Prologis Property Mexico SA de CV

OTC:FBBPF

Earnings Call Transcript 2021-Q2

[Operator]

Thank you for standing by, and welcome to the FIBRA Prologis Second Quarter Earnings. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Ms. Alexandra Violante of IR. Thank you. Please go ahead, ma'am.

[Alexandra Violante, executive]

Thank you, Justin, and good morning, everyone. Welcome to our second quarter 2021 earnings conference call. Before we begin our prepared remarks, I would like to remind everyone that all information presented in this conference call is proprietary and all rights are reserved. The information has been prepared only for information purposes and is not a solicitation of an offer to buy or sell any securities.

Forward-looking statements during this call speak only as of the date of this call. Our actual results, performance, prospects or opportunities may differ materially from those expressed in or implied by the forward-looking statements. Additionally, during this call, we may refer to certain nonaccounting financial measures. The company does not assume any obligations to update or revise any updated forward-looking statements in the future, whether as a result of new information, future events or otherwise, except as required by law.

As is our practice, we had prepared supplementary materials that we may reference during this call as well. If you have not already done so, I will encourage you to visit our website at fibraprologis.com and download this material. Today, we will hear from Luis Gutiérrez, our CEO, who will discuss our strategy and market conditions; and from Jorge Girault, our Senior Vice President of Finance, who will review results. Also joining us today is Hector Ibarzábal, our Managing Director.

With that, it is my pleasure to hand the call over to Luis.

[Luis Gutierrez, executive]

Thank you, Ale, and good morning, everyone. Customer demand in 2021 has been accelerating, and what we're seeing might be the best year for logistics real estate globally, and Mexico is not an exemption. This is reflected in our second quarter results. We have delivered a strong financial and operational performance. Let me provide some highlights.

Occupancy remains healthy. We have addressed more than half of the 2021 expirations, and the rent change increased almost 8% in U.S. dollar terms. A strong cash flow generation for the year with a high same-store cash NOI in any single quarter, especially after the rent concessions arrived from the pandemic. And our FFO and AFFO increased significantly. This growth mainly was driven by higher rents achieved through our leasing activity, a decrease in net interest expense and the recent acquisitions.

In addition, as part of our financing strategy, we recently completed a restructuring of our debt. This allowed us to have lower cost of capital and a stronger balance sheet. Jorge will provide more color on this.

We recently acquired a property from our sponsor for an investment of approximately $20 million, and that will contribute 243,000 square feet to our portfolio. This property fits our investment strategy of being located in an irreplaceable location and leads to some of the best global customers.

Consumption and manufacturing exports have been leading the economic recovery. The strong rebound of the U.S. economy, the continuous interest from companies to redesign the supply chains closer to the market, relocating mainly from China, the structural changes derived from e-commerce and companies revealing their inventories will make 2021 the best year for logistics real estate.

The metro space in the last 12 months was 22.8 million square feet in our 6 markets, which exceeded supply, lowering vacancy rate to 3% for the quarter and 90 basis points lower than last year. We expect more than 50% of additional space demand in 2021 than 2020. This is brought across our markets and Mexico City, Monterrey, Juarez and Tijuana to outperform.

Guadalajara is also turning around. The vacancy that we're seeing is decreasing, and market occupancy is nearing 100%. We expect, in this environment, rents to increase in most of our markets. This is driven by favorable demand and supply fundamentals coupled with inflation pressures, higher construction costs and land prices going up in our most land-constrained markets.

Let me briefly discuss what we're seeing on the ground. On the manufacturing side, our sponsor is in final negotiations to lease 100% of a building in Juarez from existing customers that are growing with us. We have seen an increased number of companies looking for build-to-suits or pre-leasing. This demand is across all of our manufacturing markets and companies from different sectors and countries that are required to relocate from Asia to consolidate and/or expand their operations. Prologis is well positioned to take advantage of these opportunities given the strategic land positions.

On the logistics front, e-commerce continues to lead the activity in the market, and we are the largest landlord for predominant pure e-commerce players. It is important to remember that the shutdown only accelerated a portion of the structural change expected outlook for the segment. There is still significant room for growth.

In Mexico City, we're closing additional space with one of the market leaders. Demand for space was brought across sectors and we are expecting rents to rise as a result of the land scarcity. Logistics real estate has been the preferred asset class. It has attracted new investors and developers to our markets. As a result, our portfolio valuations reached a record increase year-over-year, and this will boost the overall return performance for our investors. Mexico real estate values continue to be attractive on a relative basis if compared to other countries. We believe it offers the best current returns and a higher risk-adjusted spread.

FIBRA Prologis is very well positioned to take advantage of the opportunities that this rising market is offering. Our 6 markets are the most active and our focused strategy to increase our market share has worked. Our best-in-class portfolio of properties have been resilient and is positioned to capture the upside on market rents.

Our exclusive access to the Prologis development pipeline has been a competitive advantage. Our sponsor will increase its properties under development and replenish the land bank, which is -- will be uniquely positioned for organic growth in the short and medium term. Our balance sheet is the best in the sector as it provides the liquidity and flexibility to continue our growth plans.

Finally, I'm very proud of our sustainability performance and leadership. This year, we were included for the second time in the S&P/BMV ESG Index, and we just published our first sustainability report. ESG is embedded in the DNA of the company, and we will continue to work on those areas that need improvement.

With that, let me turn the call over to Jorge.

[Jorge Girault, executive]

Thank you, Luis. Good morning to everyone, and thank you for joining us. I hope everyone is staying healthy. This first half of the year has proven the strength of our operations, resilient business and strong balance sheet. This quarter, we delivered once again solid results, and we remain on target to meet guidance.

FFO for the quarter was $36 million or USD 0.042 per certificate, representing an increase of 11% on a nominal and per certificate basis if compared to last year. AFFO was $29 million for the quarter, an increase of 25% if compared to last year and in line with our expectations. We were able to achieve the results due to our outstanding operational performance.

Leasing activity was almost 2 million square feet, addressing on a cumulative basis, 65% of total lease expiration for the year. Period-end occupancy was 96.4%, a 90 basis point increase if compared to last year. Net effective rent change on rollover increased almost 8%. And for the last 12 months, it had a positive change of around 12%. For the quarter, same-store cash NOI was 16.4% and same-store GAAP NOI was 10.6%. It was driven by less rent concessions even this quarter, stronger FX rent increase on growth on renewals and customary annual bumps.

Regarding our balance sheet and capital markets activity, we have increased our liquidity and improved our capital structure, ending the quarter with a loan-to-value of 27%. This provides us additional financial strength and flexibility. Additionally, in May, we announced that we raised $370 million through a $70 million green bond in the local market and $300 million in a partially green U.S. private placement. For this last transaction, we received the funds last July 1. As such, the positive effect of the refinancing will be shown in the third quarter results.

Having said that, let me provide you with what we expect to be the end result of all the refinancing activity. Weighted average debt expiration term increased from 7 to 10 years. Our closest debt maturity is until 2026. We took advantage of low interest rate environment. As such, we moved our long-term debt from 66% to 100% fixed rate, resulting in a weighted average cost of debt of 4%.

We don't have any debt maturation in a given year larger than $150 million, which, given the pace of the portfolio, we believe, is a manageable amount. Our total green or sustainable financing has reached more than 60% from 0 a year ago. Additionally, we have an unsecured and committed line of credit for $500 million, including its revolver facility. As you can see, we have one of the strongest and most flexible balance sheet in the sector, supporting our international investment-grade rating.

On the valuation front, our portfolio value increased almost 4% compared to the first quarter of 2021 and 10% year-over-year. The main drivers are: additional investors entering the sector, attracted by good demand and supply fundamentals; increasing rents, especially in Tijuana, where values are up around 10% versus the first quarter of '21 and 32% year-over-year; and higher barriers of entry like land and energy as well as higher replacement costs.

In light of the rapid movement in valuations, we believe that values being assigned by -- to FIBRA Prologis by The Street are conservative.

In terms of performance, FIBRA Prologis reached a 13.2% return [indiscernible], which marked our seventh anniversary, triggering a promote or incentive fee to our sponsor Prologis. What this means is that as approved in yesterday's shareholders' meeting, additionally, 7.2 million certificates will be issued for Prologis, resulting in an 85 basis points dilution overall. Having said this, we are keeping our dividend per certificate unchanged.

In terms of guidance, we are holding our forecast, so please refer to Page 7 of the FIBRA financial information for specifics. The combination of strong demand for logistics real estate, our operating results and a best-in-class balance sheet in what we see is a bright outlook, positioning FIBRA Prologis as one of the best players in our sector.

To sum up, the second quarter was a continuation of what has already been a very good year, and I feel great about our growth outlook. With that, I turn it to the operator for Q&A. Thank you.

[Operator]

[Operator Instructions] Your first question comes from the line of Nikolaj Lippmann from Morgan Stanley.

[Nikolaj Lippmann, analyst]

Congrats on the solid numbers. Just one question here, and it relates -- so you sold out in most markets, especially in Mexico City. When we look at these numbers, the pace was strong. We wonder -- I wonder why we're not seeing more of an uptick in terms of same-store rents in that area. And I was wondering, you're looking at the contract, your better information than we do. Can you give us a sense of when we will see that inflection outputs in terms of pricing in the Mexico City area specifically?

[Hector Ibarzabal, executive]

Thank you. Thank you, Nikolaj. This is Hector. Good to hear from you. In Mexico City, what we have been experiencing is customers are requesting more terms in the contracts. I think that the price is trending to be not the #1 triggered decision for a customer. They want to have the space, and they want to have certainty that they will have the space. We expect to have an important rent growth going forward from today to year-end. My expectation is that we will have at least from 8% to 10% rent growth, and customers are getting privilege to the fact of securing the space. So Mexico City is strong. We are very well positioned. Land-constrained situation in Mexico is becoming more difficult. And this is only good news for the current facilities because they will keep on increasing rents and value.

[Operator]

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

[Vanessa Quiroga, analyst]

The one that I have is regarding the position that you just announced into the Juarez. If you can tell us a bit about the property that you acquired, the cap rate with and without the closing costs? And also what can you tell us about the current market prices of land into the Juarez?

[Hector Ibarzabal, executive]

Thank you, Vanessa. And since FIBRA was launched, I have not seen Juarez in such a great position. The cap rate that was seen in Juarez is the minimum cap rate that we have seen, is in the middle bit of 7%. Land prices are going up, and we're expecting rents implies to go up, probably 5% to 10% in the following months.

[Vanessa Quiroga, analyst]

That cap rate is with -- including closing costs, can you tell us more or less from March with closing costs for this transaction?

[Hector Ibarzabal, executive]

Closing costs are between 4% to 5%. And what we are seeing, not only in Juarez, but in -- I can say, in all of the markets in which we're participating is cap rate compression pressure. There is plenty of new investors who's willing to jump into the arena. So I wouldn't be surprised if the asset value in Juarez reach a record high in the following quarters.

[Vanessa Quiroga, analyst]

Okay. Okay. Can you tell us what's the current occupancy of the property -- of the portfolio? The acquisition, 100%?

[Luis Gutierrez, executive]

Vanessa, we didn't understand the question, but our occupancy in the Ciudad Juarez segment is 100%, and the occupancy of the acquisition is 100%.

[Operator]

Your next question comes from the line of Pablo Monsivais from Barclays.

[Pablo Monsivais, analyst]

I have two. The first one is whether you have an update on your acquisition plans that you mentioned in your previous earnings call. I remember it was a 1.6 million square feet M&A plan. I just wonder if there's an update there.

And my second question is on the occupancy rate decrease in the manufacturing segment. It went from 98%, 99% to 96%. So can you please shed some light on the reason behind this decrease?

[Luis Gutierrez, executive]

Thank you, Pablo, and I'll take the question on acquisitions. So Pablo, this is time to play offense. And of course, we have been working in preparing the company for growth. In fact, we have a loan-to-value of around 27%, 28%, and we have also expanded our line of credit, as Jorge mentioned. So let me tell you the sources.

Number one is we are in progress to meet our guidance between $100 million to $200 million. So the PLD pipeline, as you say, there is 1.6 million square feet. This is around $130 million. So we recently acquired this property that was mentioned. And it is likely that before year-end, we will add some $90 million, mainly before the end of the year. Some of it will be third quarter and some of it will be fourth quarter.

On this bracket, let me just mention that the sponsor will put to work around 3 million square feet in this next 6 months. This is close to $200 million, and this property will be stabilized in 2022 and 2023. In addition, the sponsor will replenish its land bank, which today sits around a capacity of 5 million square feet, and we are planning to triple that to 15 million square feet. This is mainly in Mexico City, Monterrey -- Guadalajara and Monterrey.

Now let me talk about third-party sales. So we have done, in the first half, around $30 million. We bought a property in Toluca and Mexico City, Last Touch. And we are seeing a good environment. There is an increased sale of portfolios. And we see a good relative valuation. And of course, we're evaluating some options. And hopefully, we will act on them before year-end.

[Hector Ibarzabal, executive]

Regarding, Pablo, your question on the border markets, what you're seeing is probably part of the frictional vacancy that it's a regular part of our operations. In Tijuana, we experienced 100% occupancy. Luis mentioned, we have 100% occupancy as well in Ciudad Juarez. We integrate in Ciudad Juarez [indiscernible], which -- those are assets which do not fit our strategy anymore, and we are actively trying to sell them.

Reynosa, there was a slowdown in the occupancy. But we have already executed a couple of contracts in Reynosa that will take such occupancy from 93.5% to 97.9% starting the first day of October. So the way I see the fundamentals in these 3 markets makes me be -- make me be very confident that these markets are going to be facing not only low vacancies, but very substantial growth going forward. Reynosa is a market that we like a lot, that's where our sponsor is currently actively pursuing some interesting transactions. So I'm pretty sure that I will be able to announce something in that market in the short term.

[Operator]

Your next question comes from the line of Sheila McGrath from Evercore.

[Sheila McGrath, analyst]

You purchased the Last Touch asset in the quarter. I was wondering if you could give us a little more insight on that strategy. Do some of your existing logistics tenants take space in those closer-end assets? Or is it a whole new set of tenant?

[Hector Ibarzabal, executive]

Sheila, thank you for your question. And I'm thrilled with the good activity that e-commerce is showing. Hard to say, but probably 2021 is going to be even a better year on e-commerce than 2020 as we're seeing not only the big players, but we are seeing all of the retailers taking important actions on trying to reinforce their e-commerce strategy.

Omnichannel is the name of the game and e-commerce, on this regard, plays a very important work. On this environment, Last Touch facilities every day will become more important as competition to get the customers make them try to be closer to the customers in order to provide faster service. Having said this, it is important to understand that e-commerce players, they always have alternative routes and that cost is an important component of this.

Our Last Touch strategy is linked hand by hand with what we hear from our customers, understanding what are the locations, what are the characteristics and what are the restrictions that they do not want to have in this type of facilities. In other words, when we launch -- or when we make the Last Touch acquisition, we know for sure the interest that our customers might have regarding that building.

I would say that probably 75% of the demand is coming from a current customer base for these type of facilities. We see as well a demand coming from other customers looking for other type of facilities like the recent lease that we think where the facility was directed to our research and development center. So there's plenty of demand from all types, but most of it comes from the current customer base.

[Luis Gutierrez, executive]

Sheila, I would just add that the main e-commerce players are building the infrastructure nationwide. And the next phase of focus will be servicing with lower times. When this happens, I think there will be a boost in Last Touch demand. And I think we're getting prepared building a portfolio.

[Sheila McGrath, analyst]

Okay. Great. And one quick follow-up. Cap rates for industrial have compressed meaningfully in the U.S. and globally. I was wondering if you can comment on those trends in Mexico and also put from your position from the sponsor, if you put Mexico's strong market conditions in perspective with the rest of the world, is Mexico stacking up among the top from a demand perspective?

[Luis Gutierrez, executive]

Thank you, Sheila. Yes, I mean, as I mentioned in my remarks, logistics real estate is the preferred asset class. And we have been seeing a lot of demand -- very good demand-supply fundamentals around the world, and Mexico is not the exemption. We've seen cap rates in the U.S. trending lower than 4%. And this is an important decrease. Valuations in the U.S. increased 10% in the quarter.

So you could see that even the values went up higher in the U.S. compared to Mexico. As Jorge mentioned, we had a 4% increase in the quarter. This reflects about a 40 basis points reduction in cap rates, taking maybe the average cap rate according to our standard between 6.4% and 6.5%, probably Mexico City and Tijuana leading the pack with around 6.1%. And then maybe you have a moderate 25 basis above, Juarez is about 50 basis points. And so we see a good trend as investors are really looking to invest in our sector.

[Operator]

Your next question comes from the line of Gordon Lee from BTG.

[Gordon Lee, analyst]

One quick question, which is what's your view of how disciplined development activity will be? Because obviously, we've seen in the past where we've seen over development in markets like Juarez, et cetera. Given the enthusiasm and the amount of capital that you see flowing into the segment, into the sector, how concerned are you that -- or how confident are you maybe is a better way of asking the question that developers will be a bit more disciplined this time?

[Hector Ibarzabal, executive]

Thank you, Gordon. I think this is a good question that needs to take me back to our strategy. We'd like to participate in markets where there's high barriers of entrance. So one thing is that investors might be interesting -- interested, for example, of developing in Mexico City. And a different reality is if they are going to be able really to get the land and to get the conditions and the development -- to do that type of development.

Let me try to provide you some figures about our 6 markets. In the last 4 quarters, there has been a net absorption of 22.8 million, it's per feet. And completions have only been 19.9 million. So there's a deficit of 3 million square feet that has been absorbed more than what completions have happened. If you analyze the supply pipeline, that is a number that we monitor permanently, we're seeing that there's 11.8 million of new supply coming in the pipeline and 3.7 million out of these figures are already build-to-suits, which are committed. So you only have 8 million of new investors jump into the market.

The interest is there. Developers are more active than ever, but getting entitlement has become more difficult. Getting the right piece of land, land prices are going up importantly. So investors, they do hesitate about paying 40% to 50% above the regular land prices, and construction costs as well are going up. So all of this represents an interesting combination that if you do not know what you are doing, you can very easily commit a mistake. We feel very confident we have a strategy to tackle cost, we have a strategy to control land and we have the feedback from our customers. So we understand what their expansion plans are.

So interesting moment in the market, a lot of interest, a lot of activity. But I need to say that there have never been as many challenges as I'm seeing today for developing new products.

[Operator]

Your next question comes from the line of Francisco Suarez from Scotiabank.

[Francisco Suarez, analyst]

Congrats on the results. And the follow-up question to the Juarez and your acquisition of Juarez. Where exactly that asset is located and in which core results? And if you can give us a little bit of color on what are your views on the differences across the corridor that [ we see carrying out ] in Ciudad Juarez, perhaps like more of the -- that will be portion of the CD? Anything that you can share with us?

And then secondly, it is the first time since about 4 years or so that I have heard you optimistic about Guadalajara. And does that mean that the sponsor might actually allocate much more reports to Guadalajara?

[Hector Ibarzabal, executive]

Thank you, Paco. And I'm happy on seeing what is happening now, what is happening in Juarez. This facility that was acquired for FIBRA is completing a part of previous properties that the FIBRA has passed. The remaining backlog that the sponsor holds in Ciudad Juarez is in the best location. Land has disappeared from the tradition of corridor. So all of the new movement is going to the market that [ digitalized ] Electrolux that is several miles away from this core market. So we -- Prologis is the only company that still has land to develop in the more desirable corridor, and we will take advantage of the situation.

In Juarez, we are seeing demand from the auto industry from 3PLs, from logistics, from medical and from consumer products. I can say that Juarez is in very good shape. And from understanding the plans that the sponsor has, I wouldn't be surprised for the first time our sponsor would be developing several buildings at the same time in Ciudad Juarez.

Regarding Guadalajara, it's interesting because Guadalajara has 2 components. Guadalajara has a component of electronics/technology and that has a very important component of 3PL and e-commerce. So the interest that we have in Guadalajara is high. Our sponsor has just controlled an important piece of land there that will provide a space to provide expansion and to take care of the new demands. And we're seeing activity as well from companies in technology. I can make a list of at least 9 companies that recently experienced activity on electronics and research and development. Guadalajara is a peso market. This is a situation that you need to understand and you need to treat accordingly. And we will not be shy, and we will be playing offense in Guadalajara as well.

[Operator]

Your next question comes from the line of Froylan Mendez from JPMorgan.

[Fernando Froylan Mendez Solther, analyst]

Two questions. So can you help us rank from the strongest to the weakest of your markets in terms of rent growth expectations? You already mentioned Tijuana with almost 32% year-on-year increase so far. But how much more can we see? And how does it look for the rest of your markets? And if there is any difference between the pricing power that you have on the logistic tenants versus the manufacturing tenants?

[Hector Ibarzabal, executive]

Thank you, Froylan. We do not make important differentiation scoring on logistics and a manufacturing tenant. Of course, the process with a manufacturing tenant is more complex as in the most of the cases, there is -- they require special features. And we always have the discipline not to invest in specialized allowances that the customers start to require. But the growth of the shell is exactly the same.

We do see 3 markets that are pushing brands importantly. Let me plan up at the very front. We do see Mexico City and Juarez in that lease. In these 2 markets, I would be expecting a rent increase of at least 2 digits in the next 3 to 4 quarters. The other 3 markets, Monterrey, Guadalajara and Reynosa, they are as well experiencing rent growth in a lower scale. Probably in these markets, we should be expecting something from 4% to 6%. So on the overall, the expectation that I have for rent growth going forward is as high as I have seen it. And this will bring, as a consequence, combined with what Luis was mentioning of new interest from new investors that the value of the assets keep on growing.

You guys have heard me saying that the name of the game is increasing value of the properties. The rent is important, and the rent growth is a consequence of being able to increase the value of the facility.

[Operator]

Your next question comes from the line of Juan [ Masevo ] from GBM.

[Unknown Analyst]

So I would like to ask you about your retention rates. They seem lower than usual, although occupancy has been stable. Could you provide some colors on the drivers for the retention rates?

[Hector Ibarzabal, executive]

Thank you, Juan, for your question. The way I like to see retention is always linked to occupancy and rent growth. There's a red light when you have low retention and your vacancy is increasing and your rents are decreasing. In our case, we have been losing some business. Part of it has been because our permanent effort on trying to increase rents. So some customers decide to go and look for a cheaper facility, lower quality. But the most of the transactions have been anticipated, we knew that they were going to be happening, and they depend on personal circumstances of our customers consolidating spaces, expanding business, that type of situations.

We have a low retention rate. And in corporate, I received congratulations because of a low retention rate with high rent growth in our new activities. Nothing to be concerned on this regard.

[Operator]

[Operator Instructions] Your next question comes from the line of Jorel Guilloty from Morgan Stanley.

[Wilfredo Guilloty, analyst]

So two questions. The first one is, I was wondering if you can quantify the opportunity for Last Touch assets within Mexico City in terms of available GLA? Or perhaps any other metric that you see appropriate? And within this, do you see the opportunities more within M&A? Or do you see it more towards perhaps greenfield or brownfield? Those are my questions.

[Hector Ibarzabal, executive]

Thank you. Thank you for your question, Jorel. In GLA, the typical size of the Last Touch facilities could range between 30,000 to 80,000 or 90,000 square feet. I would say that the average is more between 50,000 to 60,000. We have a program in which we plan probably to acquire from today till year-end, probably 4 or 5 more of these facilities. And the program for next year, I think it's going to be more important than that we have this year as we are seeing some other markets besides Mexico City, they start to get some traction in this regard.

On the M&A front, I think that there's opportunities. I think that the current values of the assets are becoming an incentive, particularly to some funds that are finalizing their investment periods and that they're trying to get a nice profit out of the investments that they have made.

I think that the second half of this year is going to be more active on this regard than the first half of this year. And I'm already visualizing some important processes are outside in the market that FIBRA Prologis participate.

[Wilfredo Guilloty, analyst]

So bringing it back to Last Touch, does that mean that the opportunities for asset acquisition is more M&A? So it is not necessarily that you would take a building and convert it into Last Touch?

[Hector Ibarzabal, executive]

The answer is yes. You need to get the facility design and redevelopment plan because it's going to be tough to get the facility the way the customers are requesting it, but it's much more difficult in Mexico City to try to start from scratch as the entire process is very complicated.

[Operator]

Your next question comes from the line of Alan Macias from Bank of America.

[Alan Macias, analyst]

Just one quick question on the land acquisitions that the sponsor will be making. Is there any percentage? Is it more towards manufacturing or logistics?

[Luis Gutierrez, executive]

Thank you, Alan, and it's in markets in which we have replenished our -- the sponsors [ replenished ] its land bank. So I think it's pretty balanced in terms of manufacturing and logistic locations. So we will see additional land in Mexico City and Guadalajara, which are the logistics markets. And on the manufacturing markets, it's Monterrey, Tijuana. The sponsor has pretty good land in Juarez and Reynosa so far. So this is a huge effort, which is building for the future and this will be a major competitive advantage as the land bank is jumping from 5 million square feet capacity today to tripling more to around 15 million feet of capacity. So we are excited about these new opportunities going forward.

[Operator]

[Operator Instructions] There are no further questions at this time. I will hand the call over to Mr. Luis Gutiérrez, CEO, for closing remarks.

[Luis Gutierrez, executive]

So thank you very much to everyone for your interest in FIBRA Prologis. We are very excited to see the acceleration of our business during 2021, which is positioned to be the best year for logistics real estate. And I would like to encourage you guys to read our sustainability report, which was just issued last week. It is very interesting, and this is a sector-leading effort. So looking forward to see you guys now that the economy is going to reopen to see you in person and not virtually and looking for a great third quarter. Thank you.

[Operator]

This concludes today's conference call. You may now disconnect.