Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenues increased by 6.4% year-over-year, reaching MXN1.6 billion, driven by higher fixed rent, overage, and parking revenues.
- Net Operating Income (NOI) rose by 7.1% year-on-year, achieving a 77.3% margin.
- Occupancy rates improved, with retail occupancy at 92.3% and office occupancy at 74.2%, both showing significant increases from the previous year.
- Lease spreads on renewal agreements were 5.7%, surpassing inflation rates.
- The company has a stable development pipeline, with plans to continue expanding in the industrial sector, particularly in logistics-focused markets like Mexico City.
Negative Points
- Total expenses increased by 4.1%, primarily due to rising operating and maintenance costs.
- The company faces pressure from rising minimum wages, impacting property expenses, particularly in shopping malls.
- The payout ratio for the quarter was 66%, indicating a significant portion of earnings is retained rather than distributed.
- There is uncertainty regarding the impact of future economic conditions and political events, such as the USMCA revision in 2026, on the company's growth trajectory.
- The office segment, while showing improvement, still has a relatively low occupancy rate of 74.2% compared to retail.
Q & A Highlights
Q: With the industrial project in Kazakhstan expected to be completed in the second quarter of next year, how should we think about your industrial pipeline going forward? Are you thinking of expanding in the same park or looking at other markets?
A: Elias Mizrahi Daniel, Concentradora Fibra Danhos SA de CV - We are focusing on the Mexico City market, which is mostly logistics-based. The intention is to continue developing with a steady and conservative pace, finishing current projects before moving on to the next. We are exploring future projects and will announce them once ready.
Q: Have you started to see pressure on property expenses due to minimum wage increases, and are there any mitigation efforts?
A: Elias Mizrahi Daniel, Concentradora Fibra Danhos SA de CV - The minimum wage has increased significantly, impacting costs. We are offsetting this by using more machinery and equipment. Jorge Serrano Esponda, CFO, added that they have controlled expenses through strong supplier relationships and increased bargaining power.
Q: Can you provide insights into the growth of rent per square meter and same-store sales trends in your retail portfolio?
A: Jorge Serrano Esponda, CFO - Growth is driven by solid consumption in Mexico, allowing rent increases in line with tenant revenue growth. Elias Mizrahi Daniel confirmed that rent growth aligns with sales growth, which is in the high single digits to low double digits.
Q: Are you seeing any changes in the M&A space for malls in Mexico, and what is your approach?
A: Elias Mizrahi Daniel, Concentradora Fibra Danhos SA de CV - Our focus remains on development rather than M&A, as it creates more value and higher returns. We are open to opportunities but prefer to grow through development.
Q: What is your yield on cost for developing in the mall space?
A: Elias Mizrahi Daniel, Concentradora Fibra Danhos SA de CV - The stabilized development yields for shopping malls are around 12% to 13%. Malls are dynamic, offering additional revenue streams like parking and advertising.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
