FIBRA Macquarie México Reports First Quarter 2017 Results

AFFO per Certificate Increases 15.4%

Adjusts Distribution Policy to Act on Value-Creating Expansions

MEXICO CITY--()--FIBRA Macquarie México (FIBRAMQ) (BMV:FIBRAMQ), owner of one of the largest portfolios of industrial and retail properties in Mexico, announced its financial and operating results for the quarter ended March 31, 2017.

HIGHLIGHTS

  • Increase in AFFO per certificate of 15.4% to Ps 0.5832
  • Overall occupancy of 92.7%, up 60 bps
  • Increase in industrial property rental rates of 2.3% to US$4.55 per square meter per month
  • Reaffirms AFFO guidance of between Ps 2.13 and Ps 2.18 per certificate in 2017
  • For the full year 2017, FIBRAMQ expects to make cash distributions of between Ps 1.45 and Ps 1.50, consistent with achieving a long-term target AFFO payout ratio of approximately 70%
  • Authorization of a quarterly cash distribution of Ps 0.375 per certificate; retained capital expected to be primarily deployed into accretive expansion opportunities

During the first quarter we continued to serve our customer needs, effectively manage our properties, and prudently pursue opportunities to unlock value in our portfolio through building expansions and developments. Through our high-quality portfolio and best-in-class administration platform, we were able to deliver another quarter of strong AFFO growth,” said Juan Monroy, FIBRA Macquarie’s chief executive officer. “We are reducing our payout ratio and intend to use the retained capital to create additional value for certificate holders by acting on our pipeline of building expansion needs. Our priority is to be good stewards of capital and to generate the highest possible risk-adjusted returns for certificate holders over the long term and believe these building expansion projects are consistent with that objective.”

DISTRIBUTION POLICY

On April 27, 2017, FIBRAMQ declared a cash distribution for the quarter ended March 31, 2017 of Ps 0.375 per certificate. The distribution is expected to be paid on May 10, 2017 to holders of record on May 9, 2017. FIBRAMQ’s certificates will commence trading ex-distribution on May 5, 2017.

FIBRAMQ reduced its payout ratio in favor of positioning itself to act on attractive value-creating building expansion opportunities. Management believes pursuing such opportunities is consistent with its view that both Mexican and sector fundamentals remain strong and, combined with FIBRAMQ’s track record of deploying capital effectively, will deliver attractive unlevered NOI and AFFO yields as well as an increase in NAV per certificate.

FIBRAMQ has a solid pipeline of expansion projects for its customers. Since IPO, FIBRAMQ has invested Ps 570.1 million in expansions, developing an additional 650 thousand square feet of gross leasable area (GLA). These expansions have produced double digit unlevered cash yields, and have enhanced and extended existing customer relationships and attracted new customers. Investing in expansions of existing properties allows FIBRAMQ to deploy capital on a de-risked basis and provide potentially higher returns to investors.

The payment of any future cash distribution is subject to the approval of the board of directors of the Manager, the continued stable performance of the properties in the portfolio, and market conditions.

FINANCIAL AND OPERATING RESULTS

For the quarter ended March 31, 2017 compared with the quarter ended March 31, 2016 FIBRAMQ reported:

           
TOTAL PORTFOLIO 1Q17 1Q16 Variance
Net Operating Income (NOI) Ps 838.8m Ps 743.9m 12.8%
Funds From Operations (FFO) Ps 549.9m Ps 471.1m 16.7%
Adjusted Funds From Operations (AFFO) Ps 473.2m Ps 410.0m 15.4%
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) Ps 778.8m Ps 684.7m 13.8%
GLA (’000s sqm) EOP 3,433 3,440 -0.2%
Occupancy EOP     92.7%     92.1%     60 bps
 
Note: Consistent with best practice, NOI, FFO and AFFO have been adjusted in the current and prior periods to move building painting expenses from repairs and maintenance (included in NOI) into normalized maintenance capex (included in AFFO).
           
TOTAL PORTFOLIO - SAME STORE 1Q17 1Q16 Variance
Net Operating Income Ps 832.9m Ps 702.2m 18.6%
GLA (’000s sqm) EOP 3,407.5 3,386.1 0.6%
Occupancy EOP 92.7% 92.8% -10bps
Industrial Retention (LTM) 67% 76% -1,050bps
Retail Retention (LTM) 65% 74% -900bps
Weighted Avg Lease Term Remaining (years) EOP     3.6     3.9     -0.3
 

Industrial Portfolio

The following table summarizes the results for FIBRAMQ’s industrial portfolio during the quarter ended March 31, 2017 and the prior comparable period.

           
INDUSTRIAL PORTFOLIO 1Q17 1Q16 Variance
Net Operating Income Ps 705.0m Ps 619.5m 13.8%
GLA (’000s sqft) EOP 32,050 32,243 -0.6%
GLA (’000s sqm) EOP 2,978 2,996 -0.6%
Occupancy EOP 92.3% 91.6% 70 bps
Average monthly rent per leased (US$/sqm) EOP $4.55 $4.45 2.3%
Retention (LTM) 66% 76% -1,050 bps
Weighted Avg Lease Term Remaining (years) EOP     3.2     3.4     -6.7%
 

FIBRAMQ’s industrial portfolio generated a 13.8% increase in NOI to Ps 705.0 million versus the prior comparable period. The increase was driven by improvements in both occupancy levels and rental rates as well as foreign exchange rate movements. The occupancy rate across the industrial portfolio at March 31, 2017 was 92.3%, up 70 basis points over the first quarter in 2016. Occupancy declined by 30 basis points versus the fourth quarter in 2016. Rental rates rose to an average of US$4.55 per leased square meter per month at the end of the first quarter, up 2.3% from the end of the first quarter in 2016.

FIBRAMQ signed nine new and renewal leases in the first quarter comprising 410 thousand square feet of GLA. The leases included four new leases totaling 112 thousand square feet, and five renewal leases totaling 298 thousand square feet. Leasing during the first quarter was slower than previous quarters. Management attributed the slowdown to potential new customers waiting for more clarity in the macroeconomic and political outlook, together with relatively few lease expirations during the period.

Notable new contracts included 15 thousand square feet leased to an existing logistics company that expanded its operations into Saltillo and 27 thousand square feet leased to a company in Puebla that provides tooling and automation solutions to the automotive and aeronautical industries. Key renewals included leases with an automotive parts supplier, a refrigeration manufacturer and a logistics provider in Monterrey, and a fastenings and plastics manufacturer in Querétaro that also added a 14 thousand square foot expansion.

Six customers, representing 266 thousand square feet, vacated properties during the quarter. This figure compares favorably with the first quarter in 2016 in which 12 customers representing 835 thousand square feet moved out. FIBRAMQ temporarily removed 165 thousand square feet from its industrial portfolio GLA as two vacant properties are undergoing renovation and improvements.

Retail Portfolio

The following table summarizes the proportionally combined results of operations for FIBRAMQ’s retail portfolio during the quarter ended March 31, 2017 and the prior comparable period.

           
RETAIL PORTFOLIO 1Q17 1Q16 Variance
Net Operating Income Ps 133.8m Ps 124.5m 7.5%
GLA (’000s sqm) EOP 455 445 2.2%
Occupancy EOP 95.2% 95.2% 0 bps
Average monthly rent per leased (Ps/sqm) EOP 144.85 142.51 1.6%
Retention (LTM) 65% 74% -900 bps
Weighted Avg Lease Term Remaining (years) EOP     5.2     5.6     -7.4%
 

FIBRAMQ’s retail portfolio generated a 7.5% increase in NOI to Ps 133.8 million versus the first quarter of 2016. The improvement was driven by increases in both leased GLA and average monthly rent. Additionally, sales reported by our customers increased by 5.0% from the prior year period, demonstrating the ongoing strength in Mexican consumer spending. FIBRAMQ signed 60 leases including 38 new leases and 22 renewals representing a total of seven thousand square meters of retail GLA.

The majority of the new leasing activity during the quarter was with small shop customers, which typically has a positive impact on average monthly rent per square meter.

PORTFOLIO ACTIVITY

FIBRAMQ maintains an active pipeline of expansion and selective new development opportunities in its core markets. Subsequent to quarter end, FIBRAMQ completed two projects: a 54 thousand square foot expansion of an industrial facility in Ciudad Juárez and a new 145 thousand square foot industrial building in Reynosa.

BALANCE SHEET

As of March 31, 2017, FIBRAMQ had approximately Ps 16,887.6 million of debt outstanding, Ps 3,137.8 million available on its undrawn revolving credit facility and Ps 431.2 million of unrestricted cash on hand on a proportionally combined basis. In addition, FIBRAMQ’s CNBV regulatory debt to total asset ratio was 37.8% and the regulatory DSCR ratio was 1.2x.

FIBRAMQ is exploring options to accelerate the refinancing of the US$182 million loan secured by properties in its industrial portfolio that matures in February 2018.

CERTIFICATE BUY-BACK PROGRAM

On April 24, 2017, at the Annual General Meeting, certificate holders noted and acknowledged the potential for FIBRAMQ to establish a certificate buy-back program in accordance with the terms of its trust agreement. When and if the buy-back program is launched is subject to FIBRAMQ’s capital allocation strategy and market conditions and Technical Committee approval.

OUTLOOK

FIBRAMQ reaffirmed its stable outlook for 2017 and expects continued strength in the performance of both its industrial and retail segments. Management expects FIBRAMQ’s real estate portfolio to generate total AFFO of between Ps 2.13 and Ps 2.18 per certificate in 2017. For the full year 2017, FIBRAMQ expects to make cash distributions of between Ps 1.45 and Ps 1.50, consistent with achieving a long-term target AFFO payout ratio of approximately 70%.

The AFFO and distribution guidance is based on the cash-generating capacity of its existing portfolio, and assumes no acquisitions or divestments, an average exchange rate of Ps 19.0 per US dollar for the remainder of the year (versus Ps 20.4 for the first quarter of 2017) and no change in the number of certificates on issue. Whilst overall portfolio performance and underlying AFFO in natural currency is expected to remain steady for the remainder of 2017, AFFO in Peso equivalent terms is expected to be lower compared to the first quarter of 2017 if the recent strengthening of the Peso against the US dollar continues.

WEBCAST AND CONFERENCE CALL

FIBRAMQ will host an earnings conference call and webcast presentation on Friday, April 28, 2017 at 7:30 a.m. CT / 8:30 a.m. ET. The conference call, which will also be audio webcast, can be accessed online at www.fibramacquarie.com or by dialing toll free +1 (877) 304 8957. Callers from Mexico should dial 01-800-9269157 and other callers from outside the United States should dial +1-973-638-3235. Please ask for the FIBRA Macquarie First Quarter 2017 Earnings Call.

An audio replay will be available by dialing +1-855-859-2056 or +1-404-537-3406 for callers outside the United States. The passcode for the replay is 4194436. A webcast archive of the conference call and a copy of FIBRAMQ’s financial information for the first quarter 2017 will also be available on FIBRAMQ’s website, http://www.fibramacquarie.com.

ADDITIONAL INFORMATION

For detailed charts, tables and definitions, please refer to the First Quarter 2017 Supplementary Information materials located at http://www.fibramacquarie.com/investors/bolsa-mexicana-de-valoresfilings.

About FIBRA Macquarie

FIBRA Macquarie México (FIBRA Macquarie) (BMV:FIBRAMQ) is a real estate investment trust (fideicomiso de inversión en bienes raíces), 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. FIBRA Macquarie’s portfolio consists of 275 industrial properties and 17 retail properties, located in 24 cities across 19 Mexican states as of March 31, 2017. Nine of the retail properties are held through a 50/50 joint venture with Grupo Frisa. FIBRA Macquarie 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 FIBRA Macquarie, please visit www.fibramacquarie.com.

Macquarie Infrastructure and Real Assets is a business within the Macquarie Asset Management division of Macquarie Group and a global alternative asset manager focused on real estate, infrastructure, agriculture and energy assets. Macquarie Infrastructure and Real Assets has significant expertise over the entire investment lifecycle, with capabilities in investment sourcing, investment management, investment realization and investor relations. Established in 1996, Macquarie Infrastructure and Real Assets has approximately US$104.1 billion of total assets under management as of September 30, 2016.

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 over 27 countries. Macquarie employs over 13,800 people and has assets under management of more than $377 billion (as of September 30, 2016). For more information, please visit www.macquarie.com.

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 and we undertake no obligation to update any forward-looking statements.

None of the entities noted in this document is an authorized 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.

THIS ANNOUNCEMENT IS NOT FOR RELEASE IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA.

 

FIBRA MACQUARIE MÉXICO AND ITS CONTROLLED ENTITIES

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION AS AT MARCH 31, 2017 (UNAUDITED) AND DECEMBER 31, 2016

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

       
Mar 31, 2017 Dec 31, 2016
$’000 $’000
Current assets
Cash and cash equivalents 413,825 612,443
Restricted cash 46,177 10,849
Trade and other receivables, net 83,908 116,865
Other assets 66,445 72,677
Investment properties held for sale 112,776 284,130
Total current assets 723,131 1,096,964
 
Non-current assets
Restricted cash - 39,881
Other assets 189,984 185,323
Equity-accounted investees 1,077,220 1,084,875
Goodwill 931,605 931,605
Investment properties 39,356,461 42,466,715
Derivative financial instruments 95,380 97,762
Total non-current assets     41,650,650     44,806,161
Total assets     42,373,781     45,903,125
Current liabilities
Trade and other payables 599,481 480,673
Interest-bearing liabilities 3,406,462 67,977
Tenant deposits 20,184 21,396
Income tax payable 1,630 1,409
Total current liabilities 4,027,757 571,455
 
Non-current liabilities
Tenant deposits 327,223 346,863
Interest-bearing liabilities 12,626,097 17,946,449
Deferred income tax 1,667 1,667
Total non-current liabilities     12,954,987     18,294,979
Total liabilities     16,982,744     18,866,434
             
Net assets     25,391,037     27,036,691
Equity
Contributed equity 18,369,994 18,369,994
Retained earnings     7,021,043     8,666,697
Total equity     25,391,037     27,036,691
 
 

FIBRA MACQUARIE MÉXICO AND ITS CONTROLLED ENTITIES

 

CONDENSED UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016

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

 
    3 months ended

March 31,
2017

   

March 31,
2016

$’000 $’000
 
Property related income 913,167 837,118
Property related expenses     (129,302)     (137,356)
Net property income     783,865     699,762
 
Management fees (48,129) (46,087)
Transaction related expenses (1,261) 46
Professional, legal and other expenses     (11,765)     (13,126)
Total expenses     (61,155)     (59,167)
 
Finance costs (225,909) (218,225)
Financial income 2,877 12,458
Share of profits from equity-accounted investees 15,767 12,061
Foreign exchange gain/(loss) 1 ,586,778 (157,352)

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

(3,086,820) 299,272
Unrealized revaluation loss on investment property measured at fair value (301,455) -
Net unrealized loss on interest rate swaps     (2,382)     -
(Loss)/profit before taxes for the period     (1,288,434)     588,809
 
Current income tax     (221)     -
Net (loss)/profit for the period     (1,288,655)     588,809
 
Other comprehensive income
Other comprehensive income for the period     -     -
Total comprehensive (loss)/ income for the period     (1,288,655)     588,809
 
Earnings per CBFI*
Basic earnings per CBFI (pesos) (1.59) 0.73
Diluted earnings per CBFI (pesos)     (1.59)     0.73

*Real Estate Trust Certificates (Certificados Bursátiles Fiduciarios Inmobiliarios)

 
 
FIBRA MACQUARIE MÉXICO AND ITS CONTROLLED ENTITIES
 

CONDENSED UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016

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

           
Contributed Retained
equity earnings Total
$’000 $’000 $’000
Total equity at January 1, 2016 18,369,994 5,150,406 23,520,400
Total comprehensive income for the period - 588,809 588,809
Total comprehensive income for the period - 588,809 588,809
 

Transactions with equity holders in their capacity as equity
holders:

- Distributions to CBFI holders - (373,227) (373,227)

Total transactions with equity holders in their capacity
as equity holders

- (373,227) (373,227)
                   
Total equity at March 31, 2016     18,369,994     5,365,988     23,735,982
 
Total equity at January 1, 2017 18,369,994 8,666,697 27,036,691
Total comprehensive loss for the period - (1,288,655) (1,288,655)
Total comprehensive loss for the period - (1,288,655) (1,288,655)
 

Transactions with equity holders in their capacity as
equity holders:

- Distributions to CBFI holders - (356,999) (356,999)

Total transactions with equity holders in their
capacity as equity holders

- (356,999) (356,999)
                   
Total equity at March 31, 2017     18,369,994     7,021,043     25,391,037
 
 
FIBRA MACQUARIE MÉXICO AND ITS CONTROLLED ENTITIES
 

CONDENSED UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016

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

       
3 months ended
Mar 31, 2017 Mar 31, 2016
$’000 $’000
Inflows/(Outflows) Inflows/(Outflows)
Operating activities:
(Loss)/profit for the period before taxes (1,288,434) 588,809
Adjustments for:

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


3,086,820

(299,272)

Unrealized revaluation loss on investment property measured at fair
value

301,455 -
Straight line rental income adjustment (5,966) (7,437)
Tenant improvements amortization 7,816 3,037
Leasing expense amortization 10,933 7,415
Financial income (2,877) (12,458)
Provision for bad debt 5,448 7,945
Net foreign exchange (gain)/loss (1,633,252) 172,940
Finance costs recognized in profit for the period 225,909 218,225
Share of profits from equity-accounted investees (15,767) (12,061)
Net unrealized loss on interest rate swaps 2,382 -
Movements in working capital:
Decrease/(increase) in receivables 35,865 (28,774)
Decrease in payables 44,076 (42,719)
Net cash flows from operating activities 774,408 595,650
Investing activities:
Investment property - asset acquisitions - (396,408)
Maintenance capital expenditure and other capitalized costs (117,798) (3,792)
Distributions received from equity-accounted investees 23,422 1,606
Net cash flows from/(used in) investing activities (94,376) (398,594)
Financing activities:
Financial income 2,877 12,458
Repayment of interest-bearing liabilities (404,227) -
Interest paid (171,328) (208,629)
Distributions to CBFI holders (356,999) (373,227)
Net cash flows used in financing activities (929,677) (569,398)
Net decrease in cash and cash equivalents (249,645) (372,342)
Cash, cash equivalents at the beginning of the period 663,173 2,394,426
Foreign exchange gain/(loss) on cash and cash equivalents     46,474     (15,588)
Cash and cash equivalents at the end of the period*     460,002     2,006,496

*Included in the cash and cash equivalent balance at the end of the period is restricted cash of $46.1 million (March 31, 2016: $188.8 million).

 

Contacts

For FIBRA Macquarie México
Investor relations:
+52 (55) 9178 7751
fibramq@macquarie.com
or
Evelyn Infurna, +1 203-682-8265
evelyn.infurna@icrinc.com
or
Nikki Sacks, +1 203-682-8263
nikki.sacks@icrinc.com
or
For press queries:
FleishmanHillard México
Alejandro Sampedro Llorens, +52 (55) 5540 6031 ext. 249
alejandro.sampedro@fleishman.com

Contacts

For FIBRA Macquarie México
Investor relations:
+52 (55) 9178 7751
fibramq@macquarie.com
or
Evelyn Infurna, +1 203-682-8265
evelyn.infurna@icrinc.com
or
Nikki Sacks, +1 203-682-8263
nikki.sacks@icrinc.com
or
For press queries:
FleishmanHillard México
Alejandro Sampedro Llorens, +52 (55) 5540 6031 ext. 249
alejandro.sampedro@fleishman.com