Fibra Shop Portafolios Inmobiliarios SAPI de CV

BMV:FSHOP13

Earnings Call Transcript 2022-Q3

[Operator]

Good morning. My name is Ali, and I will be your conference operator today. At this time, I would like to welcome everyone to Fibra Shop's Third 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 the 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 and are stated in nominal Mexican pesos unless otherwise noted.

Joining us today from Fibra Shop in Mexico City is Salvador Cayón, 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. My name is Irvin Garcia. 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 third quarter results.

It is very likely that at some moment in the past, we have mentioned that the third quarter of the year is the worst of the year. Nevertheless, in the opportunity to speak with you, I would like to show you that it is what the complete opposite.

I want to start by talking about the Urban & Life Center Experience. If you remember, La Perla in Zapopán, Jalisco is the first step in this new concept. After just 6 months in operation, La Perla positively contribute to the portfolio, covering all the operational expenses and their financial costs. Fibra Shop has a 93% stake and expects to close 2022 taking total control of the project.

Once stabilized, La Perla will provide another 30% in the NOI to the result of the entire portfolio. Fibra Shop will continue implementing the Urban & Life Center Experience concept in the rest of its portfolio as soon the next properties where this concept will be replicated will be announced.

About the ESG project, we published our second ESG report for 2021. It was authorized by our ESG Committee and will be our first report verified externally. This second report shows our commitment to full transparency, and it relates all indicators in detail of each of one of our properties. It describes progress in our strategy and established specific goals for the indicators or KPIs that we have established for the coming years.

We published our Sustainability-Linked Financial Framework. The company's debt issuance under this framework will follow the guidelines established by the ICMA 2022 for Sustainability-Linked Bonds and those established for Sustainability-Linked Loans by the LMA, which set out guidelines recommending best practice for structuring, releasing and presenting these reports.

We got from Standard & Poor's a Second Party Opinion of the Sustainability-linked Financial Framework. In the report, S&P points out some characteristics for the framework as a "Strong". Under this framework, a loan for MXN 1.8 billion was contracted, which now is being extended to up to MXN 2.45 billion and integrating sustainable KPIs.

We will also use that framework to restructure the syndicated bank loan of MXN 3 billion. Once this negotiation has finished, 50% of our debt will have sustainability-linked criteria. Fibra Shop continues working with different strategies to improve the balance sheet structure and maintain the company's long-term vision to add value for its certificate holders. One of these actions is the project of divesting nonstrategic assets for about MXN 1 billion.

In August, we successfully concluded the partial sale of this portfolio. Negotiations continue, and we expect to close on the sale of all of these assets in the first quarter of 2023. The funds obtained from the sales were used for early payment of the Banco Sabadell loan, which was scheduled to mature in November 2022.

In addition, during the ordinary meeting held in September, the Technical Committee of the trust decided to reactivate the CBFI repurchase program for up to MXN 40 million. During the quarter, several repurchases were made at market prices. A total of 6.3 million shares were repurchased, which represents 1.39% of shares in circulation. The Technical Committee also ordered cancellation of those certificates.

Now let's continue with the financial information. Revenues in the quarter, including net income from its stake in La Perla were MXN 417 million, the highest revenue in its history, even higher than the fourth quarter of 2019. Revenues rose by 15.86% on an annual basis and 12.34% over the previous quarter. NOI in the quarter was MXN 322 million, and NOI margin was 77.66%.

EBITDA in the quarter was MXN 310 million, and EBITDA margin was 74.81%. Adjusted net income for the quarter was MXN 105 million. This is MXN 0.2338 per share and represents a dividend yield of 14.61%. The AMEFIBRA FFO in the quarter was MXN 109 million. FFO per certificate was MXN 0.2422 cent, which is an annualized rate of 15.16%. The portfolio's weighted occupancy rate closed at 93.52% during the year.

We have rented 18,000 square meters of locations that were vacancies during the pandemic, which represents about 3% of the portfolio without La Perla. The Technical Committee of the trust determined not to pay the distribution of the third quarter of 2022.

The decision was based on a proven and a healthy financial approach and considering Fibra Shop is currently finalizing the last stages of the strategy to improve the balance sheet structure and it wraps up the sale of nonstrategic assets.

The committee also took in consideration the current economic environment, the tightening of monetary policy in Mexico, higher interest rates, high levels of inflation and supply chain challenges that continue to impact new tenant store openings.

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 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]

[Operator Instructions] Our first question is coming from [ Edson Nagoya ] with Soma Capital.

[Unknown Analyst]

The first question is regarding on La Perla. So you're expecting to have 93% through the end of 2022 [indiscernible] ownership. However, so looking forward, what is your expectation on NOI contribution? You mentioned in this quarter, one of the highlights was the results of the -- the past results in history of Fibra Shop was related to La Perla. So looking forward, what is the expectations on NOI contribution from La Perla?

And the second one, it got our attention that you mentioned about the repurchase program, but I was wondering if you are considered the distribution last quarter, you mentioned that because of closing the La Perla and the dynamics of the [indiscernible] you were not considering distribution. So I'm trying to understand rationale of merchants in program rather than pay distribution?

[Salvador Cayón Ceballos, executive]

Thank you, Edson, for those questions. The third one about the La Perla. We already are in the process to confirm the 93% of ownership of La Perla what is probably a basic to already have it, but the process to change in the legal documents that you take the control of the assets.

And we'll expect that -- at the end of the year, we consolidate all of the balance sheet of La Perla inside the Fibra Shop. In this moment, we have the economic rights of 93% of his EBITDA and the distribution before pay his debt, his financial expenses that we show in the Page #12 of the English report. We have a rent. We have expenses. We have a cost of his debt -- La Perla's debt, and we have 93% of his profit of that project.

We are continuing the process to take the control because we have already 93% of the project. And maybe when you see the figures of the balance sheet and the numbers of Fibra Shop last year -- the last quarter of this year, we'll see the La Perla consolidate all of the income, all of the assets, all of the parts of the financial statement in La Perla. In terms of the future contribution of La Perla, La Perla will stabilize, maybe in 2024, we expected that, that it goes to his goals of occupancy, income and something like that. We have tried to stabilize.

We expect that if you see the NOI that we already have in Fibra Shop increased between 30% or 35%. It's a big, big contribution of La Perla for the numbers of Fibra Shop. In terms of the second question, Edson, about I think if I not mistake the question - I don't understand the question. You asked about what is the rationality of repurchase instead of pay dividends and when we will stabilize the dividends. Is that the question?

[Unknown Analyst]

Yes. Because it related to -- but it's related to the rationality to -- we assume the repurchase or the buyback program that you established a couple of years ago and you already bought 6 million shares or CBFI. But I was trying to understand why we assume the repurchase program rather to pay distribution?

[Salvador Cayón Ceballos, executive]

Yes. But part of the question that we decide, for example, this quarter do not pay a distribution for this specific quarter is because we are in the process that you read in the report, we are in the process to the rollover of our debt and the process to sell some nonstrategic assets.

And we disclosed that the money that we rise for that sale is basically to pay debt because we are in a state that the central banks rise the interest rate. We have some rise of inflation and there is some noise in terms of the financial market.

The reason of that is basically prepaid in the high interest rates and reduce the money that we want to pay interest rate quarter-by-quarter. The idea to during the last quarter use part of the money to buy back program is because we see that the -- in our opinion, in a personal opinion of the company and in the Board of the company, the price of the stock of Fibra Shop or the CBFI of Fibra Shop is very cheap.

And if you buy that shares, you give a potential return higher than we use this money with another thing. It's basically the rationale.

[Unknown Analyst]

Okay. And the last question that I have is regarding selling nonstrategic assets, [indiscernible] the fact that you already sold the [indiscernible] property. What are your plans looking ahead? Are you internally considering other assets or other properties?

[Salvador Cayón Ceballos, executive]

Yes. We have another property that in this moment, we cannot disclose because it's in the process of negotiation and is in the process of the due diligence for the potential buyer of the property. But it's basically amount around 80 -- we disclosed MXN 1 billion. We felt maybe 50% of that is basically the last part of that MXN 1 billion.

We are in that process that for the amount of that transaction, we are going to commission the competent antitrust authority to -- and when we are in that stage, we will disclose this transaction. We expect if all of the things go right, to go good, we expect to sell or to close that transaction in the first quarter of the next year and the money of that goes to pay liabilities basically.

[Operator]

[Operator Instructions] We have a question from Javier Martinez, who is a private investor.

[Unknown Attendee]

Congrats for the results. I just have 1 question regarding the MXN 3 million syndicated loan refinancing. I don't know when is refinancing expected to occur? And what is the timing that we are considering?

[Salvador Cayón Ceballos, executive]

Thank you for the question, Javier. We are now -- as you see, we are refinanced the bond [indiscernible] this year for MXN 1.0 billion (sic) MXN 1.8 billion. We get new financials syndicated loan for MXN 1.8 billion. We are now in the process to increase this line to MXN 2.5 billion. The increase of this line that we will expect to close during 2 weeks. We used this increase of this loan to prepay part of the MXN 3 billion syndicate.

After that, we launched the refinancing. We are working with the banks that is in that facility of revolving credit. And we expect to close the refinances of that MXN 3 billion less the prepayment because we increased the another line, we expect to close around March of next year.

[Operator]

There appear to be no more questions in line. So I will hand you back to Mr. Cayón and Mr. Ramirez for any closing remarks.

[Salvador Cayón Ceballos, executive]

Thank you. Thank you all for all of the people to attend the call. We are very happy about the result of Fibra Shop. You see this is the biggest risk -- incomes in the Fibra Shop for the beginning. The pandemic -- the impact of the pandemic are in the past, we will skip that difficult period of the company.

We don't have now more releases. We don't have more discounts. We are increase. If you see the occupancy, we are in the good path to recovery the percent that we have before the pandemic, but we have more income than before the pandemic. If you -- if we increase that percentage of occupancy, we increase basically the NOI or the distribution of the Fibra because we already have the expenses and it's basically more income for the company.

We continue in the process to stabilize La Perla, but the good news is La Perla are basically in black numbers, with utilities in half of year or he's open. The process of La Perla is there. The new concept [indiscernible] life experience centers.

We are in the process. We are in the process to change more properties with this new concept that is basically the new idea of Fibra Shop where we put in the properties and the results are there, that people go more times per week to put the properties. There are more time in the property. And we obviously, the result of that, that is expense more money in the properties, the tenants gain money and they pay rent for Fibra Shop. That is basically the model of business.

We are continue working and we see you soon when we'll have more information to disclose and the next quarter results. Thank you so much.

[Operator]

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