Fibra Shop Portafolios Inmobiliarios SAPI de CV

BMV:FSHOP13

Earnings Call Transcript 2022-Q1

[Operator]

Good afternoon. My name is Matthew and I'll be your conference operator today. At this time, I would like to welcome everyone to Fibra Shop's First Quarter 2022 Results Conference Call. Fibra Shop issued its earnings report yesterday. If you did not receive a copy via e-mail, please do not hesitate to contact us by e-mail in Mexico City at [e-mail].

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. These statements are subject to a number of risks and uncertainties. All figures included herein were prepared in accordance with International Financial Reporting Standards, or IFRS and our stated in nominal Mexican pesos, unless otherwise noted.

Joining us today from Fibra Shop in Mexico City is Salvador Cayón, Chief Executive Officer; Gabriel Ramírez, Chief Financial Officer; and Irvin García, Controller and Investor Relations Officer. And now I'll turn the call over to Mr. García. Sir, please begin.

[Irvin García Millán, executive]

Thank you. Hi, everyone. Good afternoon. My name is Irvin García and I'm part of the Investor Relations team. Thank you for joining us on today's conference call. During our call today, I will start by talking about the financial highlights of the 2022 first quarter results. In the last months, we have seen how all the properties in the portfolio have recovered their affluence. Many stores reaching sales greater than 2019. The dynamic of commercial activity are coming back. Payments are returning to the rent spaces and we are empty during the pandemic. We expect to rent during the year between 24,000 and 28,000 square meters.

Our goal is to return to the 96% of pre-COVID levels. The inauguration of the Life Center, La Perla in Guadalajara was a success. La Perla is a new offer for a commercial concept ranking in first place, the quality of life of people. La Perla integrates social, sports, cultural and social spaces and a friendly place for pets. We invest in sustainability and clean energy. We implement social actions in favor of the city and citizen organizations. La Perla is a project that began during the pandemic period and changes the way we see the spaces and visualize a different way of building and operating these assets. La Perla is a project with identified strength and a market that we hope will be consolidate before the second quarter of this 2023.

This space is a new version of what we now use to call fashion mall or shopping center and going forward, it will be the spearhead for the adapting the other assets in our portfolio. In this project, we went from having 25% of ownership to 93%. This decision -- this has forced us to make the best decision with responsibility looking for the highest profitability and value for our company and investors. We had to face challenges but convinced of the opportunity of value and success of this project. We have begun the process of divesting some assets that are not strategic for the company or that do not have the characteristics we seek for the new commercial reality for our properties or do they location or regions or markets also seeking to improve our financial profile.

Regarding to ESG project, we recently published the climate change risk study under the TCFD methodology for all the properties. As part of our strategy to implement TCFD we decide to start with an exhaustive professional analysis by an independent firm. The scope of this report includes a complete study of all of Fibra Shop's properties. Analysis of relevant critical and chronic risk arising from climate change, change regarding exposure compared to the recent past on their various climate scenarios and time horizons, physical climate risks such as decreased precipitation, heat waves, floods, cyclones and rising sea levels have direct impact on infrastructure, health, agriculture and productivity.

The results of the study reflect the impact and consequences that climate change might have in our operations, with the data obtained, we will improve our strategies to consider the risks and opportunities arising from climate change. The solar panel project has been resumed, starting in May 2022, panels will be installed in 15 properties. The project will take 52 weeks from installation to testing and final operations.

Once installed and in operation, the total photovoltaic system will be able to generate 51% of the energy consumed in a year, generating a considerable reduction in greenhouse gases and generating savings. Fibra Shop maintained its commitment to continue moving forward with ESG projects, seeking to achieve the highest international standards under the guidance of independent experts and with a strong commitment to transparency.

Now let's continue with the financial information. Revenues for the quarter were MXN 362 million, an increase of 7.6% compared to the same quarter of the previous year. NOI for the quarter was MXN 276 million and the NOI margin was 66%. The NOI for the quarter increased by 8.29% compared to the same quarter of the previous year. EBITDA for the quarter was MXN 265 million and EBITDA margin for the quarter was 73.47%. The EBITDA increased 8.25% when compared to the same quarter of the previous year. Adjusted net income for the quarter was MXN 110 million. Adjusted net income per CBFI for the quarter was MXN 0.24, resulting in an annual return of 15.6%. The portfolio weight occupancy rate closed at 92.56%.

Fibra Shop announced that it has an authorized bank credit line for MXN 1.8 billion for a 5-year term, the closure is pending. The funds of this credit will be used to prepay the MXN 1.4 billion FSHOP17 issuance and for general purpose corporate purposes. As part of the financial structure, Fibra Shop will establish sustainability conditions by incorporating KPIs, which will be validated by a sustainability agent through a third-party opinion. This measure allows Fibra Shop to extend its debt maturity profile and reiterate its commitment to sustainability in accordance with overall ESG strategy. Fitch rating ratified our long- and short-term domestic ratings for Fibra Shop at A+ in Mexico.

The long-term rating outlook was revised to a stable from negative. In the opinion provided by Fitch Ratings, the stabilized outlook includes a recovery in the commercial sector, contribution of revenues by La Perla, positive free cash flow generation moving forward and a gradual moving to deleveraging and the plan to refinance maturing debt issuance. There are still certain issues that could affect us and create a cloud of visibility of the immediate future. Some of these challenges such as inflation or the global supply chain affecting trade, we will take the necessary financial measures according to the circumstances as they arise.

Fibra Shop have distinguished itself for the responsible use of these resources. Therefore, while seeking the greater value and future for the company and its investors, the technical committee or the trust determine that the dividend of the quarter will be invested in La Perla, knowing that these dividends will generate more value and greater profitability for our investors by investing them in this project, seeking to reinforce the financial structure, especially now that financial costs are rising. In the coming quarters, we will continue to distribute dividends as before. This investment in La Perla should yield higher returns in the medium and long term that -- those that we had in the past.

We would like to thank you for your trust. At this time, I would like to open the floor for questions. Operator, we are ready to take any questions.

[Operator]

Certainly. [Operator Instructions]. Your first question is coming from [indiscernible].

[Unknown Analyst]

I have a couple of them but could you give us a little bit more details about the process that you mentioned in the earnings release about divesting some assets. Have you identified some properties that might be in this recycle cycle that you're planning to use going forward in quarters. And the second one is, regarding on the buyback program, a couple of deals, you have a buyback program in order to give a price momentum to CBFI. So I was wondering if you are not planning to make any distribution this quarter or maybe the following, are you planning to resume the buyback program?

[Gabriel Ramirez Fernandez, executive]

[indiscernible], thank you for the questions. Regarding to the first question for the assets what we will try to -- we are in the process to sell. The idea is nonstrategic, we already not have -- not a individual decision to sell a particular asset. The idea, the Board of Fibra Shop, with a hand of the independent members of the Board, we defined the strategy and the new tendency of the malls, for example, like La Perla there is, like an open spaces with ESG characteristics and something like that. And there is some malls or some properties there is very close to this high potential level of profits and don't have, for example, a space to grow or space to have the leases spread in the near future for the rent. The idea is to planning to what is a strategic core portfolio and what is not a strategic core portfolio and made -- and in the coming months, we are disclosed what is, if we have some specific asset to sell.

Today, we don't have any decision to sell any shopping center, is the process to define the new strategy but it's obviously not a big percentage of the company. It's a small percentage of the company. And when we sell part of this or a specific property, the idea is part to prepay debt, to have more strong capital structure and some part of this through a buyback program that is basically your second question. I don't know if you understand the first and the second question but you have another doubt, [indiscernible]?

[Unknown Analyst]

I think, yes, you covered part of the second one, [indiscernible] on the buyback program. But maybe let me put it another way. At some point, are you planning to give more sites move into the CBFI because when you -- actually I have to tell you that think you to put more graphs in this earnings release. But the question about again on the pricing is basically you are in the value if you consider the assets that you have in there on the balance sheet and giving you a [indiscernible] value you have in the balance sheet because it sounds like a MXN 0.20 per CBFI. So at some point, are you trying to give more momentum to the price movement of the CBFI.

[Gabriel Ramirez Fernandez, executive]

I'm not sure if I understand the question because the line is not so much clear. But if I understand the question, you asked me about the discounting in the NAV of the company and why don't give more buyback. That is a question, [indiscernible]?

[Unknown Analyst]

Exactly. At some point, because I know that right now, this quarter, you [indiscernible] mentioned that you have a buyback program, looking a couple of quarters ago, even years ago, you have a buyback program that I remember that you were some quarters active. There were other quarters you were not active as much. But I think that's the relationship between the questions in the past and going to the future.

[Gabriel Ramirez Fernandez, executive]

Yes. In the past, we are -- we have very active. We have the first Fibra in the Mexican market to have a buyback and use that buyback. Today, we are some different circumstance. First is to finish and start the operation of La Perla that is already is operating at Fibra, La Perla, sorry, in Guadalajara and is in the process to ramp up and take the leverage of the company. Look, if I have an aggressive buyback company, obviously increase the leverage and also increase the value of the company but in the same hand increase the leverage.

And we have some take care about the [indiscernible] of both sides of the equation. That is the idea, is why it's sold, for example, an specific asset that is very close to the higher return of the asset, in part to pay back part of the money or the majority of the money, reduce debt and some part of the money to buy back to increase the return in the future for the company. And in the near -- in the coming quarter, the idea is to distribute cash. In this particular quarter or in this particular quarter, the idea is to invest in La Perla because we are in the process to -- the [indiscernible] but is in the process to ramp up and consolidate the asset. And obviously, we announced on the other hand, the solar panels photovoltaic program. That is basically the idea for the near future.

[Unknown Analyst]

Gabriel and last, regarding on this new credit line that you have or you are in the process to close. The specific question is, the KPIs are ultimately related to the ESG metrics in order to comply something more, let's say, bigger picture to decarbonize Fibra Shop or those KPIs are not defined because it's not close.

[Gabriel Ramirez Fernandez, executive]

Both, it's not defined because it's in the process to close and is in the process to independent sustainability agent do the -- already have a second opinion. For example, we in bonds, we have a framework for issuing bonds. But the idea is to link this new credit for KPIs regarding to the reductions in consumption of energy and in the consequence of emissions to the atmosphere and know about the emission of this energy. That's the idea to enhance the program for reduce significantly around half of the consumption of energy. And the idea is this some goals in specific years to link this new financing. And the idea is the next financing, of all of the next financing of the Fibra have KPIs or take a green bond, a combination of that.

[Operator]

Your next question is coming from [ Gualima-Modieda ] from Fibra.

[Unknown Analyst]

I don't know if you already answered my question. My question is regarding occupancy. I want to clarify if I understood correctly, you want to return to the 96% of occupancy that you had in 2019 or I didn't quite understood if you want to get there this year. And another question related to that is, how have you seen the occupancy rate and the traffic during the first weeks of April? Are they already in 2019 levels?

[Gabriel Ramirez Fernandez, executive]

Thank you. I missed your name. Sorry about -- I missed your name. But in terms of the occupancy, we -- the goal of the company is at the end of these years -- of this year goes to 94% of occupancy, recovery 2 points and during the next year, recover the other points to goes to 95%, 96% that is basically with -- our average before the pandemic. But the good news, if you see the results in terms of income, the income is basically the same that we had before the pandemic. And the good news about that is the increase of that occupancy is basically net profit because the increase of the cost is very marginal because we have full operation up to date of the whole properties but basically, that has recovered 2 points this year and the next point during the next year.

We're starting to see a very strong market in terms of the tenants to ask for the new spaces. One example is La Perla property that is open and of today have 85% of signed contracts of the GLA. And this is a new project. If you see La Perla, that is construction during the pandemic and we're starting the operation a couple of months, 1 year ago, La Perla was 55% of occupancy because it's in the process of construction. But if you see the dynamic of the market, the brands come back to see specific properties, it takes more time because maybe have more offers in the table. But if you have a very good property lot and I think the portfolio of the Fibra is very good properties. We are very optimistic about that. The second question, if I understand, is in terms of the traffic, the affluence in the shopping centers. It's right?

[Unknown Analyst]

Yes. Exactly.

[Gabriel Ramirez Fernandez, executive]

Yes. In terms of affluency, if you see the numbers that we disclosed in the Page 10 of the English version of the release, we disclosed these 2 statistics in terms of vehicles and people. For me, it's better the vehicles because you have a ticket that is very exactly a number that always has a -- in another number you have some estimations. If you see in the last quarter of the last year, we are basically in the same level of prepandemic, in some cases, above that because it's Christmas season. And if you remember, January and December, we had the Omicron variant of the COVID-19 to reduce some people to goes to the properties. And we are, as you see, for example, March, this number is more close to 92%. And the recent numbers that we already have them, we don't put in the release. we are more close to 95%. Maybe we are very, very close to the people prepandemic in the properties.

[Operator]

[Operator Instructions] Your next question is coming from [indiscernible].

[Unknown Analyst]

I have 2. The first one is, how should we think about distribution pay in 2022? I mean what's the payout ratio or what's the pay the end of the year? And the second question is, you said part of your priorities was to finish La Perla, which is in ramp-up process. I was wondering how much investment La Perla still will require.

[Gabriel Ramirez Fernandez, executive]

In terms of the distribution, the idea is at the last quarter of this year, the distribution that we paid in last quarter, we didn't pay in the next year, are very close to MXN 0.80 per certificate or per share. That is basically the guidance that we published before the pandemic. The idea is this goes to that number. The non-distribution of this quarter is -- because you don't worry, it's basically to invest in La Perla and the project of ESG product in terms of the solar panels. But the idea is recover very close to that [indiscernible] MXN 0.80 per certificate at the end of this year. In terms of La Perla, we are very close to finish all of the invest because we are -- basically the shopping center is open but you have some final payments because you give some in advance monies for the suppliers for the construction and materials and something like that. And we are very close to finish around MXN 200 million approximately.

[Operator]

[Operator Instructions] Your next question is coming from [ Juan Gutierrez from HBC ].

[Unknown Analyst]

I was just wanted to congratulate you for your excellent results on these first quarter results. And I wanted to ask you regarding your debt maturities. How you've been working on these upcoming maturities in the following months and that you have secured well -- refinancing for these maturities.

[Unknown Executive]

Thank you, Juan, for the congratulation of the results. And regarding for your question, if you see our maturity of our debt we have some bond at maturity this year. It's basically the Fibra Shop 17. We already cover with the line that we are close to close with big Mexican bank where maybe sign this credit line in the next year -- in the next year -- in the next week, sorry, in the next week. And we have another big maturity in the next year. There is a syndicated loan for MXN 3000 million. We are now in the process with us -- we're working with the syndicated bank to extend the maturity of that debt and the other maturity of another -- those are very small and we are planning to pay with the money that we generate with the company.

[Operator]

[Operator Instructions] There are no further questions in the queue.

[Gabriel Ramirez Fernandez, executive]

Well, for final remarks, this is Gabriel Ramírez. Thank you for attending the Fibra Shop conference of first quarter results. If you see in the results, we are in the right line for recover all of the metrics prepandemic in terms of occupancy, income, earnings, et cetera. And we in the other hand, we are continue with a strong compromise of Fibra Shop for the ESG program and our ESG implementation in terms of climate risk, in terms of best practice, in terms to all of the things that ESG are in the table. And we are working to recover all of the metrics of the company. We are working hard to disclose for the investors transparency and all of the metrics and we are hoping to all of the questions in terms of this exercise of the results on an [indiscernible] basis to show to the investors and the stakeholders what is Fibra Shop and what is in the line for Fibra Shop, goes to [indiscernible]. Thank you so much and take care and see you soon.

[Operator]

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