Fibra Mty, S.A.P.I. de C.V. ($FMTY14)

Good morning, and welcome to the 2026 First Quarter Fibra Monterrey's conference call. All information presented in this conference is proprietary and all rights are reserved. The information has been prepared only for information purposes and is not a solicitation of an offer to buy or sell any securities. It is important to note that the presentation related to this conference is available at fibramty.com, and recording of the call will be available on the website of the company in the next 2 hours. If you are connected using our webcast pool, you have the option to download the presentation in order to move the slides at your own pace. Let me remind you that the information discussed in today's call may include forward-looking statements on the company's future financial performance and prospects, which are subject to change to risks and uncertainties. Additionally, during this call, we may refer to certain nonaccounting financial measures. Actual results may materially differ and the company advises not to rely on these forward-looking statements. Fibra Monterrey undertakes no obligation to publicly update or revise any forward-looking statements. With us this morning from Fibra Monterrey, we have Mr. Jorge Avalos, CEO; and Jaime Martinez, CFO; Javier Llaca, COO and CIO; Eduardo Elizondo, Legal Counsel; and Cesar Rubalcava, Investor Relations. They will discuss the most important strategic financial and operating aspects of the quarter. I will now turn the call over to Mr. Jorge Avalos.

Thank you, and good morning, everyone, and thank you for joining us today. We started 2026 with strong momentum, positioning Fibra Monterrey for what we believe can be another transformational year. Successfully, we completed our equity range for almost $0.5 billion executed on acquisitions and continuing to advance portfolio optimization. On Slide 3, let me begin by addressing the public tender after we officially launched last Friday for Fibra Macquarie. This transaction represents a strategic step toward building a larger, more efficient industrial platform. Our proposal is grounded on a simple principle, delivering a holistic approach to value creation for both investor groups. We believe our offer stands out across multiple dimensions: first, supported by the continued confidence of our investors our proposal reflects the highest implied value among competing alternatives. Second, our lean cost structure and cash flow focus model position us as the only offer in the market that delivers AFFO presenting accretion for both investor groups, even before considering synergies. Third, we believe the combined entity offers the most compelling valuation upside as our AFFO multiple still has room for improvement. Finally, if successful, this will demonstrate the strong demand for companies that privilege corporate governance that fully align their incentives with investors. For clarity, I would like to address 2 topics that have been raised by the investment community in recent weeks, the FIBRA Macquarie breakup fee and the expected operating and administrative synergies. Starting with the breakup fee. Our offer is already presented on a net to investor basis. Therefore, no adjustment is required to reflect the potential removal of external advisers. Our analysis assumes an estimated net present breakup value of approximately $130 million to $160 million, which may ultimately be subject to negotiation with Macquarie Asset Management. Importantly, any payment would occur post closing and therefore, would have limited impact on a post-transaction AFFO with no impact on our offer price. Moreover, we expect these costs to be more than offset by the synergies generated by the combination. Turning to the synergies based on 2025 financial information, we have identified approximately $35 million in annual savings when capitalized at Fibra Monterrey's current last 12 months economic value to EBITDA multiple of 16.5x, this represents the potential to generate over $550 million in incremental value for the combined entity. These synergies are derived from 3 main sources. First, the elimination of Fibra acquirers external management team of approximately $30 million annually a structural and recurrent benefit that flows directly to the holders on the Fibra Monterrey internalized model. Second, operating and administrative efficiencies at the property level, where we estimate approximately $13 million in savings. This is supported by Fibra's Monterrey track record of operational efficiency with property-related expenses below 10% of revenues compared to over 20% of Fibra. On a pro forma basis, property-related expenses will total approximately $55 million, reflecting the larger combined G&A yet remained below the aggregate expense base of both portfolios. These highlights efficiency gains achievable through scale and operational integration. Third, we estimate approximately $9 million in additional savings from general and administrative expenses, primarily driven by the elimination of asset management overlap functions and external services. Other than savings from external management fees that we expect to be ceased immediately we expect operational synergies to materialize progressively over time, supported by our proven track record of EBITDA margin expansion and disciplined cost management. I would like to briefly note that given this is an ongoing transaction, we cannot address specific questions related to the tender offer during this call. We encourage investors to refer to the publicly available filing materials where the terms, rationale and detailed disclosures of the offer are presented in full. Moving on, I would like to turn the call to Jaime to expand on the execution of our business strategy during the quarter. Jaime, please go on.

Thank you, Jorge. As mentioned in the opening remarks, on March 11, Fibra Monterrey successfully completed its equity offering and raised approximately $0.5 billion. Importantly, these proceeds are not expected to be used in connection with the tender offer of Fibra Macquarie. During the follow-on, we engaged with more than 75 investors across multiple geographies. The book was 2.1x oversubscribed representing demand of over $800 million, which allow us to increase the base offering by 11%. This strong response reflects continued confidence in Fibra Monterrey from both domestic and international investors. As shown on Slide 5, as demand has remained solid after pricing supported by favorable price performance and higher trading activity. We are proud to be included in MSCI Small Cap Index, which further enhances our liquidity profile and broadens our institution institutional investment base. During the quarter, our average daily trading volume exceeded $4.5 million, nearly double the traded amount in last year's fourth quarter. This positions Fibra Monterrey amongst the 30 most traded companies in the Mexican Stock Exchange. Moving on Slide 6. Our updated commitments to investors continue to rest on 3 pilots. First, we plan to invest approximately $750 million in industrial assets, which reflects the deployment of the follow-on proceeds together with incremental debt capacity to reach up to 30% loan-to-value. In this regard, our track record speaks for itself. From capital allocation, we remain guided by disciplined prudence and a clear focus on risk-adjusted returns. Second, we will continue to optimize our portfolio through disciplined asset recycling with a focus on value realization. To date, we have sold or signed sale agreements subject to certain conditions for approximately 46% of our office portfolio and 100% of our retail portfolio. Third, we maintain our commitment to increase market liquidity through investor engagement and capital markets initiatives. I will turn the call over to Javier to discuss real estate M&A activity and pipeline portfolio performance and market conditions. Javier?

Thank you, Jaime. Page 7 of the presentation provides a side-by-side comparison of CBRE key market indicators across the 13 primary industrial markets in Mexico and our portfolio as of the end of the first quarter. According to CB Retail, vacancy across these markets stood at 6.2%, while total net absorption during the quarter reached approximately 6 million square feet. In Monterrey, vacancy remained broadly stable below 7% with rents holding flat quarter-over-quarter. In contrast, vacancy in Tijuana continued to increase, reaching 16% in the first quarter of this year, nearly 800 basis points higher year-over-year, still asking rents remained stable when compared to last quarter. While now stands as the fourth largest market and continues to show strong rental dynamics supported by sustained demand. Lastly, Mexico City Bacon's increased quarter-over-quarter following new supply deliveries, although market fundamentals remain healthy. Our portfolio continues to outperform the broader market in terms of occupancy. When comparing in-place wins to current asking rents, we maintain meaningful embedded mark-to-market potential. In addition, our weighted average lease term of 5.5 years provides strong cash flow visibility and near-term defensiveness. As discussed in previous calls, while we do not have material exposure to Tijuana, and near-term fundamentals may present some challenges. The market may offer attractive opportunities in stabilized assets, given its long-term structural advantages. A similar perspective applies to Ciudad Juarez and Mexico City, where we currently have no own properties. Moving on to Page 8 of the webcast material. During the quarter, we advanced in the deployment of capital through our selling transaction of an industrial portfolio for approximately $100 million which includes U.S. dollar-denominated rent, mandatory 15-year term with annual adjustments linked to U.S. inflation and a land bank of more than 20,000 square meters, increasing its cash flow generation capacity over time. The portfolio is is estimated to generate annual NOI of approximately $7.6 million during the first 12 months after closing. At the same time, we continued optimizing the portfolio. We signed an agreement subject to certain conditions for the future divestment of our office and retail portfolio for $46.8 million across different geologies. With this transaction, we have already sold or executed sale agreements for approximately 46% of the office portfolio and majority of the retail portfolio. Including properties currently under negotiation, representing approximately $60 million in fair market value and excluding the office assets within the, which we do not intend to sell. Our remaining nonindustrial exposure would be approximately $120 million. concentrated in 2 office properties, including our best-in-class facility in. Moving on to Page 10. Our current acquisition pipeline totals approximately $700 million. focused on institutional quality industrial assets in core markets. Given its dynamic nature, assets within the pipeline have continued to take we remain focused on assets that provide stable cash flows, supported by long weighted average lease terms and U.S. dollar-denominated revenues and mainly focused on light manufacturing. Most opportunities are currently under negotiations with expected entry cut rates broadly in line with our recent acquisitions. We will continue to provide updates as these negotiations progress. Moving on to Slide 11. We continue to see strong demand from our tenants to expand their footprint within our facilities, supported by new production lines and increased product demand which reflects the quality of our tenant base and a high level of client satisfaction. Our nonspeculative development pipeline exceeds and is expected to generate high single-digit to low double-digit returns, complementing acquisition yields and supporting growth in cash flow per share. We expect this pipeline to be gradually deployed while continuing to expand in the coming months. As shown on Slide 13, our KPIs remained broadly stable compared to the fourth quarter. Industrial assets now account for more than 80% of total revenues with a strong presence in core markets. Our tenant base is well diversified, present ample U.S. dollar-denominated and supported by long-term agreements with inflation-linked escalations, providing resilience and cash flow visibility. As mentioned earlier in the call, our weighted average lease term stands at 5 years supported by a well-staggered maturity profile. Importantly, approximately 20% of industrial revenues are set to mature across 26 and 27 million where we expect to capture lease spreads of between 10% and 15% in contracts that can be marked to market. Over the last 12 months, retention stood at approximately 90%, and while the absorption to maturity ratio reached 120% over the same period. Page 15 of the webcast shows our properties performance. On a same-property basis, and excluding FX effects, NOI increased year-over-year despite temporary vacancy pressures, supported by inflation linked escalations new leasing activity and expansion related revenues. It is worth noting that for the industrial portfolio on a stand-alone basis, same-store NOI grew 4.5% year-over-year while overall rent per square meter increased by approximately 5%, both in U.S. terms, U.S. dollar strong, demonstrating solid NOI growth despite limited lease rotation. Furthermore, acquisitions completed over the past 12 months further supported NOI growth, while margins expanded to 92.2%. Turning to valuation investment properties, including assets held for sale remained virtually flat versus 2025 year end on a constant FX basis. Acquisitions added approximately MXN 1.9 billion during the period, bringing the balance to MXN 4.4 billion. After incorporating FX effects, the final balance stood at MXN 14.7 billion. The current implied cap rate for the industrial portfolio stands at 7.3% and while the combined portfolio remains up 7.5%. The valuation from our independent appraiser could be subject to adjustment as interest rates environments continue to unfold. I'll turn the call back to Jaime to discuss financial performance in 2026, AFFO guidance. Jaime, go.

Okay. Thank you, Javier. Operational and administrative margins remained strong at above 92% and approximately 85%, respectively, despite FX headwinds from a stronger peso. Excluding FX fluctuations, all key financial metrics recorded year-on-year growth. Revenues increased by approximately 12%, while FFO grew more than 7%. It is worth mentioning that AFFO growth slightly outpaced FFO primarily due to adjustments related to the equity issuance, which isolates the 15-day dilution effect in March. Additionally, as part of Fibra Monterrey preparation for the adoption of IFRS 18, the presentation and disclosure is in the financial statements. The company implemented regrouping of beginning in fourth quarter '25 fully aligned with income statement line items. This change was purely presentation related and had no impact on AFFO or distributions. Moving to Slide 18. Following the recent equity issuance, our balance sheet reflects a lower leverage profile with loan-to-value decreasing from 26% to 22% as expected net loan-to-value and net debt-to-EBITDA ratios reflect lower levels. As of quarter end, our firepower totals approximately $1 billion with potential to expand roughly $1.2 billion as assets held for sale are monetized. During the quarter, we force strengthened our financial flexibility through a nonsecurity syndicated credit facility for up to $265 million. Under terms that represents the lowest financial cost for comparable facilities in the trust's history. This outcome reflects the strength of our credit profile supported by our global scale investment-grade rating as recently affirmed by S&P and Fitch at BBB minus and stable outlook. As mentioned in our previous calls, our existing committed facilities provide flexibility to extend our debt maturity profile, and we plan to do so to our year-end. All other debt KPIs remain broadly unchanged compared to the previous quarter. It is worth highlighting that S&P published an opinion regarding our tender offer, noting that our rating would not be negatively impacted by the transaction provided that the net debt-to-EBITDA remained below 6x and loan-to-value below 40%. We Leverage provides an attractive carry when comparing investment returns to financing costs. As a result, the recent reduction in loan-to-value is expected to temporarily impact AFFO per share, which is an important consideration when reviewing our 2026 guidance presented on Slide 19. The using the same average FX rate as in 2025 of MXN 19.2 per dollar. Our 2026 guidance stands at approximately MXN 1 per share, which represents a 2% decrease compared to 2025 AFFO per share. This reflects a modest impact relative to the benefit of increasing our investment capacity by approximately $1 billion. Holding all else constant, we expect AFFO per share to increase by an additional $0.03 to $0.05 as proceeds are deployed and leverage gravely return to normalized levels, supporting our underlying organic growth and accretive investments. As it is customary, represent a scenario analysis for AFFO per share based on different average FX assumptions for year-end. Nicole, please proceed with the Q&A section.

[Operator Instructions] Our first question comes from Pablo Moneda.

I have a broad question because as you are pointing out, there is some softness in the border markets but we'd love to hear from you, what are you seeing in terms of new construction, the leasing pace, what clients are saying in terms of releasing, is there any change in the trend that we're seeing or is just a continuation, perhaps any incremental would be useful.

Pablo, this is. That's a great question. particularly in the Tijuana and Juarez market, as I mentioned before, we see an increase on vacancy. I would say, given 2 or 3 main costs. First of all, there was an excess of construction while at the same time, there was a decline on demand. And also, there were some buildings and some new developments that were either lacking enough energy or energy at all. And to my own personal standpoint or my view, some of the buildings were not the proper the right quality of building in terms of the size, the the way out and in general, the specifications. I would say that both markets are going to continue pretty much flat or close to flat on new deliveries of space. when you talk about speculative space. There are some activity running in parallel on build-to-suit projects that might provide those markets with a small enhancement in the short and midterm. Also, I would like to point out that markets like Monterrey, Juarez they have an so offer of space. And to my own personal standpoint, I would say that probably 70% of offer of space in these 3 markets are truly plus space. So the rest of the non-Class A space that is available in market is also creating some distortions on the market. We see long-term strong fundamentals for all 3 markets. but is going to be a tough midterm in terms of displacing and allocating that space to new tenants.

Our next question is from Anton with BPM.

Just a quick one. I mean considering the size of the combined portfolios of Fibra Monterrey, Fibra Macquarie, I know you mentioned you foresee possibility for improvement in cost of capital. I was just wondering on the debt side. Is there any potential improvement or range that you could share?

Yes, thank you. Yes, of course, as we diversify our portfolio because of the size and because of the number of the tenants that might reflect certain advantages in the cost of debt, that's definitely. And I will add that it also may may give us a possibility to go to other markets in which the volume is important. So that will also help to reduce our cost of debt. And just a follow-up. Also, you mentioned potential additional synergies. If you could share a little bit of color of of all of the improvements that you see you could do in the combined entity that that will also help us address the potential combination.

Thank you very much, Anton, for the question. Unfortunately, we cannot provide any further detail on the synergies as the 1 that Jorge already spoke about in his earnings remarks, in light of this being an ongoing nature of the transaction. Nonetheless, you can go to the public filings that are in or.

Our next question comes from Felipe Barragan with JPMorgan.

So Javier, you touched on having the flagship property that there still tending to get divested. Just get some color on sort of the reception of getting that property marketed and what sort of cap you guys are expecting for that property?

Sure. Thank you for the question. Yes, you could say that we're saving the best for last. As we are in Maersk right now in several processes of divestments, as mentioned before by Tim and myself. We want to be very careful with the last sale of the best assets. So we think that, that building the way it's performing and the way it looks in the future. It's going to capture a cap rate, I would say, around but that would be our expectation. But we believe that's not going to happen probably before the beginning of next year.

Our next question comes from Enrique Cantú with GBM.

Following the recent follow-on. Could you provide more color on the expected deployment time line? And how are you thinking about capital allocation? And then just a follow-up in that context, which markets are you currently seeing with the stronger dynamics.

Sure. Thank you for the question. We expect to deploy -- to fully deploy about $750 million in the following 12 to 18 months. We have a very strong robust pipeline of both stabilized assets and potential expansions and build-to-suits. So we believe it's going to be very close to what we did between 20 and 25 with the previous public offering. A location is going to be a mix of equity and debt. We have the flexibility to do both as our leverage remains low right now. But the short answer is around EUR 750 million in the following 12 to 18 months. at a cap rate close to what we have been deploying recently.

And our next question comes from Piero Trotta with Citi.

My question is regarding the Michigan acquisition. You added this industry portfolio at a 7.6% cap rate with land for future expansion. So we have an estimated cap rate for this asset after the full development of this land. And should we see this type of acquisition with an operating asset was a land for potential expansion being representative of your further acquisitions. That's it.

Thank you very much. Yes. So we have a problem with Javier line. So yes, we don't have any expected cap rate on the expansion on the Michigan portfolio given that that would be, let's say, on a build-to-suit or expansion basis. Nonetheless, we could expect to add maybe 200 square meters in GLA. So if you add to that maybe at 10% yield on cost, that could give you a roughly estimate of how the NOI could expand if we were to do a build-to-suit or expansion within that plus land.

We have a question from Gordon Lee in our webcast. What would you estimate in the vacancy rate in Tijuana, and Monterrey if you exclude GLA that does not have access to power,.

Thank you, Gordon, for the question. I believe that what we have heard from different brokers is that roughly half of the vacancy in Tijuana, has no access to either energy or water, so you could cut that in half. We could we could expect the vacancy rate in these markets to be between 5% to 10% on the longer term, given their strong dynamics and fundamentals.

Javier,I don't know if you want to complement we continue to have some technical issues with Javelin who is actually negotiating a portfolio. So I believe that, that was the last question, Nicole, if you want to remind our -- to the investment community if they have any questions to respond.

[Operator Instructions] And I do see -- our next question comes from the line of Edson Media with Sumika.

I have 2 questions. The first 1 is related to the M&A activity even with the divestment profit that we planned. My question is about the retail portfolio is when you're going to see them out from the balance sheet? -- because you reported this first quarter, but it's my understanding that it's already done. So when we are going to take out of the balance sheet. And my second question is a follow-up on the good acquirers. -- offers. If approved this transaction, are you planning to change the $750 million target of possible acquisition? Sure. take your questions. In your current question, as Cesar mentioned before, in the ongoing nature of this transaction. As I mentioned, we're not able to provide any further comments on the tenders. So you can go directly to the file to see what information is in that timing.

The next question, I don't know if Caminis on the line.

Sure. Go ahead, Javier the question how much time for deployment on the retail given that they're signed agreements, but still depending on some certain conditions.

The small retail portfolio that we have under negotiation will preventing negotiations, we expect to close that around September of this year.

Okay. And last, I remember that you mentioned that you want to become an industrial real so my question is, is that plan still undergoing or because of is in this process of repair planning to help those offices overperforming.

No, that plan is current, and it's still the same. We -- our intention is to become a 100% industrial rate before the end of 2027.

Okay. Congrats on the results.

[Operator Instructions] And at this time, I am seeing no questions in the queue. I'd like to turn the conference over to management of the company at this time.

Thank you, everyone, for being on this call, and I hope to talk to you soon. Thank you. Bye-bye.

Thank you. Ladies and gentlemen, thank you for your participation. That does conclude today's conference. Please disconnect your lines, and have a wonderful.