Prologis Property Mexico SA de CV

OTC:FBBPF

Earnings Call Transcript 2020-Q3

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the FIBRA Prologis Second Quarter Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Kosta Karmaniolas. Thank you. Please go ahead.

[Kosta Karmaniolas, executive]

Thank you, Brandy, and good morning, everyone. Thank you for joining us for our third quarter 2020 earnings conference call.

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 and guidance. Also joining us today is Hector Ibarzábal, our Managing Director.

Before we begin our prepared remarks, I would like to remind everyone that all of the information presented in this conference call is proprietary and all rights are reserved. The information has been prepared solely for information purposes and is not a solicitation of an offer to buy or sell any securities. Forward-looking statements during this call are subject to a number of risks and uncertainties. Our actual results, performance, prospects or opportunities may differ materially from those expressed in or implied by the forward-looking statements. These forward-looking statements are current as of the date of this call. We take no obligation to publicly update or revise any forward-looking statements after the completion of this call, whether as a result of new information, future events or otherwise, except as required by law.

Additionally, during this call, we may refer to certain nonaccounting financial measures. As is our practice, we have prepared supplementary materials that we may reference during the call. If you have not already done so, I would encourage you to visit our website at fibraprologis.com and download this material.

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

[Luis Gutierrez, executive]

Thank you, Kosta, and good morning, everyone. I hope you and your loved ones are staying healthy and safe. We remain steadfast in doing everything we can to help our employees, customers and communities through this complicated time. We have been working remotely. Our markets have improved and we have excelled in our customer service and engagement. The combination has resulted in operating and financial performance that exceeded our expectations.

Let me highlight the operational results for the third quarter. We had a robust leasing activity that resulted in an increased occupancy. Leasing spreads reached an all-time high and importantly, all 6 of our markets recorded positive rate change on rollover. As of yesterday, we had collected 99.4% of third quarter rents and more than 86% of the rent due in October.

Today, we have granted rent deferrals totaling 1.8% value revenues, which is less than we expected at the beginning of the health pandemic. This is a testament to the sector diversification and credit quality of our customer roster. We expect to recover 85% of those rents before year-end, with the remainder in early 2021. We had a strong FFO and AFFO growth, which exceeded our expectations.

Turning to the broader real estate environment. Demand activity fly by more than 1 million square feet in the third quarter. Development activity remained stable and has been adapting to meet demand. Market vacancy in our 6 markets tightened 30 basis points to a historical low of 3.1%. Market rental rates increased in the third quarter, rebounding from last quarter a slight drop.

Now let me spend a few moments on what we're seeing on the ground. Customer sentiment continues to be resilient. Despite a weaker economy, there's a lot of demand for modern logistics product in Mexico. We're still engaging our customers on expansions across all of our markets. In Tijuana, where land scarcity has kept supply limited, resulting in low vacancy and higher rents, customers are moving quickly to expand. In other markets, the pace is measured. This quarter, we also started to hear about expansion from our customers in Reynosa, which is encouraging given demand there have lacked over the past year.

Two key structural drivers on logistic real estate: manufacturing and consumption have advanced significantly this year. While neither is completely decoupled from the broader economy, they have outpaced economic growth of the country as a whole and have been key factors in the strong performance of the asset plan.

Starting with manufacturing. Near-shoring operations to Mexico continues to be a simple feat and one that is building momentum. Proximity to the United States and property quality are paramount in the discussions we have been having with prospective customers. This has been a competitive advantage for us. Notably, 2 Chinese companies will soon start operations in Mexico, having signed leases in the third quarter. One is a very good company that will be based in Monterrey. The other company is a global leader in adjustable beds and sleep technology, and they will be located in Ciudad Juárez.

We're finding near-shoring demand is broad-based across medical consumer goods, electronics and field equipment among many other industries. I expect greater frequency of companies near-shoring to Mexico due to the continued trade tensions between the U.S. and China, as well as the ongoing health pandemic, which is forcing customers to hold greater inventory levels closer to the end consumer.

On the consumption front, e-commerce continues to accelerate, and in fact, has reached 15% of our portfolio following the acquisition of Prologis Park Grande in April. The lockdown forced many Mexicans to adopt digital consumption sooner. The e-commerce as a percentage of retail sales have doubled over the past 6 months. However, adoption remains low relative to the rest of the world, signaling that there is more room to grow. Retailers would have to adapt to this trend towards online shopping by carrying more inventory, which will result in more space required. While e-commerce was late coming to Mexico, it is now fairly entrenched, given the space requirements being 3x that of a traditional retailer. We expect demand for our product will continue to increase.

While we're cautiously optimistic in our outlook given the pandemic and state of the Mexican economy, we believe FIBRA Prologis is due to outperform due to the logistics asset class that's outpaced the other asset classes even more so during the health pandemic. Our portfolio has been resilient during this challenging time, exceeding our performance in recent years. We have a differentiated strategy that focuses on 2 key drivers of economic growth, along with our stringent guidelines for investing in markets with high barriers to entry. And we are well positioned for the future with low leverage and flexible balance sheet that allows us to be opportunistic when others cannot. The margin to deploy capital has become more favorable, and we are in a terrific position to take advantage of this opportunity. We expect to become more active in the next few quarters on this front as we drive to create value for certificate holders.

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

[Jorge Girault, executive]

Thank you, Luis. Good morning. Thank you for joining us, and I hope everyone is staying healthy. Before commenting on FFO, I would like to remind you that we issued 200 million additional certificates equivalent to 30% increase in the middle of March. Proceeds from these additional certificates were used to acquire Grande portfolio on April. The NOI associated to this portfolio was not stabilized until September of this year. Therefore, we have not received the full benefit.

On a nominal basis, FFO for the quarter totaled almost $37 million or USD 0.043 per certificate, which represents an 8% increase if compared to the same period last year. Excluding the impact from onetime nonoperating items on both quarters such as the realized gain on VAT of $3.6 million, FFO per certificate was basically flat.

AFFO was $38.1 million for the quarter, an increase of more than 26% compared to last year. In the last 9 months, we have received around $11 million of additional income derived from nonoperating revenues, which are related to withholding tax and VAT reimbursements as well as realized income from hedges on FX.

These revenues are not related to the operations of the portfolio. They are, however, related to the risk management of the balance sheet. To this extent, we will continue to protect earnings with peso hedges, which could result in realized gains in 2021 and beyond. In addition to protecting earnings, they ensure our dollar distribution is unaffected by changes in FX.

Moving to operating metrics. Leasing activity was 3.8 million square feet. On a cumulative basis, we have leased 11.5 million square feet during 2020, leaving us with a record low of 2% exploration for the balance of the year.

Quarter-end occupancy increased 90 basis points from the second quarter to 96.4%. However, it was down 40 basis points year-over-year. Our leasing teams are doing a phenomenal job, exceeding our expectations from the beginning of the health pandemic. Despite a weaker peso and in line with our strategy to push rents higher to create value, net effective rent change on rollover increased 16.3% for the quarter and was 12.1% on a trailing 4-quarter basis, both of which were above our expectations.

Cash same-store NOI declined 6% and was mainly driven by concession related to longer lead terms and a weaker peso. I would like to reiterate that increasing free rent is a function of longer term and lease volume and not due to COVID. To this note, free rent is not increasing. The nominal level is higher as a function of longer term and higher volume. To give you some perspective, same-store GAAP NOI, which smooths out the effect of free rent, increased 2.4%.

Moving to our balance sheet. As you may have already seen, we have announced that FIBRA Prologis have received credit rating from Fitch and HR Ratings. On an international scale, Fitch gave us BBB, and HR gave us BBB+. On the Mexican scale, we have also received a AAA rating from both agencies. This is due to the strength of our portfolio, investment strategy and balance sheet management since IPO. As a consequence, we will have greater flexibility for refinancing alternatives in the near future.

Let me go to the balance sheet metrics for the quarter. We ended the quarter with 28% loan-to-value, weighted average debt cost of 4.3%, weighted average maturity of 3.2 years, debt-to-adjusted EBITDA of 4.0, fixed charge coverage ratio of 5.1, and we have $341 million of total liquidity through our unsecured and committed credit facility.

Wrapping up. In this year, we have further improved the credit quality of our portfolio and balance sheet. Our teams have done an excellent job on lowering the leasing rent in operations in 2020 and below average growth through 2021. Also, as you can see, we are actively working on having a more flexible balance sheet. All these together makes FIBRA Prologis an attractive investment from a risk and growth perspective.

With that, I will turn to Brandy for Q&A. Thank you.

[Operator]

[Operator Instructions] Your first question comes from the line of Sheila McGrath with Evercore.

[Sheila McGrath, analyst]

Your balance sheet is low leverage based on LTV. Can you comment how that positions you for additional acquisitions, either from third-parties or your sponsor? And are there any opportunities in the pipeline? And if you can comment on pricing, if that's changed since COVID?

[Luis Gutierrez, executive]

Thank you, Sheila. This is Luis. Yes. So after the first quarter, in March, we decided to stop all capital deployment activities given the uncertainty created by the pandemic. And this decision was not only by FIBRA Prologis, we saw a lot of players, Prologis globally, our sponsor decided to stop that. So after 2 quarters, we have been seeing the sector resilience and have started to see investment activity. For example, our sponsor has started to invest and has resume activities. We're expecting a healthy pipeline to increase as part of our acquisition proprietary access from FIBRA Prologis that will increase during 2021.

So we believe it's a good time for FIBRA to resume investments. I think, as we said, we're very well positioned. We have $340 million of liquidity and 28% loan-to-value, which makes us -- to take advantage of this. So I guess we have 1.7 million square feet in the pipeline of Prologis. We will act in this fourth quarter and acquire 2 buildings mainly in Monterrey for about $60 million, and we're also seeing good third-party acquisitions. So we believe the total activity for the fourth quarter will be $100 million, of course, the plan is to do in the fourth quarter, although some of this activity may slip for the first quarter. And I guess this also positions us well to take advantage of anything that comes next year.

And for pricing, we see cap rates mainly remaining stable pre-COVID. We see a lot of investors and stakeholders interested in the logistics sector. So we are not discounting the possibility of a value increase in the overall sector. But pre-COVID pricing is something that can be expected. So cap rates for Mexico, 6.75, maybe Monterrey and Tijuana 25 basis above that and maybe there are other markets, another 25 basis above. So that's what I could comment in terms of pricing.

[Operator]

Your next question comes from the line of Alan Macias with BAML.

[Alan Macias, analyst]

Just a quick question on utility expenses. Quarter-over-quarter, they declined. And over the last 12 months, they have been declining. And just if you can give us some color on what is driving this? And should we expect utilities to remain at third quarter levels or second quarter levels of this year?

[Jorge Girault, executive]

Alan, this is Jorge. Regarding utility expenses, as you mentioned, they decreased quarter-over-quarter, but they move around, especially in the first and -- fourth and first quarter, given some timing. So you should expect, from a utility perspective to see that -- you should see it on an annual basis. And it should be in a relative basis, similar to what you have seen in the previous years. So you should see them annually quarter-over-quarter with -- due to land tax or CSP payments, sometimes they concentrate in the fourth or the third quarter, and then they move out to the year. So I would take an annual number and smooth it out for -- I mean, from projection data purposes.

[Operator]

Your next question comes from the line of Nikolaj Lippmann with Morgan Stanley.

[Nikolaj Lippmann, analyst]

My questions are quite very similar to those of Sheila. I'm just wondering, I saw that Amazon is announcing today an investment in Mexico for $100 million roughly. Can you talk about how that could affect your business in both Monterrey and Mexico City? And also, we see that Mexico City is about 10% of premium to your average. Can you talk a little bit about what you're seeing specifically around the Mexico City market in terms of sort of the marginal sort of the latest contracts that you have signed in that market vis-à-vis your average of vis-à-vis Mexico City.

[Hector Ibarzabal, executive]

Thank you very much, Nikolaj, for your question. This is Hector. Indeed, this announcement that just Amazon did this morning, it's something that it's a clear reflect of what is happening in the e-commerce. We've seen between the second and the third quarter of 2020 the same growth on e-commerce activities to what has happened since Amazon started operations in Mexico back in 2014, Prologis back [indiscernible]. The lockdown economy is bringing a lot of new online shoppers, and we are seeing not only Amazon, but we are seeing MercadoLibre and we're seeing all of the retailers enhancing in a very important manner, their online activities.

The focus that Prologis has and it is embedded in our name is regarding logistics. Amazon rents 5% of the total space globally from PMT. So it's not that we have an exclusivity with Amazon. Amazon does not have an exclusivity with us, but certainly, there's a strong corporate global relation with these guys. We're currently working with them in several projects, executed some new activity with them in Mexico City.

You mentioned specifically about Mexico City market. Mexico City market presented 3.5 million square feet absorption during this quarter. And this number is higher than the construction start from Mexico City. So we see that the Mexico City market rent are pushing up. Mexico City market rents during this quarter, we increased them 11.9%. So this is a clear testimony that the most important market for FIBRA Prologis, which is Mexico City, is a market that will keep on bringing good dividends to us.

We are optimistic. Land scarcity in this market is very important, takes several years to launch projects, and I think that FIBRA Prologis will keep on taking advantage of this.

[Operator]

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

[Gordon Lee, analyst]

A couple of questions. First, on your guidance. If you look at your performance through the third quarter, it would seem that you're performing above what your guidance would suggest. And so sitting here in October, I'm wondering whether your decision to keep the guidance untouched was because there's something in the fourth quarter that you're looking at that you might be a little bit concerned about? Or are you simply being conservative? And then the second question, Hector, for you, on the contracts you signed with Chinese customers. In the past, you've mentioned that one of the reasons why they had been slow to move into Mexico was that they really didn't -- they wanted contracts with different characteristics from what was the norm in Mexico, both in terms of ownership and currency composition. I was wondering whether you're now seeing them adapting more to the way that Mexican contracts are signed? Or are you having to be flexible in the way you're signing contracts with them?

[Hector Ibarzabal, executive]

Thank you, Gordon. Let me start with the second question. And effectively, the global Chinese companies that are part of this near-shoring phenomenon are companies that are well adapted to the way of doing business in Mexico and in some other places. The issue that you mentioned is more related to the new Chinese companies that, for first time, are getting out of China. As you know, we have the big advantage of having an important operation in China. And we have permanent conversations with our Chinese colleagues on the right way to approach the situation. It's very difficult just to be incurred in China with a Chinese company. And that's something that represents a big difference compared to some other countries.

So whether these companies are adapting, I think it's too early to say. The velocity of this adoption is going to be more related to the flexibility of openness that competition presents. It's not the same thing having a strong public U.S. company guarantees of having a strong public Chinese company guarantee. And I'm not sure if the market in Mexico competitors know about this. A key factor of this is the way we structure contracts. I think that we do have an advantage here because of our relation, but very optimistic about the flow of these new companies into the market. Border markets are in very good shape because of these new demand that we have. Let me turn it to Luis to comment about guidance.

[Luis Gutierrez, executive]

Thank you, Gordon. I hope everything is well in New York. So in relation to your question about guidance, I have to say that the results are better than expected, and we don't see anything getting in our way in the fourth quarter. So I think we're in a good shape and the final results will be at the high end of the range.

Now let me comment, I guess, on some of the items. So acquisitions, as I have announced, we will be doing $100 million, we would probably go above our year-end. But we don't know if any of this activity may slip to '21. So that's why we did not increase guidance. We see the operating occupancy results to be at the high end of the range. And FFO will be at the high end of the range, but certainly, we could bump the range at year-end.

[Operator]

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

[Vanessa Quiroga, analyst]

My first question is regarding the lease term expansions or extensions that you have been achieving. Do you expect to continue with this effort very actively going forward? Is there a target lease term that you want to achieve for your total portfolio? That's the first question. And the second one is about rent. We saw that net effective rents are growing or grew faster in the third quarter than cash rent. So how do you expect those 2 to evolve going forward?

[Hector Ibarzabal, executive]

Thank you, Vanessa, for your questions. I'm glad that you're asking this question because as I have mentioned in the past, we have passed through several changes of cycles besides COVID, and we know exactly what to do and how to react to these kind of situations.

We are presenting a longer lease term because of a program that we launched with the current customers. It's a program that did very well sold out and that has been successful in several markets in which Prologis participate. We have 18 transactions in this regard so it's not that the vast majority of our contracts hasn't to this structure. It is a win-win because it does provide certainty to both parties, the lender and the customer. And this has, as a consequence, an important stability on the portfolio. I think that there's a bit of a misperception between extending lease terms and the so-called free rent grant that is provided. Free rent is not something that we are doing because of COVID. Free rent is part of the regular leasing activity, and it comes as an origin of providing some term for the tenant to do all the final outs that they need to start operations. This is the reason of this free rent, and it's different in each one of the markets. This is why the net effective rent is different than the cash rent but this gets stabilized very rapidly.

On the long term, this is creating value for the portfolio, because we provide the stability at the same time that we optimize the investment that we do in tenant improvement. So it is a good thing, even though it could look like there is some free rent in both this part of the regular leasing activity.

Your second question regarding the rent in the different markets. We see the 2 most important markets in which we are focusing, which are Tijuana and Mexico City. I think that we have an important runway to keep on growing. The in-place rent of our portfolio in Tijuana is 6% and a 5% -- 6% and 5% approximately below the market rent. Tijuana is a market that we like a lot. We are very well positioned. Our sponsor is developing. And the rent change that we're providing in that market is very interesting.

In Mexico, the situation is the same, upward trend. But in Mexico, it's a market where the majority of the rents are peso-denominated. So there is an important catch-up on peso rents. If we were to provide a rent growth delta for Mexico City, it would be much important on the 1% to 12% in dollars.

I'm optimistic because of the demand that we have in logistics and manufacturing. And I am positive that we will keep on providing positive rent growth, the rent growth that we are showing this quarter is above what we were expecting. And I can anticipate that we will have an important positive rent growth during 2021.

[Jorge Girault, executive]

Vanessa, this is Jorge. Just to reiterate on what Hector said. Remember that net effective rent represents the economic value of the contract. So in terms of value, it shows you -- it smooth out or take away the concessions or any giveaway that you may not give to the tenant and gives you the value -- the real value of the contract. So having an increase in net effective rents, we are with 1/3 of our rent in pesos and a 20% or so devaluation in the year, I think it's remarkable.

[Operator]

Your next question comes from the line of [ Enrique Alcantara ] with Citi.

[Unknown Analyst]

I just want to ask you one question. Your net effective rent change was 16.3% year-on-year, but your cash rent change is minus 9%. So is that because new leases are starting at a lower rate, so that they step up to a higher rent level towards the end of the lease? If so, what is the rationale for this commercial strategy?

[Hector Ibarzabal, executive]

Enrique, thank you for your question, and this is pretty much related to Vanessa's question. The cash rent change is not a positive as the gap rate change, exactly because of the requisitions that always apply at the beginning of the contract. Let me provide an example that might provide additional clarity to this concept. If I'm enlarging a contract in Mexico City, for example, let's say, a 4-year contract, I might be providing 0.3 months of every additional year the time enlarging the contract. So if I enlarge contract 4 years, I would be providing 1.2 months of free rent as part of the rent package customer for these customers. This has an impact enlarging the term of the contract, as Vanessa was questioning, but during the first month of that new contract that we have with each customer, we will not be receiving cash as they have the opportunity of having some cash relief because of the new business that they provided to us. This is the main reason because you see the difference between the cash flowing change and between the gap rate change. But the overall, the way -- the right way to look at this is in the midterm, understanding all the benefits in the stabilization and additional business that we are capturing from all these customers.

[Jorge Girault, executive]

And just to be clear, Mauricio (sic) [ Enrique ], the cash rent change for the quarter was 7.5% positive, just to bring perspective. And our cash and net effective rent change was 16.2%. So I think you said negative, so I just want to clarify that.

[Operator]

Your next question comes from the line of Mauricio Martinez with GBM.

[Mauricio Martinez Vallejo, analyst]

Congratulations on the results. Just a follow-up question on my colleague, Mr. Lee, what -- maybe if you can give us more color on the strategy of -- that you're taking to capture the potential clients from the near-shoring trend? And maybe if you can give us some, well, a sense on the risk profile from these potential tenants, what are the length of the term that they are looking or that they are asking for, maybe if you can give us more color on that?

And also a second question, if I may. Probably, while the demand has been quite strong, as you pointed out during your remarks. But how are you seeing the development front? Is any ramp up of new projects at this particular point of time? Or what are you seeing in this?

[Hector Ibarzabal, executive]

Thank you, Mauricio, for your question. And I guess we are learning in this near-shoring activity, which is good news that the contribution requires. Our markets in the border are booming. As you know, we have some association of some properties in Sonora with Juarez market. But we were to analyze only the properties that are in Ciudad Juárez, our occupancy in Ciudad Juárez is 100%; our occupancy in Tijuana is 100%; and our occupancy in Reynosa is 99%. Having said this and trying to understand the new demand that is happening, it is important to establish that probably 50% of this new demand comes from customers that they do want to own their space. This is a business in which FIBRA Prologis is focusing. As we all know, the core business of FIBRA Prologis is long-term leases and creating value for the properties.

So we're focusing only on those customers that are willing to rent space. As I mentioned in my previous participation, short-term lease contracts in the right manner is important. Chinese companies value this comfort to when they find a Chinese environment here in Mexico. And we're trying to provide that comfort level by means of extending the level of the platform between the relation that we have with some of these customers in China. As you can know, we are the only company in Mexico that eventually could offer a Chinese reach to these companies that are jumping into Mexico. And if it's needed, we're in a position to use this. We know how to structure the transactions, and we know how to deal with these customers.

The only way to take care of this additional demand is if you are well positioned. Prologis has a response for being in charge of the development program for FIBRA Prologis, has an important backlog position plant in the 3-border markets in which we participate. In Ciudad Juárez, Prologis have the best remaining piece of land available in [ quality confined ] land but the best land is with Prologis. Prologis has a joint venture with a large landowner in Tijuana. And we are working as well in extending our land position in [indiscernible]. We are very bullish about these broader markets, and we will keep on seeing positive news in this.

Regarding development, activity is still there. In our markets, we were able to see 12.3 million square feet of new starters -- of new construction starts in this quarter. The most active market on this regard was Mexico City. In Mexico City, there was 3.1 million construction starts while, as I mentioned, the absorption was 3.4 million square feet. So I think that the balance between supply and net absorption, which is a clear parameter that we always monitor, is in very healthy shape in all of our 6 markets. And the barriers of entry that we have in the market is what is really preventing new competitors to jump into these development activities. Interesting times ahead. The environment is uncertain, as Luis mentioned in his opening remarks, for the resiliency of our sector and the operational results that we are providing, make us feel very optimistic about the future of FIBRA Prologis.

[Luis Gutierrez, executive]

We'd just like to add, and I guess, complementing what Hector is saying that FIBRA Prologis has a big competitive advantage, given the selections of our markets in the north. This near-shoring activities mainly concentrated in the northern part of the country, not so much in the Bajío area. So I think also given the quality of our portfolio, we are uniquely positioned.

[Operator]

Your next question comes from the line of Adrian Huerta with JPMorgan.

[Adrian Huerta, analyst]

Quick question on dividends. The payout, given the guidance that you have, seems that will be lower than what you had in the past. What are you thinking going forward? Do you think it could be an opportunity to keep a little bit of cash for investments going forward? And the second question that I had was on the turnover costs on leases commenced. It has come down considerably over the last couple of quarters, $1.33 per square feet from somewhere around $2 a few quarters back. What can we expect in coming quarters? And what is the reason for these lower costs?

[Luis Gutierrez, executive]

Thank you, Adrian. I hope you're well. So certainly, as has been said, results have been better than expected before the pandemic. The logistics sector has outperformed. We see -- how we're seeing the portfolio has been with very strong operating metrics. And certainly, as a result, this has generated better cash flow than what we have anticipated.

Our plan is to beat the distribution that we have guided for the year. As I said, distribution is USD 0.097 per certificate. That will not change. But we review our policy every quarter, and we're planning to share this additional cash flow with our investors. And of course, we will be announcing in January as part of our fourth quarter results and year-end, this new distribution policy. But certainly, we are planning to share this additional cash flow with investors.

[Hector Ibarzabal, executive]

The second part of your question, Adrian, regarding turnover costs. Effectively, this quarter, we have 12.4% compared to NOI turnover costs. While in the next quarter, we have 15.4%. The difference between this is because of the lack -- a couple of lockdown months that we had in the second quarter. The size of the portfolio is such that the right way to look at this is on a fourth quarter trailing. And the number that we have here is 12.1%. A regular run rate for these type of companies on an international basis is between 12% to 14%, and I'm expecting going forward to be in the top range of this because of the solar program that we are launching. And because of the [ LEP ] program that we are launching. So let's try to look at this on a fourth quarter trailing because there could be volatility in a specific quarter as it happened in the second quarter because of the lockdown on construction.

[Jorge Girault, executive]

Just a quick comment, Adrian, on dividends and taking advantage. There were some notes that our dividend didn't meet the expectations. We are distributing USD 0.097 per certificate on an annual basis. Obviously, it depends on the FX per quarter when we buy the pesos and that can change vis-à-vis some of the models that are out there. And also you have to take into consideration that at the beginning of the year, we had 649 million share for certificates. And then at the middle of March, we issued 200 million more. So you have to take it into account the average, the weighted average for that specific quarter. But I wanted to take the opportunity to mention this because we are distributing what we said. We are going to distribute USD 0.097 per certifies.

[Operator]

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

[Francisco Suarez, analyst]

Congrats on your results. Yes. The questions that I have, do you plan to issue debt now that you have the global ratings? And secondly, on a follow-up question related with Nik's question on Amazon. Do you expect to be successful in adding more space for Amazon in those markets while trading on [indiscernible].

[Jorge Girault, executive]

[Foreign Language] And thank you for your note and everything. Yes, as you saw, we were rated by Fitch and Moody's, and that gives us a lot of flexibility. We also made public or listed confidentiality on document regarding a potential bond that we can issue in Mexico for $250 million. So I mean we're in that process. The information is there in the supplemental that is now public. And we will keep you posted as we progress.

[Hector Ibarzabal, executive]

Regarding the Amazon question, Francisco, I think that Amazon is just starting the growth. The focus that Amazon on MercadoLibre are having in Monterrey and Guadalajara are important. We have done additional business within this quarter with Amazon. I think that the advantage that FIBRA Prologis has is that we have a very strong and close relations with them. We have an executive that lives in Seattle all the time talking with these guys. We know exactly what is the kind of product that they are expecting going forward, because they evolve very rapidly and their need -- what they required in type of land a couple of years ago is not necessarily what they will be requiring within 2 years.

So this relation bring Amazon, the largest customer that we have is a competitive advantage. I'm positive that we will be able to do additional business with them in Mexico City, Guadalajara and Monterrey. Even though I got it bit clear that we do not have an exclusivity with them and that they, for sure, are going to be doing additional business with someone else in all the 3 markets. This is the way Amazon works. They like diversification, and that's an important component of this strategy.

[Operator]

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

[Pablo Monsivais, analyst]

I have one generally broad question for you. From the total inventory of industrial real estate in Mexico, which is I think roughly 80 million square meters, what do you think this metric will look like in 5 years on the back of e-commerce and near-shoring? Do you think it can grow by 20%, 5%, 10% probably seeing the inventory of industrial would look like in the near future?

[Hector Ibarzabal, executive]

This is a -- these are terrific questions, Pablo. And I think that my answer could be as good and as bad as everyone factor. What I could anticipate with the visibility that I have, and I was just requested by my corporate to do a 3-year development plan. I can anticipate several things. Number one, Prologis is bullish about Mexico. And despite of the current economic and political environment, Prologis is not slowing down. And the Executive Committee of Prologis is requesting us to be very active and to be taking care of these opportunities. So you can expect that the reason that Prologis is going to be investing is higher than the one that we have invested in the previous years.

Number two, regarding these 2 tailwinds that you mentioned, e-commerce and near-shoring. I can see that it's going to be a 2-digit growth, at least going forward. The request of e-commerce is based from warehouse. We have commented it in the past is 3x the traditional brick-and-mortar sales. And this brings an additional pent-up demand that we will be in a position to be supplied.

No matter who wins the election in the U.S., we do see that this near-shoring phenomenon will keep on being active. And we see every time more and more new type of activities taking care on this side of the border. We have commented that now there's important e-commerce operations taking place from important markets to the U.S.

So 2-digit growth, good tailwinds, interesting to see how the economy is going to react. We have positive forces and we have negative forces. But at the end of the day, I think that this lockdown has shown that this business is really resilient. We are part of the supply chain that cannot stop. We are part of this essential industry and we are very well positioned to take advantage of this situation.

[Luis Gutierrez, executive]

Pablo, the other thing that I just would add is that the drivers of the Mexican economy and the activity that will take it out of the recession and will start growing first is exports and mainly tied to this activity. And the other one is certainly e-commerce. So I think in that sense, we're very well positioned with the macro drivers that drive this economy. So we are excited.

[Operator]

Your next question comes from the line of Francisco Chávez with BBVA.

[Francisco Chávez Martínez, analyst]

Just 2 follow-ups on some previous questions. The first one is on the potential debt issuance. Would the proceeds be used for refinancing or for acquisitions? And the second question is on the dividends. Is there -- if I understood correctly, is there a chance to see a higher dividend for the fourth quarter of this year?

[Jorge Girault, executive]

This is Jorge. Regarding the first question, I just want to reiterate what I have said in the beginning of the year that we are looking to refinancing our near-term maturities. So the proceeds coming from this potential data [ filtration ] will be used for right financing, no additional debt right now. So that's one.

The other one on the dividend, is there a chance to increase the dividend in the fourth quarter? The answer right now is no. I mean we are keeping our dividend guidance, as we've mentioned. And we will inform you and let the market know the decision in the fourth quarter regarding going forward on the dividend. Hopefully, this answers your question.

[Operator]

There are no further questions at this time. I would now like to turn it back over to Luis for closing remarks.

[Luis Gutierrez, executive]

Thank you all for joining today's call and your interest in FIBRA Prologis. We remain committed to creating value for all of our investors. We look forward to see you in person soon. And please feel free to reach out if you have any questions or comments, and please keep safe. Goodbye.

[Operator]

This does conclude today's conference call. You may now disconnect.