Fibra Danhos (DANHOS13) Q4 FY2025 Earnings Call Transcript & Summary

Good day, everyone, and welcome to the Fibra Danhos Fourth Quarter 2025 Conference Call. [Operator Instructions] Please note, this call is being recorded, and I'll be standing by for assistance. Now it's my pleasure to turn the call over to your host, Rodrigo Martinez. Please go ahead, Rodrigo.

Thank you very much, Elvis. 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 Fourth Quarter Conference Call. We issued our quarterly report yesterday. 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 or financial results. These statements are subject to a number of risks and uncertainties. All figures included herein are 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; and Mr. Elias Mizrahi. Now I will turn the call for Jorge Serrano for opening remarks and financial operating indicators. Jorge, please go ahead.

Thanks, Rodrigo. Good morning. Thanks for joining us today. Let me share some initial remarks on Fibra Danhos' fourth quarter. Despite a softer consumption environment, financial and operating results reflect steadiness on our operating portfolio, complemented by the recent contribution from industrial projects. Increased revenues were explained by higher fixed rent with sound occupation levels, overage and positive lease spreads that more than compensated the effect of the dollar depreciation on our office portfolio. Revenue was up 6.5% on the quarter and 11.8% on the year. NOI margin of 78% for the quarter and 78.5% for the year reflect expense control and operating efficiencies. Quarterly AFFO reached MXN 1.3 billion that accounted for MXN 0.80 per CBFI, and accumulated close to MXN 4.6 billion in the year or MXN 2.85 per CBFI. Distribution for the quarter was determined at the same level of MXN 0.45 per CBFI, which amounts to MXN 724 million and represents a payout ratio of 56%. Capital expenditures on new developments during 2025 were financed with nondistributed cash flow plus additional debt of MXN 1.5 billion. Balance sheet, however, remains strong with only 13.5% leverage. Our MXN 3 billion Cebures DANHOS 16 will reach maturity by midyear. We are analyzing the best alternatives in order to fulfill our commitment and optimize financial expense. Danhos maintains AAA local debt rating. New projects, Nizuc and Oaxaca, have gained momentum on its construction phase and report progress as scheduled. Industrial projects on development stage are making progress as well and expect to deliver quick and sound cash flow returns [ which is evidence for ] our execution capabilities, high-quality construction standards and have become a reference in the logistics corridor located in the north of Mexico City metropolitan area. Overall, GLA increased 15% year-over-year and reached 1.25 million square meters, with an overall portfolio occupancy of 91.5%. Retail occupancy reached 94.2%, office 77% and industrial 100%. Lease spread on 24,000 square meter renewal agreements was 3.9% during the quarter, which is in line or above inflation levels. Thanks, and we may now turn to the Q&A session.

[Operator Instructions] And our first question today will come from Jorel Guilloty of Goldman Sachs.

If I can actually focus on your retail portfolio. So one thing that we found interesting is that when we look at the rent growth year-on-year, we see that the fixed rent portion 4Q went up, but the overage went down. So I just want to understand a little bit more about that dynamic. And also we saw a couple of your malls, there are about 3 of them, that saw a decline year-on-year on overall rental revenues. So I just wanted to get a sense of what could have driven those down.

This is Salvador Daniel. I mean we've -- what we've always done and we always do is every time we have a chance to transform variable rent to fixed rent, we do that. So sometimes, you will see a decrease in the variable rent and an increase on the fixed rent because we've done that. And that's something we usually do on shopping malls. Although we have to recognize that we saw a little bit of a slowdown in the last couple of months in the consumption, although still remains strong. We did see a minimum decrease on it. And on the other 3 properties you have been talking about, Parque Esmeralda is not a shopping mall. It is an office building with 1 tenant, which had a discount for a 10-year lease that we signed last year. So that was very important for us. It is a pretty old building. We actually did some work on it and [ worn ] CapEx on it, and it's now fully leased for the next 10 years. Parque Alameda, we -- it's a very, very, very small shopping mall. Actually, we can barely call it a shopping mall. And we lose a tenant, we already lease that, and it's on its time to redoing the space. So probably in the next couple of months, we will see the income coming back. And the rest, I think it's operating in a great way. We feel very comfortable with them.

A quick follow-up if I may. While we did see that dynamic on rents, we did see that parking revenues were actually quite strong year-on-year. So I just wanted to get your comment on that. What is driving that higher? Is it all coming through pricing? Is it expansion of parking spaces? Just want to get a sense of what drove the strong performance.

I mean we basically, every couple of years, we do the pricing on the parking spaces. That's something we did last year, and especially I think in the middle of the year. And we've seen also a little bit more people coming into the parking. We haven't expanded our parking spaces, but that's probably the natural thing about people coming back to -- by car to the shopping malls.

Our next question comes from Felipe Barragan of JPMorgan.

I'd like to discuss a little bit on the office side occupancy. I saw it grew quarter-over-quarter, mostly on the Urbitec office asset you have. So I just want to get a sense if this is just more property related or if you guys are seeing a pickup in the office segment overall. Any color on that would be appreciated.

I mean especially in Urbitec, we changed our mindset. We were trying to find just 1 tenant for the whole building; and we changed that and we basically took opportunity of a couple of people wanting to come into the building. And that's why you saw especially that building being leased. We actually done 3 floors of it. And that's why. But we've actually seen a little bit more movement in the office spaces with having more people asking about them and companies inquiring about prices and opportunities. So we've actually seen this past semester a little bit of movement in the office spaces.

Our next question comes from Alan Macias of Bank of America.

Just a quick question on distribution per certificate. If you can share your thoughts on what we should be thinking about for this year, what level? And what level of loan-to-value should we be thinking for the end of the year?

I mean we've -- actually think we're going to leave the distribution at the same level where we've been doing it in the past. We have a lot of projects in development, which will need cash requirements, and we feel that the best way to achieve them is by putting some cash in it and having some debt on it. So we feel we're going to be loan-to-value below 15% by the end of the year, for sure. And with that and the cash flow we've been retaining, we're going to be able to achieve our goals in the new projects.

[Operator Instructions] Rodrigo, we have no further questions at this time. I'll turn it back over to you for any closing comments.

Thank you very much, Elvis. Everyone, please let -- please know that we are always available for any further questions that you might have. And thank you very much. See you next quarter.

That concludes our meeting today. You may now disconnect. Goodbye.