Fibra Mty SAPI de CV

BMV:FMTY14

Earnings Call Transcript 2021-Q3

[Operator]

Good morning, and welcome to the 2021 Third Quarter Fibra Mty's Conference Call. With us this morning from Fibra Mty, we have Mr. Jorge Avalos, CEO; Jaime Martinez, CFO; and Javier Llaca, COO. They will discuss on the more important strategic financial and operating aspects of the quarter. It is important to note that the presentation related to this conference is available at www.fibramty.com, and recordings of the call will be available on the website of the company in the next 2 hours. If you are connected using our webcast tool, you have the option to download the presentation in order to move the slides at your own pace. Let me remind you that the company -- that the information discussed in today's call may include forward-looking statements on the company's future financial performance and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company advises not to rely on these forward-looking statements.

Fibra Mty undertakes no obligation to publicly update or revise any forward-looking statements. I will now turn the call over to Mr. Jorge Avalos.

[Jorge Avalos Carpinteyro, executive]

Thank you, and hello, everyone for attending to our third quarter conference call. I am pleased to report that during the third quarter of this year, we observed several positive signs in the real estate market. As we have mentioned in previous calls, the industrial sector has experienced an outstanding performance throughout the year and we are beginning to see that the office, retail and hotel markets are starting to show better dynamics in their occupancy activity. Although in general, these markets are still far from pre-pandemic levels, the beginning of the recovery opens new opportunities for players such as Fibra Mty. On one hand, an increase in occupancy offers organic growth in operating cash flows, but also the activity may generate acquisition opportunities that could increase our cash flow inorganically.

I would also want to highlight the success of the reopening of our previous CEBUREs issuance for $115 million at an interest rate of 3.73%. As of this date, Fibra Mty's outstanding debt is entirely denominated in U.S. dollars at a fixed rate and 100% unsecured, leaving us with no debt maturities until October year 2027. This reflects not only our capacity to constantly improve our balance sheet, but the support and interest of our institutional investors. For the first time since inception, we concluded our first recycling transaction by successfully acquiring Providencia portfolio expansion with the proceeds of Casona Los Mochis divestment and completed with our last follow-on resources. In terms of our quarterly operating metrics, we achieved solid results by maintaining our occupancy levels above 90%. At the same time, we have retention rates of around 85% in both the industrial and office sectors. But one of the milestones for this quarter was the early renovation of our Filios property lease contract for 3 more years until the end of 2031. This will be positively reflected in our weighted average lease term of the whole portfolio as it will increase from 4.6 years to 5.1 years, making this one of the longest in the industry for a diversified portfolio. Additionally, as mentioned in the previous earnings release, the demand for office spaces show signs of recovery in the market that Fibra Mty operates. At the end of the third quarter of this year, approximately 50% of our vacant space was under negotiations, and some of these were closed recently, as Javier will give you more color further on, providing that our occupancy levels are recovering.

On the inorganic front, we are currently under negotiation of our interesting number of potential acquisitions of industrial buildings, and we expect to capitalize these opportunities with our $150 million firepower, leading to the respective upward adjustment in our operating cash flows. This will once again prove our ability to carry out acquisitions that are accretive to our AFFO per share as we have done since our initial public offering. Regarding our guidance, we are on track to organically meet the high end of our target of $0.83 per CBFI. Considering the acquisition of La Perla and the expansion of the Providencia portfolio, we expect the AFFO to reach $0.88 per CBFI during 2021. Finally, the potential acquisition of properties through the allocation of the $150 million I mentioned before, will add an annualized growth of approximately $0.08 per CBFI. I will now hand out the call to Javier who will walk you through our portfolio.

[Javier Llaca García, executive]

Thank you, Jorge. Good morning, everyone. I would like to start my piece of the presentation with a brief overview of our key performance indicators for the third quarter highlighted on Page 3 of the webcast material. In terms of percentage of revenues, these indicators continue to be consistent with previous quarters. Revenue by asset class is practically half and half from our office and industrial components of the portfolio, which we estimate could offset more towards industrial properties in the following months given the composition of the potential acquisitions pipeline currently under negotiation, as Jorge mentioned. Revenue by location, occupancy and currency are in line with our projection for the year. And lease maturity schedule and weighted average lease term reflects natural aging compared to the previous quarter, partially offset by successful renewals and lease and new leases carried out during the 3 months of the quarter.

However, as we can see on Slide 4 and as Jorge mentioned a moment ago, this week, we announced the successful execution of an early extension of the Filios portfolio, which accounts for close to 20% of our gross revenue. By extending this lease for an additional 3-year term from late 2028 to late 2031, we will be able to stretch the weighted average lease term of the whole portfolio to 5.1 years, adding close to $4 million to our assured cash flow. Our original scheduled expiration of more than 23% of income for 2028 is being pushed back, so almost 20% of it will now expire in 2031. It is important to point out that this year lease term reset comes only 3 years after the acquisition and reflects the strength and confidence of Whirlpool in the [indiscernible] Mexican production base, will have the North American market in upcoming years. This transaction does not only involve certain capital expenses from Fibra Mty property, which will generate additional rent, but also a significantly larger investment from Whirlpool to increase the production line of new appliances for export and the domestic distribution.

I would like to emphasize that this is proof of our investment thesis. We look out for acquisitions that have quality in the location, the building itself and the tenant and the lease agreement. It is -- it also highlights the tangible benefits of having an institutional [indiscernible] with a strong balance sheet and forward-looking strategy and a deep understanding of tenant needs. These types of negotiations reflect our commitment to keep meaningful relationships with our clients and we are sure we'll keep repeating going forward. Moving on to Slide 5 of the webcast material. We present the same property performance analysis for the third quarter of 2021 compared to the same quarter of the previous year.

For purposes of this analysis, we used 58 out of the 59 investment properties currently in our portfolio, given that we recently sold one of our industrial properties. Another one is currently marked and on the negotiation for its disposition and the acquisition of La Perla during the second quarter of 2021. Gross revenue contracted in 15.4% to MXN 52.5 million with a reduction of 17.3% or MXN 54.2 million in our net operating income with an NOI margin of 89.4%. The composition of this variance will be explained in detail in the following slide.

During this last quarter, we have seen an inflection point on the negative trend in our rent income with signs of short-term recovery as the office markets -- I'm sorry -- as the office market begins to recover. Once we incorporate additional revenue from La Perla in early June, the aggregated portfolio generated a total net operating income of MXN 293.1 million compared to MXN 314.1 million in the third quarter of 2020, a reduction of 6.7% compared to a decrease of [ 17% ] in the previous quarter. Our NOI margin was 70 basis points above our goal of 88% in the quarter. Slide 6 of the presentation explains in detail the MXN 54.2 million reduction on our net operating income on price of the following: MXN 27 million due to an unfavorable FX effect between third quarter of 2020 and third quarter of 2021, MXN 11.8 million due to early termination of the Axtel lease agreement, MXN 9 million due to certain scheduled vacancies in both industrial and office portfolios, MXN 4.7 million from the reduction in lease rate at [indiscernible] building, and MXN 1.7 million due to increase in certain operating expenses, some of which related to an increase on utilities costs as tenants began to go back to the office.

Slide 7 of the presentation highlights our most recent activity in terms of leasing and organic growth for the last quarter. During the third quarter, we successfully executed the 6-year lease of almost 4,000 square meters in one of our office buildings in Monterrey, the largest office transaction in the market, bringing the property back to 100% occupancy. As Jorge mentioned during his opening remarks, we have achieved close to 85% of retention rate in both our office and industrial segments, and we continue negotiations for more than 42,000 square meters of GLA across the portfolio. Including these transactions and some others, we have a pipeline of new leases and extensions that represented a total of potential and additional annual net operating income of more than MXN 147 million, with more than MXN 63 million of which are already in final stages for closing.

Finally, on to Slide 8 of the presentation, we would like to talk about office markets for a moment. Since the last quarter of 2020, we have been monitoring the behavior of all 3 core office markets in Mexico and our [indiscernible] continue to be consistent to what we outlooked in January. All markets are at the bottom of the cycle with slight upward signs of less negative net absorption in Mexico City, and Monterrey and Guadalajara with positive net absorption of office space during the -- for the first time since the second quarter of 2020. Our original thesis on Guadalajara, the first Mexico City, the last markets to recover, has been proved to be valid. In that regard, we are seeing a slightly faster recovery in Guadalajara, followed by Monterrey. We believe that Mexico City will become stagnant for at least the first half of 2022.

It is worth mentioning that our portfolio has low exposure to the Mexico City market. And therefore, as I mentioned before, could start recovering in a higher pace than our peers with higher exposure to this market. We will be happy to address any specific questions regarding our operations and acquisitions during the Q&A. And with that, I will turn the call to our CFO, Jaime Martinez. Go ahead, Jaime.

[Jaime Martínez Trigueros, executive]

Thank you, Javier, and good morning to everyone. I would like to address some comments about the third quarter 2021 and then to comment on the strategy that we will execute going forward in order to take [ that ] on potential opportunities. As you can see in the charts on Slide 9 of the webcast presentation, AFFO year-on-year behavior had similar variations previous those explained -- as previous those explained in the second quarter. Nevertheless, I believe that it's important to emphasize on 2 key aspects. First, as Javier already mentioned, it seems like the market conditions have already reached the bottom in terms of occupancy. And second, the peso appreciation versus the U.S. dollar has reduced our EBITDA margin below 80%. As you can see in the chart on your right, if you exclude the foreign exchange rate effect, EBITDA margin would have been at 81%.

If we proceed to Slide 10, main variation against last quarter are explained mainly by the first 3-month period with the Axtel property vacant, higher utilities expense, leasing commissions and maintenance expenses, and finally, reduced cash flow derived from a stronger Mexican peso against the U.S. dollar. This was more than offset by the partial reversal of the market provision that took place in the third quarter of the year. Given the successful renewal and replacement of material lease contracts and the additional cash flow by the acquisition of La Perla property. Having said that, I'm glad to reaffirm that we are in the right map to reach our organic guidance of $0.83 per share with [indiscernible] to reach $0.88 per share when we consider the acquisitions carried out through this year.

If we move along to Slide 11, we've received the authorization from our shareholders to negotiate and subscribe a unsecured syndicated loan of USD 150 million. Such resources would be used to execute accretive acquisitions in the following months. The facility that we are currently negotiating has the following advantages: first, we can acquire properties using our remaining leverage capacity, which would allow us to increase our AFFO per share without tapping the market. Thus, no dilution. Second, we believe we have the ability to execute these transactions in an efficient manner, as we don't have to pay interest until we withdraw resources and [ withdrew ] the exact amount needed. Third, as the facility would be unsecured, we have greater flexibility managing our properties and leases when comparing to secured loans covenants, also keeping our current fully unsecured credit profile. Fourth, in terms of the interest rates, as you can see in the chart on your right, we may reduce the weighted average interest rate down to 3.6%. This rate doesn't consider any hedge since we will be on the lookout for the LIBOR transition.

All these advantages could improve our credit rating and therefore, reduce our cost of capital in the future. As you can see, in Fibra Mty, we are always working in keeping flexibility in our balance sheet, maintaining a prudent approach in terms of leverage. I would like to end my speech by mentioning that considering consensus inflation, expectations and the potential effects on the Forex market, Fibra Mty remains as an appealing investment instrument due to its resilient underlying fundamentals.

Rent adjustments in line with inflation, or predominantly dollarized lease revenue and our long-term lease agreements that allows investors to reduce exposure to such risk. That will be all. Kate, please proceed with the Q&A.

[Operator]

[Operator Instructions] Our first question today is coming from [indiscernible].

[Unknown Analyst]

In the report, you mentioned that the demand for office spaces shows signs of recovery in markets where Fibra Mty has present. Within your estimate, we think that in the second half of 2022, we could see occupancy levels close to 80 for this segment. And in the report, you mentioned that you have perceived a greater potential to make acquisitions on industrial buildings. Could we see any transactions during the last quarter of the year.

[Javier Llaca García, executive]

Hello, this is Javier Llaca. Yes, we're starting to see a rebound on net absorption in Guadalajara, Monterrey and Mexico City, even though that Mexico City still remains in the negative for net absorption. We've seen a 16,000 square meters net absorption positive in Guadalajara, 9,000 positive in Monterrey and 16,000 negative for Mexico City. So we believe that the market is hitting the inflection point at the bottom of the market. We do expect that recovery in Mexico City might start, I don't think before the second half of next year. And we're starting to see a slight recovery in Guadalajara and Monterrey. And interestingly enough, Monterrey is having a lot of activity for new companies coming to the market and Guadalajara is having a lot of expansion of existing base tenants, especially in the tech sector. And your second question, the acquisitions that we have working on right now, as Jorge mentioned before, it's 100% focused on industrial segment. We believe that we're going to execute a couple of those transactions before the end of the year. We're going to be updating you in the following weeks. And we're working on a very extensive pipeline of potential acquisitions on -- also on industrial for the next year.

[Operator]

Our next question today is coming from [indiscernible]

[Unknown Analyst]

I have 2 of them. The first one is a follow-up on the pipeline. Could you give us a little bit more color about if this pipeline of acquisitions, it's going to be like focusing a couple of years from now, let's say, maybe 2 or 3 or is it going to be depending on the market conditions. That's the first one. The second one is regarding your USD 150 million credit facility you are planning to negotiate with banks. Just give us a little bit more color about the trends. Are you planning to negotiate 1 month LIBOR plus 285 basis points, am I getting right. And it is correct with LIBOR, I think the concern is why are you doing with LIBOR, not SOFR. Because at some point, LIBOR, it's not going to be using anymore.

[Cesar Rubalcava, executive]

Sure, This is a Cesar Rubalcava. Thank you for your call. Thank you for joining us every quarter. I will answer your second question, and then I will give the word to Javier. The thing about the syndicated loan is because we already have the [ fallback ] language included in the terms of the contract. We'll be on the lookout for the transition, and we will execute that transaction. When it happens and as the [ fallback ] instructs to do this transition, if we have any withdrawal from this syndicated loan would be denominated in LIBOR. We would not hedge that withdraw until the transition happens. Just to keep the risk of the transition in a simple manner. We have been analyzing the situation thoroughly. And we can assure you that we can have -- sorry, that we can have a great transition with our banks because the same parties that are giving the loan are the parties that would be providing us the hedge in -- once that transition completes.

[Javier Llaca García, executive]

This is Javier. Regarding your first question. I can tell you that right now, we're working on a number of transactions, 2 or 3 transactions that are going to be closed in the next few weeks that account for about half of the $150 million firepower that we have. We are working on a larger pipeline, a substantially larger pipeline hopefully to be executed during the first half of next year. And what I can tell you is that we're focusing on industrial core markets. Most -- some of the transactions are located in Monterrey. The rest are located in the key industrial markets, particularly in the northern area of Mexico and [ Bajío ]. We -- as we move on with this short-term transactions and once we reach the $150 million firepower that we mentioned before, we're going to get around 35% to 37% LTV. And then we're going to tap the market again for equity to continue our acquisitions program. We believe that we can deploy a similar amount of money that we did this year close to $200 million. We believe that we could do something like that for next year, particularly in industrial transactions.

[Unknown Analyst]

Okay, really helpful. And last, but not least, could you give us maybe more information about the current [indiscernible] process that you have been doing with Cuprum. You mentioned in the report that it's on the process of many -- a couple of buyers, so you're planning to sell. So do you have any specific time line in order to close the transaction or it's going to be part of the 2022, let's say, time line of this acquisition of recycling assets that you're planning to do?

[Javier Llaca García, executive]

Gladly. That's a good question. We already executed a promissory purchase agreement with a large buyer. They are in the process of [ do liens ] for the property. We have a commitment with them already in place. And we believe that the transaction is going to be executed before the end of the year.

[Operator]

Our next question today is coming from Valentin Mendoza at Actinver.

[Valentin Mendoza, analyst]

I just wanted to follow up a little bit on previous comments regarding the renewals and leasing prospects that you have for the next month. If you could please repeat the figure of NOI you're expecting to generate through those transactions -- I'm sorry. And the second one has to do with, you have fairly -- or you just mentioned that you're fairly negotiating over 21,000 square meters of vacant space in your office space on your segment. And given the positive recovery prospects, how should we think that probably your occupancy in office could be evolving over the next few quarters?

[Javier Llaca García, executive]

Sure. This is Javier, again. Very good question. What we are negotiating right now comprises a total potential net operating income of MXN 147 million. Hopefully, I wish we could do all of those. About [indiscernible] leases are very advanced in negotiations, and we expect to be closing this in [indiscernible] the next quarter -- during the last quarter. That doesn't mean that we are going to add from day 1 [indiscernible] that we could generate from the current leasing activity that we have. So we believe that we're going to be able to add between $40 million and $60 million in the next -- annualized in the next months. What was the second part of your question?

[Valentin Mendoza, analyst]

Yes. It has to do with now to the market that you said that you were already negotiating over 60% of the vacant space in office. Considering the -- and congratulations on the sign of this 3,700 square meters. Do you still have -- or you will be negotiating over 21,000 square meters. And given the positive recovery process that you're seeing in the markets you have presence, the second question was how should we think about occupancy evolving in the office segment for the next few months.

[Javier Llaca García, executive]

Right now, our occupancy in the office segment is in the high 70s. We expect to achieve 80% to -- low 80s to mid-80s in the following months. And it is interesting to point out that we are potentially considering recycling some of the office assets that we have. So we do not discard the potential sale of at least one of our office buildings. So that would offset the composition of the portfolio. But bottom line means that we expect to go back to mid-90s across the -- both asset classes. We expect to achieve mid-90s by the first half, probably third quarter of next year.

[Operator]

Our next question today is coming from Francisco Suarez at Scotiabank.

[Francisco Suarez, analyst]

Congrats for the deal with Whirlpool. On that regard, considering -- question #1 is considering how tight industrial markets are at this moment, is it fair to assume that tenants might be much more eager and flexible to discuss further enhancements to existing agreements. And what I'm interested in understanding is not only in, of course, improving conditions and extending the life of leases because of how tight markets are at this moment, but also perhaps finding ways in that might be win-win solutions between your tenants and yourselves to do investments in your buildings to cut the energy intensity in your buildings. Is that something that might be happening? Is that going to be a trend? And the second question is, if you can help me understand, and thanks for the comments on the difference that you see between the 3 markets in office space in Mexico. The question that I have has to do also with potential differences that may exist between the typical corporate-oriented office building and the back office building. Are you seeing any structural difference in a post-pandemic world in a work from home and teleworking world that may yield into a certain preferences for a corporate office rather than a back office building? Or that actually doesn't have to do anything with all and that may be depending on the corridor that you are located?

[Javier Llaca García, executive]

Thank you, Paco, Hello. This is Javier, again. Nice talking to you. Regarding the first question, the short answer is yes, the not so short answer is yes a lot. And the full answer is we are already working with [indiscernible] a 9,000 square meters expansion of our existing facility. We're working with another tenant in the [indiscernible] market for a 5,000 square meters expansion. We're working with a large industrial tenant in Monterrey for initial expansion of 5,000 square meters and the potential relocation of their existing facility to a 50,000 square meter facility. So there's a lot of activity in the market, as you mentioned. The market is really tight. And as we mentioned during the Whirlpool part of my piece, we are proving that the tenant having an institutional investor with access to capital as we are and the level of satisfaction that they have -- having us as a landlord has been critical on this. So we expect these expansion options moving forward in the next -- I wouldn't say not only in the next few months, but in the next couple of years, we expect that to keep happening. And your second question is...

[Francisco Suarez, analyst]

Is the office. In terms of the back office...

[Javier Llaca García, executive]

Yes, yes, yes. I'm sorry. Yes, a good example of what we expect is going to be successful in the market is La Perla. La Perla is a building that is massive, is 0.5 million square feet of GLA, and it has only 4 floors. So you're talking -- 5 floors, I'm sorry. You're talking of a building that has more than 8,000 square meters per floor split into floor plate. So the flex space is going to be critical and instrumental for new and successful occupancy of office in the following months. We are seeing a trend amongst not only our tenants, but the market in general. But they're looking for [indiscernible] high floor plate space, and that's going to be the flavor of the future. As a matter of fact, if you remember, the Axtel building that we have vacant right now, that building has 13,000 square meters in 4 floors. And if just that type of building that becomes very appealing, not only for back office, but also for a mix of back and front office. What we're looking at is that companies are trending to have less and less visitors traffic in their office space. So we're going to see space is mixing up between the back office space and the corporate space. And obviously, that's going to drive -- on 1 side, it's going to drive rents down on the central district, and it's going to drive probably even rent high in the suburban or alternative corridors. So we have a few of those buildings in our belly. We are not looking at potential acquisitions of office buildings that do not have a robust floor plate and can have that possibility of providing the tenant with our flex space.

[Unknown Executive]

Last question comes from [indiscernible] and is this one from the webcast. Could you give further color on the authorized loan by your shareholders' meeting for potential acquisitions? What type of properties are looking for or negotiating allocations and potential upside for your indicators? And what could be the terms of this loan?

[Javier Llaca García, executive]

Well, I'm going to let Jaime answer first to talk about the terms of the loan, and then I'm going to address a little bit on the use of those resources and acquisitions.

[Jaime Martínez Trigueros, executive]

Michel, this is Jaime. Well, in the first -- in the side of the covenants, the covenants are basically the same that we have in the bonds that we issued that you already know. So we like to have parallel conditions because it's what makes sense for us. And the second part, in terms of interest rates, the spread between -- plus LIBOR, it would be around 235 and 285 basis points depending on the leverage that you have. We have additionally some discounts if we achieve some ESG targets, and it's going to be a 5-year facility. Also, Michel, this would be a balloon. So we don't have any amortization on that -- that would be add to our current maturity schedule. And as I mentioned earlier to [indiscernible] this would be LIBOR plus 235 and 285 considering the composition of our balance sheet. And that interest rate would lower to 3.6%. If we don't consider any hedge until we have the transition LIBOR being fully executed.

[Javier Llaca García, executive]

And in regards to the second part of the question on the use of those resources in terms of acquisitions, we're focusing on 13 industrial markets, the primary industrial markets in Mexico, particularly across the northern area, [ Bajío ] and Guadalajara and Monterrey -- Guadalajara, Mexico City and the State of Mexico. We are looking at a good -- a few good options for office acquisitions, nothing concrete so far. We're looking at around $400 million to $500 million total pipeline of industrial. We hope that we can get our hands around part of that. And we're going to be focusing on Class A long-term triple net dollar-denominated leases as we usually have in our portfolio.

[Unknown Executive]

Finally, last question comes from Mariana Cruz of BTG. It's a follow-up on previous commentary. Can you please give us more color on potential asset divestments you are countering for the following months?

[Javier Llaca García, executive]

Yes. We are -- we continue to work on our asset recycling program and the recycling of assets are aimed toward 2 main goals. The first goal is to enhance the quality of the portfolio. We have a couple of properties that were part of our initial contribution portfolio that are either Class B properties or Class A properties in a class B market or a secondary market. So we are looking at disposing of some of those assets. We want to renew or to enhance also the age of our portfolio. So even though we have almost of our portfolio, if not 100% of our portfolio is Class A. We have some buildings that are older than 10 years that we will look at renewing, selling and buying brand-new properties or [ sale and ] leaseback of properties that are no older than 5 years. So our goal is to lower, to reduce the average age of our portfolio down to less than 10% across the both asset classes.

[Operator]

[Operator Instructions] Our next question today is coming from Francisco Chavez at BBVA.

[Francisco Chavez, analyst]

I have a question regarding the pipeline of the lease transactions in which you are currently working. Specifically for the office segment, can you give us an idea on the rent levels that you are negotiating, how these rent levels compared to the pre-pandemic levels?

[Javier Llaca García, executive]

This is Javier. In office transactions in the pipeline that we have, I can tell you that the rent levels are about 20% -- 15% to 20% lower than pre-pandemic levels. We are seeing a clear move toward peso-denominated leases. So in that regard and compounding the FX change over the last 2 years pre and post pandemic, I could tell you that it's around 15% to 20% lower, negative spread lease -- lease spread versus pre-pandemic transactions. And we are looking at those -- most of those in Monterrey and Guadalajara. Although, Guadalajara is more dollar-denominated right now. But we're closing in Monterrey, is almost 100% peso denominated, and it's a range, I would say, between MXN 280 to MXN 300 per square meter per

[Francisco Chavez, analyst]

Just a follow-up. In the case of the transactions you are negotiating in for office space in Mexico City, any idea for your lease spread?

[Javier Llaca García, executive]

We have no activity right now in our office portfolio in Mexico City. So it would be hard to say. But the last prospect that we entertain for our office building in Interlomas Magnocentro, the lease rates that we are looking at are very consistent to the ongoing lease rates that we have on the building. So curiously enough, we're not seeing a lot of negative lease spread in our Mexico City building. And that's because when we bought that building, lease rates on that building were already 25 below market. So that gives you an idea that the market is leveling at a 20% to 25% below pre-pandemic conditions.

[Operator]

With no further questions in queue, I'd like to turn the conference over to the management of the company.

[Jorge Avalos Carpinteyro, executive]

Well, thank you, everyone, for the conference call, and hope you have an excellent weekend. Goodbye.

[Operator]

Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time, and have a wonderful day. We thank you for your participation.