Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Banco Invex SA Institucion De Banca Multiple-Invex Grupo Financiero (MEX:FMTY14, Financial) has made significant progress towards its goal of investing $700 million in industrial assets, having already invested over $400 million.
- The company has received offers exceeding MXN 650 million for its underperforming office properties, indicating strong interest and potential for reallocating resources to more profitable ventures.
- Liquidity of the company's certificates has improved significantly, with daily trading volume increasing from $0.5 million to $2 million, achieving high liquidity issuer status on the Mexican Stock Exchange.
- The company's portfolio occupancy remains strong at 96.1%, with the industrial portfolio near full occupancy at 98.1%.
- Banco Invex SA Institucion De Banca Multiple-Invex Grupo Financiero (MEX:FMTY14) has successfully reduced its financial costs through strategic debt management, including a new unsecured loan to replace a previous syndicated loan.
Negative Points
- The office portfolio continues to underperform, representing a challenge in terms of asset management and profitability.
- There is a noted slowdown in decision-making for new leases, attributed to geopolitical uncertainties, which could impact future growth.
- The company faces a potential risk of oversupply in certain markets, as vacancy rates have increased slightly, though they remain below 5%.
- Despite improvements, the current trading price of the company's certificates does not reflect the fair value, indicating a market perception challenge.
- The company is heavily reliant on the industrial sector, which could pose a risk if market conditions in this sector change unfavorably.
Q & A Highlights
Q: What are your expectations for future lease spread increases given the current market conditions?
A: Javier Garcia, Director of Operations and Acquisitions, stated that they expect to capture positive lease spreads of around 15% to 20% between now and the end of next year. Approximately 60% of their lease agreements are subject to market-to-market negotiations upon renewal, and current rents are roughly 20% below market, providing room for increases.
Q: How is geopolitical uncertainty affecting your investment pipeline and tenant activity?
A: Javier Garcia noted a slowdown in decision-making for new leases, particularly since the beginning of the second quarter, due to geopolitical uncertainties. However, existing tenants continue to expand, and there has been no significant impact on the terms or timing of their M&A pipeline negotiations.
Q: What type of buyers are interested in your underperforming office assets?
A: Javier Garcia mentioned that they are seeing interest from family offices and end users, as well as some private equity firms. These buyers are looking to acquire undervalued assets for their balance sheets or hold them until the market improves.
Q: Are there any concerns about oversupply in the industrial market?
A: Javier Garcia believes the market is close to equilibrium, with vacancy rates still below 5%. Most activity is in build-to-suit projects, and while some developers are slowing down, the vacancy rate remains healthy. They expect the new administration to address energy and permit issues, which should help maintain balance.
Q: Would Fibra Monterrey be open to partnerships or acquisitions if the Terrafina deal does not proceed?
A: CEO Jorge Avalos Carpinteyro stated that they are always open to exploring alternatives that create value for shareholders, including potential mergers or partnerships, as long as they align with shareholder interests.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
