Macquarie Mexico Real Estate Management SA de CV

OTC:DBMBF

Earnings Call Transcript 2018-Q1

[Operator]

Good morning, and welcome to FIBRA Macquarie's First Quarter 2018 Earnings Call and Webcast. My name is Carmen, and I'll be your operator for this call. [Operator Instructions] I would now like to turn the conference over to Nikki Sacks. Please go ahead.

[Nikki Sacks, executive]

Thank you, Carmen, and good morning, everyone. Thank you for joining FIBRA Macquarie's First Quarter 2018 Earnings Conference Call and Webcast. Today's call will be led by Juan Monroy, our Chief Executive Officer. And to answer any questions you may have, at the conclusion of today's prepared remarks, we also have Simon Hanna, our CFO; and Peter Gaul, MPA's Head of Real Estate Operations.

Before I turn the call over to Juan Monroy, I'd like to remind everyone that this presentation is proprietary and all rights are reserved. The presentation has been prepared solely for information purposes and is not a solicitation of an offer to buy or sell any securities. Forward-looking statements in this presentation are subject to a number of risks and uncertainties. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. These forward-looking statements are made as of the date of this presentation. We undertake no obligation to publicly update or revise any forward-looking statements after the completion of this presentation, whether as a result of new information, future events or otherwise, except as required by law.

Additionally, on this conference call, we may refer to certain non-IFRS measures as well as to U.S. Dollars, which are U.S. dollar equivalent amounts, unless otherwise specified. As usual, we have prepared supplementary materials that we may reference during the call as well. If you have not already done so, I'd encourage you to visit our website at fibramacquarie.com and download these materials.

A link to the materials can be found under the Investor Relations' events and presentations tab. And with that, it is my pleasure to hand the call over to FIBRA Macquarie's Chief Executive Officer, Juan Monroy.

[Juan Monroy, executive]

Thank you, Nikki. Good morning, and welcome to FIBRA Macquarie's first quarter 2018 earnings conference call. On our call today, we will review our operational and financial performance and discuss our ongoing progress for driving long-term growth. Building on the strategies we've established and the positive momentum from last year, we had a solid start to 2018.

We continue to remain laser-focused on real estate operations, leasing, prudent capital allocation and optimizing our portfolio. I am pleased to share with you that we have made progress against each of these key strategic priorities.

Overall, the operating environment for real estate remains favorable. Despite lingering uncertainty around international trade and upcoming elections in Mexico, stable supply-demand dynamic remains, and we are optimistic about Mexico's overall real estate fundamentals.

There is increasing certainty in the macroeconomic and political outlook and the more likely outcomes, including minimal adverse material changes to NAFTA, will only enhance our positive sentiment. In the first quarter, we delivered solid operational performance, with AFFO per certificate up 3.2% year-over-year to MXN 0.6020 per certificate. In fact, our FFO and AFFO per certificate results in the first quarter were the highest ever for a quarter since FIBRA Macquarie's inception.

These results reflect the accretive benefits of our certificate buyback program, along with year-over-year improvements in same-store NOI on a natural currency basis.

We are particularly pleased to deliver year-over-year growth, despite the significant negative impact of the peso appreciation relative to the dollar over the last year. In our industrial portfolio, NOI was up 4.3% on a sequential quarterly basis, as we realized the benefit from the high volume of leasing completed in the back half of last year.

However, we have also experienced a strengthening peso, which drove a year-over-year NOI decrease of 3.1%, compared to the first quarter of 2017. Our weighted average rental rate of $4.67 per leased square meter per month increased on both year-over-year and sequential basis, up 2.6% and 1.3%, respectively.

This rate increase was driven primarily by positive renewal spreads along with contractual increases. We saw a slight decline in our occupancy and in the quarter at 91.9% due to moderate leasing activity, combined with a handful of move-outs.

In terms of leasing, we signed 19 new and renewal leases in the first quarter, comprising 1 million square feet. Signed leases included 6 new leases totaling 289,000 square feet and 13 renewal leases totaling 745,000 square feet. Notable new leases in the quarter include a manufacturer of materials samples in Tijuana and a contract manufacturer in Ciudad Juarez. Renewal activity was diversified across various geographies and customer types and included manufacturers of consumer packaging, water technology equipment and automotive parts. For the 12-month period ending March 31, 2018, FIBRAMQ achieved a retention rate of 85%, showing ongoing improvement from the same quarter last year.

As we look to balance of the year, we have approximately 4.4 million square feet of lease expirations remaining from the total 5.6 million we have scheduled for the full year. This compares favorably to the 6.6 million of expirations that we had drive through in 2017. We remain encouraged by the overall satisfaction and activity levels of our tenants. However, we're also focused on managing near-term expirations and some anticipated tenant-specific move-outs in the coming quarter,

whilst continuing to navigate through the somewhat uncertain macroeconomic backdrop, which we think is still impacting the timing of new entrants into the market. In our retail portfolio, first quarter NOI increased by 5.9% compared to last year's comparable quarter, driven by 5.3% increase in average monthly rent and above-average increase in parking income. Leasing volumes improved compared to our 2017 quarterly average, with 3,200 square meters of new leases and 5,200 square meters of renewals. However, occupancy was impacted by several move-outs, which resulted in a closing occupancy at a healthy 94.5%.

We remain upbeat on the prospect of our retail portfolio continuing to deliver increasingly positive results, benefited by increased levels of consumption in the Mexico retail sector. Our high quality portfolio has an added benefit of being mainly located in major metropolitan areas and are all anchored by necessity-based tenants.

During the first quarter, we signed 57 leases, representing 8,400 square meters. This activity included 20 new leases and 37 renewals. Outside our quarterly operations, we continued to advance our objective of accretively reinvesting retained AFFO and any asset-sale proceeds in expansions and developments as well as buying back our own certificates for cancellation.

In terms of expansions, our team of experienced real estate professionals remain close to our customers and leasing prospects with potential space requirements in our markets. During the quarter, we completed 2 industrial expansion projects, including one with a projected dollar-base yield exceeding 13%. We have 2 additional projects in process, which together with the projects completed in Q1, represent $5.7 million of aggregate investment.

Our pipeline for incremental expansion opportunities in both our industrial and retail properties continue to be active, with a current investment outlook of more than $23 million, representing approximately 564,000 square feet, with expected yields greater than 11%.

With regard to our portfolio, we remain committed to owning a best-in-class portfolio. While we don't have any dispositions to announce during the quarter, we're actively pursuing both single asset and portfolio sales with our industrial portfolio to add to the $30 million of noncore asset sales that we have successfully closed on to date.

On the capital markets front, we continue to actively execute on our certificate buyback program, as elevated AFFO yield and discount in our certificate price has persisted.

During the first quarter, we repurchased 7.7 million certificates for cancellation. Since we commenced the program, we have acquired 2.4% of our certificates and anticipate completing a 5% buyback program by the end of 2018, with all repurchased certificates to be canceled. This complements our active real estate projects across our property expansions and development pipeline. Our balance sheet remains well positioned, with significant liquidity, including the equivalent of $224 million undrawn on our revolving credit facility, no debt maturities in 2018 and strong visibility on our competitive cost of funding, with 95% fixed-rate debt. All these provide us with the necessary flexibility to allow us to pursue our growth objectives.

Finally, I am pleased to announce a 4% increase in our quarterly cash distribution to MXN 0.39 per certificate. This distribution, like all of our previous distributions, represents a return of capital for Mexican income tax purposes, with no Mexican tax to be withheld at source.

Our distribution remains extremely well covered with a coverage ratio of 1.5x and remains an important part of the total return we offer to certificate holders, as we balance returning capital to holders with reinvesting in long-term value and creating opportunities.

We remain confident in our ability to execute on our growth and value-creating objectives and are reiterating our full year 2018 AFFO and distribution guidance that we introduced with last quarter's earnings release. Our guidance is subject to the following assumptions: Based upon the cash-generating capacity of existing portfolio and an average exchange rate of MXN 18.5 per U.S. dollar for the remaining of the year, assumes no new acquisitions, notwithstanding that FIBRAMQ has an active asset recycling program, our guidance assumes no divestments, provided the successful execution of opportunistic asset sales may result in a temporary decrease in AFFO until proceeds are redeployed in other accretive opportunities.

Repurchase for cancellation in 2018 of the remaining 21.4 million certificates available for buyback, resulting in an aggregate 5% of issued certificates being repurchased and canceled to close 2018 with 770.8 million certificates outstanding. With continued stable performance of these properties in the portfolio and market conditions, it's worth noting that based upon the midpoint or our 2018 guidance and closing certificate price as of April 26, 2018, of MXN 18.89, the current implied AFFO yield is 12% and distribution yield is 8.3%.

Before taking your questions, I'll like to thank our entire team for their unwavering commitment and ongoing dedication to FIBRAMQ. And with that, I'll ask that our operator open the phone lines for your questions. Carmen?

[Operator]

[Operator Instructions] And our first question is from the line of Eugenio Saldaña with GBM.

[Eugenio Saldaña, analyst]

I have just 1 question. This one is, can you please breakdown on the sources for the 86.8 million uses that you're planning, I mean, on the strategy to deploy for these moves, please?

[Simon Hanna, executive]

Eugenio, it's Simon here. With regards to sources, I guess, a couple of our key sources we're looking at, one is, obviously, retained AFFO. We do expect to have in excess of $30 million this year, similar levels to last year, probably in the low $30-million level, based on the AFFO guidance that we provided to the market. So that's obviously going to be 1 source. There could obviously be asset sales also coming through the course of the year. We had close to $30 million last year. Obviously, we have an active program at the moment. So assuming execution on some of those opportunities, that will also provide another good funding source. And thirdly, we do have $224 million undrawn on our revolver. We don't expect to necessarily use all that, given our leverage target. But that is available for immediate use should we consider those an attractive and worthwhile investment opportunity to take advantage of that. So those are probably 3 main capital sources at our disposal today.

[Operator]

And our next question comes from the line of Marimar Torreblanca with UBS.

[Marimar Torreblanca, analyst]

Two questions for me. The first one is, I heard you have around 4 million square feet that expires the rest of the year. Can you give us some guidance on your expected retention rate or the occupancy you're assuming in your overall guidance? Because I hear that -- you sound a bit cautious on the outlook for the renewal of this amount of leases. So I just want to make sure I get what you're assuming for the rest of your FFO, dividends guidance.

And then the second question is, a lot of your peers think that the buybacks programs for FIBRA is reset every year at every shareholders meetings. And from what I hear, you only intend to get to 5% and that's it. Or is it 5% and then you can reset if you get another approval for more buybacks in the future, assuming, of course, it still makes sense for buybacks.

[Juan Monroy, executive]

Marimar, thanks for your questions. Yes, on expirations this year and occupancy guidance, as you know, we don't offer necessarily occupancy guidance. Certainly we have 4.4 million more to go this year, which is substantial as in what it was last year and less than the historical average.

We feel comfortable that it will be a fairly stable occupancy for the year. We do know of some specific tenant move-outs that might occur next quarter, as pointed out in the release. But for the balance of the year, knowing what we know and you've seen the market activity and the supply/demand, if it remains stable, I'll say that our industrial occupancy for the full year should be fairly constant. Obviously, we might have some up and downs on an inter-quarter basis.

With regards to your second question on buyback. Yes, we intend to execute on our full program that has been approved by shareholders, up to 5% of certificates issued, that's what we expect to do this year. And I guess, in terms of what's after that once we complete that program, as you said, we'll revisit and we'll always do this. We'll revisit share price versus pipeline of expansions and development. And also, we'll be open to an expanded program, if that's would -- that's allowed by the authorities and also if it still makes sense from a capital allocation perspective.

[Operator]

And our next question comes from the line of Jorel Guilloty with Morgan Stanley.

[Wilfredo Guilloty, analyst]

I have 2 questions. First off, I want to thank you for providing the details on the capital sources and uses. So there you say you have about $23 million in uncommitted LOI and pipeline projects. That said, if you were not to deploy this capital into these projects, what would you do with it? I mean, would you retain it until you do find an opportunity? Or would you increase your dividend? Or how do you think about these $23 million in terms of timeline and possible uses if the original target is not fulfilled? And the second question is, we see that your leasing retention rates continue to run in the high 80s percent. I, however, wanted to get a sense of new leases, and I was wondering if you can provide some color on demand for new leases. Have you seen an increase, a decrease? Is it flat versus your expectations? And also, what are your biggest concerns for new tenants going forward? So those are my 2 questions.

[Juan Monroy, executive]

Sure, Jorel. Thank you for your questions. I'm glad that you find that information helpful. Regarding you first question on the alternative uses for our pipeline dollars or the dollars that have been sort of earmarked for pipeline, we have a pretty efficient capital structure in the sense that we have a revolver facility that we can repay. So the way we operate is, very efficiently, immediately repaying down revolver as we have excess proceeds, and then gradually reinvesting that capital in value-accretive opportunities. Those value-accretive opportunities are primarily investing in real estate in the form of expansions and development, and alternatively, as well in our certificate buyback as we see there a tremendous opportunity for value creation as well. We feel fairly comfortable with the pipeline that we have. And if there is a movement in the timetable, I think, we'll continue to work on those expansions and development opportunities, and over time, deploy that capital. So I don't see any changes to move our dividend as a result in the shift of a timetable. If that was to occur, we'll just repay down debt and then again, gradually bring back that capital in expansions and development. With regards to your second question on leasing environment and prospects on leasing for new tenants [ enroll ], the first quarter -- I'll say, the beginning of first quarter was a bit slower than historical. We've seen a little bit of pickup more recently in the leasing activity, which is encouraging. We continue to see a fairly healthy balance between our supply and demand, maybe a little bit of increasing supply, nothing to be concerned with. But also, that couples with what we've seen over the past 2 weeks and months, which is bit of an increase in demand as well. What worries us, looking into the future from a leasing perspective, we like to see more certainty around macro considerations, both elections and perhaps more importantly for business, NAFTA. I believe that as those -- as we find more certainty on those variables, we'll be -- the timetable, especially for new entrants into the country, will be accelerated for them to sign new leases and long-term commitments. So that's one thing that I would like to see is that also we -- so I think that as a result of that we'll see an increase in demand. Other than that, I guess, we expect a fairly stable leasing environment for the balance of the year, Jorel.

[Operator]

[Operator Instructions] And our next question is from Cecilia Jimenez with Santander.

[Cecilia Jimenez, analyst]

Actually I have a follow-up regarding the uncommitted LOI. My questions is, is it fair to think that the execution of this is related to the outcome of elections? Or is it more fair to say that it could related to the outcome of NAFTA? And basically, have you seen from your tenants they put anything of the expansion plan on hold until we have any of these macro situations cleared, meaning elections or NAFTA?

[Juan Monroy, executive]

Yes. Thanks for your questions. No, I guess, neither. For expansions, we don't see any real impact from either elections nor NAFTA considerations. If anything, those could potentially impact timing on new entrants, but not really on existing customers. The timetable with regards to the pipeline on LOIs for expansion is more with regards to specific leasing negotiation considerations, planning considerations, et cetera, and not related to NAFTA or elections. And we have a pretty good visibility on those LOIs that we have out there. We understand the business of our customers and their expansion needs. And we're working with them to find a proper real estate solution that will help them address their real estate needs for the long term in Mexico. And we continue to work on that in offering a proper solution from a real estate perspective. And as we execute on those LOIs, convert into lease agreements, we then proceed to execution on the construction side, as you know, which are done on a preleased basis. And I guess, that's not related to your macro considerations.

[Operator]

Our next question comes from the line of Vanessa Quiroga with Crédit Suisse.

[Vanessa Quiroga, analyst]

Just something quickly. We saw that you were able to increase rent by 4% year-over-year in dollar terms for the industrial portfolio. This is higher than the average results seen for your peers. So do you think that this is sustainable? And what factors do you think allow for these as higher-than-inflation increase in rents?

[Juan Monroy, executive]

Yes, we've seen a -- thank you for your question. So we've seen a fairly positive environment on supply and demand, fairly flat market from that perspective, I guess, over the last 3-or-so quarters. And we've been -- obviously, we've been able to act on -- execute on direct basis with our internal corporate and administration platform. We're always focused on closing deals and maximize rent as much as possible. I wouldn't necessarily underwrite a significant rents and -- sorry, growth in rent. I think that we can continue on our actual trend of growing with U.S. inflation for U.S.-dollar leases, and hopefully, we'll continue to see some positive spread on renewals. But we're not necessarily underwriting significant additional growth on rental rates for industrial. On the retail side, we continue to see a small positive spread on renewals and with very healthy increases north of 5% on an aggregated basis and maybe 200 to 300 basis points of inflation on renewals. So overall, positive. But we're not underwriting significant rental growth in the future, necessarily.

[Vanessa Quiroga, analyst]

Actually, on then the -- on the leasings that you signed this quarter, can you tell us what was the rent increase or rent change that you saw in the new contracts?

[Juan Monroy, executive]

Yes, we have provided a detailed bridge on our rental rates, Vanessa, which is a -- you have a page, Simon.

[Simon Hanna, executive]

Yes, Vanessa, it's Page 38 of our supplementary information. We have a bridge both for our industrial rental rate and our rental -- retail rental rate, and that's quarter-on-quarter. On Page 39, we have year-over-year. And as you'll see in those slides, the positive increase was really driven by a combination of positive leasing renewal spreads and annual contractual increases.

[Vanessa Quiroga, analyst]

Okay. And just a question on the market that you said there is slightly more supply. Can you say -- can you tell us what markets are seeing slightly more supply? And can you rank in terms of momentum the different markets where you're present in industrial?

[Juan Monroy, executive]

Sure, yes. We monitor, as you know, all 4 markets on a month-to-month basis and looking on a very granular basis, all leases that are signed from us and our peers in the market. And also, we keep track of all the current construction activity and look at this on a monthly basis. And I'll say, on average, all the markets where we operate remain very healthy. A stat that we always use is just the number of months it will take for the existing supply to be absorbed, considering the last 12 months of absorption. That number during 2017 was around 4 months, approximately. This quarter, we're tracking -- and also last quarter, we're tracking at levels between 4.5 and 5 months for current supply to be absorbed, which is -- remains very, very healthy compared to other markets like the industrial U.S. market or even, obviously, the office market in Mexico City. And there is variances on a market-by-market basis. We see a little bit of additional supply in markets like Queretaro, Monterrey and Guadalajara. These are very healthy markets that, from my perspectives, is more a timing consideration. Over time, I think they'll revert back to the historical average. We remain very focused on our core markets of Tijuana, Juárez, Guadalajara, Mexico City. We also like Reynosa, despite some security considerations. And we see a very healthy supply/demand in these markets, Vanessa.

[Operator]

And our next question comes from the line of Francisco Suarez with Scotiabank.

[Francisco Suarez, analyst]

The question I had relates with the following. Are we reaching a point where actually move-outs are occurring for the right reasons? In other words, do you actually think that there is a higher chance of improving your overall rents and overall economics fundamentals and that's a major driver of why you may actually prefer to see more move-outs rather than having higher occupancy levels? Perhaps this answer has to be addressed at market level. But what I want to understand is that, and it was kind of interesting for me to see that, overall activity -- or leasing activity in this quarter actually was pretty high in several markets in Mexico, across the industry. And actually, you are reporting lower leasing activity compared to your peers in terms of a proportion of total GLA. So I want to understand if this is something that reflects something of your -- on your portfolio as such, perhaps a structural weakness in certain markets, or perhaps because we are seeing that, finally, FIBRA Macquarie is reaching a point where you prefer to maximize the overall rents and economics rather than just occupancy

[Juan Monroy, executive]

Yes. Francisco, thanks for your question. A very complete question there, and it requires, probably, an extensive discussion. But I'll say -- I'll try to give you some of my thinking here. I'll say, #1, certainly, the market rent is picking up and has been picking up over the last few quarters, coming from a decrease that we saw after the global financial crisis. We've seen, finally, this year and last year, rents picking up, reflecting a tighter market from a supply/demand perspective. And then that's been, obviously, reflected in a positive spread that we've shown in our leases. I think it's always very hard to generalize, as we will certainly see on tenant-specific basis and on certain quarters where that might not be true. So the dynamic is naturally on a market-by-market basis. So as you were suggesting, it's more on a tenant-by-tenant basis if we have a positive or negative spread. In general, the trend is positive, rents increasing, with a tight and healthy supply/demand equation. And then the specific spread on roll is more tenant-specific, and that has to do with the vintage of when the lease was signed, what investment was done to the property in the form of TIs, SPIs, et cetera. So that's with regards to pricing on renewals and move-outs. We -- with regards to your second part of -- the second part of your question, we -- as always remained very focused on executing on leases and always trying to maximize rent. I don't think you'll see us lose a deal on pricing necessarily, but always with a very key focus on maximizing the rent as much as possible in working with our customers and brokers. And with regards to leasing compared to our peers, I guess, we continue to execute in terms of what's out there for vacant properties and roll. We're very close to our customers and have been acting on all the opportunities that have present themselves out there and the ones that, obviously, we have sourced ourselves. And I think that comparing leasing activity in specific quarter, it's hard because they have to do with renewals, expirations and space availability on a market-by-market basis. I wouldn't draw, necessarily, any conclusions from that. And as I said earlier, we continue to see a relatively stable leasing environment, which was a bit lower than historical average in the beginning of Q1, and we've seen a recent improvement, more recently over the last few weeks, Francisco.

[Operator]

And our next question is from the line of Gordon Lee with BTG.

[Alvaro Garcia, analyst]

It's Álvaro, actually. One quick one. One of your competitors announced the change overnight in their accounting policies, particularly concerning interest expense on development projects. So they'll now reflect this in their P&L, whereas, before, they capitalized it. And I was wondering if you can remind us of how you reflect this type of interest expense on development projects, if you capitalize it or if you reflect in your P&L. And regardless, if you were to capitalize it, could you remind us if it's reflected in your FFO or AFFO?

[Simon Hanna, executive]

Yes. It's Simon here. Thanks for the question, Álvaro. We have historically expensed the interest expense regardless of the use of proceeds. We haven't had that much development in any event and certainly not, necessarily debt-funded. And so our policy has been to always expense interest expense, but IFRS and also in our non-GAAP AFFO reporting. And we expect that to be the case going forward. Hopefully, that answers your question.

[Alvaro Garcia, analyst]

Yes, and so any sort of interest expense that we still would see reflected in your FFO, your base FFO on that 1 interest expense line, correct?

[Simon Hanna, executive]

Exactly, that would be captured in our AFFO, any type of interest expense. Yes.

[Operator]

And our next question is from Alejandro Lavin with Citigroup.

[Alejandro Lavin, analyst]

So for several quarters now, you have been sort of ticking many boxes, right. I mean, your operating results are solid, you are buying back shares, using some markets, right. So -- and still, FIBRA Macquarie shares have one of the widest valuation discounts in Mexico real estate. So do you guys ponder if there are any contact strategies or corporate actions that you can still do to unlock value and reduce this valuation discount? I mean, are you like still considering options or you think it's just a matter of time for these actions to be recognized by the market?

[Juan Monroy, executive]

Thanks for your question. Obviously, a very good one and one that I personally struggle with quite a bit. Very frustrating to see the share price to be -- where it is. I think, from a strategy perspective, both from asset management and capital deployment, I think that we are acting on what's out there. And we believe that our strategy -- is the right one to continue to create long-term value. I think that buying back shares is obviously a reflection of our frustration and the great investment opportunity that we -- [ think that inspires us around Q ]. So we'll continue to that. And we'll accelerate that as much as possible. And we'll continue to be focused on the fundamentals of business, asset management, operations, strong corporate governance, leading corporate governance, I should say, and very disciplined capital allocation. And one will hope that the market will recognize that we're delivering on our objectives and our strategy. We also have a very targeted IR program to communicate our strategy and our execution on such strategy. And hopefully, we'll see the market react to that. And people can -- can lose patience, of course. And we'll continue to diligently execute on our strategy. And at the moment, we believe it's still the best strategy to unlock value from FIBRA Macquarie.

[Operator]

And we have a question from the line of Eduardo Altamirano with HSBC.

[Eduardo Altamirano, analyst]

I guess, this goes in line with what Alejandro just asked. Last I recall, you still have the termination fee and several of your other peers and some do, some don't. Would this be something, from a governance standpoint, that you would consider at one point removing to potentially serve as a catalyst for any sort of, let's say, kind of certificate reevaluation going forward? Or are there any other sort of, let's say, kind of -- fee-structure alternatives that you've already done in the past successfully into your -- to which we would complement. But also, are there any others that we could do to -- that could unlock value?

[Juan Monroy, executive]

Yes. Eduardo, thanks for your question there. No, we're not expecting any change to our external management. That agreement has been in place since IPO, a very, very clear one. And then I'll say, perhaps the most aligned with our investors, as our fee structure is completely aligned with the investor. And also, I will say that within the context of being an external manager, I think that we have certainly been showing a very strong commitment to corporate governance on executing best practices around corporate governance. It's reflected on what we did last year in having a majority independent technical committee, bringing high quality independent members to the technical committee over the last few quarters, having our TC members buy shares so they can have skin in the game. And I think that, in general, corporate governance when you compare it to others, it's certainly market-leading. We're not necessarily anticipating any changes to the management agreement relationship. Simon, you wanted to add something else?

[Simon Hanna, executive]

No, I think, it's good summary, Juan. I think, also, obviously, with regards to the buyback program we've executed, that's obviously also a very good demonstration of the determination that we have to ensure best type of allocation, using all options available. And with regards to the fee structure, I'll say, not only that the most aligns with our [indiscernible], I think it's also right up there in terms of that transparency and simplicity. And since we only have 2 fees, a base fee and a performance fee, both correlated to shareholder returns. And just to emphasize, there are no other fees in the agreement, such as development fees or property management fees or acquisition fees. We only had those 2 fees, the base fee and the performance fee, and I consider them both very much aligned with investors.

[Operator]

And there are no further questions. I'd like to turn the conference back to management for any closing remarks.

[Juan Monroy, executive]

Thank you, Carmen, and thank you, everyone, for participating in today's call. We look forward to speaking with many of you over the coming days and weeks as well as updating you again soon for our next quarter results. Thank you.

[Operator]

And the conference is now concluded. Thank you for dialing in to today's presentation. You may now disconnect.