Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- FIBRA Macquarie (DBMBF, Financial) reported record revenue, NOI, and NAV for the second quarter of 2024.
- NOI growth was up 6% year-over-year in US dollar terms, driven by favorable supply-demand environments.
- The company successfully delivered a third building in the Apodaca industrial park and is progressing well on a 400,000 square foot project in Tijuana.
- Strong performance in the industrial portfolio with a 5.9% increase in NOI and a 13% positive renewal lease spread.
- Occupancy in the retail portfolio increased to 92.1%, the highest level since the first half of 2020.
Negative Points
- Higher interest expenses offset the higher same-store income and NOI from new developments.
- The issuance of CBFIs associated with the required extraordinary distribution last quarter impacted AFFO per certificate.
- The company faces increased construction costs and land prices, which have slightly decreased the expected yield on cost for new projects.
- The balance sheet shows a net debt to EBITDA multiple of 5.2 times, indicating a significant level of leverage.
- The company has no scheduled debt maturities until 2026, which could limit financial flexibility in the near term.
Q & A Highlights
Q: What is the strategic outlook for FIBRA Macquarie post the Terrafina acquisition process?
A: Simon Hanna, CEO: We remain well-placed with a strong balance sheet to support growth through our industrial development program. We continue to see positive re-leasing spreads and good performance in our same-store portfolio. There may be other opportunities for consolidation in the sector, and we are also considering asset recycling opportunities in our retail portfolio to potentially convert into industrial development in the future.
Q: What are your expectations regarding the new administration's support for industrial real estate?
A: Simon Hanna, CEO: We are optimistic about the incoming administration's support for key pillars such as green energy, energy infrastructure, nearshoring, and maintaining USMCA. We expect these factors to create a favorable investment environment. Importantly, we have not seen any indications from our tenants that would suggest a change in the long-term structural drivers supporting nearshoring.
Q: What caused the slight decrease in expected yield on cost for new projects compared to realized yields?
A: Simon Hanna, CEO: The overall cost components, including land and construction prices, have increased post-COVID. However, rental rates have also risen, allowing us to maintain a healthy yield on cost of 9% to 11%. We expect this range to continue being achievable for our future developments.
Q: What is the spread between your yield on cost and the stabilized cap rates for recently delivered properties?
A: Andrew McDonald-Hughes, CFO: Stabilized cap rates are generally in the mid-six to mid-seven percent range, depending on the market. For example, our recent Mexico City development achieved a 12% development yield and was revalued at a 6.5% cap rate. This indicates a healthy spread of 200 to 300 basis points, reflecting strong value creation.
Q: Can you provide more details on the property delivery scheduled for the second half of this year?
A: Andrew McDonald-Hughes, CFO: We anticipate delivering the 400,000 square foot project in Tijuana during the fourth quarter of this year. This project is in a landmark location and has seen significant rental growth and activity, making it an exciting addition to our portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
