Concentradora Fibra Danhos SA de CV

BMV:DANHOS13

Earnings Call Transcript 2024-Q1

[Operator]

Good day, everyone, and welcome to today's Fibra Danhos' First Quarter 2024 Conference Call. [Operator Instructions] Please note this call is being recorded. And it is now my pleasure to turn today's call over to Rodrigo Martínez. Please go ahead.

[Rodrigo Martínez Chávez, executive]

Thank you very much, Michael. Hello, everyone. I am Rodrigo Martínez and I run Investor Relations for the company. At this time, I'd like to welcome everyone to Fibra Danhos' 2024 First Quarter Conference Call. We issued our quarterly report yesterday and if you did not receive a copy, please do not hesitate and contact us. Please be aware that they are also available on our website and in Mexico Stock Exchange website.

Before we begin the call today, I would like to remind you that forward-looking statements made during today's call do not account for future economic circumstances, industry conditions and company performance or financial results. These statements are subject to a number of uncertainties and risks. All figures included herein were prepared in accordance with IFRS and are stated in nominal Mexican pesos unless otherwise noted.

Joining today from Fibra Danhos in Mexico City is Mr.

Salvador Daniel, CEO of Fibra Danhos; and Mr. Jorge Serrano, CFO of Fibra Danhos. Now I will turn the call to Jorge Serrano for opening remarks and financial and operating indicators. Jorge, please go ahead.

[Jorge Esponda, executive]

Thank you, Rodrigo, and good morning, everyone. Thanks for joining us to our conference call for the first quarter 2024 results. Certain financial results for the quarter were backed by a stable operation with continued positive trends. Total revenues of MXN 1.57 billion were 8.4% higher against last year and reflect increases across the board. Strict control on operating and maintenance expenses resulted on NOI of MXN 1.2 billion during the quarter, an increase of almost 8% year-over-year and posting 77.8% margin.

AFFO reached MXN 937 million that accounted for MXN 0.60 per CBFI. Distribution was determined at MXN 0.45 per CBFI with economic rights with a payout ratio of 75%. AFFO reflects cash flow requirements during the first quarter, including property taxes, insurance payments and debt service obligations. Retained cash flow of almost MXN 0.15 has been used and will be used to finance our development portfolio.

Cuautitlán Industrial project reported steady progress. Our joint venture leisure project got its construction license and progressed on other required permits that will allow us to start construction soon.

Regarding operating results, I want to highlight that overall occupancy on our portfolio improved and reached 86.7% with retail occupancy reaching 92.1% and office occupancy at 73.2%. Lease Spreads on 30,000 square meters renewal agreements was 6.4% during the quarter. On our recent developments, Parque Tepeyac ramp process has materialized faster than expected, posting positive trends on flow of visitors and improving its NOI margin.

With this, I finish my opening remarks, and let's now move on to the question-and-answer session. Thank you very much.

[Operator]

[Operator Instructions] And we do have our first question from Juan Ponce with Bradesco.

[Juan Ponce, analyst]

Hello, hello.

[Operator]

Yes, we can hear you now.

[Juan Ponce, analyst]

Okay. Perfect. All right. I would like to note, more high level, you can share just the strategy on the Industrial portfolio side. And also, if you can provide some more information on the lodging venture in Yucatán.

[Salvador Daniel Kabbaz Zaga, executive]

I mean, as you know, this first Industrial project is under construction. First phase is probably almost done, in the next trimester, it is going to be finished. We are on the verge of signing an agreement soon. And as soon as that happens, we're going to let you know.

The second phase is already started construction also. We project finishing that by the first trimester next year. And of course, we're working very hard on a couple of new projects, which as soon as they become a reality, we will let you know. But we're working hard on that part, and I think we're doing well.

[Juan Ponce, analyst]

Yes. Yes. It's a really good, especially the market that you guys are developing in. But I mean if I can follow up a little bit, so is the strategy going to be more focused on logistics? Or are you planning on getting into manufacturing in the north. Just trying to understand here what the broader strategy of Fibra Danhos is in terms of this Industrial portfolio?

[Salvador Daniel Kabbaz Zaga, executive]

I mean we're looking at many places. Of course, logistics is very important. And we're also looking at the north in some opportunities. We only want to be in the best locations around the country. So we know in the north, there are 3 important areas and also Monterrey, Guadalajara, Mexico City, probably [ Corregidora ]. No more than that. We want to stay into the probably cherry pick in best places. We know it's tough. The opportunities are very scarce, and there's a lot of people looking at them. But we've been having good opportunities checking around. And as soon as we are able to finish or to close another one, we will let you know just basically that.

In terms of the Yucatán in the Peninsula [ touristic ] property, the only thing I can tell you is we already signed a commitment with the operator. We're very happy for that. We already have the contractual licenses. And we promise both FibraHotel and Fibra Danhos not to disclose anything more until probably next call, we will do it together. I think that's the best way to do it. And I'm sorry, I'm not able to tell you anything more, but we're very happy and we are working -- we will probably start construction in the next trimester also.

[Operator]

We have our next question from Jorel Guilloty with Goldman Sachs.

[Wilfredo Jorel Guilloty, analyst]

So one thing I wanted to focus on is your retail portfolio, particularly Parque Tepeyac, had a material increase in growth in rent. And I was just wondering, at what point do you consider or do you think that Tepeyac will be stabilized? Is it another year, 2 years? Just trying to understand how much more Tepeyac can contribute to future rental revenues?

And then the other question is around office. I mean, we saw a slight improvement in occupancy, flattish rents Q-on-Q. So I was just wondering if you can provide any comments on how you're seeing both on the market level, the performance demand for office space and for your portfolio specifically?

[Salvador Daniel Kabbaz Zaga, executive]

Tepeyac project, I mean I think it's maturing very, very quick. The amount of visitors is impressive. The aquarium gets basically full every day. We have like a month advanced in selling of locations for the aquarium. So that brings a lot of traffic to the shopping mall. We expect the -- basically have it probably almost full by the end of this year and probably it is going to take one more year to completely or fully mature, but [ aquarium ] is very big and we're having a great experience in Parque Tepeyac.

In terms of office spaces. What I can tell you is, although the report does not reflect what's happening in the market. We're having a lot of people interested in office, especially in our projects. I can tell you that we're working basically every week with a new client. It's tough, yes, the prices are not where they should be. But I'm sure we're going to be able to reflect this on the next couple of trimesters or this year in terms of what's going to happen with the office portfolio, but we're seeing a lot of activity in the market.

[Operator]

[Operator Instructions] Our next question comes from Felipe Barragan with BTG Pactual.

[Felipe Barragan, analyst]

One is just digging a little bit deeper into what Juan was talking about. What sort of vision you have for Danhos in the sense that what sort of a mix of assets would you guys like to see down the line? How much more contribution do you think we can see from Lodging and Industrial?

And my second question would be following next quarter's MXN 0.45 distribution that you guys are expecting, can we expect the payout to go back to [ MXN 1.00 ] after that? Or can we continue to see this at MXN 0.45? I'm not sure if I'm getting ahead of myself in this question.

[Salvador Daniel Kabbaz Zaga, executive]

I mean we're excited with the Industrial part. Although we're not giving up, and I think we're going to continue developing shopping malls and office spaces, mixed-use projects. We're probably on the verge of announcing a couple of them. We're working very hard on achieving them. And we see it as a mix. We believe we have a strong development arm. We've seen the -- how easy for us is to do industrial quality projects, and we know how to do it because we've done it in the past.

And we expect to do a combination of them. We're basically going to have -- we have the idea of taking advantage of the very, very good opportunities. We're not leaning on any percentage on any area. We just want to take advantage of good opportunities we see in the market, and that's the way we're going to approach it.

And in terms of the payout, as you remember, we talked about a year or a year and a half probably -- around probably this year on the MXN 0.45 payout. It depends a lot on the amount of projects we have on doing and how much we want to go and also depends on the interest rate. So for now, I think we are doing great. We haven't asked for any leverage in terms of the new project. We've been doing it with our own money. And that, at the end, will reflect on the stock price. So we're happy the way we're working right now.

[Felipe Barragan, analyst]

It was very clear. Just a quick follow-up. Just out of curiosity, with the whole noise around Terrafina, was that ever on the table? Or was that just nothing discussed?

[Salvador Daniel Kabbaz Zaga, executive]

The truth is I think that the price of Terrafina will be very expensive for us. We prefer to develop and to probably [indiscernible], but get better revenues for development. I think for us paying the amount of money they're going to pay makes no sense.

[Operator]

[Operator Instructions] And our next question comes from Alan Macias with Bank of America.

[Alan Macias, analyst]

Just a question on the announcements that you might be making. Are these developments or acquisitions that you're looking at? And also regarding your Industrial development, are you seeking -- have you pre-leased these projects? Or what strategy are you following there?

[Salvador Daniel Kabbaz Zaga, executive]

The development projects, all of them, and our industrial portfolio, it's not pre-leased, but it was on a verge of having the first phase fully leased in the next, we believe, weeks. So we already started the second phase, and we have a lot of client interest in that also.

[Operator]

[Operator Instructions] And at this time, I'm currently showing no questions in the queue.

[Rodrigo Martínez Chávez, executive]

Thank you, Michael. If there are no further questions, I would like to thank everyone for joining us today. Please do not hesitate to contact us. Salvador, Elias, Jorge or myself for any further questions. We're always available, and we will see you on the next conference call. Thank you very much.

[Operator]

This does conclude today's program. Thank you for your participation. You may now disconnect.