MEXICO CITY--(BUSINESS WIRE)--Macquarie Mexican REIT (MMREIT) (BMV:FIBRAMQ) today announced its financial results for the second quarter and six months ended June 30, 2014, including the declaration of a cash distribution of Ps.0.475 per certificate for the quarter.
Results for the Second Quarter and Six Months Ended June 30, 2014
MMREIT reported an increase in total proportionately combined revenues of 38.6% to Ps.571.4 million for the quarter ended June 30, 2014 compared with Ps.412.4 million in the prior comparable period. Proportionately combined revenue includes results from consolidated properties and MMREIT’s 50% interest in the joint venture with Grupo Frisa accounted for using the equity method.
Total revenue for the six months ended June 30, 2014 rose 34.7% to Ps.1.1 billion from Ps.818.1 million in the prior comparable period. The increase primarily reflects expansion of MMREIT’s portfolio over the past year partially offset by modest declines in average rental rates. The rental rate decline was mainly attributed to the acquisition of an industrial portfolio from affiliates of DCT Industrial Inc. with a lower average rental rate compared with the broader portfolio.
Funds From Operations (FFO) increased 30.5% to Ps.287.7 million, or Ps.0.476 per certificate, in the second quarter of 2014 compared with Ps.220.4 million, or Ps.0.389 per certificate, in the prior comparable period. FFO increased 28.3% to Ps.553.8 million for the six months ended June 30, 2014 compared with Ps.431.7 million for the six months ended June 30, 2013. FFO increased primarily due to growth through acquisitions, partially offset by increased cash interest expense associated with borrowings for the acquisitions.
MMREIT’s reduction in Profit for the Period in the quarter and six months periods as calculated in accordance with International Financial Reporting Standards is primarily due to the non-cash impact of foreign exchange movements.
“We are pleased to have delivered another solid quarter of performance. Contributions from acquisitions completed in late 2013 and early 2014 are now in our top-line. We expect additional improvement in the performance of these acquired properties as our leasing teams continue to engage tenants and potential tenants to drive occupancy and positive rental rate growth at rollover,” said Jaime Lara, CEO of MMREIT. “We believe MMREIT is well positioned to capitalize on what we are foreseeing to be an active second half of the year.”
Quarter Ended |
Quarter Ended |
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Figures in millions only |
June 2014 |
June 2013 |
Variance | Variance | ||||
Total Revenues | Ps.571.4 | Ps.412.4 | Ps.159.0 | 38.6% | ||||
Net Operating Income (NOI) | Ps.485.7 | Ps.366.3 | Ps.119.4 | 32.6% | ||||
Funds from Operations (FFO) | Ps.287.7 | Ps.220.4* | Ps.67.3 | 30.5% | ||||
Profit for the Period | Ps.223.3 | Ps.720.3 | Ps.(497.0) | (69.0)% | ||||
* 2Q13 NOI results have been conformed to reflect the current period presentation | ||||||||
Six Months |
Six Months |
|||||||
Ended June |
Ended June |
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Figures in millions |
2014 |
2013 |
Variance | Variance | ||||
Total revenues | Ps.1,101.9 | Ps.818.1 | Ps.283.8 | 34.7% | ||||
Net operating Income (NOI) | Ps.952.2 | Ps.725.1 | Ps.227.1 | 31.3% | ||||
Funds From Operations (FFO) | Ps.553.8 | Ps.431.7* | Ps.122.1 | 28.3% | ||||
Profit for the Period | Ps.447.2 | Ps.804.6 | Ps.(357.4) | (44.4)% | ||||
* 2Q13 NOI results have been conformed to reflect the current period presentation |
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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.
Addition of AFFO Reporting
MMREIT is including Adjusted Funds From Operations (AFFO) as a component of its financial reporting in this and future reporting periods.
MMREIT derives AFFO by adjusting FFO for normalized capital expenditure, tenant improvements and leasing commissions. AFFO may be calculated in a different manner by other market participants thereby limiting its use as a comparative measure. Use of AFFO in the analysis of the financial performance of MMREIT should be in addition to and not in lieu of other financial measures as required under International Financial Reporting Standards.
MMREIT reported AFFO for the quarter ended June 30, 2014 of Ps.262.6 million or Ps.0.434 per certificate. A reconciliation is included in the Supplementary Financial Information materials.
As of June 30, 2014, there were 604,750,917 MMREIT real estate trust certificates (Certificados Bursátiles Fiduciarios Inmobiliarios) outstanding.
Industrial Segment Operating Results
As of June 30, 2014, MMREIT owned 259 industrial properties located in 21 cities across 15 Mexican states, with a total gross leasable area of 2.6 million m2 (28.4 million ft2). Industrial segment operating highlights include the following:
Quarter Ended |
Quarter Ended |
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Industrial Segment Metrics |
June 2014 |
June 2013 |
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Gross leasable area (m2) | 2.6 million | 2.5 million | ||||
Occupancy Rate | 89.0% | 89.9% | ||||
Rolling 6 Month Average Occupancy Rate | 89.7% | 89.4% | ||||
Average Monthly Rent per Leased m2 | US$4.52 | US$4.55 | ||||
Rolling 6 Month Average Lease Rate per m2 | US$4.49 | US$4.58 | ||||
Tenant Retention Rate | 59% | 60% | ||||
Weighted Average Lease Term | 2.9 years | 3.1 years | ||||
Occupancy rates across the industrial segment decreased 0.9% in the second quarter 2014 to 89.0% versus 89.9% in the second quarter 2013. The decline was largely attributed to an expected number of move outs and a slower than anticipated lease-up of vacant properties. Rental rates in the second quarter decreased to an average of US$4.52 per square meter, per month, from US$4.55 per square meter, per month, in the second quarter of 2013. The decrease was the result of the acquisition of the acquisition of the DCT industrial portfolio in the fourth quarter of 2013 in the fourth quarter of 2013, which had an average monthly rent per leased m2 US$4.00 per square meter, per month at the end of June 2014. Excluding the impact of that acquisition, rental rates would have increased by US$0.01 in the second quarter.
“We remain positive on the fundamentals driving the industrial segment and believe we will see an active second half of the year in terms of leasing. Our now internalized industrial property administration platform including the leasing teams are doing an excellent job of getting in front of existing and prospective tenants in order to understand their needs and offer them competitive space solutions. We are in advanced discussions on a number of lease transactions in some of our most active markets,” noted Lara.
Industrial Segment Leasing Activity
MMREIT reported signing new and renewed industrial leases totaling approximately 75,700 m2 (815,000 ft2). Highlights for the quarter include:
- 10 year agreement for an approximately 5,900 m2 (63,800 ft2) lease renewal in Mexicali
- 5 year agreement for an approximately 7,700 m2 (83,300 ft2) lease renewal in Monterrey
- 3 year agreement for an approximately 4,600 m2 (50,000 ft2) lease renewal in Mexicali
- 2 year agreement for an approximately 5,100 m2 (55,000 ft2) lease renewal in Matamoros
- 3 year agreement for an approximately 2,600 m2 (27,500 ft2) new lease in Nuevo Laredo
Retail/Office Segment Operating Results
As of June 30, 2014, MMREIT owned 17 retail/office properties in six cities with 443,000 m2 (4.8 million ft2) of gross leasable area, of which 192,000 m2 (2.1 million ft2) is owned through a 50/50 joint venture with Grupo Frisa. Approximately 90.4% of MMREIT’s retail/office gross leasable area is located in the Mexico City Metropolitan Area, Monterrey, Guadalajara and Cancun markets.
Quarter Ended |
Quarter Ended |
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Retail/Office Segment Metrics |
June 2014 3/ |
March 20141/ |
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Gross leasable area (m2)2/ | 443,000 | 445,000 | ||||
Occupancy Rate | 93.7% | 93.9% | ||||
Average Monthly Rent per Leased m2 | US$10.64 | US$10.42 | ||||
Rolling 6 Month Average Lease Rate per m2 | US$10.23 | 4/US$9.83 | ||||
Weighted Average Lease Term | 6.0 years | 6.3 years |
1/ 4Q13 was the first quarter during which the MMREIT portfolio included retail/office properties therefore 12 month comparison not available. MMREIT completed the acquisition of ten properties at the end of March 2014, nine of which were acquired through the 50/50 joint venture with Grupo Frisa. |
2/ Includes 100% of the retail/office area in the 50/50 joint venture with Grupo Frisa |
3/ FX 13.00 Peso/USD |
Rental rates across the retail/office segment increased $0.22 to $10.64 per square meter, per month, during the quarter. The increase reflects strong demand for retail properties in major metropolitan markets such as the Mexico City Metropolitan Area.
Retail/Office Segment Leasing Activity
MMREIT reported signing new and renewed retail/office leases totaling 17,000 m2 (180,000 ft2).
“We are pleased with the contributions made from our retail/office segment during the quarter. Mexico continues to experience a growth in its middle class and report positive trends in consumer confidence, all of which bodes well for the performance of our retail/office properties. We remain focused on increasing occupancy and driving rental rate growth across this segment,” noted Lara.
Distribution for Second Quarter 2014
On July 28, 2014, MMREIT declared a cash distribution of Ps.0.475 per certificate for the quarter ended June 30, 2014. MMREIT reaffirmed its distribution guidance for the full year 2014 of Ps.1.90 per certificate.
Commencing in the first quarter of 2015, MMREIT will use AFFO as the basis for determining distributions. AFFO more closely aligns with the sustainable cash generation of MMREIT’s portfolio over the long term, after taking into consideration necessary and appropriate reinvestments in those properties and other items, which to date have been funded out of surplus cash provisions.
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.
New Regulations for FIBRAS Issued by CNBV
In June 2014, the Mexican Banking and Securities Commission (Comisión Nacional Bancaria y de Valores or CNBV) issued new regulations for FIBRAs that established industry-wide requirements with respect to leverage and corporate governance.
MMREIT is in compliance with these requirements and does not anticipate any material impact to its business model as a result of the regulations as a whole. Investor approval will be sought in a duly convened holders meeting for changes required to MMREIT's constituent documents to conform them to the new regulations.
MMREIT has established an Indebtedness Committee to oversee MMREIT’s compliance with the new leverage requirements. The committee is comprised of independent members of MMREIT’s Technical Committee and MMREIT’s CEO and COO. Dr. Alvaro de Garay will chair the committee.
Disclosures Relating to Leverage
In accordance with the new FIBRA regulations:
- MMREIT complies with the leverage limit of 50%, with leverage of 46.4% as of June 30, 2014
- MMREIT complies with the minimum debt service coverage ratio (DSCR) of 1.0x, with a DSCR of 1.57x as of June 30, 2014
Please refer to the Supplementary Financial Information materials for details of how the above ratios are calculated together with detailed disclosures regarding MMREIT’s portfolio level debt facilities.
Webcast and Conference Call
Macquarie Mexican REIT will host an earnings conference call and webcast presentation on Tuesday, July 29, 2014 at 7:30 a.m. CT / 8:30 a.m. ET. The conference call, which will also be webcast, can be accessed online at www.macquarie.com/mmreit or by dialing toll free +1-877-304-8957. Call participants from outside the United States may dial +1-973-638-3235. Please ask for the Macquarie Mexican REIT Second Quarter 2014 Earnings Call.
An audio replay will be available through July 31, 2014, by dialing +1-855-859-2056 or +1-404-537-3406 for callers outside the United States. The passcode for the replay is 62224498. A webcast archive of the conference call and a copy of MMREIT’s financial information for the second 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 June 30, 2014). Nine of the retail properties are held through a 50/50 joint venture with Grupo Frisa. MMREIT is managed by Macquarie México Real Estate Management, S.A. de C.V. which operates within the Macquarie Infrastructure and Real Assets division of Macquarie Group. 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$105 billion of total assets under management as of June 30, 2014 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$396 billion (as of March 31, 2014).
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.
THIS RELEASE IS NOT AN OFFER FOR SALE OF SECURITIES IN THE UNITED STATES, AND SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED.
MACQUARIE MEXICAN REIT AND ITS CONTROLLED ENTITIES | ||||
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL |
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POSITION AS AT JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013 |
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CURRENCY AMOUNTS EXPRESSED IN THOUSANDS OF MEXICAN PESOS (UNLESS OTHERWISE STATED) | ||||
Jun 30, 2014 | Dec 31, 2013 | |||
$’000 | $’000 | |||
Current assets | ||||
Cash and cash equivalents | 798,148 | 2,118,348 | ||
Restricted cash | 40,499 | 119,730 | ||
Trade and other receivables | 123,250 | 85,963 | ||
Value added tax receivable | 199,129 | 663,452 | ||
Other assets | 71,970 | 75,142 | ||
Total current assets | 1,232,996 | 3,062,635 | ||
Non-current assets | ||||
Restricted cash | 127,180 | 109,854 | ||
Other assets | 24,085 | 14,145 | ||
Equity accounted investees | 704,649 | - | ||
Goodwill | 931,605 | 931,605 | ||
Investment properties | 24,082,023 | 23,514,719 | ||
Total non-current assets | 25,869,542 | 24,570,323 | ||
Total assets | 27,102,538 | 27,632,958 | ||
Current liabilities | ||||
Trade and other payables | 203,749 | 198,936 | ||
Interest-bearing liabilities | 327,648 | 663,013 | ||
Other liabilities | 192,310 | 182,981 | ||
Tenant deposits | 13,927 | 16,102 | ||
Total current liabilities | 737,634 | 1,061,032 | ||
Non-current liabilities | ||||
Tenant deposits | 225,922 | 231,782 | ||
Interest-bearing liabilities | 12,247,202 | 12,324,100 | ||
Total non-current liabilities | 12,473,124 | 12,555,882 | ||
Total liabilities | 13,210,758 | 13,616,914 | ||
Net assets | 13,891,780 | 14,016,044 | ||
Equity | ||||
Contributed equity | 14,507,535 | 14,507,535 | ||
Accumulated losses | (615,755) | (491,491) | ||
Total equity | 13,891,780 | 14,016,044 | ||
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MACQUARIE MEXICAN REIT AND ITS CONTROLLED ENTITIES | ||||||||
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE |
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CURRENCY AMOUNTS EXPRESSED IN THOUSANDS OF MEXICAN PESOS (UNLESS OTHERWISE STATED) | ||||||||
3 months ended | 6 months ended | |||||||
Jun 30, |
Jun 30, |
Jun 30, |
Jun 30, |
|||||
2014 |
2013 |
2014 |
2013 |
|||||
$’000 | $’000 | $’000 | $’000 | |||||
Property related income | 528,314 | 412,378 | 1,056,957 | 818,141 | ||||
Property expenses | (80,074) | (47,017) | (149,461) | (95,272) | ||||
Net property income | 448,240 | 365,361 | 907,496 | 722,869 | ||||
Management fees | (36,042) | (39,791) | (70,672) | (75,232) | ||||
Transaction related expenses | (708) | (15,532) | (29,010) | (23,410) | ||||
Professional fees, legal fees and general expenses | (16,466) | (8,207) | (33,797) | (18,261) | ||||
Total expenses | (53,216) | (63,530) | (133,479) | (116,903) | ||||
Finance costs | (168,705) | (122,116) | (345,587) | (270,874) | ||||
Interest income | 22,524 | 13,765 | 36,751 | 28,967 | ||||
Other income | - | 44,303 | - | 44,303 | ||||
Share of profits from equity accounted investees | 12,073 | - | 12,966 | - | ||||
Foreign exchange gain/(loss) | 44,473 | (473,483) | 36,870 | 23,002 | ||||
Net unrealized foreign exchange (loss)/gain on foreign currency |
(82,091) | 955,968 | (67,791) | 373,280 | ||||
Profit for the period | 223,298 | 720,268 | 447,226 | 804,644 | ||||
Other comprehensive income | ||||||||
Other comprehensive income for the period | - | - | - | - | ||||
Total comprehensive income for the period | 223,298 | 720,268 | 447,226 | 804,644 | ||||
Earnings per CBFI* | ||||||||
Basic earnings per CBFI (pesos) | 0.37 | 1.27 | 0.74 | 1.43 | ||||
Diluted earnings per CBFI (pesos) | 0.37 | 1.27 | 0.74 | 1.42 | ||||
* Real Estate Trust Certificates | ||||||||
MACQUARIE MEXICAN REIT AND ITS CONTROLLED ENTITIES | ||||||||
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
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CURRENCY AMOUNTS EXPRESSED IN THOUSANDS OF MEXICAN PESOS (UNLESS OTHERWISE STATED) | ||||||||
Contributed |
Retained |
Total | ||||||
Note | $’000 | $’000 | $’000 | |||||
Total equity at January 1, 2013 | 12,121,923 | (725,099) | 11,396,824 | |||||
Issued CBFIs, net of issue costs | 13 | 1,349,411 | - | 1,349,411 | ||||
Distribution to CBFI holders | 14 | - | (266,569) | (266,569) | ||||
Total comprehensive income for the period | - | 804,644 | 804,644 | |||||
Total equity at June 30, 2013 | 13,471,334 | (187,024) | 13,284,310 | |||||
Total equity at January 1, 2014 | 14,507,535 | (491,491) | 14,016,044 | |||||
Distributions to CBFI holders | 14 | - | (571,490) | (571,490) | ||||
Total comprehensive income for the period | - | 447,226 | 447,226 | |||||
Total equity at June 30, 2014 | 14,507,535 | (615,755) | 13,891,780 | |||||
MACQUARIE MEXICAN REIT AND ITS CONTROLLED ENTITIES | ||||||
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE |
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CURRENCY AMOUNTS EXPRESSED IN THOUSANDS OF MEXICAN PESOS (UNLESS OTHERWISE STATED) | ||||||
6 months ended | ||||||
Jun 30, 2014 | Jun 30, 2013 | |||||
$’000 | $’000 | |||||
Note |
Inflows / |
Inflows / |
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Operating activities: | ||||||
Profit for the period | 447,226 | 804,644 | ||||
Adjustments for: | ||||||
Net unrealized foreign exchange loss/(gain) on foreign currency
denominated |
67,791 | (373,280) | ||||
4(i) | ||||||
Straight line rental income adjustment | (9,562) | (8,139) | ||||
Leasing commissions amortization | 8,643 | 2,244 | ||||
Net foreign exchange gain | 4(h) | (36,870) | (23,002) | |||
Finance costs recognized in profit for the period | 345,587 | 270,874 | ||||
Other income | - | (44,303) | ||||
Movements in working capital: | ||||||
Decrease in receivables | 420,268 | 46,737 | ||||
Increase in payables | 6,578 | 20,035 | ||||
Net cash flows from operating activities | 1,249,661 | 695,810 | ||||
Investing activities: | ||||||
Investment property and capital expenditure | (635,095) | (85,551) | ||||
Investment in equity accounted investees | 9 | (704,649) | - | |||
Net cash flows used in investing activities | (1,339,744) | (85,551) | ||||
Financing activities: | ||||||
Proceeds from interest-bearing liabilities, net of facility fees | 255,851 | - | ||||
Payment of interest-bearing liabilities | (663,443) | (893,942) | ||||
Interest paid | (313,211) | (189,390) | ||||
Proceeds from issue of CBFIs, net of capital raising costs | 12 | - | 1,349,411 | |||
Distributions to CBFI holders | 14 | (571,490) | (266,569) | |||
Net cash flows used in financing activities | (1,292,293) | (490) | ||||
Net (decrease)/increase in cash and cash equivalents | (1,382,376) | 609,769 | ||||
Cash, cash equivalents at the beginning of the period | 2,347,932 | 1,400,762 | ||||
Effect of exchange rate changes on cash and cash equivalents | 271 | 1,255 | ||||
Cash, cash equivalents at the end of the period* | 965,827 | 2,011,786 | ||||
*Included in the cash and cash equivalent balance at the end of the period is restricted cash of $167.7 million (2013: $229.6 million). |
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