Market Overview

Fibra Macquarie México Reports Third Quarter 2020 Results and Provides Update on COVID-19 Impact

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- Reaffirms FY20 Distribution per certificate guidance -

- Lower rent concessions and net trade receivables, higher cash collections -

- Announces new Mexico City Metropolitan Area industrial development project -

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 third quarter ended September 30, 2020.

THIRD QUARTER 2020 HIGHLIGHTS

  • AFFO per certificate of Ps. 0.6119, down 8.1% YoY
  • Average industrial rental rate increases of 2.3%; same store retail rental rates up 0.6% YoY
  • Consolidated occupancy of 93.7%, down 184 bps YoY and 138 bps QoQ
  • 96.0% of scheduled 3Q20 industrial rents collected as of October 26
  • Sequential reduction of 35.7% in net trade receivables
  • Total liquidity of US$271.7 million, comprised of US$236.1 million undrawn committed revolver credit facility and US$35.6 million cash at hand
  • Industrial development program gains momentum; investment made in a premium land parcel in the Mexico City Metropolitan Area to develop more than 700k sqft of industrial logistics GLA
  • 3Q20 cash distribution of Ps. 0.4750 per certificate authorized, up 4.4% YoY
  • FY20 AFFO per certificate guidance updated to a range of Ps. 2.56 to Ps. 2.59 from a prior range of Ps. 2.52 to Ps. 2.62
  • FY20 distribution guidance of Ps. 1.90 per certificate reaffirmed

"During the third quarter, our industrial portfolio continued its resilient performance as demonstrated by our strong rent collection and easing of concessions. In our retail portfolio, the vast majority of stores have reopened for business, following the easing of government lockdowns," said Juan Monroy, FIBRA Macquarie's chief executive officer. "Our industrial portfolio continued its robust performance with increases in average rental rates and the benefits of largely U.S. dollar denominated rents contributing to a 12.6% YoY increase in net operating income. We experienced a slight contraction in occupancy as a few customers vacated our properties to accommodate changes to their business needs unrelated to the pandemic; we view this as an opportunity to participate in a supply constrained market. Industrial fundamentals remain strong across the country and we are cautiously optimistic about the leasing environment in the fourth quarter and into 2021. Our retail portfolio, anchored by essential businesses, continues to benefit from its defensive positioning in light of an uncertain consumer outlook. Over the past few years, we have progressively built a resilient business with a strong balance sheet and disciplined capital management strategy to support accretive growth initiatives as well as a sustainable distribution. We are confident in our strategic positioning as we have demonstrated the resilience of our platform in the near term, and in longer term growth opportunities as nearshoring manufacturing and logistics trends are expected to provide ongoing demand-side momentum."

COVID-19 PANDEMIC UPDATE

Since the onset of the COVID-19 pandemic, FIBRA Macquarie has undertaken a proactive response to prioritize the health and safety of its team members, customers and stakeholders. FIBRAMQ's property management teams remain fully operational and responsive to the needs of FIBRAMQ customers and properties across its portfolio. In the third quarter, FIBRAMQ saw improvements in all key metrics related to rent collections and concessions, and customer openings.

With respect to FIBRAMQ's total portfolio performance on a proportionally combined basis:

  • Rent concessions eased in 3Q20 to Ps. 43.2 million, lower by 63.0% versus 2Q20
  • Net trade receivables, excluding VAT, reduced to Ps. 73.3 million, sequentially lower by 35.7%, reflecting a combination of strong quarterly cash collections, along with a prudent level of credit loss provisioning
  • Cash collections increased to Ps. 1.11bn, up 12.3% from the prior quarter, with 95.0% of current quarter income collected

With respect to FIBRAMQ's industrial portfolio:

  • Substantially all of FIBRAMQ's industrial customers who temporarily suspended operations due to the pandemic have resumed operations, and rent collections have been strong
  • Through to October 26, 96.0% of scheduled 3Q20 rents were collected
  • Total rent concessions eased in the third quarter to Ps. 18.4 million, lower by 74.9% QoQ. Rent concessions comprised rent deferrals of Ps. 16.8 million, lower by 76.3% QoQ, and rent discounts of Ps. 1.6 million, lower by 34.1% QoQ
  • Total rent relief contracted or under negotiation represented approximately 2.7% of the industrial portfolio ABR, comprised of 2.6% rent deferrals and 0.1% rent discounts
  • FIBRAMQ collected 97.1% of its Ps. 38.1 million deferred rents scheduled for collection in 3Q20, through to October 26
  • FIBRAMQ is scheduled to collect deferred rents of Ps. 42.9 million in 4Q20 and Ps. 6.6 million in 1H21

With respect to FIBRAMQ's retail portfolio:

  • All of FIBRAMQ's shopping centers are supermarket anchored and have remained open since the onset of the pandemic. While most non-essential businesses have reopened, many are operating at reduced hours and/or with capacity limits, providing for challenging trading conditions.
  • Through to October 26, 96.9% of GLA and 95.0% of ABR was open, respectively
  • Total rent concessions declined in the third quarter to Ps. 24.8 million, lower by 43% QoQ. 3Q20 rent concessions comprised rent discounts of Ps. 22.8 million, lower by 41.3% QoQ, and rent deferrals of Ps. 2.0 million, lower by 57.6% versus the prior comparable quarter
  • With respect to 3Q20 rent deferrals of Ps. 2.0 million, FIBRAMQ is scheduled to collect 26.3% in 4Q20, 60.5% in 1H21 and 13.1% in 2H21
  • Through to October 26, 86.3% of scheduled 3Q20 rents were collected
  • Cash collections increased by 10.4% on a sequential basis, totaling Ps. 109.8 million, assisted by tenants settling prior period receivables of Ps. 9.5 million

FIBRAMQ has provided enhanced COVID-19 related disclosures for its rent collections, retail center store openings, rent relief and trade receivables as part of its Third Quarter 2020 Supplementary Information materials, located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings.

FINANCIAL AND OPERATING RESULTS

Consolidated Portfolio

FIBRAMQ's total results were as follows:

TOTAL PORTFOLIO

 

3Q20

 

3Q19

 

Variance

 

YTD20

 

YTD19

 

Variance

Net Operating Income (NOI)

 

Ps 906.9m

 

Ps 869.9m

 

4.2%

 

Ps 2,822.4m

 

Ps 2,544.8m

 

10.9%

EBITDA

 

Ps 841.4m

 

Ps 816.0m

 

3.1%

 

Ps 2,633.5m

 

Ps 2,384.5m

 

10.4%

AMEFIBRA Funds From Operations

 

Ps 576.3m

 

Ps 593.9m

 

-3.0%

 

Ps 1,841.9m

 

Ps 1,674.0m

 

10.0%

Funds From Operations (FFO)

 

Ps 574.6m

 

Ps 591.7m

 

-2.9%

 

Ps 1,836.7m

 

Ps 1,732.1m

 

6.0%

FFO per certificate

 

0.7544

 

0.7699

 

-2.0%

 

2.4079

 

2.2508

 

7.0%

Adjusted Funds From Operations (AFFO)

 

Ps 466.1m

 

Ps 512.0m

 

-9.0%

 

Ps 1,523.2m

 

Ps 1,485.0m

 

2.6%

AFFO per certificate

 

0.6119

 

0.6661

 

-8.1%

 

1.9969

 

1.9298

 

3.5%

NOI Margin

 

86.8%

 

88.8%

 

-203 bps

 

87.9%

 

88.1%

 

-22 bps

AFFO Margin

 

44.6%

 

52.3%

 

-767 bps

 

47.4%

 

51.4%

 

-398 bps

GLA ('000s sqm) EOP

 

3,183

 

3,194

 

-0.3%

 

3,183

 

3,194

 

-0.3%

Occupancy EOP

 

93.7%

 

95.6%

 

-184 bps

 

93.7%

 

95.6%

 

-184 bps

Average Occupancy

 

93.7%

 

95.7%

 

-206 bps

 

94.7%

 

95.0%

 

-27 bps

FIBRAMQ's same store portfolio results were as follows:

TOTAL PORTFOLIO - SAME STORE

 

3Q20

 

3Q19

 

Variance

 

YTD20

 

YTD19

 

Variance

Net Operating Income

 

Ps. 901.8m

 

Ps. 845.6m

 

6.6%

 

Ps. 2,604.0m

 

Ps. 2,342.6m

 

11.2%

Net Operating Income Margin

 

86.9%

 

88.5%

 

-168 bps

 

88.7%

 

88.9%

 

-16 bps

Number of Properties

 

250

 

250

 

0

 

250

 

250

 

0

GLA ('000s sqf) EOP

 

34,061

 

34,082

 

-0.1%

 

34,061

 

34,082

 

-0.1%

GLA ('000s sqm) EOP

 

3,164

 

3,166

 

-0.1%

 

3,164

 

3,166

 

-0.1%

Occupancy EOP

 

93.7%

 

95.5%

 

-184 bps

 

93.7%

 

95.5%

 

-184 bps

Average Monthly Rent (US$/sqm) EOP

 

5.20

 

5.27

 

-1.3%

 

5.20

 

5.27

 

-1.3%

Industrial Customer Retention LTM EOP

 

81.6%

 

85.9%

 

-433 bps

 

81.6%

 

85.9%

 

-433 bps

Weighted Avg Lease Term Remaining (years) EOP

 

3.4

 

3.5

 

-3.5%

 

3.4

 

3.5

 

-3.5%

Percentage of US$ denominated Rent EOP

 

77.6%

 

73.5%

 

408 bps

 

77.6%

 

73.5%

 

408 bps

Industrial Portfolio

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

INDUSTRIAL PORTFOLIO

 

3Q20

 

3Q19

 

Variance

 

YTD20

 

YTD19

 

Variance

Net Operating Income (NOI)

 

Ps 812.1m

 

Ps 721.2m

 

12.6%

 

Ps 2,404.0m

 

Ps 2,092.7m

 

14.9%

NOI Margin

 

90.7%

 

92.3%

 

-160 bps

 

91.5%

 

91.8%

 

-30 bps

GLA ('000s sqft) EOP

 

29,699

 

29,511

 

0.6%

 

29,699

 

29,511

 

0.6%

GLA ('000s sqm) EOP

 

2,759

 

2,742

 

0.6%

 

2,759

 

2,742

 

0.6%

Occupancy EOP

 

94.0%

 

95.9%

 

-190 bps

 

94.0%

 

95.9%

 

-190 bps

Average Occupancy

 

93.9%

 

96.1%

 

-219 bps

 

95.1%

 

95.3%

 

-24 bps

Average monthly rent (US$/sqm) EOP

 

$4.98

 

$4.86

 

2.3%

 

$4.98

 

$4.86

 

2.3%

Customer retention LTM

 

79.7%

 

85.9%

 

-620 bps

 

79.7%

 

85.9%

 

-620 bps

Weighted Avg Lease Term Remaining (years) EOP

 

3.3

 

3.3

 

-0.1%

 

3.3

 

3.3

 

-0.1%

For the quarter ended September 30, 2020, FIBRAMQ's industrial portfolio delivered NOI of Ps. 812.1 million, up 12.6% versus the prior comparable period. This increase was driven by a depreciation of the Mexican Peso and contracted annual rent increases, partially offset by lower average occupancy. Approximately 93% of FIBRAMQ's industrial ABR is US dollar denominated, consistent with historic levels. Average rental rates increased 2.3% on an annual basis, driven by contractual increases and positive leasing spreads on renewal leases.

As of September 30, 2020, gross trade receivables were Ps. 165.8 million (excl. VAT), while trade receivables net of credit loss provisions were Ps. 56.1 million (excl. VAT). FIBRAMQ property level expenses included non-cash credit loss provisions of Ps. 15.7 million, reflecting a prudent approach to trade receivable provisions across selected tenants.

During the quarter, FIBRAMQ signed 14 new and renewal leases, comprising 1.0 million square feet of GLA. FIBRA Macquarie executed on four new leases totaling 293 thousand square feet and 10 renewal leases totaling 673 thousand square feet. Offsetting the new and renewal leases was 741 thousand square feet that was vacated by five customers who did not renew their leases at the expiration of those contracts. This contributed to a retention rate of 79.7% for the last twelve months.

For detail on FIBRAMQ's same store industrial portfolio results, please refer to Third Quarter 2020 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

 

3Q20

 

3Q19

 

Variance

 

YTD20

 

YTD19

 

Variance

Net Operating Income (NOI)

 

Ps 94.8m

 

Ps 148.7m

 

-36.2%

 

Ps 418.4m

 

Ps 452.1m

 

-7.5%

NOI Margin

 

63.4%

 

75.1%

 

-1169 bps

 

71.7%

 

74.3%

 

-263 bps

GLA ('000s sqft) EOP

 

4,562

 

4,865

 

-6.2%

 

4,562

 

4,865

 

-6.2%

GLA ('000s sqm) EOP

 

424

 

452

 

-6.2%

 

424

 

452

 

-6.2%

Occupancy EOP

 

92.1%

 

93.7%

 

-158 bps

 

92.1%

 

93.7%

 

-158 bps

Average Occupancy

 

92.2%

 

93.6%

 

-141 bps

 

92.8%

 

93.4%

 

-58 bps

Average monthly rent per leased (Ps/sqm) EOP

 

$153.78

 

$162.22

 

-5.2%

 

$153.78

 

$162.22

 

-5.2%

Customer retention LTM

 

65.0%

 

80.8%

 

-1,580 bps

 

65.0%

 

80.8%

 

-1,580 bps

Weighted Avg Lease Term Remaining (years) EOP

 

3.7

 

4.2

 

-13.2%

 

3.7

 

4.2

 

-13.2%

For the quarter ended September 30, 2020, FIBRAMQ's retail portfolio delivered NOI of Ps. 94.8 million, compared with Ps. 148.7 million in the third quarter of 2019.

Average rental rates across FIBRAMQ's retail portfolio decreased by 5.2% versus the prior comparable period as contractual increases and positive new and renewal rental rate spreads were offset by the impact of a lease termination involving a prime Mexico City property in the first quarter of 2020. Excluding the impact of that move-out, average rental rates increased 0.6% year over year.

FIBRAMQ signed 32 retail leases, representing 4.3 thousand square meters during the third quarter including 9 new leases and 23 renewals. The retail retention rate was 53% for the quarter and 65% for the last twelve months. The reduced renewal activity was driven primarily by closures of non-essential small shops as a result of the pandemic. As of September 30, 2020, proportionately combined Retail portfolio gross trade receivables were Ps. 104.7 million (excl. VAT). Trade receivables net of credit loss provisions were Ps. 17.1 million (excl. VAT). Property level expenses excluding non-cash credit loss provisions, totaled Ps. 43.2 million for the third quarter, down 9.0% versus the prior comparable period as a result of effective cost controls.

For detail on FIBRAMQ's same store retail portfolio results, please refer to Third Quarter 2020 Supplementary Information materials located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings

PORTFOLIO ACTIVITY

Industrial Development

During the third quarter, construction was substantially completed on a 217 thousand square foot industrial building in Ciudad Juárez. FIBRAMQ is actively marketing the property and has a robust pipeline of leasing opportunities.

On September 14, FIBRAMQ acquired a 50.0% interest in a premium land parcel in the Mexico City Metropolitan Area. FIBRAMQ expects to develop more than 700k sqft of industrial logistics GLA on the site. This project is a continuation of FIBRAMQ's successful strategy of disciplined industrial property development activity, and follows the completion of the two development projects in Ciudad Juárez. This transaction represents a compelling opportunity for FIBRAMQ to develop class A industrial logistics facilities in one of the most prominent industrial corridors in Mexico. Additional benefits include increased portfolio diversification, added scale with high quality assets, and attractive risk-adjusted returns.

With a solid market backdrop, construction is expected to commence in the first half of 2021.

BALANCE SHEET AND LIQUIDITY

FIBRA Macquarie utilized surplus cash to repay US$90.0 million of its revolver facility during the quarter. As of September 30, 2020, FIBRAMQ had approximately Ps. 18.3 billion of debt outstanding, Ps. 5.3 billion available on its undrawn revolving credit facility and Ps. 0.8 billion of unrestricted cash on hand. FIBRAMQ's indebtedness is 100% fixed rate and has a weighted-average debt tenor remaining of 5.3 years. FIBRAMQ does not have any material commitments with respect to capital expenditures and does not have any scheduled loan maturities until 2023.

FIBRAMQ's CNBV regulatory debt to total asset ratio was 36.9% and its CNBV debt service coverage ratio was 4.4x.

CAPITAL MANAGEMENT STRATEGY

FIBRAMQ's prudent capital management strategy remains a cornerstone of its consistent financial and operating results, highlighted by:

Prudent AFFO payout ratio: providing for resilient distributions over the longer term and efficient sourcing of capital for accretive investments

Asset recycling program: divesting non-core assets, enhancing overall portfolio quality to enable better performance through the economic cycle

Disciplined capital deployment: committing manageable amounts of capital to projects with a focus on accretive investments, including build to suit expansions and selective development projects at attractive returns, complemented with an opportunistic certificate repurchase for cancellation program

Responsible use of leverage: allowing for efficient access to revolving credit facilities, a weighted average debt tenor of 5.3 years and no loan maturities until 2023

CERTIFICATE BUYBACK FOR CANCELLATION PROGRAM

FIBRAMQ did not repurchase any certificates during the third quarter. FIBRAMQ's certificate repurchase for cancellation program has a total remaining capacity of Ps. 1.0 billion through to June 25, 2021. Since launching the program in June 2017, FIBRA Macquarie has repurchased 49.7 million certificates. All repurchased certificates have or will be cancelled.

DISTRIBUTION

On October 28, 2020, FIBRAMQ declared a cash distribution for the quarter ended September 30 of Ps. 0.4750 per certificate. The distribution is expected to be paid on January 28, 2021 to holders of record on January 27, 2021. FIBRAMQ's certificates will commence trading ex-distribution on January 26, 2021.

SUSTAINABILITY

FIBRA Macquarie published its second annual sustainability report in August, underscoring its belief that managing its portfolio sustainably is part of its responsibility to investors and the communities in which it operates. FIBRAMQ is committed to continuous improvement of its Environmental, Social and Governance (ESG) efforts. FIBRA Macquarie is also committed to enhancing transparency around its sustainability initiatives and its contributions towards a sustainable future.

Among other achievements highlighted in the report, FIBRA Macquarie confirmed that it has formally achieved LEED (Leadership in Energy and Environmental Design, Core and Shell Development) certification of its recently developed and fully leased industrial property in Ciudad Juarez, with plans for additional green building certifications for other properties within its portfolio over the next twelve months.

The link to FIBRA Macquarie's sustainability report can be found here.

FY20 GUIDANCE

AFFO per certificate

FIBRA Macquarie now estimates total that it will generate AFFO per certificate of between Ps. 2.56 to Ps. 2.59 in FY20. This guidance is based upon the following assumptions:

  • An average exchange rate of Ps. 21.5 per US dollar for the fourth quarter, down from the prior assumption of Ps. 22.2 per US dollar
  • The continued relaxation of government restrictions regarding non-essential activities over the remainder of the year
  • No further deterioration in broader economic and market conditions
  • Timely collection of in-place scheduled rents, including contracted or expected deferred and discounted rents
  • No material increases in agreed rent discounts
  • No new acquisitions or divestments
  • No certificate repurchases

     

Distribution per certificate

FIBRAMQ reaffirms guidance of cash distributions for FY20 of Ps. 1.90 per certificate, with remaining FY20 quarterly distributions expected to be paid in equal instalments of Ps. 0.4750 per certificate in January 2021 and March 2021, respectively. The payment of cash distributions is subject to the approval of the board of directors of the Manager, stable market conditions and prudent management of FIBRAMQ's capital requirements.

WEBCAST AND CONFERENCE CALL

FIBRAMQ will host an earnings conference call and webcast presentation on Wednesday, October 28, 2020 at 6:30 a.m. CT / 8:30 a.m. ET during which management will discuss FIBRA Macquarie's financial results for the third quarter of 2020. FIBRA Macquarie will release third quarter 2020 results on Tuesday, October 27, 2020 after the close of the market. 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 2020 Earnings Call with conference number 1387527. 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 1387527. A webcast archive of the conference call and a copy of FIBRA Macquarie's financial information for the third quarter 2020 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 235 industrial properties and 17 retail properties, located in 20 cities across 16 Mexican states as of September 30, 2020. Nine of the retail 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 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.

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