Macquarie Mexican REIT Announces First Quarter 2014 Financial and Operating Results

  • Funds from Operations increases 25.9% to Ps.266.1 million versus prior comparable period
  • 110,200 square meters (1.2 million square feet) of industrial space leased
  • 2,100 square meters (22,500 square feet) of retail space leased
  • Portfolio wide occupancy at 90.6%
  • Acquisition of 10 retail properties completed; diversification of portfolio into retail/office segment continued
  • First quarter distribution of Ps.0.475 per certificate declared

MEXICO CITY--()--Macquarie Mexican REIT (MMREIT) (BMV:FIBRAMQ) today announced its financial results for the quarter ended March 31, 2014, including a 25.9% increase in Funds from Operations (FFO) versus the prior comparable period. Consistent with previous guidance, MMREIT has declared a cash distribution of Ps.0.475 per certificate for the quarter.

First Quarter 2014 Financial Results

MMREIT reported total property rental income of Ps.528.6 million for the first quarter of 2014 compared with Ps.405.8 million for the first quarter of 2013. Funds from Operations totaled Ps.266.1 million, or Ps.0.44 per certificate, for the quarter versus Ps.211.3 million, or Ps.0.37 per certificate, in the prior comparable period. MMREIT will fund the difference between the Ps.0.44 in FFO generated in the first quarter and the declared distribution of Ps.0.475 per certificate with available cash. MMREIT expects that acquisitions completed late in the first quarter, along with expected performance improvements during the year, will generate additional FFO in upcoming quarters. There were 604,750,917 MMREIT real estate trust certificates (Certificados Bursátiles Fiduciarios Inmobiliarios) outstanding as of March 31, 2014.

   

First Quarter
2014

 

First Quarter
2013

 

Variance (Ps.)

  Variance (%)

Total
Revenues

  Ps.528.6 million   Ps.405.8 million   Ps.122.8 million   30.3%

Net
Operating
Income (NOI)

  Ps.465.8 million   Ps.358.8 million*   Ps.107.0 million   29.8%

Funds from
Operations
(FFO)

  Ps.266.1 million   Ps.211.3 million*   Ps.54.8 million   25.9%
Net Profit   Ps.223.9 million   Ps.84.4 million   Ps.139.5 million   165.3%
       

* 1Q13 NOI results have been conformed to reflect the current period presentation

NOI includes rental income, plus expense recoveries and parking income, minus property operating expenses (including property administration fees). FFO is equal to NOI minus corporate general and administrative expenses, debt service and management fees.

“MMREIT delivered solid financial and operating results during the quarter,” said Jaime Lara, Chief Executive Officer, MMREIT. “Our top-line growth reflected the contribution from acquisitions concluded in late 2013 and generally stable average rental rates and occupancy levels. Expenses remained under control and resulted in the generation of FFO that was consistent with our expectations.”

“Our operations and leasing teams utilized their networks and capitalized on our marketing programs to close on 23 new and renewed leases in the quarter,” Lara added. “Our portfolio is poised to benefit from improvement in both the US and Mexican economies and we are maintaining our positive expectations and reiterating our guidance for distributions of Ps.1.90 per certificate for the full year 2014.”

Industrial Segment Operating Results

As of March 31, 2014, MMREIT owned 259 industrial properties located in 21 cities across 15 Mexican states, with a total of approximately 2.6 million square meters (28.4 million square feet) of gross leasable area. Industrial segment operating highlights included the following:

Industrial Segment
Metrics

  First Quarter 2014   First Quarter 2013
Occupancy Rate   90.0%   89.3%

Rolling 6 Month Average
Occupancy Rate

  89.9%   89.3%

Average Monthly Rent per
Leased m2

  US$4.49   US$4.58

Rolling 6 Month Average
Lease Rate per m2

  US$4.48   US$4.57
Tenant Retention Rate   82%   58%

Weighted Average Lease
Term

  3.1 years   3.2 years

Occupancy rates across the industrial segment increased to 90.0% in the first quarter of 2014 compared with 89.3% in the first quarter of 2013, reflecting improved conditions in key markets. Rental rates decreased to an average of US$4.49 per square meter, per month in the first quarter from US$4.58 in the first quarter of 2013. Rental rates were flat sequentially with the fourth quarter of 2013.

The decrease in average rental rates over the prior comparable quarter reflects the acquisition of a 15 property portfolio in November 2013 that had lower average rental rates relative to the remainder of the industrial portfolio. Given the attractive locations of the acquired properties, MMREIT expects to be able to increase rental rates as existing leases come up for renewal.

“We are encouraged by the level of leasing activity we saw during the quarter,” said Lara. “The automotive sector continues to be a very active sector as are medical supplies and electronics. Interest in our vacant spaces, particularly in markets like Reynosa, Tijuana and Monterrey, is strong and we have a good pipeline of prospective tenants.”

Tenant retention increased to 82% during the quarter, compared to 58% in the prior corresponding period. The leasing professionals in MMREIT’s internal property administration platform have been tasked with working more closely with tenants to ensure their needs are met quickly and efficiently. At quarter end, MMREIT’s internal property administration team served the property needs of more than 350 tenants.

Industrial Segment Leasing Activity

New and renewed industrial leases totaling approximately 110,200 square meters (1.2 million square feet) were signed during the first quarter. Highlights include:

  • 7 year agreement for an approximately 10,200 square meter (110,000 square feet) lease renewal in San Luis Potosi
  • 5 year agreement for an approximately 15,600 square meter (168,500 square feet) lease renewal in Ciudad Juarez
  • 10.5 year agreement for an approximately 11,500 square meter (125,500 square feet) lease renewal in Queretaro
  • 5 year agreement for an approximately 15,000 square meter (157,500 square feet) lease renewal in Tijuana
  • 10 year agreement for an approximately 5,000 square meter (46,500 square feet) build-to-suit expansion new lease in Queretaro

“MMREIT’s industrial segment had strong renewal and new lease wins during the quarter. We are pleased with these results, which signal that our new internal property administration platform is working,” said Lara. “Our teams are getting our story in front of tenants, prospective tenants and brokers every day. The feedback we have received is that they see the benefit in having this direct relationship.”

Retail/Office Segment Operating Results

As of March 31, 2014, MMREIT owned 17 retail/office properties in six cities with approximately 445,000 square meters (4.8 million square feet) of gross leasable area. Approximately 80% of MMREIT’s retail/office GLA is located in the top three markets of Mexico City, Monterrey and Guadalajara. The gross leasable area at quarter end included City Shops del Valle, a 15,900 square meter (171,000 square feet) retail center located in the Mexico City Metropolitan Area, in Colonia del Valle that MMREIT acquired on March 27, 2014. MMREIT also completed the acquisition of a 50% interest in a portfolio of nine retail properties and developable land in a joint venture with Grupo Frisa on March 28, 2014. MMREIT accounts for its 50% interest in the joint venture using the equity method.

Retail/office segment operating highlights as of the quarter ended March 31, 2014, include the following:

Retail/Office Segment
Metrics

  First Quarter 2014**   Fourth Quarter 2013*
Occupancy Rate   93.9%   97.3%

Rolling 5 Month Average
Occupancy Rate

  96.6%   97.3%

Average Monthly Rent per
Leased m2 ***

  US$10.42   US$9.67

Rolling 5 Month Average
Lease Rate per m2 ***

  US$9.83   US$9.65

Weighted Average Lease
Term

  6.3 years   6.4 years

* Abbreviated quarter; 4Q13 is the first quarter during which the MMREIT portfolio included retail/office properties

** MMREIT closed on ten additional retail properties in late March

*** FX 13.08 Peso/USD

The average occupancy rate for the retail/office segment was 93.9% at the end of the first quarter of 2014. Excluding the impact of the nine retail properties in the joint venture with Grupo Frisa acquired on March 28, 2014, retail/office segment occupancy rates would have increased to 97.5% during the first quarter. The nine property portfolio was 90.1% occupied at acquisition, and MMREIT expects to be able to increase occupancy for those properties subject to continued favorable market conditions.

Retail/Office Segment Leasing Activity

New and renewed retail/office leases totaling approximately 2,100 square meters (22,500 square feet) were signed during the first quarter.

“The retail segment is attractive given the expected growth in Mexico’s middle class and we are pleased to have completed the remainder of our announced retail/office acquisitions,” stated Lara. “Portfolio diversification remains a key objective of MMREIT and we have acquired relatively young properties in key metropolitan centers across Mexico. We believe this is a segment where we can drive rents and occupancy.”

Distribution for First Quarter 2014

On April 29, 2014, MMREIT declared a distribution for the quarter ended March 31, 2014 of Ps.0.475 per certificate. MMREIT will fund the difference between the Ps.0.44 in FFO generated in the first quarter and the declared distribution of Ps.0.475 per certificate with available cash. MMREIT reiterated its distribution guidance for the full year 2014 of Ps.1.90 per certificate.

MMREIT’s current distribution policy is to pay quarterly cash distributions. The payment of a cash distribution is at all times subject to the approval of the board of directors of the Manager, the continued stable performance of the properties in the portfolio, and prevailing economic conditions.

Webcast and Conference Call

Macquarie Mexican REIT (MMREIT) (BMV:FIBRAMQ) will host an earnings conference call and webcast presentation on Wednesday, April 30, 2014 at 7:30 a.m. CT / 8:30 a.m. ET. The call will follow the release of MMREIT’s earnings results for the first quarter 2014. The conference call, which will also be webcast, can be accessed online at www.macquarie.com/mmreit or by dialing toll free +1-877-303-6152. Callers from outside the United States may dial +1-678-809-1066. Please ask for the Macquarie Mexican REIT First Quarter 2014 Earnings Call.

An audio replay will be available through May 4, 2014, by dialing +1-855-859-2056 or +1-404-537-3406 for callers outside the United States. The passcode for the replay is 22674686. A webcast archive of the conference call and a copy of MMREIT’s financial information for the first quarter 2014 will also be available on MMREIT’s website, www.macquarie.com/mmreit.

About Macquarie Mexican REIT

Macquarie Mexican REIT (MMREIT) (BMV:FIBRAMQ) is a real estate investment trust (fideicomiso de inversíon en bienes raices), or FIBRA, listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores) targeting industrial, retail and office real estate opportunities in Mexico, with a primary focus on stabilized income-producing properties. MMREIT’s portfolio consists of 259 industrial properties and 17 retail/office properties, located in 24 cities across 19 Mexican states (as of March 31, 2014). MMREIT is managed by Macquarie México Real Estate Management, S.A. de C.V. which operates within Macquarie Infrastructure and Real Assets (MIRA). For additional information about MMREIT, please visit www.macquarie.com/mmreit.

MIRA is a business within the Macquarie Funds Group division of Macquarie Group and a global alternative asset manager focused on real estate, infrastructure, agriculture and energy assets. MIRA has significant expertise over the entire investment lifecycle, with capabilities in investment sourcing, investment management, investment realization and investor relationships. Established in 1996, MIRA has approximately US$103 billion of total assets under management as of December 31, 2013 (based on the most recent valuations available) with more than 400 employees managing 50 listed and unlisted funds worldwide.

About Macquarie Group

Macquarie Group (Macquarie) is a global provider of banking, financial, advisory, investment and funds management services. Macquarie’s main business focus is making returns by providing a diversified range of services to clients. Macquarie acts on behalf of institutional, corporate and retail clients and counterparties around the world. Founded in 1969, Macquarie operates in more than 70 office locations in 28 countries. Macquarie employs approximately 13,900 people and has assets under management of over US$359 billion (as of September 30, 2013).

Cautionary Note Regarding Forward-Looking Statements: This release may contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ significantly from these forward-looking statements.

None of the entities noted in this document is an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.

MACQUARIE MEXICAN REIT AND ITS CONTROLLED ENTITIES
         

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT MARCH 31, 2014 AND
DECEMBER 31, 2013 (UNAUDITED)

CURRENCY AMOUNTS EXPRESSED IN THOUSANDS OF MEXICAN PESOS (UNLESS OTHERWISE STATED)
   
 
Mar 31, 2014 Dec 31, 2013
$’000 $’000
 
Current assets
Cash and cash equivalents 924,454 2,118,348
Restricted cash 40,526 119,730
Trade and other receivables 146,992 85,963
Value added tax receivable 742,920 663,452
Other assets 48,261 75,142
Total current assets 1,903,153 3,062,635
 
Non-current assets
Restricted cash 119,525 109,854
Other assets 17,322 14,145
Equity-accounted investees 692,577 -
Goodwill 931,605 931,605
Investment properties 24,089,768 23,514,719
Total non-current assets     25,850,797 24,570,323
Total assets     27,753,950 27,632,958
 
Current liabilities
Trade and other payables 201,808 198,936
Interest-bearing liabilities 751,114 663,013
Other liabilities 215,402 182,981
Tenant deposits 14,332 16,102
Total current liabilities 1,182,656 1,061,032
 
Non-current liabilities
Tenant deposits 232,494 231,782
Interest-bearing liabilities 12,383,060 12,324,100
Total non-current liabilities     12,615,554 12,555,882
Total liabilities     13,798,210 13,616,914
         
Net assets     13,955,740 14,016,044
 
Equity
Contributed equity 14,507,535 14,507,535
Distributions (1,117,967) (833,734)
Retained earnings     566,172 342,243
Total equity     13,955,740 14,016,044
MACQUARIE MEXICAN REIT AND ITS CONTROLLED ENTITIES
           

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS
ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)

CURRENCY AMOUNTS EXPRESSED IN THOUSANDS OF MEXICAN PESOS (UNLESS OTHERWISE STATED)
     

3 months
ended

3 months ended
Mar 31, 2014 Mar 31, 2013
$’000 $’000
 
Property rental income 528,643 405,763
Property expenses     (69,387)   (48,254)
Net property income     459,256   357,509
 
Management fees (34,630) (35,441)
Transaction related expenses (28,302) (7,878)
 
Professional fees, legal fees and general expenses     (17,331)   (10,054)
Total expenses     (80,263)   (53,373)
 
Finance costs (176,881) (148,758)
Interest income 14,227 15,202
Other income - -
Share of profit of equity accounted investees 893 -
Foreign exchange (loss)/gain (7,603) 496,485

Net unrealized foreign exchange gain/(loss) on foreign currency
denominated investment property measured at fair value

14,300 (582,688)
Unrealised loss on investment property measured at fair value - -
Profit for the period     223,929   84,377
 
Other comprehensive income
Other comprehensive income for the period     -   -
Total comprehensive profit for the period     223,929   84,377
 
Earnings per CBFI*
Basic earnings per CBFI (pesos) 0.37 0.15
Diluted earnings per CBFI (pesos)     0.37   0.15
* Certificados Bursátiles Fiduciarios Inmobiliarios
MACQUARIE MEXICAN REIT AND ITS CONTROLLED ENTITIES
         
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)
CURRENCY AMOUNTS EXPRESSED IN THOUSANDS OF MEXICAN PESOS (UNLESS OTHERWISE STATED)
 
 

Contributed
Equity

Retained
earnings/
(accumulated
losses)

Total
$’000 $’000 $’000
Total equity at January 1, 2013 12,121,923 (725,099) 11,396,824
Issued CBFIs, net of issue costs 1,349,411 - 1,349,411
Total comprehensive profit for the period   - 84,377 84,377
Total equity at March 31, 2013   13,471,334 (640,722) 12,830,612
 
Total equity at January 1, 2014 13,673,801 342,243 14,016,044
Issued CBFIs, net of issue costs - - -
Distribution to CBFI holders (284,233) - (284,233)
Total comprehensive profit for the period   - 223,929 223,929
Total equity at March 31, 2014   13,389,568 566,172 13,955,740
MACQUARIE MEXICAN REIT AND ITS CONTROLLED ENTITIES
         

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)

CURRENCY AMOUNTS EXPRESSED IN THOUSANDS OF MEXICAN PESOS (UNLESS OTHERWISE STATED)
   

3 months
ended

3 months ended
Mar 31, 2014 Mar 31, 2013
$’000 $’000

Inflows /
(Outflows)

Inflows / (Outflows)
Operating activities:
Profit for the period 223,929 84,377
Adjustments for:

Net unrealized foreign exchange (gain)/loss on foreign currency
denominated investment property measured at fair value

(14,300) 582,688
Unrealised loss on investment property measured at fair value - -
Straight line rental income adjustment (2,760) (4,026)
Leasing commissions amortization 2,757 1,313
Net foreign exchange loss/(gain) 7,603 (496,485)
Finance costs recognized in profit for the period 176,881 148,758
Other income - -
Movements in working capital:
(Increase)/decrease in receivables (116,793) 66,554
Increase in payables 30,780 56,556
Net cash flows from operating activities 308,097 439,735
Investing activities:
Investment property and capital expenditure (560,746) (52,049)
Acquisition of equity-accounted investees (692,577) -
Net cash flows from investing activities (1,253,323) (52,049)
Financing activities:
Proceeds from interest-bearing liabilities, net of facility fees 255,851 -
Payment of interest-bearing liabilities (138,481) (893,942)
Interest paid (150,211) (84,665)
Proceeds from issue of CBFIs, net of capital raising costs - 1,349,411
Distribution to CBFI holders (284,233) -
Net cash flows from financing activities (317,074) 370,804
Net increase in cash and cash equivalents (1,262,300) 758,490
Cash, cash equivalents and restricted cash at the beginning of the period 2,347,932 1,400,762
Effect of exchange rate changes on cash and cash equivalents   (1,127)   3,540
Cash, cash equivalents and restricted cash at the end of the period   1,084,505   2,162,792

Contacts

Investor Relations:
Macquarie Mexican REIT
Jaime del Río
Investor Relations
+52 (55) 9178 7740
jdelrio@macquarie.com
or
For international press queries:
Macquarie Group
Paula Chirhart
Corporate Communications
+1 212-231-1239
paula.chirhart@macquarie.com
or
For press queries in Mexico:
CarralSierra PR & Strategic Communications
Jose Manuel Sierra
Cel: +52 55 5105 5907
Tel: +52 55 5286 0793
jmsierra@carralsierra.com.mx
or
Andrea Barba
Cel: +52 55 3355 4968
Tel: +52 55 5286 0793
abarba@carralsierra.com.mx

Sharing

Contacts

Investor Relations:
Macquarie Mexican REIT
Jaime del Río
Investor Relations
+52 (55) 9178 7740
jdelrio@macquarie.com
or
For international press queries:
Macquarie Group
Paula Chirhart
Corporate Communications
+1 212-231-1239
paula.chirhart@macquarie.com
or
For press queries in Mexico:
CarralSierra PR & Strategic Communications
Jose Manuel Sierra
Cel: +52 55 5105 5907
Tel: +52 55 5286 0793
jmsierra@carralsierra.com.mx
or
Andrea Barba
Cel: +52 55 3355 4968
Tel: +52 55 5286 0793
abarba@carralsierra.com.mx