Vesta Real Estate Corporation SAB de CV

NYSE:VTMX

Earnings Call Transcript 2023-Q1

[Operator]

Greetings, ladies and gentlemen, and welcome to Vesta First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Maria Fernanda Bettinger, Investor Relations Officer. Please go ahead.

[Fernanda Bettinger, executive]

Good morning, everyone, and thank you for joining our first quarter results call. With me today are Lorenzo Dominique Berho, Chief Executive Officer; and Juan Sottil, Chief Financial Officer.

The earnings release detailing our first quarter 2023 results crossed the wire yesterday afternoon and is available on the company's website along with our supplemental materials. Before we begin the call today, I'll remind you that today's presentation contains forward-looking statements. Forward-looking statements are predictions, projections or other statements about future events. These statements involve risks, uncertainties that may cause actual results, and tends to differ materially from those projected. For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to our first quarter result's press release and our MBV filings. Please also note that all figures included herein were prepared in accordance with IFRS and are stated in nominal U.S. dollars, unless otherwise noted. Let me now turn the call over to Lorenzo Berho.

[Lorenzo Dominique Berho Carranza, executive]

Thank you, Fernanda. Good morning, everyone, and welcome to our first quarter earnings call. Let me begin by thanking our team for delivering an excellent start to the year. We had a strong first quarter, achieving almost 20% year-on-year increase in revenue driven by high occupancy and rent increases. During the quarter, we signed 1.2 million square feet of new contracts with companies such as Polaris, DB Schenker and TLC Moka, among others. We also saw almost 1 million square feet in lease renewals. We continue to see Vesta's buildings being occupied even before delivery, which was the case with 3 buildings this quarter, 2 in Monterrey and 1 in Ciudad Juarez. We had 3.8 million square feet in projects under construction during the quarter, in line with last quarter's pipeline. While there were no new construction starts during the first quarter, we're laying a strong foundation for new buildings over rest of the year working with development teams to target larger projects within our 5 strategically defined regions with a particular focus on manufacturing and e-commerce opportunities. You will recall we acquired 52 acres of land in the San Martin Obispo Punta Norte area of Mexico City during the fourth quarter 2023 adjacent to one of Mexico's main roads with optimal connectivity. This best-in-class location is ideal for last mile distribution and logistics and another addition to Vesta's increasing footprint within Mexico City and metropolitan areas with trophy assets. We expect to begin construction on this land in the near future. As you have heard me comment in the past, we believe Mexico nearshoring is essentially still in its early stages. During the first quarter 2023, we continue to see American, European and Asian businesses moved their manufacturing operations to Mexico. Nearshoring represents a viable and enduring long-term solution to the challenges many companies faced when operating in other markets. Economic and political factors have taken the bloom of the roads for manufacturing in China in particular. At the same time, the growth of Mexico and U.S. trade has reduced costs, improved quality and made the concept of nearshoring in Mexico, a truly viable if not sometimes superior alternative for U.S. manufacturers compelled to make the move. We have seen clear indications that Mexico is ready to meet the moment. This includes its manufacturing, which today is better able to handle increasing logistics demand also with a strengthened focus on research and development. Clearly, it is difficult for U.S. manufacturers to walk away from the billions of U.S. investments they have made in other markets. But the exodus to Mexico's friendlier shores started as a trickle but has become a steady stream. We believe this is a lifetime opportunity for Mexico industrial real estate in general and for Vesta in particular. Our state-of-the-art industrial parks and facilities have secured our reputations as Mexico's premier industrial real estate developer. 2023 marks Vesta's 25th anniversary. We have spent 25 years building and expanding a solid foundation, establishing deep relationships with the world's premier global companies and a presence in Mexico's most strategically relevant markets, all while assembling one of the most experienced operating teams in our industry, attracting each region's very best talent. And Vesta's 25 years of experience building the premier properties is an important differentiator for our clients. While Vesta has seen challenging operating environments over the last 25 years, we are now witnessing the kind of explosive growth we have long anticipated based on the unique qualities that the Mexican manufacturing market represents. Today, Vesta is in the privileged position to have achieved both the size and the strategic vision to capture this moment, with the demonstrated ability to seize opportunities in a disruptive environment. We can and will continue to be opportunistic driven by our experience and entrepreneurial spirit. With that, let me turn it over to Juan, and I will return for some brief closing remarks. Thank you.

[Juan Felipe Sottil Achuttegui, executive]

Thank you, Lorenzo, and good day, everyone. Let me begin with a summary of our first quarter results. Starting with our top line, as Loren mentioned, we had a strong start of the year with total revenues up 20% to $50.2 million, mainly due to rental revenue coming from new leases and inflationary adjustments on rental property during the quarter. As a reminder, most Vesta leases are indexed to inflation. Therefore, we continued to benefit from the favorable effect of higher-than-expected inflation on our top line results. In terms of the currency mix, $86.7 million of the first quarter revenue was denominated in dollars, decreasing from $87.1 million recorded in last year's comparable period. Turning to our cost structure. Total operating cost reached $3.2 million in this quarter from $2.2 million in the first quarter of 2022. This was mainly due to higher real estate taxes, maintenance and other property-related expenses as well as the increase in the number of leased properties in our portfolio. Net operating income increased 18.1% to $47.7 million, driven by higher rental revenues, while the margin contracted 120 basis points to 95%, mainly due to higher costs from rented properties. Administrative expenses were up 28.2%, reflecting again this quarter higher noncash expenses due to an increase in the company's long-term compensation plan. In turn, EBITDA reached $42 million in the first quarter of the year, an 18.6% increase compared to the prior year's quarter. And the margin decreased 60 basis points to 83.7% as compared to the 84.3% from the same quarter last year. Moving down the P&L. Total other income reached $4.3 million compared to $27.4 million in the first quarter 2022. This decrease was mainly due to lower property valuation gains and higher interest expense, partially offset by a positive variance in foreign exchange results. As a result, we closed the quarter with a pretax income of $43.1 million compared with $60.8 million in the first quarter of 2022, while the pretax FFO increased $21.6 million to $30.4 million and NAV per share increased 10.1% to $2.87 from $2.61 per share in the same quarter of 2022. Now, turning to our CapEx and portfolio composition. We invested $54.2 million in the quarter, mainly in the construction of new buildings in the Northern and Bajio regions as of March 2023. The total value of the portfolio was $2.79 billion, comprised of 202 high-quality industrial assets with a total G&A of 33.7 million square foot and with 86.7% of total income denominated in dollars. Year-over-year, our stabilized portfolio grew 5.6% to $33.1 million in square feet with an occupancy of 96.7% from 94.3% in the first quarter of last year. Our land bank stood at 38 million square feet as of March 2023 and remained unchanged from December 2022. Turning to our balance sheet. We closed the quarter with a total debt of $930 million. Net debt-to-EBITDA was 5.3x, and our loan-to-value ratio was 32%. Cash and equivalents stood at $98 million that, together with our $200 million committed credit line provides us with total liquidity position of nearly $300 million at the end of the first quarter. Subsequent to quarter end, on April 17, we paid a cash dividend for the first quarter of 2023, equivalent to MXN 1.39 per share in ordinary share. With that, this concludes our first quarter 2023 review. Operator, could you please open the floor for questions?

[Operator]

[Operator Instructions] So our first question comes from Carlos Peyrelongue from Bank of America.

[Carlos Peyrelongue, analyst]

Gentlemen, congratulations on the strong results. 2 questions, if I may. First one, if you could give us an idea of what was the positive lease spread that you got during the quarter for those contracts that expired that were renovated during the quarter? And secondly, if you could give us some idea of occupancies in your key markets just to get a sense of how they've been evolving on a quarter-over-quarter basis, if you have that number?

[Juan Felipe Sottil Achuttegui, executive]

Carlos, thank you for the questions. On the lease spreads, we didn't have that many maturities during the quarter. And we had a lease-up spread of between 5% and 15% over and above inflation, depending on the markets, as you would expect, Northern markets more positive than central markets.

[Carlos Peyrelongue, analyst]

And any form of the occupancy?

[Juan Felipe Sottil Achuttegui, executive]

On that we continue to extend the maturity profile of the portfolio, even on the rollover. So that's very positive for us.

[Lorenzo Dominique Berho Carranza, executive]

And the second question was on occupancy of?

[Carlos Peyrelongue, analyst]

Your key markets?

[Lorenzo Dominique Berho Carranza, executive]

Let me get back to you and we have on the top of my head. But by the end of the conference call, I will just.

[Operator]

Our next question comes from Rodolfo Ramos at Bradesco.

[Rodolfo Ramos, analyst]

A couple of questions as well on my side. Just looking at the 20% of GLA that expires this and next year, can you tell us how much of that do you expect to reset to market rate and how much of that has extensions still left? And if you can quantify the magnitude of adjustment you would expect there.

[Lorenzo Dominique Berho Carranza, executive]

Okay. So can you just briefly repeat the question? I got lost in the stringent thoughts. Sorry about that. That was my mistake.

[Rodolfo Ramos, analyst]

No, no. Just when we look at the GLA that expires this and next year, I just want to get a sense of how much of those contracts that expire do you expect to reset to market rate? In other words, how much of -- or the other way around, how much of that -- how many of -- how much of those -- that GLA that is expiring, has extensions that tenants can still extend at current rates with inflation?

[Lorenzo Dominique Berho Carranza, executive]

Sure. Look, it is a very common picture in the leases that we have. And I would venture to say that the leases that the market as a whole has that most of leases have 2 extensions of 3 or 5 years. That's very common.

The way that we manage this is we typically get close to the clients and that's one of our most important differentiating factors. The fact that we are -- the company has its own asset managers and we are very close to the clients. And what we do is that in spite of the short-term extensions that the contracts have, we invest in the properties because most clients will have the requirements of property improvements and what have you. And we trade off the investments of our CapEx into the properties in order to upgrade the time frame of extensions. So instead of a 3 or 5-year extension, we typically do 7 years, 5 years, if it's a 3, whatever. And then we calculate the rent, so that we get over the in-place rent. That tends to be a winning proposition. We have a better building, which is a priority for our company. And the client gets to have the TIs that they require at a minimal expense to them. For example, sometimes they require larger, I don't know, larger lounge and room the heavy doors and certain improvements, and we trade off those 2 things. So that's the way we manage rollovers.

[Rodolfo Ramos, analyst]

Okay. And just a second one, when we look at your land reserve, roughly about 10% is in the Monterrey market. And you're currently already developing something in the Apodaca submarket. So my question is, is there anything in that specific market; holding you back to develop the rest of your land reserve sooner than perhaps you indicated in your pipeline? And if you have any presence in the Santa Catarina or Escobedo submarkets, which are -- which is where Tesla or close to where Tesla and suppliers will be setting up operations. I just want to get a sense whether you have any bottlenecks there that might be holding you back? And what -- how does your land reserve look in that submarket?

[Lorenzo Dominique Berho Carranza, executive]

Sure, great question. As you are well aware, we have penetrated the Monterrey market with 2 very successful projects, the first one been in Guadalupe, where we were able to lease up to Copel to OXXO and Amazon, among others, and our second project in Apodaca.

In Apodaca, our first anchor project was leased or the first 2 buildings to Polaris, which is one of the greatest news we have for this quarter. And part of the land that we still have in Apodaca, part of it. We're considering an expansion also. There could be a potential expansion for the anchor tenant. However, we are also expanding and developing 2 new inventory buildings in Monterrey. And hopefully, throughout the year, we're going to be able to lease them up even before finalizing construction. As the year continues, we are paving the ground. So that we can start construction of the additional land as soon as we can be able to keep on leasing up. So we feel very comfortable that while this period of marketing, we're going to be able to put the infrastructure in place, the organization for the land. And I'm pretty sure that this privileged location will benefit from the strong market. Now clearly, Apodaca is the most traditional industrial market in Monterrey, which is in the opposite side to Santa Catarina, where Tesla is going. However, we feel very comfortable by having land in the opposite side to Tesla, because Tesla also represents a challenge when it comes to labor. And if you develop a building that is not -- that is next to Tesla, the clients might have a challenge for labor. And we think that the Apodaca and Guadalupe region where we're at is a privilege in terms of having accessibility to labor, accessibility for logistics. And even for suppliers of Tesla, it has even a great connectivity in the most desired industrial market. But we are excited about the Tesla announcement. And I'm pretty sure that it will benefit Santa Catarina, Monterrey and even the rest of Mexico for its supplier base.

[Operator]

Our next question comes from Vanessa Quiroga at Credit Suisse.

[Vanessa Quiroga, analyst]

My question is about your growth plans. It's clear would you like to concentrate your development growth going forward? And how you expect to get the funding for the growth? I mean, after the shareholders meeting, just any update on those plans would be great. And also, any update on the environment in Bajio and on timing for Bajio to become a more attractive region for the nearshoring trend. And so that Vesta is able to use more rapidly its land bank in the region.

[Lorenzo Dominique Berho Carranza, executive]

Thank you, Vanessa, and thank you for your question. We are executing very successfully the development pipeline for the $1.1 billion we presented last year in our Vesta Day. That actually, fortunately, is coming quicker than expected. Which markets are we -- do we see with a major demand? Well, it's clearly the 5 strategic markets that we defined as the 5 Olympic rings. But we're currently very active in Tijuana with a mega region project.

We are very active with the new land acquisition we did in Juarez, very close to the Saragossa bridge crossing. And we've actually leased to DB Schenker, a great logistic company from Germany, focusing the integration of supply chains for the electronics business. And that was the first project that we were leasing. And we're going to be very active in Juarez too and we have land to develop still for the next upcoming years. Again, Monterrey that I recently mentioned, Mexico City with 2 projects that are going to be real iconic projects for Vesta in the Mexico City area. And Bajio is coming actually -- it's coming -- it's getting back on track. And we might see a greater commercial and leasing activity, particularly in the Creator market and Guanajuato. So we are seeing that there is a strong demand in these major markets even just to mention Guadalajara is another market that we're very strong at. And we have been able to lease at under great conditions. And ideally, if this continues to move as fast as it is happening, we're going to be able to invest about $250 million per year. And the idea after we got the shareholder approval to raise equity; ideally, if -- when markets permit at some point, we might have an equity issuance and that's something that we have talked already with existing shareholders. We see a strong pipeline, even on top of our existing pipeline that is little by little building up with a strong demand in most of these markets. And therefore, we see that we might have an opportunity to raise capital and put money to work even that we have a strong balance sheet. We believe that this is a great path going forward to particularly take advantage of the great opportunities in the market and the strong operational presence that Vesta has in many of these dynamic markets.

[Operator]

So our next question comes from Jorel Guilloty at Goldman Sachs.

[Wilfredo Jorel Guilloty, analyst]

I actually have 2. One is you made it clear that on your Investor Day and you just repeated that you're focused on the $1.1 billion development pipeline. But I was also wondering, as you look at your valuation and you look at opportunities if M&A is something that could be of interest or is something that you might think about.

Just any color you can provide on that possible consolidation strategy would be helpful. And then, my other question is around Bajio dynamics. We actually saw, I believe it was one also that saw a decline in occupancy quarter-to-quarter. So I was just wondering if you can talk a little bit about what drove that and as I look at Bajio in general, I mean, you do have that delta between the north and the central regions of Mexico. It's 8% vacancy in Bajio, 2% vacancy in the North and about the same in Central Mexico. How do you see that developing in your existing portfolio in terms of perhaps closing that delta between the Bajio and the rest of Mexico? Like, what's the time frame, how do you think it will happen and so on?

[Lorenzo Dominique Berho Carranza, executive]

Thank you, Jorel, and good question. And I will start by the light one. First, I think that as long as we continue growing and expanding according to our strategy in the main regions, this will clearly balance out well our diversification among markets. So clearly, we're not only a developer in the Bajio, but it's an important market. But we are also a leader in markets like Tijuana, where we are the largest landlord in Tijuana. And we have over 6 million square feet that we are currently developing. And we're seeing new opportunities coming in that market. The same for Juarez and Monterrey, where we have -- as mentioned, we have been able to not only close with great tenants. But we are paving the growth for the upcoming -- for the upcoming years in these 2 markets are going to be very dynamic and the rest for Mexico City and Guadalajara. So having said that, if we continue growing and we eventually get to 50 million square feet, this will balance out well and close that particular delta that you mentioned between the different markets. And we'll have -- so we're going to be seeing very, very soon a very well-balanced portfolio on Vesta being a leader in the most dynamic markets and continue to take advantage of the markets that will foster growth. And the Bajio, we believe that we'll continue to show growth, show resilience with great companies and have a -- and will show also long-term sustainability opportunities in the strong industrial markets. Regarding M&A, as you remember, last quarter, we were able to acquire in the state of Mexico, a couple assets related to the supply chain of electric vehicles business for Stellantis, Chrysler, Expressed, --. And our approach will continue to be opportunistic. We have such a great pipeline of development with great quality assets in the best markets at very attractive returns, development yields of 10%. So we will continue to do acquisitions whenever there is an opportunity to buy at discounts to replacement costs at attractive yields and particularly at yields that we believe that are accretive for our net asset value per share focus. There has been some activity in the lower 6% range on acquisitions. We think that on that range, it's really hard to increase value on a net asset value per share basis. And also, there has been also other type of consolidations. But particularly in markets where we do not necessarily would like to focus or the quality of assets do not match our strategy. So we're going to be very careful on the acquisitions. Thankfully, we have a strong development pipeline that actually is not only accelerating but might even at some point increase.

[Wilfredo Jorel Guilloty, analyst]

Loren, a follow-up, if I may. You mentioned affixes for M&A. Do you think there could be pressure for that to go even lower?

[Lorenzo Dominique Berho Carranza, executive]

Yes, there's a lot of appetites to enter the Mexican industrial market. And I mentioned 6. But I heard that it has been even below 6. That is just a reference. That is just a reference. There's, a lot of appetite. This is an industry that represents great risk-adjusted returns. And I'm pretty sure that our cap rates will continue to be very well bid. This is a fantastic asset class with long-term opportunities. And if you compare with other asset classes, which are currently being punished and are actually, in many cases, driven by pesos.

Interest rates in pesos are at 12%, 13%, 14% when it comes to a loan. That's why if you consider and if you compare it with dollar leases, long-term leases, great companies in a hot market like the industrial sector globally. It doesn't surprise me to see these low cap rates. And that's actually makes us actually focus on the development because developing a 10% and having yields at 6% for good quality assets, that's the most attractive and appealing value proposition that we can find.

[Operator]

Our next question comes from Andre Mazini at Citi.

[André Mazini, analyst]

So 2 quick questions. The first one, a little bit of a follow-up on stuff people have asked. Why do you think nearshoring is -- happening, the most in Monterrey and Saltillo, right? So 60% of nearshoring is happening over there, Monterey and Saltillo, at least regarding the numbers we have. So do you think it's just a matter of proximity to the U.S.? Of course, it's the biggest city among the few metropolis' of Mexico, which is closest to the U.S. It's just a matter of proximity or something else, maybe public policy, infrastructure, so on and so forth. So another way of asking, what Monterrey has that maybe the Bajio still doesn't have to capture the 60% share of nearshoring, which is definitely a lot? And the second one would be on the likely dual listing, right, that you guys are considering doing. So talk a little bit about the cost benefit analysis of doing a dual listing. On our one hand, you could increase costs, compliance costs with another stock exchange and maybe split liquidity, right, among 2 stock exchanges. But on the other hand, you can probably tap a new investor base, right, being in another stock exchange. So how do you guys think about the trade-offs there?

[Lorenzo Dominique Berho Carranza, executive]

Thank you, Andre, and thank you for your question. Well, first of all, I think that -- when it comes to nearshoring, clearly, many of these companies are fully related to the U.S. And that's why we -- normally, this starts at the border or the north part of Mexico, Monterrey being a part of the north part of Mexico. Monterey is the largest market, industrial market in Mexico. And that's why I believe that it has attracted the attention of nearshoring opportunities initially in the north -- in this area first. We think that this will have an impact in the rest of the country, Bajio, Central Mexico, actually 2. And I think that -- and I think that it's very -- it's -- we're going to see that impacting the whole country. Again, I think that Monterrey is also doing a great job attracting investment and it's a great city. So therefore, I think that today, it's very appealing to consider projects in Monterrey. However, we think that this wave of nearshoring, we think, is just starting. And we're going to see a lot more of foreign direct investment coming into electric vehicle business industry, electronic industry, even aerospace industry. The decoupling from China is even considering industries that are -- were gone a long time ago, like textile industry somehow and the garment industry. So it's going to be interesting how this impacts the rest of the country. On your second question, well, we will consider and analyze different alternative markets. There's, some alternatives also to -- for dual listing. So for the moment, we're just analyzing and we will, for sure, make the decision where it would make the most sense for the company.

[Operator]

Our next question comes from Francisco Suarez at Scotiabank.

[Francisco Suarez, analyst]

This is a great opportunity to talk to you. Thanks for this call. The question that I have is mostly on the -- on your pipeline. I mean you have roughly 3.6 million square feet of new GLA on spec property will be delivered over the next few quarters. Can you give us a sense of how much of that -- were pre-leased? How much -- what are your expectations on that?

[Lorenzo Dominique Berho Carranza, executive]

Great, Francisco, thank you very much for your question. As you can see -- that you're completely right in our supplemental package, we -- out of the almost 4 million square feet that we are currently presenting under construction. It's almost 40% has been already pre-leased, which is a great number. However, the pipeline for us is not only what we have under construction. But what we're paving the road for. And we see a very strong pipeline coming in the upcoming years, a combination of inventory buildings as well as potential build-to-suits. Another -- an important way to see our -- not only our construction pipeline, but just look at the number of the projects that we are that we are currently in our lease-up stage or stabilized properties. Our stabilized properties that are not same stores, which are the projects that we pretty much developed throughout last year or end of 2021, 100% have been leased, which means that the market is incredibly strong. And even if we -- inventory buildings, even if it's either through construction phase or later, we are able to lease them up very, very quickly. The same for our lease properties and that's why our strategy for inventory buildings is still paying off. On top of that, with a high occupancy in our existing portfolio at, let's say, somewhere north of 96%. We think that it's the right time to continue developing inventory buildings or spec buildings. That's why we will continue to focus on the $250 million approximately of investment phase per year, balancing throughout inventory buildings and build-to-suit. But we think that the opportunity of developing and capture 10% returns on cost is very, very appealing. And that's why we're making strong moves to get ready as soon as possible. Demand is there. Good companies want to grow. And we are taking advantage of that particular opportunity. So we're going to continue to see a lot of construction throughout this period.

[Operator]

And our next question comes from [ Antoine Morten Goter ] from GBM.

[Unknown Analyst]

Congrats on the results. I ask just 2 quick ones. One is, could you provide a breakdown on the $54 million CapEx you did during the quarter? And the second one is, I mean, we know that the energy infrastructure and other services in some regions of the country having kind of restricted. Have you seen any shift or efforts from governmental agencies to improve this?

[Lorenzo Dominique Berho Carranza, executive]

Sorry, it was hard to listen to the question. Can you repeat that again?

[Unknown Analyst]

Sure. Just if you could provide a breakdown on the $54 million CapEx you did during the quarter? And also if you have heard anything from governmental efforts or something to improve the restrictions and the lack of capacity and energy infrastructure and overall services in some regions of the country?

[Juan Felipe Sottil Achuttegui, executive]

On the CapEx, look, the CapEx is basically executing the pipeline, the development pipeline that we have disclosed on the supplemental package. And it also encompasses some advanced payments on the various buildings that -- and projects that we are executing. So that's basically -- but we're closely following what you are seeing on the supplemental package on the pipeline. Just take a note that from when we start a new building, we do give an advanced payment. So that the supplier can -- the contractor can take a position on the key raw materials, think about the steel and concrete. And that's why we typically do a 30% or 35% even advance payments, so that they can secure the supply of those key elements. And they can comply with a very tight pricing that they provide to us. So basically, that's what you might see on the CapEx. But I think that the headline that we all should think about is that we expect this year to be another year of $250 million CapEx. And we see that to be executed without any issue. On the second question which is energy and infrastructure. Well, look, we work a lot with governmental agencies and local governments to secure the supply of those things well in advance. So when we plan for a part, we're already talking to the CFE to see how can we guarantee the supply of electricity. That implies significant investments. And we have the balance sheet to do that. And that is why when we have a part, it becomes a reference part in the regions that we operate because we plan well ahead in advantage for -- to get the necessary energy and other infrastructure, public infrastructure that we will need. That's basically what a good development does.

[Operator]

So our next question comes from Felipe Barragan from BTG Pactual.

[Felipe Barragan, analyst]

Congrats on the results. I have a couple of questions. My first one is on USD income. So you guys had a nice jump this quarter and we saw a strong peso. So I'm just curious on your thoughts on how you guys are navigating the current environment where Mexican peso is getting stronger and then how you guys are seeing the exposure of the currency for the firm. And my second question is on -- in the press release, you guys noted that you guys looked at the development and commercial teams to capture both manufacturing and e-commerce opportunities. I'm just curious, is there anything notable that you'd like to share from the time digging this quarter, digging more into these opportunities? Is there anything unique that you guys would like to share with us?

[Lorenzo Dominique Berho Carranza, executive]

So regarding the currency position of the company, as you know, we have always liked that Vesta is a long dollar, it has a very strong long dollar position. We believe that we're building -- I mean, we just had a 25-year anniversary.

We're building best and we continue to build best for the next 25 years. And I think that over the long term, having long-term leases and dollar-denominated leases are what will provide the best value for our shareholders. In the peso's strengthening, well, that's great. That puts some pressure on us. But over the long term, long-term dollar leases with an average maturity of 5 years does provide the quality of earnings that I think all of our shareholders value the most. We will continue to manage the cost implications of that by trying to have initiatives of cost savings so that my income statement stays profitable. We have a very profitable EBITDA. And we are keen on keeping that EBITDA as high as possible. So look, we think that we will continue to have this policy. We will not sell dollars forward to take advantage of the -- to get an advantage and have some kind of financial income for that. That's something that my shareholders can do on their own if they think so. But I will like the type of exposure that we provide to our shareholders. And so we'll just keep managing that. In relation to e-commerce and the type of clients that we're seeing; I have to underline that the clients that we're closing leases with is quite diverse. We're no longer seeing auto-only clients. We're seeing a well-diversified client base, e-commerce, industrial logistics, logistic for exports, health care, electronics significantly. And so it's quite widespread. And that's what you would expect on the initial phases of an expansion. And that's why we believe that the expansion that we're feeling is not a short-term phenomenon. It's rather a meeting and moving and it'll take years to reach the peak and to end the cycle. So we're quite optimistic in that regard.

[Operator]

Our next question comes from Mariel Abreu from T. Rowe Price.

[Mariel Abreu-Santiago, analyst]

I would like to have more color on how you go about securing the energy in the areas where you're growing? I have engaged in calls with people also close to the government. And the messaging is pretty negative in terms of the availability of infrastructure in certain regions, especially transmission and how limiting that could be for the nearshoring team and all the demand that may come to Mexico. So I will appreciate more color on your thoughts there. How companies will continue to come to Mexico if you have those limitations and also probably also the lack of access to keep energy, which is the other, I think, area of concern is if Mexico is really not supporting renewables, for example. Can you please comment on that? And then the second question is regarding debt appetite. I know you're waiting to raise equity. That's the plan. What about debt issuance in the international market?

[Juan Felipe Sottil Achuttegui, executive]

Sure. Let me take the bottom and then the first. The bottom one is Mariel, we have a strong balance sheet. Right now, I mean, we have enough capacity in the balance sheet to execute this year's plan and thereafter. So we have a strong revolver, which is unused and we have committed revolver. And with -- it's a $200 million revolver with our cash on hand. We have no issue for the $250 million CapEx that we're planning. Regarding the debt issuance in the future, we will refinance the debt maturities that we have, when they are view, which is way in the future. So that's about it. We will come to the market as needed. I think that's why we keep managing the company to have flexibility and to be a rated company, BBB minus rating company by the 3 agencies and we manage the company to keep that rating. So we will access that market as needed.

[Lorenzo Dominique Berho Carranza, executive]

And probably the energy, I can just comment that clearly, it has been a challenge. And it's the challenge that we have always been seeing in the last years, particularly current administration. However, I will only use a couple of examples that probably identified or let's say, reflect what's happening in our industry. The first one is Tesla in Monterrey. Tesla is bringing a huge investment, multibillion-dollar investment that will definitely require huge amounts of energy, not only energy, renewable energy. I don't know exactly the details, because they have not been provided. But I'm pretty sure that Elon Musk and his team has been able to secure some energy for their project. So that -- it's a good example that at some point, the government has to be somehow open to supply and have the transmission for projects like Tesla and other projects that I'm sure that will require major amounts of energy. However, in our -- the projects that we're developing, every time we start a project, we secured some energy so that our clients can have. And a good example is Tijuana. Tijuana is a project that will have 6 buildings. We have already leased up 3 of them. And the most recent one being leased to TCL, which is a Chinese company in the electronics sector, is the second building we lease to them. They do -- they do TVs and screens -- television screens that are quite attractive in the U.S. market. And they require energy. And we were able to secure the energy for our industrial park. We have put a large investment in the transmission internally of the park and the supply. So that we can have the energy for live manufacturing, for logistics and enough to capture this type of tenants, which actually are the bread and butter of Vesta. Any other major user of energy could probably be a challenge. But for the moment, the type of clients that Vesta has, we have been able to secure some of that. It's challenging, yes. But I think that our ability to develop for 25 years gives us the advantage of being close to the government agencies that require this, also to anticipate for potential demand. And I think that laying off that part of the investment from the beginning on is giving Vesta actually an advantage to other developers.

[Mariel Abreu-Santiago, analyst]

This is reassuring the fact that you are able to secure energy for your pipeline. I guess I was focusing more on how -- what's the life of this nearshoring team if things can't keep up like this, just future demand being met by the supply of energy and how that's built up in Mexico, so in my mind, something that I'm keeping in mind.

[Lorenzo Dominique Berho Carranza, executive]

No, definitely. And we will continue the conversation, Mariel. Thank you.

[Operator]

Perfect. Thank you very much and thank you for your questions. I'd now like to turn the call back over to Mr. Berho for his concluding remarks. Please go ahead, sir.

[Lorenzo Dominique Berho Carranza, executive]

Thank you, operator. It's an exciting time for Vesta. We are focused on executing on our Level 3 strategy also with an eye towards the future ahead. 25 years have enabled unparalleled industry experience, deep client relationships and a privileged position within our markets. Vesta's nimble adaptability and entrepreneurial spirit will ensure we continue capturing today's exciting opportunities and delivering strong shareholder value. Thank you to entire Vesta team for your hard work and to our shareholders for partnering with us on the path ahead.

[Operator]

This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.