FIBRA Macquarie México Reports Second Quarter 2019 Results

- Consolidated Closing Occupancy Record of 96.4% -
- AFFO per Certificate Increases 5.1% YoY -
- Increases Full Year Cash Distribution per Certificate Guidance -
- Increases Full Year AFFO per Certificate Guidance -

MEXICO CITY--()--FIBRA Macquarie México (FIBRAMQ) (BMV: FIBRAMQ), owner of one of the largest portfolios of industrial and retail property in Mexico, announced its financial and operating results for the quarter ended June 30, 2019.

SECOND QUARTER 2019 HIGHLIGHTS

  • AFFO per certificate increases 5.1% YoY to a record Ps 0.6348
  • Consolidated closing occupancy increases 354 basis points YoY to 96.4%
  • Average industrial and retail rental rates increase 3.1% and 5.3% YoY, respectively
  • Same store net operating income (NOI) increase of 5.2% YoY
  • Sale of final two properties contracted in FY18 completed, substantially completing near term asset recycling program
  • US$500 million refinancing program completed
  • Full year AFFO per certificate guidance increases to a range of Ps 2.50 to 2.55
  • Second quarter distribution of Ps 0.445 per certificate, up 14.1% YoY
  • Full year distribution guidance increases to Ps 1.76 per certificate, up 10.0% over 2018

FIBRA Macquarie delivered another record AFFO per certificate in the second quarter, driven by record occupancy and strong rental rate gains,” said Juan Monroy, FIBRA Macquarie’s chief executive officer. “These strong results demonstrate the quality and attractive location of our assets, our commitment to customer service, and the effective execution of our strategy. We are very proud of our capital management program, where we have continued to create value and flexibility through expansions and development, certificate buy-backs for cancellation and debt repayment, with many of these benefits reflected in the current results. The strength of our performance year to date, along with a favorable outlook, allow us to increase our AFFO and distribution guidance for the year. We now anticipate our 2019 distribution will represent a 10% increase over 2018, whilst maintaining a prudent AFFO payout ratio. This balanced approach continues to provide us with the ability to deliver a strong and high-quality distribution, while also pursuing growth initiatives through accretive investments to further enhance the value of FIBRAMQ.”

FINANCIAL AND OPERATING RESULTS

Consolidated Portfolio

FIBRAMQ’s total results were as follows:

TOTAL PORTFOLIO

2Q19

2Q18

Variance

1H19

1H18

Variance

Net Operating Income (NOI)

Ps 845.5m

Ps 834.4m

1.3%

Ps 1,674.9m

Ps 1,659.2m

0.9%

EBITDA

Ps 792.2m

Ps 778.5m

1.8%

Ps 1,568.5m

Ps 1,546.3m

1.4%

Funds From Operations (FFO)

Ps 575.8m

Ps 546.1m

5.4%

Ps 1,140.3m

Ps 1,093.0m

4.3%

FFO per certificate

0.7478

0.6905

8.3%

1.4810

1.3796

7.3%

Adjusted Funds From Operations (AFFO)

Ps 488.8m

Ps 477.9m

2.3%

Ps 973.1m

Ps 955.7m

1.8%

AFFO per certificate

0.6348

0.6042

5.1%

1.2637

1.2062

4.8%

NOI Margin

87.8%

88.5%

-69 bps

87.7%

88.1%

-38 bps

AFFO Margin

50.8%

50.7%

8 bps

50.9%

50.7%

22 bps

GLA (’000s sqm) EOP

3,187

3,417

-6.7%

3,187

3,417

-6.7%

Occupancy EOP

96.4%

92.8%

354 bps

96.4%

92.8%

354 bps

Average Occupancy

95.2%

92.5%

267 bps

94.7%

92.4%

225 bps

FIBRAMQ’s same store portfolio results were as follows:

TOTAL PORTFOLIO - SAME STORE

2Q19

2Q18

Variance

1H19

1H18

Variance

Net Operating Income

Ps 842.9m

Ps 801.4m

5.2%

Ps. 1,906.1m

Ps. 1,819.0m

4.8%

Net Operating Income Margin

87.8%

88.5%

-70 bps

87.8%

88.2%

-42 bps

Number of Properties

251

251

0

251

251

0

GLA (’000s sqf) EOP

34,307

34,201

0.3%

34,307

34,201

0.3%

GLA (’000s sqm) EOP

3,187

3,177

0.3%

3,187

3,177

0.3%

Occupancy EOP

96.4%

94.1%

226 bps

96.4%

94.1%

226 bps

Average Monthly Rent (US$/sqm) EOP

5.35

5.20

3.1%

5.35

5.20

3.1%

Industrial Customer Retention LTM EOP

87.5%

83.5%

404 bps

87.5%

83.5%

404 bps

Weighted Avg Lease Term (years) EOP

3.5

3.6

-1.1%

3.5

3.6

-1.1%

Percentage of US$ denominated Rent EOP

71.0%

72.0%

-101 bps

71.0%

72.0%

-101 bps

Industrial Portfolio

The following table summarizes the results for FIBRAMQ’s industrial portfolio:

INDUSTRIAL PORTFOLIO

2Q19

2Q18

Variance

1H19

1H18

Variance

Net Operating Income (NOI)

Ps 694.8m

Ps 686.2m

1.3%

Ps 1,371.4m

Ps 1,369.3m

0.2%

NOI Margin

91.7%

91.6%

8 bps

91.5%

91.5%

-4 bps

GLA (’000s sqft) EOP

29,464

31,866

-7.5%

29,464

31,866

-7.5%

GLA (’000s sqm) EOP

2,737

2,960

-7.5%

2,737

2,960

-7.5%

Occupancy EOP

96.8%

92.6%

426 bps

96.8%

92.6%

426 bps

Average Occupancy

95.6%

92.2%

336 bps

94.9%

92.0%

287 bps

Average monthly rent per leased (US$/sqm) EOP

$4.83

$4.69

3.1%

$4.83

$4.69

3.1%

Customer retention LTM

87.5%

82.9%

466 bps

87.5%

82.9%

466 bps

Weighted Avg Lease Term Remaining (years) EOP

3.3

3.3

2.4%

3.3

3.3

2.4%

For the three months ended June 30, 2019, FIBRAMQ’s industrial portfolio delivered net operating income of Ps 694.8 million, an increase of 1.3% from the prior comparable period. This was a particularly strong year-over-year result when taking into account the loss of NOI from the sale of 35 properties in July 2018. Adjusting for this impact, industrial same-store NOI increased an impressive 6.0% from the prior comparable period.

The occupancy rate of the industrial portfolio as of June 30, 2019 was 96.8%, up 426 basis points versus the prior comparable quarter, and up 200 basis points sequentially. This represents a record occupancy level for FIBRAMQ’s industrial portfolio, reflecting healthy market fundamentals.

FIBRAMQ signed 19 new and renewal leases in the second quarter of 2019, comprising 1.5 million square feet of industrial GLA. This included eight new leases totaling 605 thousand square feet, the highest quarterly volume of new leases executed since the fourth quarter of 2016.

Notable new leases included those with logistics providers in Monterrey and Matamoros, and auto parts manufacturers in San Luis Potosi, Saltillo and Puebla. Renewal activity included the retention of an auto parts manufacturer in Matamoros, an electronics manufacturer in Ciudad Juárez and a logistics provider in Reynosa.

For the twelve-months ending June 30, 2019, FIBRAMQ’s retention rate was a robust 87.5%. This result was achieved by having the lowest quarter on record for move outs of just 105 thousand square feet, whilst executing on 11 renewal leases totaling 891 thousand square feet.

Rental rates at the end of the quarter improved 3.1% versus the prior comparable quarter, to a weighted average of US$4.83 per leased square meter per month. The increase was driven primarily by asset sales, contractual increases and continuing positive lease renewal spreads.

For detail on FIBRAMQ’s same store industrial portfolio results, please refer to Second Quarter 2019 Supplementary Information materials located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings.

Retail Portfolio

The following table summarizes the proportionally combined results of operations for FIBRAMQ’s retail portfolio:

RETAIL PORTFOLIO

2Q19

2Q18

Variance

1H19

1H18

Variance

Net Operating Income (NOI)

Ps 150.6m

Ps 148.2m

1.6%

Ps 303.4m

Ps 289.9m

4.7%

NOI Margin

73.5%

76.5%

-301 bps

73.9%

74.8%

-90 bps

GLA (’000s sqft) EOP

4,843

4,920

-1.6%

4,843

4,920

-1.6%

GLA (’000s sqm) EOP

450

457

-1.6%

450

457

-1.6%

Occupancy EOP

93.6%

94.5%

-92 bps

93.6%

94.5%

-92 bps

Average Occupancy

92.8%

94.6%

-179 bps

93.2%

94.6%

-137 bps

Average monthly rent per leased (Ps/sqm) EOP

$162.51

$154.34

5.3%

$162.51

$154.34

5.3%

Customer retention LTM

81.5%

69.5%

1,201 bps

81.5%

69.5%

1,201 bps

Weighted Avg Lease Term Remaining (years) EOP

4.3

4.6

-6.9%

4.3

4.6

-6.9%

For the quarter ended June 30, 2019, FIBRAMQ’s retail portfolio delivered NOI of Ps 150.6 million, an increase of 1.6% from the prior comparable period. The growth was driven by a 5.3% increase in monthly rents, partially offset by a reduction in closing occupancy to 93.6%. Occupancy increased 10 basis points sequentially as new leasing activity was supported by a record level of renewals.

During the second quarter of 2019, FIBRAMQ signed 74 leases, representing 30.3 thousand square meters. This activity included 30 new leases and 44 renewals. Of note, during the second quarter, an anchor grocery tenant vacated FIBRAMQ’s Grand Polanco property in Mexico City. Importantly the tenant paid in full its early termination obligations and FIBRAMQ efficiently re-let the space in the same quarter under a long-term lease term to a leading gym operator. Although average occupancy was impacted by the temporary vacancy, taking into account early termination fees and new lease and car parking income, there is an overall positive impact to FIBRA Macquarie’s NOI result for 2019 as a result of the change in anchor tenant.

PORTFOLIO ACTIVITY

FIBRAMQ continued its deployment of available capital into accretive investments including targeted expansions of existing properties on a pre-leased basis and selective property developments during the second quarter.

Industrial and retail expansions

FIBRAMQ progressed with construction of a new 2,100 square meter retail center expansion at Multiplaza del Valle in Guadalajara. The expansion includes 1,400 square meters for Cinépolis, a leading cinema operator. The project is expected to complete in the second half of 2019.

FIBRAMQ also continued to progress a 47 thousand square foot industrial property expansion for a manufacturer of lighting products in Reynosa. The expansion is expected to complete in the second half of 2019.

Industrial development

FIBRAMQ continued construction of an industrial project in Ciudad Juárez, Chihuahua. The first phase of the project, a 200,000 square foot, class A industrial building is expected to be completed in the second half of 2019. In total, the project involves the construction of up to two buildings, totaling approximately 435,000 square feet.

Asset Recycling

During the second quarter, FIBRAMQ closed on the sale of the final two properties contracted for sale in 2019, generating cash proceeds of US$5.5 million on 30 June 2019, with an additional US$1.7 million of cash proceeds to be received in two installments over the next 18 to 24 months. With these closings, FIBRAMQ has substantially completed its near-term asset recycling program.

Since starting its recycling program in 2017, FIBRAMQ has sold 44 properties and generated approximately US$117 million in proceeds at a 2.2 per cent premium to book value. The sales have upgraded the profile of the FIBRAMQ portfolio overall and the proceeds have been reinvested in value-creating opportunities.

BALANCE SHEET

At June 30, 2019, FIBRAMQ had approximately Ps 15.7 billion of debt outstanding, Ps 4.7 billion available on its revolving credit facility (completely undrawn) and Ps 339.3 million of unrestricted cash on hand. FIBRAMQ’s indebtedness was 100% fixed rate with a weighted-average tenor remaining of 6.6 years.

During the second quarter, FIBRAMQ closed on its previously announced US$425 million 5-year unsecured syndicated bank term and loan and revolver facility as well as a US$75 million, 15-year secured term loan facility. Proceeds from the US$500 million refinancing program were used to fully repay outstanding debt facilities, resulting in a mainly debt neutral outcome. FIBRA Macquarie has no debt facilities maturing prior to June 2023.

At June 30, 2019 FIBRAMQ’s CNBV regulatory debt to total asset ratio was 35.1% and its CNBV regulatory debt service coverage ratio was 5.0x.

CAPITAL MANAGEMENT

FIBRAMQ remains committed to its disciplined approach to capital sourcing as well as capital deployment across property expansions and developments, certificate repurchases for cancellation, and repayment of debt.

During the second quarter of 2019, FIBRAMQ continued to fund the expansion and development projects discussed above. For the full year FIBRAMQ anticipates investing approximately US$22.4 million in announced projects including expansions, remodeling and development. This accretive investment has been, and is forecasted to continue, to be funded by retained AFFO.

At its Annual Holders Meeting held on April 24, 2019, FIBRAMQ received approval for the extension of the certificate buyback program for an additional twelve months ending June 25, 2020, for a total amount of up to Ps 1.0 billion. Since commencement of the buyback program, FIBRAMQ has deployed Ps 871.9 million to repurchase 41.4 million certificates. All certificates repurchased have been or will be cancelled.

For additional details on FIBRAMQ’s capital management please refer to the Second Quarter 2019 Supplementary Information materials located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings.

DISTRIBUTION

On July 23, 2019, FIBRAMQ declared a cash distribution for the quarter ended June 30, 2019 of Ps 0.445 per certificate, a 14.1% increase over the distribution in the prior comparable period and a 4.7% increase sequentially. The distribution is expected to be paid on September 25, 2019 to holders of record on September 24, 2019. FIBRAMQ’s certificates will commence trading ex-distribution on September 23, 2019.

2019 GUIDANCE

Based on its strong performance to date and positive outlook for the remainder of the year, FIBRA Macquarie is increasing its full year 2019 guidance for both AFFO per certificate and cash distributions.

FIBRAMQ is increasing its guidance for AFFO per certificate to be between Ps 2.50 to Ps 2.55, up from its prior expectation of between Ps 2.45 and Ps 2.50 for the year.

For full year 2019, FIBRAMQ anticipates making cash distributions of approximately Ps 1.76 per certificate, an increase of 3.5% from its previously announced guidance of Ps 1.70 per certificate and an increase of 10.0% on a YoY basis. The remaining distributions are expected to be made in equal quarterly distributions of Ps 0.445 for the third and fourth quarters of 2019.

This guidance is based upon the following assumptions:

  • Cash-generating capacity of its existing portfolio and an average exchange rate of Ps 19.25 per US dollar;
  • No new acquisitions or divestments;
  • No certificate repurchases;
  • The continued stable performance of the properties in the portfolio, and stable market conditions; and
  • The payment of cash distributions remaining subject to the approval of the board of directors of the Manager.

SUSTAINABILITY REPORT

FIBRAMQ recently published its 2018 Sustainability Report. The report outlines FIBRAMQ’s sustainability strategy, provides ESG highlights and achievements and includes a case study of its Ciudad Juárez industrial development project being constructed to best-in-class LEED standards.

The complete report can be found at this link.

WEBCAST AND CONFERENCE CALL

FIBRAMQ will host an earnings conference call and webcast presentation on Wednesday, July 24, 2019 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.fibramacquarie.com or by dialing toll free +1-877-304-8957. Callers from Mexico may dial 01-800-926-9157 and other callers from outside the United States may dial +1-973-638-3235. Please ask for the FIBRA Macquarie Second Quarter 2019 Earnings Call with conference number 5686717.

An audio replay will be available by dialing +1-855-859-2056 or +1-404-537-3406 for callers from outside the United States. The passcode for the replay is 5686717. A webcast archive of the conference call and a copy of FIBRA Macquarie’s financial information for the second quarter 2019 will also be available on FIBRA Macquarie’s website, www.fibramacquarie.com.

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 234 industrial properties and 17 retail/office properties, located in 20 cities across 16 Mexican states as of June 30, 2019. Nine of the retail/office properties are held through a 50/50 joint venture. For additional information about FIBRA Macquarie, please visit www.fibramacquarie.com.

Cautionary Note Regarding Forward-looking Statements

This document includes forward-looking statements that represent our opinions, expectations, beliefs, intentions, estimates or strategies regarding the future, which may not be realized. These statements may be identified by the use of words like “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “should,” “seek,” and similar expressions. The forward-looking statements reflect our views and assumptions with respect to future events as of the date of this document and are subject to risks and uncertainties.

Actual and future results and trends could differ materially from those described by such statements due to various factors, including those beyond our ability to control or predict. Given these uncertainties, you should not place undue reliance on the forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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.

Contacts

Investor relations:
Tel: +52 (55) 9178 7751
Email: fibramq@macquarie.com

Evelyn Infurna
Tel: +1 203 682 8265
Email: evelyn.infurna@icrinc.com

Nikki Sacks
Tel: +1 203 682 8263
Email: nikki.sacks@icrinc.com

For press queries:
Flavio J. Díaz-Tueme FleishmanHillard México
Tel: +52 (55) 5520 5460 E
Email: flavio.diaz@fleishman.com

Contacts

Investor relations:
Tel: +52 (55) 9178 7751
Email: fibramq@macquarie.com

Evelyn Infurna
Tel: +1 203 682 8265
Email: evelyn.infurna@icrinc.com

Nikki Sacks
Tel: +1 203 682 8263
Email: nikki.sacks@icrinc.com

For press queries:
Flavio J. Díaz-Tueme FleishmanHillard México
Tel: +52 (55) 5520 5460 E
Email: flavio.diaz@fleishman.com