Prologis Property Mexico SA de CV

OTC:FBBPF

Earnings Call Transcript 2018-Q4

[Operator]

Good morning, and welcome to the FIBRA Prologis Fourth Quarter Earnings Call. My name is Kyle, and I will be facilitating the audio portion of today's interactive broadcast. [Operator Instructions]

At this time, I would like to turn this over to Mr. Kosta Karmaniolas, Head of Investor Relations. You may begin your conference.

[Kosta Karmaniolas, executive]

Thank you, Kyle, and good morning, everyone. Thank you for joining us for our fourth quarter 2018 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 Ibarzabal, our Managing Director.

Before we begin our prepared remarks, I would like to remind everyone that all 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 as well. If you have not done so already, 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. 2018 was a strong year for FIBRA Prologis. We leased out almost 9 million square feet last year, increasing occupancy to 97.4%. Our portfolio has been above 95% occupancy for more than 4 years. Rent change on rollover was 13.1% for the year and has exceeded 10% for the last 2 years. This translated into AFFO growth of 4%, and we delivered a distribution in 2018 that was 5% higher than the previous year.

Additionally, we acquired 4 Class-A properties from our sponsor. These strategic acquisitions are 100% leased to global customers located in Guadalajara and Monterrey. As they were acquired near the end of the year, these properties will be accretive to earnings in 2019.

Consumption and manufacturing exports drove demand in 2018. In our 6 markets, supply and demand were balanced and vacancy was a healthy 4.2% at year-end. We saw the strongest market rental growth in Tijuana, Monterrey and Mexico City.

Following the announcement of USMCA, our manufacturing market saw an increase in demand. New entrants as well as those that had their expansion plans on hold became more active. FIBRA Prologis was a beneficiary of this demand as we ended the year at 98.5% occupied at the border.

On the logistic front, consumption continues to be a very important driver of the Mexican economy. Third-party logistic providers are demanding more space, and e-commerce sales grew an estimated 25% in 2018.

With vacancy near record lows and land difficult to source, our customers are signing longer-term leases.

With respect to balance sheet management, we have worked hard to increase flexibility and liquidity while maintaining low leverage. We view this as a major competitive advantage. The flexibility we have allows us to be opportunistic should the environment change.

Before concluding, let me discuss why FIBRA Prologis is very well positioned to outperform. Our results are evident that location and quality matter. FIBRA Prologis' diversified multinational customer base has spanned industries and space sizes. Its breadth avoids dependency on any one sector or customer.

Our strategy to overweight consumption while maintaining a healthy presence in light manufacturing insulates our business from excessive swings in the market. We have a big head start serving e-commerce customers in Mexico due to our customer relationships and investment strategy. We believe this will be a significant tailwind to our business as the adoption rate by Mexican consumers accelerates. And our 4.3 million square feet pipeline of Class-A assets from our sponsor Prologis, these are well-located properties, and I believe no one has access to anything remotely close to the quality or size.

Our goal is, and always has been, to put the interest of our certificate holders first. While we're laser-focused for signs of market weakness, we remain committed to delivering sustainable growth in an accretive manner. We feel great about our business and our ability to outperform.

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

[Jorge Girault, executive]

Thank you, Luis. Good morning, and thank you for joining our fourth quarter 2018 earnings call. Today, I will cover the highlight for the quarter and introduce 2019 guidance.

Starting with operations, quarter-end occupancy increased 90 basis points from the third quarter and 10 basis points from the same period last year. For the full 2018, we lease almost 13% more area or approximately 1 million square feet more than we expected. For the fourth quarter, we lease 1.8 million square feet with an average leasing term of 86 months. To give some color on this, the average term for the last 3 quarters has been 47 months.

Net effective rent change on rollover for the quarter increased by 13.5% in dollar terms. Rent change was led by Tijuana, Monterrey and Reynosa. It's important to point out that FIBRA Prologis portfolio remains around 7% below market rent, which signifies embedded organic growth.

Moving to same-store cash NOI for the year. We reached a positive 2.2%, which was lower than our expectations due to more free rent as a function of longer lease terms as well as lower average occupancy and weaker peso.

Now let me move to our financial performance. Excluding incentive fee, FFO for the year came in at $107 million, an increase of 1.4%. During the quarter, FFO decreased 4.6% if compared to same period last year. This decrease was due to higher interest rates from 2017 acquisitions.

AFFO for the year was up 4.1% if compared to the same period last year. During the quarter, AFFO was down 9.5%. This decrease was due to higher leasing commissions related to lease volume.

Now let me move to our balance sheet. Our balance sheet remains one of the strongest in the business. We ended the year with 35% loan-to-value, a weighted average debt of cost of 4.1%, weighted average maturity of just under 4 years and $237 million of liquidity.

Last quarter, we said that we were looking on extending our 2020 debt maturity for $255 million in order to lock better terms and avoid additional rate increases. As a result, we have been able to reduce our spread by 10 basis points on our new term loan, and our new term loan is oversubscribed. We expect to close by the end of the quarter.

Now let me produce guidance for 2019, which factors the capital market volatility and geopolitical uncertainty. We are assuming an exchange rate of MXN 20 per dollar and are excluding the impact of any potential incentive fee.

We expect year-end occupancy to range between 96% and 97%. We expect cash same-store NOI growth to range between 1% and 3% for the year, which will be mainly driven by continuing to capture the gap between in-place rents and lease expirations as well as contractual rent escalators. Annual CapEx of a percentage of NOI to range between 13% and 14%. G&A to range between $20 million and $22 million.

We continued to see significant capital inflows to Mexico, and because of a favorable discount situation based on where the peso ended in 2018, we have executed a purchase and sale agreement subject to some conditions present, to sell certain properties to an institutional investor. These are quality properties that are no longer consistent with our long-term strategy. As such, our building disposition guidance is in range of $50 million to $70 million.

Given where the gap between NAV and our CBFI value has been, we are initially excluding acquisitions from our guidance. We will be patient until there is more clarity and the valuation gap closes.

Putting all these together, we're keeping our full year FFO per certificate between $0.155 and $0.165. For now, we are keeping our distribution at $0.1240 per certificate, which represents approximately 10% dividend yield in dollar terms at current value.

Given the current discount to NAV, I would like to talk about the possibility of certificates buyback. We will take advantage of pricing dislocation depending on the day-to-day discount and availability of CBFI in the market.

FIBRA Prologis is positioned as a blue chip in the sector, offering best-in-class governance, low risk and attractive returns. In short, we have done the required work in positioning the portfolio and balance sheet in the best shape for all parts of the market cycle.

To wrap up, we had an excellent quarter and year.

[Audio Gap]

[Kosta Karmaniolas, executive]

We apologize for any technical difficulties. It seems we were disconnected mid-call. Kyle, could you go ahead and begin the Q&A process?

[Operator]

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

[Sheila McGrath, analyst]

You mentioned a purchase and sale agreement. Can you give us some insight on the timing cap rate and how the pricing compares to where your -- where you were carrying those assets on your balance sheet and just kind of the interest level as well?

[Hector Ibarzabal, executive]

Thank you very much, Sheila, for your question. This is Hector. We went, at the end of last year, in this process engaging CBRE to present to the market a portfolio of properties that we consider that they're not strategic anymore, long term for us. We were very satisfied with the process. We did receive much more proposals than what we were expecting. At the end of the day, there was a final competition between 3 important institutional players. And the final one that we are dealing with was a little bit above the in-house value that we have for those assets. Those are good quality assets that are leased, but they do not fit our investment strategy anymore. Some of them are outside the 6 markets in which we are actively investing. The cap rate was above 8%, and I think that we are going to be finalizing the execution and closing on these disposings before the end of this quarter.

[Operator]

Your next question comes from the line of Marimar Torreblanca from UBS.

[Marimar Torreblanca, analyst]

My question relates to your conversion to FFO and AFFO. We saw a big decrease in your AFFO quarter-on-quarter. And I was wondering if you could give us some additional color on what's driving this, what are you expecting for the near term. And given the very positive trends you have on effective rent changes, when do you think that's going to flow through other items, like, same-store NOI or FFO and AFFO? And then the second question has to do with comments you made in, I think, your supplementary material where you say that in some of your renewals, you had to give some additional concessions, and these have to do with leases that probably were signed now for a longer term. Can you give us some examples of what kind of concessions and whether you expect this to still go on for the next couple of quarters even if the markets you're operating in have very positive trends?

[Jorge Girault, executive]

This is Jorge. Regarding the first part of your question on AFFO for this quarter, yes, it came down. Basically, the AFFO came down because of the leasing volume that we had, as I commented. In the year, we have 1 million square feet more that we -- more leasing volume than we expected at the beginning of the year, which was reflected mostly in the end of the -- and this last quarter. And we have longer lease terms. These higher volume of leases, obviously, we didn't expect that, and we had to pay the leasing commission on that additional leasing volume. So the additional leasing volume, it's -- the counterpart for that is that we paid more leasing fees. So if you see our CapEx under the financial supplemental information, you will see the line of leasing expenses that grew. This is the reason why our AFFO came down. Obviously, we didn't expect that leasing cost because of the leasing volume. So that's why it came down. Regarding your question on the rent growth that you made in the same part of your question, we have been harvesting that growth. Remember that the rent change comes when -- every time lease expires. So if we had in the quarter a 13.5% increase in leases, it doesn't apply for the whole quarter. It applies as leases roll. So you will see that reflected in the following year if you want to see it that way in full force and effect. For the second part, I pass it to Hector.

[Hector Ibarzabal, executive]

Thank you very much, Jorge. I think it's important to state that there has not been an increase in rent concessions. This is a very important fact. What we have experienced is that our strategy that we have set up in the field has been effective, and we have been able to push longer terms on our leases and on our renewals. This quarter we had 21 transactions. In the fourth quarter, we have [ a lot ] of 85 months, and on the full year, we have 55 months as the average [ lot ] of all the transactions that we executed. Rent concessions are a function of the lease term. So this ability that we have shown that has been effective of enlarging our lease terms, that's taking us to offer longer free rent at the beginning of the contract, but on a relative basis we're staying all the same. All of our markets are still strong, and we do not see in the short-term rent concessions going up.

[Operator]

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

[Adrian Huerta, analyst]

Two questions. One is, if you can just explain further the decline that you saw in the fourth quarter on same-store cash NOI. And then also under what conditions we could see a decline as well for this year? I think you're guiding for a 1% to 3% growth for this year. And the other question I had -- the question was, is -- in your guidance, is the asset sales included in the guidance or not, just to make that clear?

[Jorge Girault, executive]

Adrian, thank you for your question. This is Jorge. We will answer the second part of your question first. Yes, the asset sales are included in our guidance. And regarding the first part of your question on the decline of same-store NOI, as I said in my opening remarks, it had to do with 3 things. One is more free rent derived from the longer leases that were leased during the quarter. As you saw, we leased -- the term for the leases -- the average term for the leases in the quarter was 86 months, vis-à-vis 47 months in the last 3 quarters. So that longer lease, as Hector was explaining, derived or brought more free rent. It's not a bigger -- larger concession, it's just a matter of market. That's how it works, definitely even helped in the last quarter. We had some devaluation during the quarter and then it came back at the end, but during the quarter, we had some devaluation. And also, we had a slightly lower average occupancy. I have to say that the fourth quarter has something -- has a specific matter related to expenses from our tenants that are passed through to the tenants like the electricity that is paid by our tenants. This reconciliation is done every quarter at the end of the quarter or every month at the end of the month whenever the payment is done. And since, I mean, we ended the quarter, we had to pay, say, the electricity, and we reconciliate in the following quarter. So there is a lag on some of these expenses that we have to bear in the quarter and then it's reimbursed by the tenants in the next quarter. If you remember, electric power or electricity came up during the year. Importantly, no one expected that. So it takes longer to reconciliate with our tenants. It's a timing matter on that front.

[Operator]

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

[Vanessa Quiroga, analyst]

My first question is regarding the asset sales. If you can provide the GLA that you expect to dispose from this transaction? Also, can you name the potential use of proceeds? You mentioned share buyback, but, I don't know, if you could provide more details on other use of proceeds and what would be your priority if you plan to pay down debt as well?

[Hector Ibarzabal, executive]

Thank you, Vanessa, for your questions. This is Hector. We are selling 1 million square feet of properties. Guadalajara, Monterrey, Querétaro, Nogales are part of the markets in which we are disposing.

[Jorge Girault, executive]

Regarding the second part of your question, Vanessa, on the use of proceeds, we will -- the first thing that we will do is paying down the line of credit that we have used. And then we will be mindful of the use of capital during the year, and we will see what's the best use of it, is it share buyback or any other use of it that would bring value to our certificate holders. That's the main plan.

[Operator]

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

[Francisco Chávez Martínez, analyst]

I have 2 questions. The first one is on the tenant retention rate. We saw a decrease at the end of last year. Can you give us more color on this and when can we expect a recovery on this? And the second question is on the -- also on the asset divestment plan. I remember that last year, you canceled the divestment due to a potential tax impact. Is this impact will happen this year with the divestment that you are planning to do?

[Hector Ibarzabal, executive]

Thank you very much, Francisco. This is Hector. And effectively, as you mentioned, we have reduced our retention. This is linked to the effort that we are doing in the different markets to push rents up and to enlarge terms. I wouldn't be concerned about a lower retention rate because we are keeping very high occupancy, and we're experiencing a 13.1% of rent change. Retention could be a concern if retention is linked to additional occupancy, which is not our case. Sometimes we need to leave some customers, go to a cheaper facility because we are pushing rents up in order to have market conditions in our premises.

[Luis Gutierrez, executive]

Francisco, this is Luis. So on your asset divestment plan question, so we have a total or around $200 million of properties we would like to recycle. As you correctly said, this depends very much on the tax implications. And of course, the FX is the main factor. So we monitor the FX, and this is why we consider selling this initial portfolio. And as the year moves through and we monitor the FX, we may include additional sales, but that, of course, is something that is not in our control. So as the year goes by, we'll be updating you guys.

[Operator]

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

[Sheila McGrath, analyst]

I was wondering if you could describe the potential investment volume from the sponsor. Is it a $200 million pipeline, $300 million? And are the bulk of the acquisitions e-commerce-related?

[Luis Gutierrez, executive]

Thank you, Sheila. So let me take advantage and just mention why we believe it's time to be prudent. So I guess, on the domestic front, there is a new administration that is less than 60 days old. And they are transitioning from campaign rhetoric to actual policies, and it's too soon to measure the impact on the economy. And I guess, on the international stage, the U.S.-China trade relations remain unresolved. The USMCA needs to be approved by the U.S. Congress, and we do not know what ramifications the U.S. government shutdown could have on the U.S. economy. So although we have not seen any weakness in the operating environment nor any hesitation from our customers, the capital market volatility of last December as well as conservative economic forecast is something that we cannot ignore, and we plan to maintain prudent and flexibility as we start 2019, and this is the reason why we guided 0 acquisitions. So the pipeline of 4.3 million square feet that our sponsor has is 3.5 million square feet from Grande, and these are mainly related to e-commerce mostly. I think this is a great asset that will eventually be offered by the sponsor to FIBRA.

[Operator]

Your next question from Francisco Suarez.

[Francisco Suarez, analyst]

So it's interesting because you clarified that you are actually selling assets at slightly above book value. So the reason if I think correctly that you are not going to have more aggressive asset sale program and recycle these proceeds to fund for the acquisitions of Grande, for instance, is basically because of fiscal reasons, isn't it? And the second question that I have is, if your tenants have suffered any disruption in Jalisco, for instance, for the gas shortages that we saw in Mexico or also for the blockades that we have seen that are taking around 10 days or so from the railways in [ Chacon ]?

[Luis Gutierrez, executive]

So let me first -- Sheila, the volume of the pipeline is $300 million to $350 million. With that let me turn the call to Jorge to answer the tax question.

[Jorge Girault, executive]

Francisco, thank you for your question. You are correct, it's a fiscal reason why we reduced, on one side, the size of the portfolio sale, and two, as Luis said, we are looking at monitoring the FX. FX has a direct impact on the fiscal results of FIBRA. And because of that, it's kind of a balance you have to look at it, and it's hard to predict the FX. So to be prudent on that side, we choose to make a smaller package. And as we said, there is a bigger package that we would like to dispose, but it will depend on how geopolitical events unfold and that affects our FX. So you're 100% right on that. With that, I pass the word to Hector on your question on...

[Hector Ibarzabal, executive]

Indeed, this gas shortage, probably Guadalajara has been the city that has been more affected. Actually, the reports that I received by yesterday, they keep on informing that it's still very difficult to get gas for the regular citizen. I need to mention that our business has been probably not impacted, importantly. 60% of our customers in Guadalajara, they are service-related. One of them is -- provides business solutions. Parque Jalisco, which is an important asset that we have in Guadalajara, is basically an asset that has been bought to be more an office park than an industrial park. So our customers have shown enough strength to get their gasoline. It's easier for them with transportation companies to have access to preferred supply of oil. But having said this, and this applies not only to Guadalajara, but to the overall market, this gas shortage brings as a need back, the reduction in economy. People do not go out. People start administrating carefully their gasoline. So consumption is going to be affected or has been affected already. It is a good thing that Mexico City, the big apple, only suffered this situation for 10 days. And hopefully, this situation will not be back anymore. It seems that retail sales by means of the gas shortage are going to be affected near 1% at least. This is what ANTAD is expressing. So we're going to be monitoring carefully. This situation is not good, not for our business, not for anyone. But so far, our customers and our operation is still moving relatively normal.

[Luis Gutierrez, executive]

And Francisco, so this is the reason why we're taking a cautious stance to our guidance for 2019, as we don't fully understand which could be the impact of a lot of the things that are happening in the environment.

[Operator]

Your next question comes from the line of [ Eduardo Alvizuri ] from GBM.

[Unknown Analyst]

We just had one question regarding the acquisition guidance for 2019. Is the company still considering the $20 million acquisition that fell short for 2018? Because we didn't see anything regarding the acquisitions for 2019. Or are you not considering anything?

[Luis Gutierrez, executive]

Thank you, [ Eduardo ], for your question. So we've seen a lot of volatility in the financial market. Our stock was trading at MXN 38. At the end of December, we were trading at MXN 30, and now we have recovered to around MXN 34. So we believe that until we see more clarity on the trend on how the financial markets recover, and I think this will have to do with how the environmental -- the geopolitical environment behaves. I think for now, our guidance will be 0. If things stabilize, I think there's an upside scenario, and we could do something, but for now given the uncertainty, our acquisition guidance is 0.

[Operator]

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

[Pablo Monsivais, analyst]

My question has been answered.

[Operator]

[Operator Instructions] Your next question comes from the line of Froylan Mendez from JPMorgan.

[Fernando Froylan Mendez Solther, analyst]

Regarding the sponsor's pipeline, it looks well ahead in the leasing progress. Can you explain if the sponsor can sell that pipeline to a third party if you decide not to execute your right of first of refusal? That's my first question. And the second one is, how much of the GLA under -- how much GLA under construction does the sponsor have? As I understand, the 4.3 million square feet pipeline is mostly finished, since it has a very high leasing progress.

[Hector Ibarzabal, executive]

Yes. What's worth -- you're right that most of the 4.3 million square feet is already finished and some of it is in the process of being leased and stabilized. Actually, we're developing today Grande #2, which is a 1 million square feet facility that must be completed by the end of this year, and that's basically what we have under construction. Regarding your question, Prologis is a very solid sponsor. The development assets that Prologis has are going nowhere. I mean, Prologis is not willing to offer those assets, trying to be respectful, and they're not going to be offered to the FIBRA until the FIBRA is in the right conditions to take over those assets. In the meantime, this is the core business that Prologis has. They can perfectly hold these assets until market conditions improve. They are going nowhere.

[Luis Gutierrez, executive]

Yes. So Prologis, the sponsor has a great balance sheet. They're normally long-term holders, and they don't have a need to sell assets. They also own 46% of the FIBRA. So as Hector mentioned, I think they will hold the assets, and the FIBRA is under the conditions to acquire them.

[Hector Ibarzabal, executive]

And this condition for land, I think that it is important to state market opportunities will kept on -- be taken care by Prologis. The fact that FIBRA is not acquiring assets right now does not mean that we're losing market penetration. Prologis has a development program in place and Prologis will keep on taking care of expansions or new business that in the market could be appealing. That's another competitive advantage that FIBRA has. Prologis will be taking back those assets and holding them till the right moment for FIBRA.

[Operator]

Your next question comes from the line of Roberto Waissmann from Bradesco BBI.

[Roberto Waissmann, analyst]

I would like you to brief -- give us a little bit more color on how the e-commerce impacted 2018 in comparison to 2017? And how do you expect to grow to the segment [ will and, in fact, to Prologis in second half ]?

[Hector Ibarzabal, executive]

Thank you very much, Roberto. This is a very good question because, actually, e-commerce have kept on presenting important delta on its activity. Our best estimate reflects that e-commerce activity has been increasing by 30%. It's still very low on the 4% of total retail sales. These numbers have a potential to go 3x what they are representing. With the visibility that we have on having part of the brick-and-mortar retailers in our portfolio, we do observe that even those conventional retailers are doing very important efforts to increase their e-commerce division. Each one of them -- they have been increasing the area that they take in our facilities to take care of this activity, and we do see that going forward because of the demographic profile of the people, e-commerce will keep on having 20% or 30% growth from now on until we'll reach a number more closer to mature economies. I think that it is a competitive advantage that we have. The fact that most of these important players are global players, we do hold a corporate relation with them, and we understand perfectly the trends and the plans that they have. So we can anticipate and be ready to capture their business here in Mexico.

[Operator]

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

[Vanessa Quiroga, analyst]

The question that I have is, if you can tell us, so at the end of 2018, what was the exposure to contracts in pesos that you have in each market or regional or however you can provide this number? And then also if the increased average term in the contracts, was that something that FIBRA Prologis wanted to achieve? Or was that brought by customers to the table?

[Hector Ibarzabal, executive]

Thank you for your questions, Vanessa. The market in which we are presenting today a higher exposure to pesos is Mexico City market. In Mexico City market, 39% of our leases are peso denominated. The second market that we have with this condition is Guadalajara, where 32% of our leases are peso denominated. And finally, Monterrey, we have 22% of our leases, which are peso denominated. When a customer is at pesos because their business is in pesos, mainly what they are looking is not to have a mismatch between the cost of the lease and the revenues that they are representing. What I got to say is that more than 50% of our customers are pretty sophisticated and taking a lease in pesos is not a minor thing. Lease in pesos is between 4% to 5% more expansive than lease in dollars, and lease in pesos have the Mexican inflation CPI convert to 2.5%, which is in dollar terms that our lease contracts had. So CFOs, they do their analysis. Some of them, they select to go to pesos and some of them, they select to go to dollars. I think that we're comfortable with the current plan that we have, as we have some expenses that have been established -- some expenses that are in pesos. Regarding that we have been experiencing longer leases, this is not a consequence. This has not been a request by our customers. This is something that we are pushing. We are taking advantage of the low vacancy that most of the markets are presenting. And in some cases, we do present no alternative for the customers, but to take a higher lease term. Customers are sophisticated and they understand. For example, in Mexico City, we have almost 99% of occupancy. Our customers are aligned with us. When they understand the situation, they don't want to be in a position 3 years down the road to be confronting again if they can't find a space or if they're going to be experiencing a higher lease. So our customers, they do understand that. We take advantage of the situation and I think that we end up in a win-win situation because we have higher lease, higher term, and they have the ability to secure a facility long term in order to keep continuity to their business.

[Operator]

There are no questions at this time.

[Luis Gutierrez, executive]

So thank you very much. FIBRA Prologis had an excellent quarter and a strong 2018. We remain optimistic about the demand drivers for our business. E-commerce is just getting a start. We're confident we will outperform given our portfolio, customer relationships and proven track record. And while we're not seeing signs of weakness, we're just trying to be prudent in running our business until uncertainty begins to resolve. I also want to mention that as of January, I was elected President of the AMEFIBRA, and I am looking forward to working with all of you implementing some of your suggestions to improve the sector. So I want to thank you for joining in our today's call. And if you are planning to visit Mexico, please let us know. We would like very much to show you our properties. Thank you.

[Operator]

This concludes today's presentation. You may now disconnect.