Fibra UNO

Thank you, Luis. Thank you, everybody, for your attention to this call and your interest in our company.

I would like to talk about the results of the quarter, of course. But before we do that, we can only -- we want to have the opportunity to talk about the successful IPO of Fibra NEXT that took place a couple of days ago.

The short-term goal of this new company is for us to consolidate the consolidation of the industrial assets. And with this, we'll be witnessing creation of a giant, the largest pure industrial real estate in Mexico, and the potential of becoming amongst the largest of the world in the midterm, with a clear goal of achieving close to 250 million square feet in the midterm.

Partnering with the recently created and launched Fibra NEXT will bring us the opportunity to continue to grow in the industrial space sector. And this potential alliance will be the creation, not only of the largest, but of the best company in pure industrial assets.

Further on, Jorge Pigeon will take you through the numbers of this particular quarter in Fibra UNO. We posted growth of around double-digit area all across the board.

We want to preserve the ability to astonishment. We don't want to lose them.

We really astonish ourselves with the endurance and resilience of the company. And with the new steps that have been taken, which I described earlier, with the launch and IPO of Fibra NEXT, we expect to continue the good work in our company and enter this potential new era for the company with growth and improvement of all of our metrics.

In the ESG front, Jorge will walk you around the achievements of the quarter. I just want to stress out that we achieve and receive qualification, we obtained a certification on 2 companies in which one of them is the first ever awarded in the whole world.

So Jorge will tell you about this in detail. And I am just proud and pleased to give word to you of these achievements of the company.

Before I pass the mic to Jorge, I would like to thank really to all of our collaborators. All of my colleagues have been working overtime in order to get things done.

Many of them had a direct impact on the placement of the IPO of Fibra NEXT, and I am very pleased to see everything finished, we get to the finish line, and this will bring very good news to our company in the near future and in the midterm. I just want to thank again all of them for their commitment, and we look ahead for a very bright future for our company and our sister company, Fibra NEXT once we make the joint venture -- potential joint venture of our industrial assets with them.

And I will see a very bright company -- a very bright future for our company, and I expect you to accompany us in this adventure again. Thank you very much, and I would like to pass the mic to Jorge Pigeon to talk about the numbers in detail.

Jorge, please?

Thank you very much, Andre, and thanks, everybody, for joining our quarterly call. As usual, I'll start with the quarterly MD&A, starting with the P&L.

On the revenue line, we saw a MXN 99.5 million decrease quarter-over-quarter to be at MXN 7.5 billion. This is mainly a seasonable issue resulting of a combination of different factors, primarily a decrease in variable revenue related to seasonal factors and then 40 basis points decline in occupied gross leasable area, and I'll go a little bit into the detail of what happened with occupancy.

Nothing specific that marks a change in trends or anything like that, more of a series of one-off things that I'll describe briefly. Also, we had the impact of the peso-dollar exchange rate appreciation.

And obviously, that has a negative effect, let's say, on the peso side of our rents denominated in U.S. dollars.

On the positive side, we have inflation indexation of our active contracts and obviously, the rent increases from these renewals. The net effect of that was a decrease of 1.3% quarter-over-quarter and an increase, as Andre mentioned, of double-digit, around 10% year-over-year.

In terms of occupancy, the operating portfolio stands at 95%, the sweet spot, let's say, of where we want to see the portfolio of the company operating. 95% is sort of the ideal occupancy number across the different sectors.

This is a 40-basis point decline compared to the previous quarter. In the industrial portfolio, we recorded 97.4%, 80 basis points below the first quarter of '25, not related to any specific trend, as I mentioned, just some smaller -- a group of smaller tenants that left some of the properties that we expect, obviously, to rebound quickly.

The retail portfolio recorded 93.7%, 10 basis points below the previous quarter. The office portfolio recorded 82.2% occupancy, 20 basis points below the previous quarter.

Others stood at 99.3%, which is stable versus the first quarter. And the In Service portfolio recorded an 80% occupancy, which is 10% above the previous quarter.

Obviously, this portfolio is not yet included in the operating portfolio. So the net effect, all things included, could possibly be an increase in the occupancy.

So we're pleased with our performance of the overall portfolio. In terms of operating expenses, property taxes and insurance, we saw a decrease of MXN 15.3 million quarter-over-quarter, mainly due to the ongoing effects to maintain a stable operating expense environment, partially offset by above inflation increases in the cost of some services and supplies.

Property taxes also increased 3.8% (sic) [ MXN 3.8 million ] or 1.8% compared to the first quarter of '25, mainly due to updates at the properties that transitioned from development to operational. Insurance expenses also increased MXN 314 million or 13.3% versus the first quarter of '25, mainly due to the biennial renewal of our insurance policy.

And as we discussed before, we've seen a spike in the cost of insurance for a while now. So we're happy with a number, but it's definitely been a tough negotiation to get that expense line under control and at that level.

At the end of the day, this resulted in a net operating income decrease of MXN 71.2 million or minus 1.3% quarter-over-quarter. NOI margin calculated over rental revenues was 8.2% and 74.3% against total revenues.

In terms of interest expense and interest income, we saw an interest expense decrease of MXN 42 million or 1.4%, compared to the first quarter of '25, mainly due to the reduction of the interest rate in pesos and the effects of variable-rate debt, the appreciation of the exchange rate, which went from MXN 20.31 to MXN 18.89, and the effect in interest payments during the quarter. It was offset by interest -- a decrease in interest expense capitalization, which we continue to see as we transition to a more stabilized portfolio, and the impact of pricing of our derivative financial instruments.

FFO, funds from operation, as a result of the above, controlled by FUNO decreased by MXN 40 million or minus 1.7%, compared to the first quarter of '25, reaching MXN 2.344 billion. Adjusted FFO is the same number, a decrease of MXN 40 million.

So a total of MXN 3.344 billion (sic) [ MXN 2.344 billion ]. FFO and AFFO per CBFI during the second quarter of '25 stood stable as we did not issue or repurchase CBFIs.

During the quarter, the CBFI count is 3.805 billion CBFIs. And the average FFO and AFFO per CBFI was of MXN 0.6162 per CBFI, a decrease of 1.6% compared to the previous quarter.

The quarterly distribution amounted to MXN 2.169 billion or MXN 0.5700 per CBFI, which corresponds 100% to fiscal results and represents a quarterly AFFO payout of 92.5%. Now moving to the balance sheet.

Accounts receivable totaled MXN 2.4 billion, a decrease of almost MXN 50 million or 2% compared to the previous quarter. Investment properties, which is the value of our investment properties, including financial assets, investments in associates, et cetera, increased by MXN 823 million or 0.2% compared to the first quarter of '25, resulting primarily in CapEx invested in our operating portfolio.

Although we are not actively developing large-scale portfolios or properties like we have in the past, we continue to invest in improvements in our properties. So CapEx invested in the portfolio played a role here.

And investment property fair value adjustment, as you know, normally during the course of the year, we do an internal adjustment. And on year-end, once we have closer to the end of the year, we bring in the third-party appraisers to appraise the whole portfolio.

In terms of debt, total debt stood at MXN 147.4 billion compared to MXN 151.7 billion the previous quarter. Variation was mainly due to the prepayment of our senior unsecured local bonds, the FUNO-15 and FUNO 21-2X for MXN 7.48 billion and MXN 5.2 billion, respectively; and the issuance of our senior unsecured local bonds, the FUNO-25L and FUNO-25-2L for MXN 3.7 billion and MXN 9 billion, respectively; a net increase of MXN 710 million in bilateral lines of credit; and the effect of exchange rate appreciation as the peso moved from MXN 20.31 to MXN 18.89 per U.S.

dollar. The total equity increased by MXN 4.361 billion or 2.3%, including participation of controlling and noncontrolling interest, compared to the previous quarter.

This is primarily due to the net income generated from quarterly results, derivatives valuation, shareholders' distribution resulting from the first quarter results and the employee compensation plan (sic) [ Executive Compensation Program ]. In terms of operating results, we are pleased to announce that we saw renewal contracts in peso terms with a leasing spread of 1,840 bps or 18.4% in the industrial segment.

So we continue to see very solid performance and demand for the industrial segment. We also continued to see very solid performance in the retail segment with 700 basis points, 530 basis points in the Other segment.

And we also managed to see a slight increase in the office segment of 210 basis points. Now for dollar-denominated lease renewals, we saw 12.3% for the industrial segments.

We're very pleased to see that 12.3% increase in dollar terms; almost 9%, 890 basis points in the retail segment; and we saw a slight decrease of 230 basis points in the office segment. So in line with what we have been guiding the market, basically high mid-double-digit growth in the industrial sector; between 7% and 10% growth in the retail segment; and sort of stable leasing spreads for the office segment.

So completely in line with the guidance and the expectations that we've had for the performance of the portfolio. In terms of constant properties, the retail price per square meter in constant properties increased by 5.2%, so slightly above inflation.

Annual weighted average inflation was 4%. Therefore, we had 120 basis points on top of inflation, which we feel is a very solid and very positive result for the company.

At the subsegment level, the portfolio's total annual rent per square foot went from $12.8 per square foot to $12.5, or 2.1% compared to the previous quarter. This is mainly due to the peso appreciation and the effect it has on U.S.-denominated rents, which was partially offset, obviously, by rent increases in the current contracts and the leasing spreads and rent renewals I just mentioned above.

Total NOI at property level for the quarter remained stable compared to the previous quarters. And the variables on a subsegment basis where from the industrial segment, logistics, we saw a decrease of 2.6%.

Light manufacturing decreased by 6.2%. Business parks increased by 8.1%.

The decrease in light manufacturing subsegment is mainly due to the exchange rate appreciation and its effect on U.S. dollar-denominated rents as well as an early exit penalty that occurred during the first quarter '21 (sic) [ '25 ] and was not present, obviously, during the second quarter of '25.

The office segment NOI increased by 8.2%, mainly due to rent updates on contracts that we have. In the retail segment, fashion mall subsegment decreased by 8.7%, regional subsegment was almost flat basically, stand-alone subsegment increased by 8% and we saw a decrease in both fashion mall and regional subsegments, which was due to variable rent income seasonality.

The Other segments NOI decreased by 1.9%, also attributable to hotel variable income seasonality. And with this, I conclude the comments of the MD&A of the quarterly results.

And Luis, I would ask you if you can poll for questions, and then we can open the floor to Q&A.

I guess this question is more for Andre. Andre, in your remarks, you mentioned that your short-term goal remains to establish a JV with Fibra NEXT.

I was wondering if you can provide a little bit more color on the timing of the size and the next steps for this to materialize? Should we expect to conclude all these transactions by the summer?

Or it's more towards year end? And also on the internalization process, what's next -- what's the next step to see this materializing?

Okay. First question first, I didn't quite get the second one, so I'll ask you to repeat it further on.

But I don't know the exact timing. What I do know is it's going to be a matter of a very short time.

Remember that we were supposed to do everything together back in November 2023. And due to the structure of the approval that we got from the taxable authorities -- tax authorities, I'm sorry, we decided to do step-by-step.

So the second step is continuing to get the approval of the CNBV, of course, in making the assembly, et cetera, et cetera. So it would take you a few days, a few weeks, a few months.

It's going to be very short term, but I wouldn't want to guess an exact time, more precise time than that. So if you can tell me the second question, please, Pablo?

Sure. Absolutely.

The second question is about the internalization process. What are the next steps for this to happen?

Okay. We're working on having everything protocolized.

So I think that it should take place, of course, this year, and now I think that everything is going to start fresh on January 1.

First of all, congrats on the IPO of Fibra NEXT and also on the solid results. My question is regarding your balance sheet and the credit rating.

Can you share with us what are your main drivers to lower leverage? And also you can share with us how your conversations with credit rating agencies are going.

Sure. Jorge please.

Sure. In terms of the expectations, obviously, with the consolidation that we expect to have, and obviously, this is not going to happen immediately.

We need to take that second step that Andre was mentioning that we see as, let's say, imminent. It should be -- it should occur in the very short term.

The joint venture with FUNO and the completion of all the transaction you saw back in November of '23, we should see that imminently happening. With that, we should see a lowering of the LTV and net debt-to-EBITDA metrics at FUNO below the thresholds that both rating agencies require for a stable minimum BBB-, Baa3 credit rating.

So that's sort of the expectation that we have at a minimum to be on a stable investment-grade credit rating once we complete this transaction, which should be imminently. In terms of conversations with both rating agencies.

obviously, they have access to, let's say, nonpublic information of our business plans and everything ahead of those things. So they're very well aware of what the plans are and where we're headed.

I think we've delivered on 100% of every single thing we told them we wanted to do. From the refinancing of the '26, to the refinancing of the short-term bonds, to the IPO of Fibra NEXT, et cetera, everything is happening exactly as we planned and on the timing that we plan with the rating agencies.

So our expectation would be to have the ratings stabilize, let's say, at a minimum on a BBB-, Baa3 scale. And obviously, we have the goal of improving even those credit metrics.

Just with the capitalization that we get with the additional equity that's coming in with the JV that FUNO is going to have with NEXT that in and of itself is going to put the ratings solid -- the rating metrics, let's say solidly within those levels. Obviously, we haven't discussed a specific rating with any of the 2 rating agencies.

That's a matter of the rating agencies' decision. But from our point of view, we see that the numbers fall within the categories of what should be a BBB-, Baa3 rating.

And that's where we should expect to land shortly.

Great. And also just a follow-up.

Can we expect asset divestments to speed up this deleveraging process?

We do have some asset divestments that we have offers on the table. There's a couple of things that we have been working on.

And obviously, that can accelerate a little bit the process. But I would tell you that given the rate of speed at which our NOI is growing and the capitalization that we have, we don't necessarily have to divest assets to get to the credit rating.

Of course, we can do that. And if we do receive a good offer at a good price, definitely, we're willing to sell some assets.

I think Andre has mentioned in the past jokingly that he's only married to his wife, not any of the assets. So if you bid the right price, definitely, we're willing sellers.

And we do have a couple of things in the pipeline that we're working on that are very attractive valuation for us. So probably you could see us execute some M&A shortly.

I have two. So the first one is around the impact of FX appreciation so far this year.

I mean we were in a totally different scenario at the beginning of the year. And I was just wondering how this impacts how you're thinking about the FFO payout going forward?

That's first question. And then the second question is, I know you don't publish same-store sales figures, but just wanted to get a sense of how your retail portfolio is doing.

I mean, you're printing leasing spreads in the high single digits. And I just wanted to take it a step above and just trying to get a sense of how the underlying tenant is doing?

Are we seeing, on average, like high single-digit growth for them mid-single-digit, just to get a sense of the state of the consumer within your portfolio?

Gonzalo, would you like to tackle that?

Actually, talking about the impact of the FX and tariffs and everything on our retail, what we have been seeing on our shopping malls is more consumption. We -- as you know, we receive the variable rents report every month from each one of our major tenants.

And what we have been seeing on those is just a growth in the sales. Net growth compared to last year, same-store sales, it's better.

The traffic that we measure on each one of our shopping malls has increased. And if we do the comparison since '19 -- 2019 up to date, obviously, it went down, deeply went down during the COVID 2021.

But as I talk today, if you compare 2019 to 2024 to 2025, figures are getting much better in real terms than what it were in 2019.

Great. And on the potential dividend payout, I was just wondering what the effects -- the effect of having a more appreciated peso can have on your potential payout for dividend going forward on a similar basis.

Deputy Chief Executive Officer Go ahead, Jorge.

Well, I think, obviously, we'll have to look at the combination of the net fiscal result, at the end of the day, what we expect it to be and as a combination of how the FX behaves and how inflation behaves. We do have and are continuing to monitor this on a daily basis.

Obviously, stronger FX means FX gain and that's part of the fiscal results. So we have to monitor that to see where we are.

So far, we feel comfortable with the payout that we've had. But it's something that's ongoing and we monitor on a quarterly basis to make a decision about the payout requirement that we have.

As you know, in the past, we had a couple of years in the pandemic where we had a combination of high inflation and an appreciating FX that resulted in a fiscal result that was larger than our FFO. We are not in that situation today, but we are monitoring that closely to define what the payout should be.

Congratulations on the results. This quarter showed strong leasing spreads, particularly in the industrial segment.

Can you share what's driving this strong spread -- spreads. Is it market dynamics, specific geographies?

Or is it something else?

Thank you for the question. Actually, it's the market dynamics already, but it's market dynamics, particularly to our portfolio.

Remember that we are in the logistics and distribution subsegment much more inclined to logistics than manufacturing. And the logistics will take place, especially in the metropolitan areas of the biggest cities of the country.

We are very much concentrated in the metropolitan area of Mexico City. And you have been seeing in Mexico City, the rents -- the occupancy is almost getting to 98% and the rents are coming up very strong because there's lack of space in this particular area.

So it's related only to our portfolio, our portfolio. We've been saying day in and day out that we have the best portfolio.

And I think these metrics are -- these results are only the reflection of what we have been saying, we have the best location in town by a mile. And it's only showing that in the results.

And that's why we have been able to have this very strong occupancy and strong growth on the rents.

I don't know if you can share more details on what drove the occupancy decline across segments, especially on the office segment. If I'm not mistaken, on the first quarter, there was an issue with WeWork.

And I don't know if this quarter you saw something similar. Just trying to understand the dynamics in each of the sectors.

That's it.

Thank you, Pablo. Actually, obviously, you've seen a small decrease on the occupancy, but we are talking about 2 basis points.

But mainly it's just that -- I think it was like a 1,500 square meter lease that expired in [ Torre Diamante Insurgentes ]. I think that's natural, nothing to be a worry about.

It's not a tendency on the market. It's just a matter that 1 tenant with 1,500 meters left this quarter.

That space will be taking -- will be taken by someone else in the next probably 3 to 6 months. We are seeing a lot of new activity going on, on empty spaces that we have.

On Torre Mayor, for example, each floor is around 1,800 square meters. So this quarter, we will be reporting an additional 2 floors.

So that will be the opposite. Probably we will be growing another 4 basis points on top of what we are as of today.

So I don't -- I'm not worried at all on the office market at this stage.

This is [ Octavio Arias from Signum Research ]. To report strong leasing spreads in both pesos and dollars, how much of that lift is driven by market demand versus below-market legacy contracts catching up?

[Foreign Language].

[Foreign Language] but the -- actually, it's a combination of both. We have -- in the industrial segment contracts that are on average are around $6 and change about $6.25 or more or less.

And we are about 31% below the market. So that is obviously one of the things that's happening that we have contracts that are below the market.

And then the other one is market dynamics because the demand is there. So given that we have a very strong demand, as Andre was mentioning, particularly, we are in the logistics market in the Metro City area, which is the largest portion of our portfolio.

About 56% of the portfolio we have is in the, I'm going to call it, the Metro Mexico City area. There is super strong leasing spreads.

As a matter of fact, in this market, we are even at a deeper discount, more like 40-plus percent. On average, the overall portfolio is 31% below the market.

So it's market dynamics combined with the fact that we traditionally want to have below-market rents now. The markets have moved so quickly in the last, let's say, 18, 24 months that our spread to the market is now significantly larger than what our strategy is, 31% significantly higher than what we want.

And that has been driving leasing spreads to be very solid, in particular, in the industrial sector. That's why you see the double-digit spreads of 12%, 18%, which is more or less where we have been guiding the market for the industrial sector.

And we see, as Gonzalo mentioned, very solid, robust consumption and good sales of our tenants, and that is what's driving the around 9% -- 8%, 9% leasing spreads that we have in the retail segment. So it's a combination of where our rents are and obviously, market dynamics.

Perfect. And about the industrial segment, do you see potential for rental rate outperformance versus market venture for transport for the next year -- for the next few quarters?

Sorry, how do you mean?

Yes. Like before you say like this rate of performance like the leasing spreads in the industrial market?

Well, so long as the market remains where it is right now, if the market were not to move, we have a 31% gap to catch up, and we have to roll over about 50% of the portfolio in the next 3 years. So we have at least 3 years of the expectation of having the ability to have very solid leasing spreads, industrial sector in particular.

So in a nutshell, yes, we do see a very solid future, in particular, in the Industrial segment given the gap that we have with the market. Obviously, that is going to create a bigger gap.

Regarding the first question, Yejide, it's nothing special. It just happened to coincide this quarter that we have some exits.

But for example, the previous quarter, we could point out that WeWork was going out in the office sector, and we knew this, and we were expecting this specifically. There's nothing particular this quarter to point out to directionally that we have seen or are seeing a change in the trend, let's say, of where we should see things.

So it's just a quarterly coincidence, let's say. And in terms of the second phase or the combination joint venture that we expect to do with NEXT, we expect to do this imminently as soon as we can practically do it.

There's some corporate acts that we have to go through. But you should expect an announcement shortly on that next step is something that definitely will conclude before the year-end.

And I would likely say that it's something that we would love to be able to do within the third quarter of this year. And you should expect to hear news soon.

Sure. In terms of CapEx on a quarterly basis, we budgeted about MXN 2 billion, so MXN 500 million per quarter.

I think this quarter, we were slightly shy of that number, closer to MXN 360 million or MXN 370 million. But the budget for the year is to be at MXN 500 million on a quarterly basis, MXN 2 billion is what we have more or less budgeted on the operating portfolio.

And regarding the business park, we saw one tenant leave one of the business parks. Can't remember the name of the tenant, someone in Monterrey, but it's just 1 tenant that left, I think, is about 15,000 square meters.

Thank you very much, Luis. Thank you, everybody, for your interest in this call.

And we'll hear from you and you will hear from us again for the results of the 3Q 2025. Thank you very much.