Fibra Danhos (DANHOS13) Earnings Call Transcript & Summary

Good day, everyone, and welcome to today's Fibra Danhos Second Quarter 2022 (sic) [ 2023 ] Results Conference Call. [Operator Instructions] Please note this call is being recorded, and I will be standing by to need any assistance. It is now my pleasure to turn today's program over to Rodrigo Martínez, Investor Relations Officer.

Thank you, Brittny. Hello, everyone. I am Rodrigo Martínez, and I run Investor Relations for the company. At this time, I'd like to welcome everyone to Fibra Danhos 2023 Second Quarter Conference Call. We issued our quarterly report yesterday and if you did not receive a copy, please do not hesitate and contact us. Please be aware that they are also available on our website and in Mexico Stock Exchange website. Before we begin the call today, I would like to remind you that forward-looking statements made during today's call do not account for future economic circumstances, industry conditions and company performance and financial results. These statements are subject to a number of risks and uncertainties. All figures here included were prepared in accordance with IFRS standards and are stated in nominal Mexican pesos, unless otherwise noted. Joining today from Fibra Danhos is Mr. Jorge Serrano, CFO of Fibra Danhos; and Elias Mizrahi. Now I will turn the call to Jorge Serrano for opening remarks and financial and operating indicators. Jorge, please go ahead.

Thank you. Good morning, everybody. Thank you for joining us to our second quarter 2023 conference call. Total revenues of MXN 1.5 billion were 13% higher against last year. Fixed rent overage and parking revenues posted strong growth during the quarter against last year's figures and last consecutive quarter. Maintenance, operation and advertising expenses were 26% higher. 40% of this increase comes from Parque Tepeyac that started operations on 4Q '22 and is not comparable on a same property basis. Most relevant increases are due to higher consumption and tariff increases, including water and energy, cleaning and security services, explained by higher headcount and labor costs. NOI of MXN 1.1 billion during the quarter is up 10% year-over-year with a 77% margin. EBITDA increased 10.7% year-over-year. However, higher financial expenses and exchange rate losses affected AFFO that posted MXN 959 million and accounted for MXN 0.62 per CBFI. Distribution was determined at MXN 0.60 per CBFI with economic rights, flat when compared to second quarter of last year. Payout ratio stood at 97%. Balance sheet remains strong. Leverage stood at 10.4%. During the quarter, we announced the issuance and public offerings of long-term CEBURES on the Fibra Danhos debt program. Our sustainability-linked bond would be for up to MXN 2.5 billion, 7 years fixed rate and has a AAA local rating by Fitch and HR. Use of proceeds will be to refinance debt and other corporate uses. Our portfolio overall occupancy increased 70 basis points to 85.9% driven by retail properties that reached 91.3% occupancy with tenant additions at Tepeyac, Duraznos, Antenas, Toreo, Puebla and [ Alameda ]. With this, I finish my opening remarks, and let's move to the Q&A session.

[Operator Instructions] And we'll take our first question from Vanessa Quiroga with Credit Suisse.

The first one is regarding retail. On traffic, we saw food traffic growing nicely. So I would like to know your expectations for the coming quarters in that regard. And the second is regarding office. How you're seeing the rollover trends for rents.

Vanessa. This is Elias. Regarding retail the flow of visitors is, I think, now comparable to 2019. So there has definitely been an increase in visitors. Remember that, that figure also includes our recently opened mall Parque Tepeyac, which was not accounted for in the second quarter of 2022. But overall, I think what we're seeing is that the retail market is very strong. Our malls are performing very well, and consumption continues to be strong throughout the properties. Sales are doing well. So we believe that the retail market has been performing very well as we've expected. Regarding the rollover -- and sorry, just wanted to clarify. This is on retail or office.

For us retail, yes.

I mean rollover for office as we've mentioned in previous quarters, we have an average lease term in our portfolio of around 4 years. And depending on the property, we're looking at the renewals on a case-by-case basis. So depending on some properties, we feel that we have a stronger case. And we're actually working to retain our tenants and that's our main goal.

Okay. Okay. And what's your outlook for occupancy for the rest of the year for office?

I mean it's hard to say. What we do feel is that -- and we get a sense of the market by the amount of LOIs we received the amount of visits we have in our properties with brokers and so on. And there has definitely been an uptick in the market. So there's been some leasing activity, but it's hard to say how much it's going to be towards the end of the year. Obviously, this is one of our main priorities, as you know. We've been focusing on this. And we've been able to get some leases executed during the year. And this is one of our main goals, but it's hard to give guidance on where we see the occupancy. It will all depend on some LOIs that we can execute them in the market really.

We will take our next question from Rodolfo Ramos with Bradesco BBI.

Just a follow-up on Vanessa's question on the retail traffic. I mean, on a like-to-like basis, so adjusting for Tepeyac, where would you say are on, let's say, on a pre-pandemic level, just to get a sense of what the catch-up if there's still to happen? That will be my first question.