FIBRA Macquarie México Reports Third Quarter 2019 Results

- Quarterly AFFO per Certificate Increases 6.1% YoY -

- Increases Cash Distribution per Certificate -

- Increases Full Year AFFO per Certificate Guidance -

- Increases Full Year Cash Distribution 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 September 30, 2019.

THIRD QUARTER 2019 HIGHLIGHTS

  • Quarterly AFFO per certificate increased 6.1% YoY to a record Ps 0.6661
  • Quarterly AFFO increased 4.3% YoY to a record Ps 512.0 million
  • Record quarterly AFFO margin of 52.3%, up 16bps YoY
  • Consolidated closing occupancy increased 122 basis points YoY to 95.6%
  • Additional 4.3 million certificates repurchased for cancellation
  • Full year AFFO per Certificate Guidance increased to approximately Ps 2.57
  • Quarterly distribution of Ps 0.4550 per certificate authorized, up 11.0% YoY
  • Full year distribution guidance increased to Ps 1.78 per certificate, up 11.3% YoY

We achieved another quarter of record free cashflow generation, as we see the benefits of our strategy generating steady returns,” said Juan Monroy, FIBRA Macquarie’s chief executive officer. “Our thoughtful approach to capital management is creating value for our certificate holders while maintaining an appropriate risk profile. This approach has resulted in a well-positioned balance sheet with both stability and flexibility, and a higher quality portfolio through our asset recycling, property expansion and development, and selective remodeling programs. We believe the Mexican industrial and retail real estate market is healthy, and it is a particularly attractive environment for the Mexican manufacturing for export industry, which comprises a substantial proportion of our customer base. This favorable backdrop, coupled with FIBRAMQ’s local real estate expertise, provides us with a stable outlook and confidence in our ability to continue to deliver an increasing cash distribution profile.”

FINANCIAL AND OPERATING RESULTS

Consolidated Portfolio

FIBRAMQ’s total results were as follows:

TOTAL PORTFOLIO

 

3Q19

 

3Q18

 

Variance

 

YTD19

 

YTD18

 

Variance

Net Operating Income (NOI)

 

Ps 869.9m

 

Ps 824.7m

 

5.5%

 

Ps 2,544.8m

 

Ps 2,483.8m

 

2.5%

EBITDA

 

Ps 816.0m

 

Ps 770.8m

 

5.9%

 

Ps 2,384.5m

 

Ps 2,317.1m

 

2.9%

Funds From Operations (FFO)

 

Ps 591.7m

 

Ps 555.3m

 

6.6%

 

Ps 1,732.1m

 

Ps 1,648.4m

 

5.1%

FFO per certificate

 

0.7699

 

0.7106

 

8.3%

 

2.2508

 

2.0901

 

7.7%

Adjusted Funds From Operations (AFFO)

 

Ps 512.0m

 

Ps 490.9m

 

4.3%

 

Ps 1,485.0m

 

Ps 1,446.5m

 

2.7%

AFFO per certificate

 

0.6661

 

0.6281

 

6.1%

 

1.9321

 

1.8341

 

5.2%

NOI Margin

 

88.8%

 

87.6%

 

126 bps

 

88.1%

 

87.9%

 

18 bps

AFFO Margin

 

52.3%

 

52.1%

 

16 bps

 

51.4%

 

51.2%

 

21 bps

GLA (’000s sqm) EOP

 

3,194

 

3,204

 

-0.3%

 

3,194

 

3,204

 

-0.3%

Occupancy EOP

 

95.6%

 

94.3%

 

122 bps

 

95.6%

 

94.3%

 

122 bps

Average Occupancy

 

95.7%

 

93.8%

 

190 bps

 

95.0%

 

92.8%

 

219 bps

FIBRAMQ’s same store portfolio results were as follows:

TOTAL PORTFOLIO - SAME STORE

 

3Q19

 

3Q18

 

Var(%)

 

YTD19

 

YTD18

 

Var(%)

Net Operating Income

 

Ps. 869.9m

 

Ps. 819.4m

 

6.2%

 

Ps. 2,541.1m

 

Ps. 2,413.8m

 

5.3%

Net Operating Income Margin

 

88.8%

 

87.9%

 

94 bps

 

88.1%

 

88.1%

 

4 bps

Number of Properties

 

251

 

251

 

0

 

251

 

251

 

0

GLA (’000s sqf) EOP

 

34,376

 

34,261

 

0.3%

 

34,376

 

34,261

 

0.3%

GLA (’000s sqm) EOP

 

3,194

 

3,183

 

0.3%

 

3,194

 

3,183

 

0.3%

Occupancy EOP

 

95.6%

 

94.6%

 

97 bps

 

95.6%

 

94.6%

 

97 bps

Average Monthly Rent (US$/sqm) EOP

 

5.35

 

5.29

 

1.1%

 

5.35

 

5.29

 

1.1%

Industrial Customer Retention LTM EOP

 

85.9%

 

86.2%

 

-30 bps

 

85.9%

 

86.2%

 

-30 bps

Weighted Avg Lease Term Remaining
(years) EOP

 

3.5

 

3.6

 

-2.4%

 

3.5

 

3.6

 

-2.4%

Percentage of US$ denominated Rent EOP

 

71.8%

 

71.1%

 

69 bps

 

71.8%

 

71.1%

 

69 bps

Industrial Portfolio

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

INDUSTRIAL PORTFOLIO

 

3Q19

 

3Q18

 

Variance

 

YTD19

 

YTD18

 

Variance

Net Operating Income (NOI)

 

Ps 721.2m

 

Ps 680.3m

 

6.0%

 

Ps 2,092.7m

 

Ps 2,049.6m

 

2.1%

NOI Margin

 

92.3%

 

91.2%

 

113 bps

 

91.8%

 

91.4%

 

36 bps

GLA (’000s sqft) EOP

 

29,511

 

29,569

 

-0.2%

 

29,511

 

29,569

 

-0.2%

GLA (’000s sqm) EOP

 

2,742

 

2,747

 

-0.2%

 

2,742

 

2,747

 

-0.2%

Occupancy EOP

 

95.9%

 

94.4%

 

141 bps

 

95.9%

 

94.4%

 

141 bps

Average Occupancy

 

96.1%

 

93.8%

 

228 bps

 

95.3%

 

92.6%

 

267 bps

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

 

$4.86

 

$4.80

 

1.3%

 

$4.86

 

$4.80

 

1.3%

Customer retention LTM

 

85.9%

 

84.5%

 

140 bps

 

85.9%

 

84.5%

 

140 bps

Weighted Avg Lease Term Remaining (years)
EOP

 

3.3

 

3.3

 

-0.1%

 

3.3

 

3.3

 

-0.1%

For the three months ended September 30, 2019, FIBRAMQ’s industrial portfolio delivered net operating income of Ps 721.2 million, an increase of 6.0% over the prior comparable period. The result was driven by gains in occupancy, rental rates and margin compared with the third quarter in 2018.

The occupancy rate of the industrial portfolio as of September 30, 2019 was 95.9%, up 141 basis points versus the prior comparable quarter, with average occupancy up 53bps sequentially to a record level of 96.1%. The ongoing high level of occupancy for FIBRAMQ’s industrial portfolio reflects healthy market fundamentals and solid leasing results year to date.

FIBRAMQ signed 16 new and renewal industrial leases in the third quarter of 2019, comprising 1.0 million square feet of industrial GLA. This included the commencement of one new lease totaling 47 thousand square feet as a result of the completion of a US$2.4 million expansion project in Reynosa.

For the 12 months ending September 30, 2019, FIBRAMQ’s retention rate was 85.9%. FIBRAMQ executed 14 renewal leases totaling 976 thousand square feet. Notable renewals included several consumer goods manufacturers, a metal products manufacturer and an electronics distributor.

FIBRAMQ’s industrial portfolio achieved a quarterly NOI margin of 92.3% driven by record-level revenues which were up 4.7% as compared to the prior comparable period. In addition, higher triple net lease up and cost control contributed to lower repairs and maintenance, security and utility costs, resulting in an exceptionally low quarter for industrial portfolio property-level expenses; property expenses are expected to return to historical run rate levels in the fourth quarter of 2019.

For detail on FIBRAMQ’s same store industrial portfolio results, please refer to the Third 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

 

3Q19

 

3Q18

 

Variance

 

YTD19

 

YTD18

 

Variance

Net Operating Income (NOI)

 

Ps 148.7m

 

Ps 144.3m

 

3.0%

 

Ps 452.1m

 

Ps 434.2m

 

4.1%

NOI Margin

 

75.1%

 

73.8%

 

133 bps

 

74.3%

 

74.5%

 

-17 bps

GLA (’000s sqft) EOP

 

4,865

 

4,918

 

-1.1%

 

4,865

 

4,918

 

-1.1%

GLA (’000s sqm) EOP

 

452

 

457

 

-1.1%

 

452

 

457

 

-1.1%

Occupancy EOP

 

93.7%

 

93.6%

 

7 bps

 

93.7%

 

93.6%

 

7 bps

Average Occupancy

 

93.6%

 

94.0%

 

-44 bps

 

93.4%

 

94.4%

 

-105 bps

Average monthly rent per leased (Ps/sqm) EOP

 

$162.22

 

$154.85

 

4.8%

 

$162.22

 

$154.85

 

4.8%

Customer retention LTM

 

80.8%

 

71.1%

 

966 bps

 

80.8%

 

71.1%

 

966 bps

Weighted Avg Lease Term Remaining (years)
EOP

 

4.2

 

4.5

 

-6.2%

 

4.2

 

4.5

 

-6.2%

For the quarter ended September 30, 2019, FIBRAMQ’s retail portfolio delivered NOI of Ps 148.7 million, an increase of 3.0% over the prior comparable period, which was in line with Mexican headline inflation, reflecting an overall steady retail environment with customers in general continuing to report same store sales growth. Retail portfolio property level expenses were lower on reduced repairs and maintenance and lower bad debt expense, which boosted quarterly NOI margins to 75.1%. NOI margins expanded by 133bps versus the prior comparable period.

During the third quarter of 2019, FIBRAMQ signed retail 49 leases, representing 8.2 thousand square meters. This activity included 19 new leases and 30 renewals. Two leasing highlights for the quarter included:

  • At Multiplaza Ojo de Agua, the commencement of a 1,500 square meter lease with Promoda, a prominent Mexican outlet retailer, replacing a delinquent tenant who moved out in the first quarter of 2019; and
  • At Magnocentro in the Mexico City Metropolitan Area, Sonora Grill opened a new restaurant, representing a new lease for an 800 square meter space.

PORTFOLIO ACTIVITY

During the third quarter, 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.

Industrial and retail expansions

FIBRAMQ delivered a 47 thousand square foot industrial property expansion for a manufacturer of lighting products in Reynosa.

In addition, FIBRAMQ progressed construction of a new 2,100 square meter retail center expansion at Multiplaza del Valle in Guadalajara. The expansion includes an approximately 1,500 square meter space signed under a long-term lease agreement with Cinépolis, a leading cinema operator. The build-to-suit project is expected to be substantially complete by year-end 2019, and to generate additional rental income from the second quarter of next year following completion of the customers improvements and fit-out.

Industrial development

FIBRAMQ neared completion of an industrial project in Ciudad Juárez, Chihuahua. The first phase of the project, a 201,000 square foot, class A industrial building is expected to be LEED certified and completed by year-end 2019. In total, the project involves the construction of up to two buildings, totaling approximately 420,000 square feet.

FFO AND AFFO METHOLDOGY UPDATE – NORMALIZED FINANCING COSTS

Commencing from 1 July 2019, FIBRA Macquarie is adjusting its AFFO methodology to include normalized financing costs, incurred from time to time upon loan facility establishment and refinancings. Normalized financing costs represent cash outlays such as upfront lender fees and associated transaction costs, amortized over the original term of the respective loan facility.

Prior to this change, financing costs amortized through profit and loss were excluded from FFO and AFFO results. This methodology update follows a comprehensive review of global REIT best practice measures. FIBRA Macquarie believes that the inclusion of normalized financing costs that are cash expenditures incurred in its ordinary course of business provides investors with a more complete view of FFO and AFFO generated by the business. Based on the existing normalized amortization profile, FIBRA Macquarie’s quarterly AFFO is expected to be reduced by approximately Ps 6.0 million; on an annualized pro forma basis this reduction in AFFO is expected to total Ps 24.0 million, or Ps 0.03 per certificate. With this update, FIBRA Macquarie continues to position itself as an industry leader in AFFO reporting and disclosure measures.

BALANCE SHEET

As of September 30, 2019, FIBRAMQ had approximately Ps 16.1 billion of debt outstanding and liquidity of Ps 4.8 billion in the form of an undrawn revolving credit facility and Ps 386.0 million of unrestricted cash on hand. 100% of FIBRAMQ’s debt was fixed rate with a weighted-average tenor of 6.3 years. FIBRA Macquarie has no near-term refinancing requirements with the next scheduled loan maturity in June 2023.

FIBRAMQ’s CNBV regulatory debt to total asset ratio was 35.6% and the debt service coverage ratio was 5.1x, satisfying the applicable regulatory requirements of 50% and 1.0x, respectively.

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.

Property Investments

During the third quarter of 2019, FIBRAMQ continued to fund the expansion, development and remodeling projects discussed above. For the full year FIBRAMQ expects to invest or commit approximately US$33.7 million.

Certificate repurchase for cancellation program

FIBRAMQ continued to repurchase its certificates on the open market. FIBRA Macquarie has repurchased a total of 45.7 million certificates, or 5.6% of its market capitalization, since launching the program in 2017. The weighted average purchase price of Ps 21.34 represents a significant discount to intrinsic value and current trading levels. FIBRA Macquarie has a remaining program capacity of approximately Ps 900 million through to June 25, 2020. All certificates repurchased have been or will be cancelled. The following table summarizes the repurchase activity in the quarter:

CERTIFICATE REPURCHASES

Number of Certificates

Repurchase amount

Third quarter 2019

4.3m

Ps 102.6m

Since program commencement1

45.7m

Ps 974.5m

1. Includes certificates repurchased from 27 June 2017 to 30 September 2019

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

DISTRIBUTION

On October 24, 2019, FIBRAMQ declared a cash distribution for the quarter ended September 30, 2019 of Ps 0.4550 per certificate, representing an 11.0% increase over the prior comparable period, and the third consecutive quarterly increase in distributions per certificate.

The distribution is expected to be paid on January 24, 2020 to holders of record on January 23, 2020. FIBRAMQ’s certificates will commence trading ex-distribution on January 22, 2020.

2019 GUIDANCE

FIBRA Macquarie is increasing its full year 2019 guidance for both AFFO per certificate and cash distributions.

FIBRAMQ expects to generate AFFO of approximately Ps 2.57 per certificate in 2019, up from its prior guidance of between Ps 2.50 to Ps 2.55. For full year 2019, FIBRAMQ anticipates making cash distributions of approximately Ps 1.78 per certificate, up from its prior guidance of Ps 1.76 per certificate.

The expected increase in cash distributions reflects assumptions including continued stable operational performance, an average exchange rate of Ps 19.35 per US dollar, no additional acquisitions or divestments, no additional certificate repurchases and maintenance of a prudent AFFO payout ratio. The payment of any distribution remains subject to market conditions and the approval of the board of directors of the Manager.

FIBRA Macquarie expects its full year 2019 AFFO payout ratio to be approximately 69%.

Sound fundamentals are providing a stable outlook for FIBRA Macquarie’s performance during the fourth quarter of 2019 and early FY20. The stable outlook, along with FIBRA Macquarie’s prudent AFFO payout ratio, is expected to sustain positive momentum in its cash distributions to investors over the medium term.

WEBCAST AND CONFERENCE CALL

FIBRAMQ will host an earnings conference call and webcast presentation on Friday, October 25, 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 Third Quarter 2019 Earnings Call with conference number 5991555.

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 5991555. A webcast archive of the conference call and a copy of FIBRA Macquarie’s financial information for the third 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 September 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
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
Email: flavio.diaz@fleishman.com