Fibra Danhos (DANHOS13) Earnings Call Transcript & Summary

Good day, everyone, and welcome to the Fibra Danhos Second Quarter 2026 Conference Call. [Operator Instructions] Please note, this call is being recorded, and I'll be standing by for assistance. Now I'll turn the call over to your host, Rodrigo Martinez. Please go ahead, Rodrigo.

Thank you very much, Adi. Hello, everyone. I am Rodrigo Martinez, Head of Investor Relations for the company. At this time, I'd like to welcome everyone to Fibra Danhos 2026 Second Quarter Conference Call. [indiscernible] quarterly report yesterday. If you did not receive a copy, please do not hesitate in contact us. Please be aware that they are also available on our website and in Mexico Stock Exchange website. Before we begin our 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 format or financial results. Statements are subject to a number of risks and uncertainties. All figures included wherein were prepared in accordance to IFRS standards and are stated in nominal Mexican unless otherwise noted. Earnings today from Fibra Danhos in Mexico City is Mr. Jorge Serrano, CFO of Fibra Danhos and Mr. Elias Mizrahi. Now I will turn the call today to Jorge Serrano for opening remarks and financial and operating remarks, Jorge, please go ahead.

Good morning, everyone. Thanks for joining us today. Let me share some initial remarks on a solid and steady second quarter for Fibra Danhos Total revenues of MXN 2 billion were 9.4% higher against last year and reflect increases of 8% on fixed rent and 18% on average and on parking revenues. NOI reached MXN 1.6 billion, an increase of 8.5% year-over-year with a 78% margin. AFFO reached MXN 1.2 billion that accounted for MXN 0.75 per CBFI. Distribution per CBFI with economic rights remain at MXN 0.45. Our dividend is equivalent to 1.6x taxable income and represents a payout ratio relative to AFFO of 60%. [ Reflow ] has been used to partially fund close to 50% of our CapEx needs, which are complemented with additional debt. Balance sheet, however, remained strong at 14% leverage. During the quarter, we refinanced our Danhos 16 bond maturity with 2 new SLB issuances and other credit facilities. The staggering process revealed a strong appetite for Danhos debt risk profile, finding strong demand from institutional investors and banks. Following the transaction, we improved our debt profile while preserving the financial flexibility and competitive funding costs. Overall, portfolio occupancy reached 89% with retail occupancy reaching almost 95% and office portfolio occupancy at almost 80%, while industrial occupancy stood at 86%, explained by the conclusion and delivery ahead of schedule of building 2 at Paloma which increased GLA and weigh on occupancy is [indiscernible] only partially leased at 30% at the time being. Lease spread on our operating portfolio calculated on 32,000 square meter, renewal agreements reached 4.6% as it was triggered once again by strong performance on our retail portfolio. On our CapEx pipeline, Danhos Industrial Palomas Building 2 has been completed and delivered. Building 3 on its first phase at Palomas and buildings 1 and 2 at Eronextress projects are scheduled to be delivered later this year. Finally, Guajaka and Nishu construction pace continues and advances on time and within budget. Thanks. We will be happy to address any questions you may have.

[Operator Instructions] Our first question today comes from Alejandra Obregon of Morgan Stanley.

I actually have 2. The first one is on your nonparty revenues. So particularly when I look at media and parking, they seem to be accelerating quite meaningfully this quarter and perhaps growing faster than the core rental business. So I was hoping if you can elaborate on the key drivers behind this performance? Are there any specific, perhaps commercial or advertising or media initiatives that you are implementing that are contributing to this momentum? And then the second question is a little bit more strategic. So when we look at your portfolio, clearly, retail and industrial continue to drive growth. So I just wonder if there's a scenario where perhaps retaining office assets just creates a higher opportunity cost for you than just recycling some of them maybe into development opportunities in what is clearly your core growth engines. So just wondering how do you evaluate that trade-off today? Those are my 2 questions.

Alejandra, this is Elias. Thank you for the call. Regarding parking revenues and marketing revenues, I would say marketing revenues were positively impacted by World Cup this second quarter. especially during the month of June, which was obviously a very important month for our shopping malls. So that's probably more of a systemic onetime effect. But I mean marketing revenues have been growing, but just, I think, not at the same pace that we saw them this last quarter. Regarding parking, this is more of a structural increase, so this is not a one-off. We have been able and we continue to be able to increase the parking revenues and the parking tariffs at our malls. So every year, we do adjustments to our parking tariffs, and that's been the main driver for the increase in revenues. Regarding your second question, we're not in the market of selling properties. We haven't been an active seller and the office assets that we have [indiscernible] reformer which, I would say, these 3 accounts for probably 80% of our portfolio. These are not properties which we believe are replicable or wouldn't be a good seller. So we do intend to keep on developing retail and industrial, but we just don't see recycling the office as one of the sources of capital to do so.

Got it. And perhaps I may follow up. So when you evaluate whether develop or hold or perhaps if monetizing an asset would be ever an opportunity, what would be the KPIs that would guide your decision making? How do you measure your projects internally?

We think a lot about replacement cost and we think about not only as a financial metric, but if we were able to sell, for instance, a building such as Torre Virreyes or Reforma 222. And we would try to build another one, we wouldn't be able to do so. So I think that's something that drives the way we think about our portfolio, which is irreplicable assets. So even if we have a great offer to buy Tore or to buy [indiscernible] or we would get that money and we wouldn't able to build another [indiscernible] because this is applicable asset in the best location in the city. So that's one of the ways that we think about our portfolio. As you know, we don't have hundreds of properties. We were very keen and very specific on where we want to develop and what kind of assets we want to own.

And just to complement, Elias, I think, our strategy has been and will always be to focus on quality assets, having a portfolio of quality assets including the office sector, I think it's on our vision for the medium and long term. So I think that's the most important measure to consider regarding your question.

Next, we'll hear from Igor Machado of Goldman Sachs.

I have 2 questions here on the industrial portfolio. So first one is on the [ Palmetto ] as was ever with 31% of occupancy rate. Just trying to understand here why do you expect on the time line to stabilize the upfit of the asset? The second question also on industrial, how much further capital do you expect to invest in industrial portfolio and what returns yield on cost are you targeting? That's it.

So building [indiscernible] was a spec building that we developed. So during the of the construction, we were able to lease 20,000 square meters to a logistics tenant which is now operating and will soon start paying rent. There has been a lot of interest for this building with a lot of clients coming in and looking at the building. It was just recently finished. Actually, we were finishing the last details of the building. So it just came to market, and we expect it to be leased within, I'm going to be conservative, but within a year at the most. So we believe before that it should be leased. With this building, Palomas is basically fully developed we've almost finished the construction there. And along with Building 3, which will come into operation in December, but it's already [indiscernible] to suit and building 1, which is already leased I don't know it's basically finished. And just to give you some more information on our industrial portfolio in Tultepec, we're going to deliver 2 buildings in Adometry, we're going to deliver 2 buildings in September between August and September. So those are 100,000 square meter buildings. We actually just launched the construction also of a 30,000 square meter building, which is a spec building and should be ready by year-end, so December, January, and we also have additional land to do a 70,000 square meter building there, which we're looking at potential build-to-suit options. So industrial continues to be an attractive proposition for us. I think that we don't have a specific capital target that we want to achieve. It's more, I would say, project and opportunity driven. So if we continue to find great locations and specifically with build-to-suit opportunities where we can lower the risk of the development and have basically tenants before starting or as we're starting the works. We're going to continue to invest capital if it makes sense to us as a business opportunity. And the returns we're achieving, I would say, are in the low double digits, so low teens.

From JPMorgan we have Felipe Barragan.

I just want to understand the component of the variable rents. So obviously, right now in the macro environment how we're seeing decelerating in the sort of depressed consumer environment. I just want to understand what drove the growth of the variable rents in your quarter? Is this more of a World Cup sector, if there's something a bit more structural as in where your assets are located within Mexico City, where you guys saw a bit more certain type of consumer segment arms. So I just want to get more color on that.

Felipe, this is Jorge. I mean, of course, this recent event has effect on revenue of our tenants and has an effect on average -- but there was also an effect, a change in agreement with an important retail chain that changed agreements from fixed rent to variable rents. And that has had an impact beginning a couple of quarters ago. So that -- I would say it's a combination of consumption dynamism that it's still been in our shopping centers. And this change on the agreement with a specific retail chain. And that has had an important effect on average.