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Good morning. My name is Devin, and I will be your conference operator today. At this time, I would like to welcome everyone to FibraHotel's 2021 First Quarter Earnings Conference Call. FibraHotel issued its quarterly report on Wednesday. If you did not receive a copy via e-mail, you can find it at www.fibrahotel.com or e-mail gbravo@fibrahotel.com.
Before we begin the call today, I would like to remind you that forward-looking statements made during today's conference call do not account for future economic circumstances, industry conditions, company performance and financial results. Unless noted, all figures included herein were prepared in accordance with International Financial Reporting Standards and are stated in nominal Mexican pesos.
Joining us for FibraHotel are Mr. Simón Galante, CEO; Mr. Eduardo Lopez, General Manager; Mr. Edouard Boudrant, CFO; and Mr. Guillermo Bravo, CIO.
With that, I would like to turn the call over to Mr. Simón Galante. Sir, please go ahead.
Thank you, and good morning, everyone. I'm going to begin today's call by providing an overview of the first quarter 2021 results, the current situation and will then turn the call over to Edouard Boudrant, our CFO, who will discuss our financial results in more detail, and we will then open the call for questions and answers.
The results of the first quarter of 2021 continued to demonstrate the resilience of our portfolio and the progress in recovering from the impact of COVID-19 pandemic. To put the results into context, we began the quarter in a difficult situation with a new wave of infections. In January, Mexico has almost doubled the previous number of daily COVID infections. The government imposed mobility restrictions in the most important states of the country's CBD, including the red stop sign in Mexico City, the State of Mexico, Nuevo Leon, Jalisco and Guanajuato. Additionally, the U.S. government and the CDC announced a test requirement for air passengers entering the United States. And initially, there was some misinformation about the test and the quarantine requirements.
Even with these adverse conditions, we were able to close the month of January with an occupancy rate of 32.4%, thanks to the quality of our hotels and our portfolio diversification. More importantly, as the quarter progressed, we saw a rapid recovery in occupancy, in line with better mobility and health conditions. The portfolio had an occupancy of 35.4% in February and 42.3% in March. During March, close to 40% of our hotels had occupancy above 50%. As conditions improved, we were also available to increase rates. The RevPAR improvement from March 2021 versus January 2021 was 40%.
In April, we continue to see numbers similar to March. Overall for the quarter, revenue increased 2% versus the last quarter, but we are still 41% below last year. We continue to see similar trends at the past few quarters, with business travel recovering more slowly than leisure travelers.
In order to give you a better perspective on business travelers, let me tell you how we see the recovery from 2 different groups. First, we have seen a good recovery of what we call the group travelers. These are travelers that do business in person and have to be on the ground. They are generally associated with manufacture and essential business and have less flexibility to postpone their trips. We see demand in this segment growing as most industries related to the export sector have had a good recovery and having expanding a very small demand, especially from the U.S. We have seen the fastest recovery in hotels with more group travelers such as our properties in the north part of the country.
The second group is what we call suits travelers, which will have a slower recovery. These travelers are more closely linked to service and sales sectors. They are also generally associated with large or multinational companies, which have not yet authorized travel for a variety of reasons. We think that more offices need to be opened in order for these travelers to return.
On a positive note, we have not seen pushback on rates from this segment in general. And this will be an important component to optimize rates as they return. These travelers are more relevant in large cities such as Mexico City, where we continue to see low profitability numbers in our portfolio. We think that suit travelers, along with large conference and groups, will be the last to return and that they are more at risk for structural change. We understand that not all travel would be the same as pre-pandemic. For example, overnight suite could become longer, more structured business.
The impact from work-from-home movement is still uncertain on our hotels as the [ tweets ] by fewer people in offices could be offset by companies that look to [ tweets ] as way to socialize and build the company's culture as well as more frequent regional [ tweets ] from people not located in the company's headquarters. We are aware that travel is evolving, and we'll look to position our hotels to capture market share. We believe we are well positioned to do this, thanks to the quality of our assets and our relationships with leading brands and operators.
In general, we believe that the losses from the suit travelers can be offset by gains in other and new segments. On the other hand, tourism continues to recover at a faster pace than business travelers. The Fiesta Americana Condesa Cancun hotel had 52.4% occupancy in the quarter, even with the uncertain impact from the U.S. announcement in January. Another example is the Live Aqua San Miguel de Allende hotel, which had similar record to last year, but generated a 31% carrier lodging contribution, thanks to operating efficiencies. We continue to see positive booking pace and believe that there is a strong pent-up demand for leisure trips as vaccinations grew in the U.S. and Mexico.
With further [ offset ] from Canada, we believe this segment will have an additional support as there could be more mixed business and leisure -- or leisure trips. As I have mentioned before, for the past few years, we have strategically diversified our portfolio into leisure and dollar-generated hotels. In line with this, I would like to highlight 2 recent announcements that continue to strengthen our presence in the leisure segment.
First, we make the remaining payment to finalize the acquisition of the Fiesta Americana Hacienda Galindo Hotel. Second, we announced the signing of our first hotel with Hilton to reopen the hotel in Playa del Carmen as The Yucatan Resort, Tapestry Collection by Hilton. This agreement also represents our first partnership with Playa Hotels & Resorts, who will operate the hotel. This is an example of our strategy to work with the best brands and operators. We think the outlook is positive, and the leisure segment and especially in properties with leading brands that have attractive distribution channels that can command higher rates and lead to better margins.
On the cost side, we continue to be focused on operating efficiencies. EBITDA for the quarter of MXN 81 million, thanks to the cost control as well as a more normalized contribution of the rent we have embedded in our portfolio. We are also proud to announce that in March, we achieved positive AFFO for the first time since the pandemic was announced.
Even with a better short-term outlook, we continue to work on improving our liquidity and balance sheet position. We have MXN 476 million in cash, an LTV of 30% and have signed agreements to significantly reduce capital amortizations in 2021 and also obtained covenant waivers for the remaining of 2021. I am very proud of how our team and partners have responded to these adverse circumstances. And we have taken advantage of the difficult situation to make the company better and more resilient for the long term.
Before I pass the floor to Edouard, I would like to highlight that even with the positive perspective, we continue to be very vigilant of the current situation as we are still in an uncertain environment with little control over the health conditions, vaccination progress and full economic recovery.
With that, I will now pass the call to Edouard Boudrant, the CFO of FibraHotel, to further discuss the financial and operating results of the second quarter.
Thank you, Simón, and good morning, everyone. During the first quarter of 2021, our financial results substantially improved versus the first quarter of last year. We closed the first quarter with 81 projects in operation. Even though we began the quarter with some operating restrictions and limiting capacity compared with the fourth quarter of last year, the activity for the month of March was very favorable.
The occupancy rate for the quarter was 36% for managed hotels. This number has a very positive progression as on a monthly basis, the occupancy rate was 32% in January, 35% in February, and 42% in March. Average daily rate was MXN 1,041. Quarterly RevPAR was MXN 379. The Fiesta Americana Condesa Cancun hotel had a net package ADR of MXN 4,798, occupancy was 52.4% and net package RevPAR was MXN 2,514.
Total revenue for the quarter was MXN 557 million versus MXN 545 million for the first quarter of last year, increasing 2%. Lodging contribution for the quarter was MXN 154 million versus MXN 134 million for the fourth quarter of last year, increasing 15%. We continued with a strong cost control at hotel [indiscernible] we implemented last year. Even though the beginning of the year was impacted by operating restriction and limiting capacity, if we compare with the month of October and November of last year, we saw an interesting rebound in the month of March. That has been the best month in terms of revenues, margin and cash flow generation since the COVID-19 crisis started.
Our EBITDA for the quarter was MXN 81 million versus MXN 60 million for the first quarter of last year, increasing 37%. Real estate expenses were MXN 19 million versus MXN 23 million during the first quarter of last year. Corporate expenses were MXN 53 million versus MXN 51 million during the first quarter of last year. Please note that the statement of the advisory fee for the year 2021 will not be postponed, as it was in 2020, and it will be paid as agreed in the advisory agreement. Additionally, as proposed by the Practice Committee, we expect that the account payable to the operator related to the 2020 will be paid beginning in the second half of this year based on the EBITDA generation of the company.
We closed the quarter with net debt of MXN 4.7 billion, which is MXN 238 million more than last quarter, mainly due to the payment of the acquisition of the Fiesta Americana Hacienda Galindo Hotel. Gross debt amounted to MXN 5.2 billion. We finished the quarter with an LTV of 30%.
During the quarter, the debt position generated a financing cost of MXN 90 million. The net financial income was negative MXN 86 million. During the month of March, we sold USD 9 million, generating a MXN 13 million gain overall. As mentioned before, at the end of March, we decided to draw down the MXN 250 million available credit line in order to reinforce our cash position that closed at MXN 476 million.
We also signed, in April, a credit management with Sabadell in order to extend the current MXN 200 million credit line from May 2021 to May 2023. As of today, and thanks to the credit amendment we've made, our debt structure [indiscernible] from [indiscernible], only MXN 140 million of amortization for the remainder of 2021. Only 7% is maturing during 2021 and 2022. Average cost of debt is 6.95% and only 5% of our debt is in U.S. dollar, $30 million.
During the first quarter, we deployed MXN 32 million of maintenance and repositioning CapEx. Please note that in 2021, the maintenance CapEx reserve that was temporarily suspended during 2020 will be provisioned as before. We continue to deploy everything to certain investment CapEx projects. For the quarter, FFO and AFFO were negative MXN 8 million and MXN 38 million, respectively. For the month of March, AFFO turned positive. Please note that we will not pay a contribution for the first quarter of 2021.
At this point, I would like to open the floor for the Q&A session. Operator, we are ready to take any questions.
[Operator Instructions] Our first question comes from the line of Sheila McGrath with Evercore.
I was wondering if you could help us understand how to model the Condesa Cancun? You received MXN 45 million, I believe, in the quarter. Is that a new minimum rent payment that we should be modeling? And just any insights on how that asset is performing and if conditions are improving in Cancun?
Sheila, thank you very much for the question. So basically, what we did with Posadas for this year is that we agreed with them to make a very slight amendment to the minimum guaranteed amount that they will pay. And for this year, on a monthly basis, they will pay 85% of the minimum, and the remaining 15%, we will receive it next year. So basically, on a cash flow basis, we grant them ahead regarding 15% of the amount that we will have -- that we will receive on next year.
So basically, there is no major changes. It just helps that we get them in terms of cash flow. So that's the reason why on a monthly -- on a quarterly basis, we should receive, at minimum, [ 16 ] billion. And as of today, we received a little bit less.
And just to complement Edouard, Sheila, thanks for your question. In terms of the conditions in Cancun, we have seen that they have been very positive and that the pace and the desire to travel to Cancun have continued to increase in line with better vaccination and health results. We have been improving the average daily rate, which we expect at the hotel. And the new reservations coming in are starting to have better results for the hotel.
So in general, we do believe that the summer months will be good. And we do believe that in the second half of the year, based on the trends we currently see, especially from the U.S. market and early, we will continue to see better results from the hotels, which could be upside to the minimum we currently have. The big part for the -- for Condesa Cancun is that the numbers look better. The operating margins also look better, and we hope to benefit more starting in the next winter.
Okay. Great. And can you update us if you've made a lot of progress on your negotiations with the banks to push amortization to 2022? Can you -- are there any other negotiations ongoing? Or have you completed that process to your satisfaction at this point?
So basically, if we stand 1 year before, for 2021, we have like more than MXN 400 million of amortization. And thanks to the great periods that we have with EBITDA on one line that give us the cash flow amortization derived from the MXN 100 million, first, that amendment on Sabadell, which should give us the -- to push like MXN 200 million from this year to 2023, so we reduced by MXN 300 million amortization for this year. So I think we are very comfortable. And as of today, with the AFFO we should generate this year, we have no problem for the debt service for 2021.
We are still under negotiation with BBVA to make some amendment with a credit line. And basically, if we pay the MXN 100 million of amortization we have with them in the month of July and in the month of August, we should be able also to have some management on amortization for 2022 regarding MXN 150 million, and 2023 regarding MXN 40 million.
So basically, if we do that, and if we stand for next year, we should be able to reduce the current amortization of MXN 252 million to a little bit more than MXN 100 million.
And just to finish with you, Simón -- Sheila, all the stakeholders for FibraHotel have been super supportive of our initiatives. And we believe that our amortization schedule couldn't be better than what we have today. So we want to thank in this call all these stakeholders. And if people from the banks are in this call, we want to thank them because we really got very low amortizations for '21 today, and we are working on having '22 and '23 with lower amortizations as well.
That's great. One more quick question. I know that Fibra didn't buy CBFIs in the quarter, but you did put an announcement out that some senior management or members from the technical committee did. Can you just provide some detail on that announcement?
Yes. Myself, my family and some of the committee members and some of the people in management bought a piece of CBFI that were on the market. And it was about -- the number, it was about 2% of the whole company. And we made the official announcement through the [indiscernible], through the -- through all communications in order to have transparency and to comply with corporate governance of the Fibra. So we obviously can present a lot of facts in this call, but this could ratify the belief in this management for the future and -- of FibraHotel and the commitment to FibraHotel in -- today and in the future.
Our next question comes from the line of Francisco Chavez with BBVA.
Two questions. The first one is on the operating side. What can we expect for April? Do we expect that the recovery will continue? Can you give us any color on how are you doing during April in terms of occupancy? And the second question is regarding the payment of the advisory fee. When and how do you expect to normalize the payment of this fee?
Paco, thank you for your question. We think we got a little bit cut off. But if I understood the first part of your question, it's how we continue to see the operators and the recovery based on the different operators and segments. Is that linearly correct?
Yes. It's basically the trend of occupancy during April.
Sure. So to get back into recovery, in April, we have seen a very similar month to March, and I think that is a very positive sign. Because as you know, the first quarter of the year generally is seasonally the work for business travelers.
In this year, we also have a change in the Holy Week. We started in the third week of March instead of in the -- in April as it happened last year. So the trend we are seeing in numbers of hotels that are posting better numbers continue to this month, and we expect them to continue at least in the short term.
This means that for most of the past 2 weeks, the occupancy of the portfolio within weekdays has been above 50%, so this is a positive sign for us as we continue to see this recovery. As you know, we continue to see better recovery. I think Simón laid out a very good overview of the different type of segments and travelers we are seeing. But just to give you an idea, we have continued to see strength in Mexican business travelers in manufacturing and in the people that continue to go to the different regions to be in plants or in that type of the economy. And so we have seen better numbers in that sense.
But even in that, we continue to now see better results from Mexico City, Monterrey and from other cities. So the recoveries in general has been good. It is still with the same trends that we saw, but it is off of better numbers, and we continue to see a better recovery in Mexican travelers.
Just to complement that, Paco, the other thing that we cannot control, and I said it over my -- what I said is that we do not know the -- what's going to come up with the pandemic and what's going to be the future in Mexico with restrictions of any kind for that. What Guillermo said and what I said is all pending what's going to be the reality. As well, there was a communication from the U.S. government of more than 180 countries about traveling abroad from -- for U.S. citizen. And that could be an issue. We have not seen in the 2 days that have been -- that they published that, a change in the pace, but we should look out for that and be obviously very cautious to continue looking at all these trends that can modify the trend that we're looking at today.
And Paco, regarding the second question of the advisory fee. So what we are doing, and as we mentioned, that the fee for 2021 will be paid as it was paid with crisis, with COVID-19 crisis. And regarding the account payable that we have for the 2021 fee that amount to MXN 144 million, we agreed with the Practice Committee of FibraHotel to start to pay it until the second semester or the third quarter of this year, and it will depend on the EBITDA generation. And as of today, some estimation that we have on the internal budget is that we should be able should pay roughly 40% of the amount in this year and 60% in next year in the first half of the year.
Our next question comes from the line of Froylan Mendez with JPMorgan.
Congrats on the strong results. Just curious about if there's still flexibility on when and how to pay the fee that you just mentioned, Edouard? And if something changes on the negotiations with the banks, et cetera, can we still see these payments deferred, either the one that goes for 2021, and also the one that is already a payable? That's my first question.
And then just -- if you could just remind us, what would be the EBITDA margins today if we had the same levels of revenues of 2019? Just to understand all the efficiencies that you have gotten over this experience.
And thirdly, on leverage, so if you take the net debt that you reported in this quarter and you use the 2019 EBITDA, you are around 4x leverage. That is 1 point higher versus your levels in 2019, the actual levels. What is your goal in the midterm? And do you have any short-term plans to increase the pace of deleverage, maybe asset sales, something like that?
Froy, thank you for your question. Let me start with the first part of your question. I think from my perspective and the adviser is here with us, but from my perspective or from the company's perspective, the support that the adviser has given the company has been absolute. And I think this -- we expect that this would continue if anything would change in the future. The measure that was taken to defer the fee and the agreement that it is to be paid based on the cash generation of the company. I think it's very positive for the company. And from my perspective, it speaks very well of the adviser and his alignment of interest with the company.
So I definitely do believe that if things changes, that is an option that we have in order to shift another lever. We believe this is a good agreement for the company, and we believe it is also prudent to pay down this amount. So I think that is a positive sign.
And regarding the leverage question and also the margin question, I will pass to Edouard.
So particularly for the number regarding the EBITDA margin, the best EBITDA margin we've had, it was in 2018, and we were roughly about 28% of EBITDA margin. And what we plan with all the efficiency that we've made last year and that we contract strictly on a monthly basis in order to maintain strong efficiency at the first lever, that once we recover the revenues that we had 2018 and 2019 should be to gain above 30% EBITDA margin. So basically, this is a target that we have when we reached the pre-COVID revenues to have 30-plus EBITDA margin.
And the third, regarding the leverage, basically, what we want as of today is to reduce as soon as possible the amount of debt that we have. As of today, we have a little bit more than MXN 5 billion. LTV is very comfortable at 30%. But one of the priorities would be to reduce the debt level. Indeed, we are actively working with banks to have the best amortization schedule possible for the forthcoming quarter on year. If we have possibility to make prepayments of debt in excess of the amortization schedule, we will do that. We want to delever the company as soon as possible.
Any plans for asset sales? I remember there were 5 or 6 hotels that you plan to reposition, but maybe selling them for a player that might pay a little bit more value that does not necessarily look at hotels, for example?
Thank you, Froy. We continue on the strategic front, we continue to work on all those alternatives. As you know, the size that we have before are now 4, thanks to the announced reopening of the Hilton Playa del Carmen Hotel, the Playa del Carmen Hotel with the Tapestry Collection by Hilton brand. But we continue to work on those. And also on hotels that are open, we continue to work in different alternatives in terms of accommodations as well as places to work at the hotels.
So we continue to do that. We do believe that, that is a longer process. We still do not see the M&A market very active or even the financing market for independent players are very active. So we do not believe that, that is a solution in the short term, but we continue to look at the different alternatives for those and other assets within our portfolio. And we will announce as we have more clarity on that in the future.
Our next question comes from the line of [ Edson Margie ] with [ Summer Cap ].
I have 2 of them. The first one is regarding to this reopening of the resort, Playa del Carmen from the Tapestry Collection by Hilton, are we expecting more reopening with this brand, as I can say brand? And the second one is regarding to the advisory fee. It got my attention that the total amount of the advisory fee, it's MXN 144 million. So I was wondering if those are going to be the payable during this 2021? Or it's going to be at least 2022?
[ Edson ], thank you for your questions. Regarding the second part of the question, it is the same calculation and the same number we have had to the company started. As you know, it is variable based on the depreciated assets net of that calculation. And so we have seen a slight reduction. We believe it will be similar next year to this year. The only difference is in how it's paid and the support that we receive on a cash flow basis last year when the conditions were worse. So that will be similar and the same calculation we have always had.
And regarding your first question, we think it was a very attractive opportunity to open the hotel. As you know, this is our first hotel, both with Hilton, but also with Playa Hotels & Resorts. And these are 2 companies that we have been very surprised and very happy at what they have been able to show us in the early results of how they're planning to position this property. The Tapestry Collection brand was chosen because we are able to also use a hotel nearby that is also owned and operated by Playa Hotels. And this gives us an advantage of offering the customers not only the experience that we have at our [indiscernible] Hotel in the [ Sixth ] Avenue but also to offer the access to the beach and a beachfront property in the Hilton Hotel.
So that was a specific transaction, but I do think that in general, we don't have to tell you the sense of where we think or what we feel that strategically going forward, is interesting, which Simón also mentioned, which is we do believe that leisure has more clear prospects, and we do believe that these types of properties that are branded with international brands that have access to better distribution channels is something that we would like to continue to explore as we go forward. And it's a clear message of our open architecture policy that we took a hotel out from Posadas, and we opened this new venue with Hilton. So we are very proud of this open architecture, and we will be using it in the future for other changes that can add value to FibraHotel.
Okay. Great. And a quick one, the third one will be regarding to the Fiesta Americana Viaducto, what about the occupancy rate? I mean, of course, you opened at the end of 2019, but regarding the remaining time and everything that we've been through last year, what is the performance of the Fiesta Americana Viaducto? And what are your expectations on that property specifically?
I think, [ Edson ], we continue to be bullish in Mexico City in general and in that hotel in specific. Clearly, the results have been very difficult for the past year. One thing we have already mentioned that is critical, especially for that hotel and for this affiliate hotel, is the embedded minimum rent that we have.
And just to give you some overview of how the hotel has performed. We are still -- it's a nice hotel, it's a 260-room property, and we are still not at occupancy levels in line with the portfolio. It's one of the lowest occupancies to date. But what we have done is we have brought in new customers or new clients like a flight overboard crew. And also, for instance, we also have the baseball team. The [indiscernible] Broncos are starting the preseason, and they're already using the hotel.
So those are the types of substitutes that we see in the demand drivers. Before, we used to see more business travelers and more people either using the hotel or the region, which has a lot of manufacturing activity. And that has not yet resumed. We continue to see this shift to lower-paying customers, but we believe that once the demand comes back, we will be able to substitute those back and be able to optimize RevPAR again.
So we continue to like that hotel where we think it's a strategic property, and we make real estate investments for a long period of time and over the cycle. And we believe that we will be proven right in that and our other investments as the economy and the health situation normalize.
And our next question comes from the line of Sheila McGrath with Evercore.
I guess just on the news on Playa del Carmen, when will that -- is that property already reopened? And when should we expect that to start contributing again to the bottom line?
Thanks, Sheila. So specifically in that property, the reservation channels are already open, and we have the planned opening for May 14, if I'm correct -- May 12, sorry. So we should start confirming. It will take a ramp-up period. And generally, we believe that it will start contributing a little bit during the summer months. But more importantly, we want to get that hotel ramped up, especially for the winter season where we are able to get more international business travelers.
Okay. Great. And then can you remind us, for that asset and also Fiesta Inn Perisur, they both switched from investment property to PP&E. Can you just explain to us again why the accounting switches on that?
Basically, Sheila, under IFRS, if you have a rent agreement with a strong view on the long-term cash flow, you can register with under the fair value under investment properties. If you -- there is no depreciation. On a yearly basis, you will make an appraisal to see if there is a -- if you can decrease or increase the value.
And as with Playa del Carmen and Playa Resort, we signed an operating agreement. We do not really have the strong view on the cash flow. So basically, we have to register it under PP&E, and we have to depreciate the asset on a monthly basis. And this would be the same case with Fiesta Inn Perisur, because 2 weeks ago, the rent agreement was done, and we entered a new agreement, which is an operating agreement. So basically, also, this asset will be registered as PP&E and will be depreciated on a monthly basis. And so basically, after that, we will only have 1 hotel under the investment properties. It will be the Fiesta Americana Condesa Cancun.
Okay. That's helpful. And one last question. On the Hacienda acquisition, is that asset already opened and operating? And just a little bit more detail on that transaction.
Yes. Basically, if you remember, this -- we entered in an agreement with Posadas in 2017, and the deal was as follows: We take the hotel. We sign like a rent agreement. We remodel completely the hotel because the hotel was very, very old. So we made a formal renovation. We invested a little something like MXN 150 million. And the deal was, let's see the GOP that the hotel will generate in 2019. We will pay 10x the GOP. We will reduce the investment that we've done so far, so basically the renovation, and we paid the remaining. And last year, we negotiated with Posadas to delay the payment, and we have to pay the payment at the end of March. And it was basically MXN 156 million.
So if you see, we bought a big hotel near Mexico city, very, very popular for around MXN 300 million. And once the business will recover, there is no doubt that it's a very cheap hotel because it's a Fiesta Americana, fully remodeled, and we have some plans to make some improvements in order to have the hotel that will be the place to be around Mexico City.
There are no further questions at this time. Thank you for participating in FibraHotel's 2021 First Quarter Results Conference Call. If you have any further questions, please do not hesitate to visit www.fibrahotel.com or contact FibraHotel's Investor Relations department. This concludes today's call. Thank you, and have a good day.