX depreciation. The Office segment NOI increased by 5.8%, mainly driven by occupancy gains as well as what I mentioned before, some of the rent increases that we did manage to pass through.

In the Retail segment, the fashion mall sub-segment increased by 3%. Regional segment relatively flat with almost 1% or 0.7% and the standalone sub-segment decreased by 3.10% compared to the previous quarter.

Latter mainly due to maintenance expenses associated to the standalone segments. The other segment, NOI increased by 31.1%, which is mainly due to the seasonality of the hotels variable income.

And with this, I conclude the MD&A. Luis, if we can please poll for questions.

Perfect, thank you. Good afternoon and congratulations, André, Jorge and team for the results.

I'm going to apologize first in advance for the blunt question, but it's been almost a couple of years since we started to talk about the internalization process. So just wondering if you can tell us what has been holding up this process?

Is it the definition of the asset themselves, valuation themselves? Anything you can share with us that would give us a little bit of better visibility that it will be indeed concluded in the first half as you previously guided?

And then I have a second question, if I may, on the listing of the assets.

You mean second question on carve-out of next?

Yes. .

Okay. If you want to start with the second question, I’ll let André talk about internalization in a second.

Okay. The second question was just to – you received this tax authorization.

Of course, the timing now with all of the uncertainty around Mexico seems a little bit more challenging. Just wanted to see how you’re thinking about that in terms of time line?

And if there has been any shift in considerations from the Jupiter Portfolio in terms of changes in the properties that perhaps have been already developed or any material change that you would envision for next vis-a-vis what we saw during the first part of the process.

Thank you. It’s a very good question and understandably.

So it’s been a lot of work. And definitely, the persistence paid off finally being able to get the confirmation criteria that will allow us to carry out the carve-out.

Conceptually, I think we would like to continue to do the same things that we’ve already discussed with the market a while back, clearly, and we’re obviously not at liberty to discuss specific changes, but there has been changes in the portfolio. As we were discussing the occupancy of 98% in the FUNO portfolio and the fact that we have continued to see leasing spreads like the ones we’re showing here of 14% and 15%, indicate that we have an extremely solid market in the markets in which we operate.

There is demand for new development in those markets. And the sponsor Fibra UNO has carried out some of those development outside of Fibra UNO.

So there is, let’s say, there is additional growth and very good news to come on that, but nothing that we can discuss the specifics of other than to say that if we showed you something, what we have is even better.

And for the internalization, we said that we will have it executed by the end of the second half – before the end of the second half. And I think there was the first half, I mean, of the year, and we are there.

There’s a lot of implications, tax implications, valuation implications, different implications that we have been resolving one by one. And we will be ready for the time frame that we set in last year.

So I am very confident that we will get that done in this first half of the year.

Great news, André. Thank you.

Thank you.

Thank you.

Thank you. Thank you, André and Jorge for the call, and congratulations on the results.

My question has mostly been answered related to the previous one. Just to clarify, if I understand correctly, the internalization is likely to happen before the – potentially before the IPO of Next, correct?

It doesn’t have to be simultaneous, it can be before a potential IPO of Next?

Yes. Actually, Carlos, thank you very much, Carlos.

It has been disconnected. It was connected at the beginning, but we disconnected that a year ago.

And we hope that we can do it simultaneously. But the window of the market does not open, it will happen before that.

Understood. Thank you.

Thank you, André.

Thank you for taking my questions. I have two, mostly focused on the balance sheet.

So one thing we saw a sequential improvement in leverage levels. You saw net-debt-to-EBITDA.

It's still a little bit high, seven times net-debt-to-EBITDA. And the debt service coverage ratio about 1.6 times.

So we – you've discussed before about your intention to delever the company. So I just wanted to get a sense of what we could expect in terms of deleveraging going forward, if there's like any target that you're looking for towards year-end 2025.

And also on your asset recycling pipeline, there's about MXN4 billion that you noted on your earnings release. So I just wanted to get a sense of where you are in the process.

You do give some target dates as when you expect to have this done. But just if we can get some more color on this deleveraging – sorry, on these divestment?

And if there is the possibility of seeing even more going forward. Thank you.

I'll ask Gonzalo to deal with the M&A pipeline and that portion of the question, Jorel. Now specifically about the deleveraging, I'd like to take a step back to remind everybody of how the business works because this is a business that is indexed to inflation.

And if we were just to sit down and start collecting rents and renewed contracts, et cetera, as we have the NOI of the company growing at the speed which is growing, ends up deleveraging the company on its own. So that is something that sort of takes care of itself if you give it enough time.

The way I look at it or the way I feel about it, I think that the pandemic, like robbed us about two years. If I fast forward about two years from where we are now, that's more or less where the leverage – the real leverage of the company should be, which is definitely below seven times closer to six times and change and below 40% LTV is where the company would naturally on its own without doing any major activities, let's say.

Now one important thing, obviously, which is something that can change significantly the face of the business as we are – have been running it the last 11-plus years or we're getting close to 14 years to actually that we listed the company. Yes, next month, it's going to be 14 years since we IPO'd.

But basically, this carve-out of the industrial assets, what's going to be results that we are going to end up capitalizing Fibra UNO to the tune of MXN [indiscernible] billion or somewhere around that number. There's still a lot of moving pieces to fine-tune to come out with the exact number.

But that will put us in a leverage ratio is going to be closer to 35-ish that we have been historically – and that also – if you manage the LTV at around that 35-ish, 37, 33, we've been running for a few years, then the net debt to EBITDA also is going to drop – is going to be probably around or 5.5 times or below 5.5 times net debt EBITDA. And that would be sort of the objective, let's say, the long-term goal, but we would like to see the company operate.

So taking other measures to delever the company quickly is something that we can do if we need to or we want to or we find a very attractive opportunity, but the business delevers on its own. And when we execute next, we're going to have an immediate deleveraging.

So in a nutshell, that's how we're thinking about it.

And with regards to the pipeline for potential sales, we are talking about around 100,000 square meters. Half of them will be retail and half of them will be on the others sector, around 50% from each one of the sectors.

And we have programs that three of them will be on the third Q of 2025, one of them can be on the second Q of 2025. We used to have one here that was office building, if you recall.

And that one end up being – we are negotiating the lease we couldn't close the sale, but at the end, we are negotiating the lease of that building. So that's what we have on the pipeline of potential sales.

As always, we are open to nonsolicited offers. We have rejected some of them, but we are always open to them.

So probably, there will be some changes during the next couple of months.

Thank you.

Hi guys. Thank you for taking my question.

It's just a quick one. I mean we're seeing from not only you also some of your peers, some pressure in the occupancy rates in some of the northern markets, specifically maybe places like Nuevo Leon and Tamaulipas and you also witnessed a slight decrease there.

I was just wondering what kind of dynamics are you seeing there? And what are your overall expectations for those markets in the short term?

Thank you.

I think we've talked about this in the past about the relevance of the different markets, different segment of the market. And we foresaw when everybody was very eager and very excited about the border, we always said that for us, it's much more important to be in primary cities because it preserves the real estate value of your property.

We're not going only for the dividend. We are not going only for the rent and the dividend that it may produce and in the border in secondary cities, tertiary cities, secondary roads because you don't need more than that to place a factory of whatever product you want.

You don't need more than that in terms of real estate, in terms of location, but we do need a much more than that in terms of real estate. So we prefer much more to have our properties or our industrial workhouses sitting on primary cities, on primary roads, which is what we have because we prefer to preserve the real estate value.

We – of course, we want the return. We want the rent.

We are growing our rents. We are growing our returns and our dividend produced by the rent, but also we have a lot of appreciation on our real estate.

At the end, we will still have the real estate and it's much more profitable for all of us to have real estate that grows on its own, despite the rent. Of course, we are looking at the rent and our results.

It's a very clear sample of what we are looking into. But we're also privileged to be in primary cities, in primary roads.

So at the end, the market has put everything in its right place. Our right place is that we were right on our assessment and we were right on our design of the company.

We have the properties in which the rent is growing more, in which the properties themselves appreciate much more through time. So we will continue to privilege that, even though we know that we need to pay more for our land, because all of our properties are sitting in land that is much more valuable than the rest of the product.

We are, you know, that we are – we have 20% or 25% of our portfolio in manufacturing hubs, but we prefer, and we privilege much more logistics and distribution.

And having said that, as you can see on the NOI sub-segment level, both logistics and light manufacturing continue to perform solidly and we have a very stable, let's say portfolio. We have not been developing new space in the borders and things like that.

So we're very comfortable with the position that we have.

Perfect. Thank you.

Hi. Thank you for taking my question.

Just one quick one from my side. The office segment experienced a 200 basis points, year-on-year increase in occupancy.

Do you anticipate this recovery to persist throughout 2025? And additionally, at what occupancy level would you feel comfortable initiating rent increases?

Thank you.

I think that will be the pace. Obviously, we will be happier if that will be increasing in a faster way.

But the truth is that we are seeing that that will be probably the pace to see it. And we are almost at the level – at the level of 85% occupancy, where you will start being able to start increasing the rent levels.

And as I told you, we have a couple of lease negotiations for new spaces that will take us immediately into the 85% occupancy. So probably that will happen in the next quarter and we will be on the possibility of increasing rents at a better pace.

It's not just a matter of our occupancy, it's a matter also of the market behavior.

Thank you.

Hi, good morning. Thanks very much or good afternoon.

Thank you very much for the call. A couple of questions.

The first, property taxes have been increasing, let's say, significantly for some time. I was wondering whether that's attributable to a particular sector or a particular region.

If it's more widespread and that we should expect that sort of continued growth in property taxes going forward? And then just the second question, which is more of a modeling question, but the if you look at your fourth quarter and your 2024 payout ratios, they were close to 85%.

Is that a fair number to assume going forward? And should we assume that the balance will be used to reduce debt at the margin or net debt?

Thank you.

Thank you, Gordon. Very interesting question.

Actually, we are trying to assess which will be the right percentage that we will be at – we will make as a payout of the dividend. Remember that in the previous year, we had the account bars of the accountability to fiscal results.

Fiscal results upside down. So we were in the standing in the obligation of distributing more than we produce.

That I think it was one-time the deviation of the curve. I don't see that happening again.

So we should be able to withhold some of the money, and we will make that money maybe 15% sounds right. I don't really know.

– we will play a year. But that amount of money will serve to make to put fully on the best use for the company.

Maybe that will be to pay some debt in advance or to repurchase some of our stock, so we will have that flexibility in the coming years, and we will play it by every year, year in and year out, we will be deciding on the amount of the percentage of the dividend payouts. And the first.

On the property taxes, do you expect them to rise across the board or is it just a special.

Yes, the property tax has been rising all across the board, but we expect them to stabilize in the next coming years. We are reaching levels that we've never seen before in Mexico.

So I don't think that – because there has been some gossip in the press about the property tax should rise dramatically. I don't see that because it has been growing a lot much more than inflation for many years.

So it will be there in inflation plus 300 or inflation plus 400, but consistently. So I don't see a dramatic change in that.

Perfect. Thank you very much.

Gracias, Gordon.

Well, that's it for this call. Thank you very much, everybody.

Thank you for having your attention and for your interest in Fibra UNO, and we expect to see you in the first quarter of 2025 call in which we expect also to deliver good results to you. Thank you very much.