Fibra Danhos (DANHOS13) Earnings Call Transcript & Summary

Good day, everyone, and welcome to today's Fibra Danhos Second Quarter 2025 Conference Call.[Operator Instructions] Please note, this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Rodrigo Martínez. Please go ahead, sir.

Thank you, Paul. Hello, everyone. I am Rodrigo Martinez, and I run Investor Relations for the company. At this time, I'd like to welcome everyone to Fibra Danhos' 2025 Second Quarter Conference Call. We issued our quarterly report yesterday. If you did not receive a copy, please do not hesitate in contacting 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 or financial results. These statements are subject to a number of risks and uncertainties. All figures included herein were prepared in accordance to IFRS standards and are stated in nominal Mexican pesos unless otherwise noted. Joining today from Fibra Danhos in Mexico City is Mr. Salvador Daniel, CEO of Fibra Danhos; Mr. Jorge Serrano, CFO of Fibra Danhos. Now I will turn the call to Jorge for opening remarks and financial and operating indicators. Jorge, please go ahead.

Thank you, Rodrigo. Good morning. Thanks for joining us today. Let me share some initial remarks on a solid second quarter for Fibra Danhos. Total revenues of MXN 1.9 billion were 16% higher against last year and reflect increases of 17% of fixed rent, 5% on overage and 30% on parking revenues. Total expenses increased 9% on the back of strict control on operating and maintenance expenses. Consequently, NOI reached MXN 1.5 billion, an increase of almost 19% year-over-year and posting a 79% margin, almost 150 basis points higher than last year's. Worth mentioning here that less than a year ago of installing solar panels across 9 of our properties of this -- we have achieved significant reductions in energy consumption and related expense. AFFO reached MXN 1.1 billion that accounted for MXN 0.70 per CBFI. Distribution per CBFI was determined at MXN 0.45 and represents 1.66x taxable income and a payout ratio relative to AFFO of 64%. Retained cash flow has been used to finance our development portfolio and has been complemented with MXN 500 million of short-term debt. Balance sheet remains strong with only 12.2% leverage. Now regarding operating results, overall occupancy reached 90% with retail occupancy reaching almost 94% and office 76%, while industrial is 100%. Lease spreads on our current operating portfolio was calculated over 60,000 square meter renewal agreements and reached 1.6%. Even though it is lower for this quarter, it reflects the renewal of a couple of important leases and that significantly improved our lease expiration profile. On our CapEx pipeline, we have basically concluded and delivered [indiscernible] and important progress has been achieved at Palomas industrial project. Danhos Industrial Estado de México Trust, Oaxaca and Nizuc are consolidating, and we are working on initial construction stages. Thanks. We may now turn to the Q&A session.

[Operator Instructions] And we'll take our first question from Felipe Barragan of JPMorgan.

I was wondering if there are any other details on the CapEx spend for the EdoMex III project or -- and if you could also provide any details on CapEx spend related to the Oaxaca project? Any color would be greatly appreciated.

Felipe, yes. Thanks a lot for your question. The Oaxaca project is a very interesting retail project in an excellent location in Oaxaca City. So we're making progress to consolidate the project and we are starting -- we are expecting to start the project during the fourth quarter of this year. Oaxaca is -- has shown a very important demand for retail assets, and we have a great location and it will be as usual a mall with our usual partners, and we believe it will be very, very successful. And regarding the EdoMex III project, it's within the CTT logistic corridor, close to the metropolitan area of Mexico City. We have here a joint venture with a nonrelated party and it will be a very important project. It will be built in 2 phases, more than 400 -- expected more than 400,000 square meters of GLA and we're also in the final stages before construction.

Okay. And are there any details that you could share with us on CapEx for both of these projects and maybe GLA for the Oaxaca one? Or is that all we can know for now?

The Oaxaca project is a big project, should be around probably 80,000 square meters of GLA, which is a very important size, probably such as big as our project in Mexico City, and we expect that to be very, very successful. There's a lot of interest for that project. And I mean the EdoMex III project, that's a huge project that's around 350,000 square meters of GLA of industrial buildings. So they're important, and both of them should start by the end of this year.

[Operator Instructions] And our next question comes from Alejandra Obregon of Morgan Stanley.

It's actually a follow-up on your JVs as well. The first question is on the Industrial JV. I'm just wondering if the partner for this project might be a shareholder today for Danhos or whether the deal could involve any sort of share-based arrangement with the partner for Danhos shares? That's the first part. And then the second one, if you have any sort of details on the economics for the hotel JV, I understand that's now under construction. So anything that you can help us understand here.

I mean the third partner -- our partner in the Mexican project, it's -- we don't know if it's part of -- I mean, has some interest in the Fibra as a shareholder. We don't know that, but it's an independent group, which just wanted to take advantage of our development capabilities and help us achieve a piece of land. And in the hotel project in Cancun, as you may know, we started construction. It's a huge project, and we expect that to be finished by the end of 2028. We will start preoperating the hotel, probably the second quarter of 2028 and full operations by the end of the year. So we're happy on that, and we expect that to be very successful also.

To complement Salvador just on that, as we have mentioned before, it's a JV with FibraHotel in the hotel operation, 50%-50%.

And our next question comes from Alan Macias of Bank of America.

Just a clarification for the Parque Industrial Danhos Cuautitlán Phase II, you will be receiving rents second quarter or third quarter? And the same for Danhos Industrial Palomas, is this -- rents are going to be received in the fourth quarter or first quarter of next year.

I believe that in Cuautitlán, we should start receiving money by the -- probably the last month of the third quarter and for Palomas fourth quarter. Those are more or less the terms of the contract. They have some month for them to adapt the buildings inside, and that's why.

Also, can you remind us of your land bank that you have in Mexico City for industrial projects? And I guess you have 1 other project underway, right?

We're working on a lot of pieces of land -- different lands for the EdoMex and we cannot disclose most of them, but we have a pipeline for the next years to come.

[Operator Instructions] And we have a question from Igor Machado of Goldman Sachs.

My question is on the retail portfolio. Lease spreads at 4% this quarter were the smallest in 3 years. So I'm just trying to understand here what were the drivers for this? And how do you see these spreads going forward?

Thanks, Igor. Yes, as you know, we have very solid occupancy levels in our retail portfolio at almost 94%. And absence to our parks have been also very strong. So lease spreads have been performing at above inflation rates. And this is even the case in this quarter. This is not indicative of what may come in the future. But we're confident that spaces are going to be continually demanded and we're positive going forward for our retail portfolio. And are there any additional questions?

Yes, sir. Our next question comes from Francisco Chávez of BBVA.

Yes. Congrats on the numbers. My question is regarding the office segment. Can you share with us your expectations for the second half of the year? How is the activity going in the offices?

Hello, Francisco. The office spectrum, it's a bit tricky and complicated to understand. We believe it should be better than the first half, but also people or businesses are not taking basically decisions on to move, there's a lot of inquiring of the office spaces, but nothing closing. So we expect it to be better. Not much different as it's been behaving, but not really for the second half, probably for the next years to come, I expect the office spaces to be much, much better. I expect them to be actually very positive. But I don't know at what pace this is going to start moving.

And we have a question from Jose Serrano [indiscernible]. [Technical Difficulty] I think the gentleman had a problem with his line and he has disconnected. And it appears we have no further questions at this time. I will now turn the program back to our presenters for any closing remarks.

Thank you, Paul. Thank you, everyone, for joining us today. Please do not hesitate to contact us Salvador, Jorge or myself for any further questions. We are always available, and we'll see you in the next conference call. Thank you very much.

Thank you. This does conclude today's Fibra Danhos Second Quarter 2025 Conference Call. Thank you for your participation. You may disconnect at any time.