Fibra Shop Portafolios Inmobiliarios SAPI de CV

BMV:FSHOP13

Earnings Call Transcript 2023-Q1

[Operator]

Good morning. My name is Kelly, and I will be your conference operator today. At this time, I would like to welcome everyone to FibraShop's First Quarter 2023 Results Conference Call. FibraShop 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 the International Financial Reporting Standards, IFRS, and are stated in nominal Mexican pesos, unless otherwise noted. Joining us today from FibraShop in Mexico City is Salvador Cayon, Chief Executive Officer; Gabriel Ramirez, Chief Financial Officer; and Irvin Garcia, Controller and Investor Relations Officer.

And now I will turn the call over to Mr. Garcia. Sir, please go ahead.

[Irvin García Millán, executive]

Thank you. Hi, everyone. Good afternoon. Thank you for joining us on today's conference call. Before I begin, I would like to take up a part of Salvador's message in this report. He mentioned that over the last several years, we have chosen diligence, creativity, responsible financial management and constant strategy development. As our way to face the challenges of the global economy.

For FibraShop, 2023 is a time to reap the harvest of our work as several significant projects we'll measure throughout the year. The strategy announced years ago to strengthen the balance structure consists in different pillars. During our call today, we will discuss about the financial highlights of the quarter and look back at some of the strategies that began years ago and during 2023, we expect to see the results. Let's begin with the financial -- refinancing debt plan.

Yesterday, we have signed the refinancing of the MXN 220 million credit line with Scotiabank that would mature in November 2023 and it was extended until November 2026, with the same conditions. In order to continue with the refinancing of liabilities maturing, this year, with the approval of the Technical Committee of the trust and the favorable of all independent members, the progress of the plan and the next steps were approved, which are to choose the following transactions. The first is the refinancing, the revolving syndicate line of credit for MXN 2.4 billion with BBVA as the lead bank. The idea is to expand the period of another 4 years and include sustainability-linked KPIs.

The second is the refinancing the credit line of credit with Nacional Financiera. The current loan of MXN 300 million expires in July 2023, and the plan is to increase the amount for up to MXN 400 million and to extend the period of another 3 years on the same conditions. FibraShop is, therefore, seeking to extend the maturity profile of the debt, reiterating its commitment to sustainability in accordance with ESG strategy.

We estimate these operations will be closed during May. This plan will be presented in the next shareholders' meeting in the coming days. Once we close this transaction, FibraShop will not have significant debt expiration date on the 2025. The ratios continue to advance in the plan of sale non-strategic assets. Since 2022, FibraShop amounted that it would seek to complete the sale of a portfolio of MXN 1 billion. The proceeds would be distributed approximately as follows: 75% for debt repayment, 15% in investments to replicate the [indiscernible] , 10% to reactivate the buyback program.

In August 2022, the sale of the Urban Center Xalapa property was announced. With the proceeds of this transaction, a bilateral loan with Banco Sabadell for about MXN 150 million was prepaid in advance, and the CBFI repurchase program was reactivated for approximately MXN 40 million.

On March 21, FibraShop informed the sale of Kukulcán Plaza. The sale price of the Kukulcán Plaza is MXN 840 (sic) [ 850 ] million and is subject mainly to the authorization of the Federal Antitrust Commission or COFECE. The proceeds has already begun and the proceeds from the sale will be used in line with the percentage mentioned above.

Now let's talk about the ramp-up of La Perla. Today image of the Urban and Life Center experience developed by FibraShop. La Perla provides the basis of the strategy to refurbish all its properties. FibraShop has allocated a significant amount of financial resources, both new term and new loans to open this project.

Even so, we continue investing in consolidating the project and the concept. After the first year in operations, La Perla positively contributes to the portfolio, covering all the operation and the financial expenses. During the first quarter, generated about MXN 90 million with less than 70% of doors opened. The volume of permanence and affluence continue increasing, which is reflected in variable and parking revenues. By the end of the year, the expectation is that 85% of the doors will be opened and there will be another 1.5 million visits per month.

The levels projected in the budget for the year will be reached earlier than initially expected. Now about the ESG project, for the second consecutive year, FibraShop participates in the Corporate Sustainability Assessment or CSA, as standard and important initiative with more than 10,000 global companies are invited. In March 2023, the results were published. FibraShop has an overall score of 39%, well above the average score of 22%. Our best results were in the environment area as we exceed the industry average by 118%, largely due to the projects we have to decide to implement such as solar panels, water treatment plants and construction that focus on the environmental and sustainability use of materials.

In the corporate governance area, we exceed the industry average by 30%. We have good results in the evaluation of the structure of our committees, the majority of the experience of the Board members and the number of women on the board is one of the highest worldwide. In the social sphere, we exceed the industry average by 70% principally due to the impact of philanthropic activities we performed in the communities where we operate, the commitment and support of human rights and the work we have been doing to strengthen the organization in areas that generate social well-being with our employees. The results this year were improved 50% of the previous results and we will continue analyzing the results obtained to continue to position ourselves as one of the best worldwide.

In December 2022, the Urban and Life Center experience La Perla obtained the EDGE certification from the International Finance Corporation or IFC, with its 362 (sic) [ 362,789 ] square meters of construction has become the largest shopping center in Latin America to obtain that certification. La Perla represents one of the -- represents 25% of the total constructed surface in the entire portfolio administrated by the FibraShop.

FibraShop plans to transform the majority of its projects into the Urban and Life Center experience, following the successful startup of La Perla. The next property that will seek the EDGE certification is Puerta La Victoria property located in Santiago de Querétero, which has a constructed area of 179,000 square meters (sic) 179,092 square meters. If we achieved the EDGE certification of La Victoria in the coming months, we would reach approximately 37% of the total certified construction area. FibraShop will seek to obtain EDGE certification for the rest of the portfolio.

Now let's continue with the financial highlights of the first quarter 2023. The financial results on this quarter reflect the stability and solidity of the portfolio. Revenues in the quarter were MXN 523 million, increasing around 45% year-on-year and 2% quarter-on-quarter. And for the third consecutive quarter, had the highest revenues in the FibraShop history. The consolidated NOI in the quarter was MXN 413 million with a margin of 78.8%, while the NOI margin at the property level that is the operating margin of shopping center was 85%. NOI in the quarter increased 49% on an annual basis.

Consolidated EBITDA in the quarter was MXN 397 million with a margin of 75.8%. EBITDA in the quarter increased 49% year-over-year. Adjusted net income for the quarter was MXN 85 million. This is MXN 0.1893 per CBFI, which represents a dividend yield of 12%. AMEFIBRA FFO in the quarter was MXN 90 million. FFO per certificate was MXN 0.1999 with an annualized rate of 13%. The portfolio stabilized, weight occupancy rate closed at 93.62% including La Perla was 92.45%.

The Technical Committee of the Trust deliberated on the economic outlook for 2023. On one hand, the recovery of the portfolio, the remarkable performance of La Perla and the advances in refinancing debt plan as well as the status of the sale of non-strategic assets. In the other hand, the expectations about the monetary policy in Mexico, the inflation levels and the possibility of a slowdown economy and prevent possible drop in cash flows.

Based on the above mentioned, the Technical Committee decided to maintain a prudent position, healthy finance for the benefit of all the investors. Therefore, it determined not to pay dividend distribution corresponding to the first quarter of 2023. The profit generated in the quarter will be reinvested in the business. Nevertheless, the Technical Committee ratified the guidance published since the previous quarter. The purpose of the guidance is to show the market a tentative route for reestablishing cash distribution over the next 3 years. A gradual return to pre-pandemic levels on distribution and given the incorporation and future stabilization of La Perla and the dynamics of the portfolio as a whole. The new levels could be reached in a horizon of 3 years.

The tentative distribution for the next year are as follows: in 2023, a minimum of MXN 0.003 and a maximum of MXN 0.005 annually per certificate. In 2024, a minimum of MXN 0.005 and a maximum of MXN 0.008 annually per certificate. And the year 2025, a minimum of MXN 0.008 and a maximum of MXN 0.011 annually per certificate.

It should be noted that FibraShop Technical Committee may at any time modify the guidance, and it may also modify the assumptions and considerations used to prefer that guidance. We have made the necessary decision for the business to remain solid, and we hope that with each successive quarter, the economy will continue to improve.

We would like to thank our investors for the trust and we reiterate for our commitment to keeping the company on a stable path. At this time, I would like to open the floor for questions. Operator, we are ready to take any questions.

[Operator]

Certainly. The floor is now open for questions. [Operator Instructions]

Your first question is coming up from Felipe Barragan with BTG Pactual.

[Unknown Analyst]

I have a couple of questions. One is on distributions. So you guys are obviously refinancing and you guys will reach an ideal debt profile by May that I think as you noted in the press release. What sort of time line should we expect sometime in the second half of this year? Or maybe in the next quarter, that is for your guidance for 2023.

And my second question is -- the Kukulcán Plaza was sold for MXN 50 million below the MXN 900 million you had posted last quarter of the property's value. I'm just curious, is there anything in particular that the property had as to why it was sold below the book value? If you can give some color on that, that would be great.

[Gabriel Ramirez Fernandez, executive]

Felipe, thank you for attending the call and obviously thank you for the questions. In terms of distribution, it's important to say that the decision of the Technical Committee to ratify the guidance. That means that [indiscernible] and the environment, about the financial system, the interest rates and the numbers of the FibraShop is in the same line than in the last quarter. That means that the idea is to starting the cash distribution this year. I don't know if the next quarter or in the second half is more probably than in the second half because during this April and May, we're planning to finish the refinance all of the liability that expire this year. That is basically the plan to refinance the revolving credit line with [indiscernible] and a single line for Nacional Financiera. Board is planning to sign in May.

And this is part of the question that pay the methods to the market that we have a transaction. The other hand of the strong balance is to reduce the level of debt, selling the non-strategic assets. We already have designed for Kukulcán, obviously, with some automization, basically, the Antitrust Commission in Mexico, COFECE and finish legal line of processes, notarial and something like that. And the committee thinks its stable. We don't finish the plan that we disclosed to the market. First finish and then use the cash to distribution. It's more probably that we distribute in the second half than in the next quarter, but maybe in the next quarter, starting the distribution.

For the second question about Kukulcán, obviously, there is -- the sales prices are a little below for the last appraisal. The last appraisal was the MXN 900 million and published in the last quarter, basically with numbers at the end of the last year. As you know, when you sell an asset that we offer and demand of this, 2 parts in the table. We're starting with -- we tried to sell above the appraisals, the last negotiation goes to a little discount, but we decided to sell because it's a good price and it's not a strategic asset. It's an asset in a city with a lot of shopping centers around this property, a lot of competition.

There is not a good property to transform to [indiscernible] have the characteristics to that. And for the buyer, it becomes a strategic asset because of the core business of the buyer and the location of the property for the oriented of the buyer. And with this -- sorry. And that is the reason we decided to say yes and go to the transaction. A little below is not a significant discount, but little below to that percent. There is not any situation or any situation different about the problems on the asset or something that explains the discount.

[Operator]

Your next question is coming from Francisco Chavez with BBVA.

[Francisco Chávez Martínez, analyst]

The question is regarding the divestment of assets. Do you plan to continue selling some non-strategic assets during the rest of the year?

[Gabriel Ramirez Fernandez, executive]

Of today, the Technical Committee approved the sale of that asset that we already disclosed. [indiscernible] already done and Kukulcán is in the process. Now the Technical Committee is analyzed if there is another non-strategic assets and if the Technical Committee decides that there is one or more non-strategic asset, in the next weeks or in the next months, announce what is the next steps in stronger our balance sheet. The idea is obviously, there is some assets that is in the scope to the Technical Committee to do that but today, we don't have any decision about another asset to another portfolio of assets that is in process to sell.

[Operator]

[Operator Instructions] There appears to be no further questions in queue. I would now like to turn the floor back over to Gabriel Ramirez for any closing remarks.

[Gabriel Ramirez Fernandez, executive]

Well, thank you for attending the conference. Thank you for the questions. As you see in the report, the recovery of FibraShop is there. The company is strongest, we recover the levels in traffic pre-pandemic and in some cases, above pre-pandemic. We have a very optimistic path to the next months about the earnings, dividend and some another metrics of the company. We continue our ESG strategy. And we are in the process and with that maybe a good advance or our opinion with advance in the strategy of a strong balance in a new scenario that it's more likelihood if there is no probability that in the next 12 months, we have a better level of interest rate that improved the FFO AMEFIBRA.

And continued increase the consolidation of La Perla and that is basically the reason that we disclose the guidance to give some color for the market and for the investors and for analyst and all of the stakeholders about what is the path to recover the distributions and strongest the balance of the company and the cash condition of the company. Thank you so much for attending the conference and see you soon.

[Operator]

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.