Fibra Mty, S.A.P.I. de C.V. (FMTY14) Earnings Call Transcript & Summary

Good morning, and welcome to the 2026 Second Quarter Fibra Monterrey 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 www.fibramty.com, and recordings of the call will be available on the website of the company in the next 2 hours. If you are connected using our webcast tool, 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 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; Jaime Martinez, CFO; Javier Llaca , COO and CIO; Eduardo Elizondo, Legal Counsel; and Cesar Rubakova with Investor Relations. They will discuss the most important strategic financial and operating aspects of the quarter. I'll now turn the call over to Mr. Jorge Avalos.

Thank you, and good morning, everyone, and thank you for joining us today. The second quarter of 2026 marked a defining moment for FibLa' Monterrey's history. The successful completion of our tender offer for FIBRA Macquarie with more than 80% of its outstanding certificate represents the most significant transaction we've ever made. More importantly, the combination fundamentally transforms our platform by expanding its scale, increasing diversification and positioning Fibra Monterrey among Latin America's leading industrial real estate companies. As expected, FIBRA Macquarie's contribution to second quarter results reflects only the period following the settlement of the tender offer. Going forward, our results will increasingly reflect the full earnings capacity of the combined platform as integration advances and synergies begin to materialize. I would like to recognize the teams at Fibra Monterrey, MPA, which is Fibra MacFRE operating real estate platform and Macquired Asset Management. Their professionalism, commitment and countless hours of work made possible the first consolidated report possible, an effort that required extraordinary coordination across both organizations. Today, we're not simply reporting another quarter. We are marking the beginning of a new chapter. When we founded Fibra Monterrey more than a decade ago, we had a very clear vision. We wanted to build a different kind of REIT based on disciplined capital allocation, internal management, strong corporate governance and full alignment with our investors. This transaction validates that vision. It demonstrates that a company built on transparency discipline and long-term thinking can successfully execute one of the largest and most complex real estate transactions in Mexico's history while maintaining the confidence of investors, lenders, regulators and business partners. The strong support we received throughout the process reflects the market confidence not only in the strategic rationale of the combination, but also in our ability to execute with discipline and create long-term value. The integration of MPA is equally important by combining the experience and capabilities of both organizations, we are creating a stronger operating platform with broader experience in property management, development, engineering and maintenance. This will support operating efficiencies, accelerate future growth opportunities and preserve best-in-class service for our tenants. Together with the follow-on offering completed earlier this year, the transaction enabled us to achieve several important milestones. Our assets under management increased nearly threefold to approximately $6.6 billion. Our market cap nearly doubled to $4 billion, positioning Fibra Monterrey as the second largest listed industrial real estate issuer on the Mexican Stock Exchange. Our average daily trading volume more than doubled to nearly $5.5 million, reflecting a broader investor base and greater market participation. We received credit rating upgrades from S&P Global Ratings and Fitch Ratings. And as an immediate demonstration of value creation, our NAV per share in U.S. dollar terms increased by approximately 9%. With that, I will now turn the call over to Jaime Javier, who will discuss the transaction and our financial and operating performance for the quarter in greater detail.

Thank you, Jorge, and good morning to everyone. As a result of the acquisition, and as mentioned before, Fibra Monterrey's NAV per share improved by approximately 9% in U.S. dollars. Compared with last quarter, -- the transaction was highly accretive on a stand-alone basis, supported by the relative trading to NAV valuations of both companies. Given the transaction's significant scale relative to Fibra Monterrey's pre transaction platform, the resulting value creation is particularly meaningful for the combined entity. At the same time, our shares continue to trade at a premium of more than 10% in NAV, reflecting the market recognition of the quality of the combined platform and Fibra Monterrey's investor aligned business model. Moving to the next slide. During the quarter, we reached a key integration milestone by entering into an agreement with Mato Asset Management to internalize FIRA Mato management once the agreed conditions are satisfied. The transaction has been carefully designed to preserve operational continuity while enabling an orderly integration. D to the occurrence of the closure of the internalization agreement, Macquarie Asset Management will continue managing FIBRA Macquarie under the existing agreement in the ordinary course of business. The closing remains subject to certain conditions, including obtaining the required approvals at the following FIBRA Macquarie's holder meeting and the participation of Macquarie Infrastructure and Real Assets Holding in the second tender offer of FIBRA Macquarie remaining certificates to be launched by Fibra Monterrey by tendering its entire holding in FIBRA Macquarie, representing approximately 5% of the outstanding services. We have already submitted the filing of the initial tender offer document However, the offer remains subject to regulatory approvals and according to noefinitive launch date has been established. Once the conditions are satisfied, Fibra Monterrey will pay $172.4 million to Macquarie Asset Management as an internalization consideration andrador Fibra Monterrey will take over the management of Fibra Matory. It is worth mentioning that Macquarie Asset Management will remain available to provide support services post closing in accordance with the internalization agreement, subject to the satisfaction of applicable legal requirements, which include the acquisition of 95% of ownership of Fibra Macquarie certificates, of which we have already obtained approximately 81%. We will begin the process of delisting FibraAacarie. Moving to Slide 5. In parallel to the internalization of Ira Macor's management, we established an integration plan designed to preserve business continuity while gradually bring both platforms together. The plan involves Fibra Monterrey MPA, Macquarie Asset Management and specialized third-party advisers, all working in coordination to support the transition with prudence and curve. The process is structured in 3 phases. We are currently in the discovery phase, focused on maintaining uninterrupted operations, financial reporting and regulatory compliance, while we develop a deeper understanding of Ira Maco's processes and evaluate best practices for the combined entity. The second phase will focus on joining systems and processes, including the consolidation of databases and reporting platform. This will help to summarize information across the combined organization, improve data consistency and transparency and enable factors better informed decision-making. The final phase is intended to maximize value by enhancing the combined operating model, strengthen the combined organizational structure and position the platform for additional growth. The integration process and an orderly transition remains our highest priority. As shown on Slide 6, following the tender offer of FIBRA Macquarie, our balance sheet reflects a higher leverage profile with a loan-to-value of almost 33%, still over 35% debt ceiling. This reflects 2 main drivers, starting with the consolidation Matoryc debt, additional borrowings to fund the cash consideration in tender offer and the cash retained to fund the internalization consideration once the conditions are satisfied. Importantly, we hold 10% of assets in cash, mainly from the follow-on proceeds, which reduces our loan-to-value to around 25%. As of quarter end, net of the internalization consideration, our firepower was approximately $700 million with potential to expand to roughly $1 billion as assets held for sale are monetized. Following the acquisition of Macquarie, we received credit rating upgrades from S&P Global Ratings and Fitch ratings. S&P upgraded our global scale corporate credit rating from BBB to BBB+ with a stable outlook and Fitch upgraded our local rating from AA+ to AAA with a stable outlook, assed our global rating at BBB- and we executed on a positive watch pending for further progress on the integration. The rating actions reaffirm Fibra Monterrey's investment grade profile and reflects the strengthening of its financial capacity following the tender offer, which creates an opportunity to improve the debt structure, reduce financial costs and execute liability management initiatives in a disciplined manner. As discussed, -- in previous calls, both Fibra Monte and FRA Mac have sufficient credit facilities to address upcoming debt maturities and provide flexibility to extend the combined debt maturity profile. Moving to the following slide. The commitments made in connection with the equity offering remain unchanged. Starting with investments. As of the quarter end, we have deployed all commit more than $200 million through the cash consideration paid in the tender offer, signed expansion and acquisitions currently under evaluation. This represents almost half of our target while preserving sufficient capacity to deliver on the remaining commitments. Second, we will continue to optimize our portfolio through asset recycling. To date, we have completed sales or entered into agreements subject to certain conditions for nearly half of the office portfolio and entire retail portfolio. Javier will discuss this in greater detail shortly. Lastly, the liquidity of our shares has continued to improve. During the second quarter, our ADV reached nearly $5.5 million, supported by the larger number of shares outstanding and broader investor participation following the equity offering and the tender offer. I will now turn the call over to Javier to discuss recent divestment activity, updated portfolio composition and development activity. Javier?

Thank you, Jaime. As shown on Slide 9 of the webcast material, following quarter end, we completed the sale of 2 office properties located in Caliscovoron, both of which were already subject to binding sale agreements. The aggregate sale price was in line with the property's fair market value as determined by the external appraisers. For Fibra Monterrey's stand-alone portfolio, including assets currently under valuation and excluding the Filus office assets within the Whirlpool campus, which we intend to remain, our remaining nonindustrial exposure will be approximately $120 million, concentrated in 2 office properties, including our best-in-class facility in Calisco La Per. This is consistent with our objective of optimizing the portfolio and increasing industrial exposure. At this stage of the integration, we cannot comment on potential asset recycling activity within the FIBRA Macired portfolio. We will update the market as the internalization and integration processes advance. Before discussing the updated composition, I would like to briefly address market conditions and tenant sentiment. On Page 10, we present CBRE's key indicators across the 13 primary industrial markets in Mexico. According to CBRE data, vacancy across these markets stood slightly above 6%, while total net absorption during the first half of the year reached approximately 11 million square feet. The Mexican industrial market are moving into a normalization phase after the exceptional expansion recorded from 2021 through 2024. During the first half of this year, net absorption moderated and vacancy increased in selected markets, particularly where speculative supply expanded more rapidly. Nevertheless, leasing activity remained active, supported by expansions, preleases and build-to-suit projects, while long-term fundamentals continue to benefit from Mexico's growth in North American manufacturing and logistics supply chain. Performance remains mixed by region. Monterrey, Saltillo Bajio and Guadalajara continued to show generally healthy and balanced conditions. Mexico City remains highly active, but with -- but with a greater proportion of relocation and pre-leases and Reynosa and Tijuana faced softer demand and higher vacancy. Overall, the current adjustment appears to reflect a rebalancing of supply and demand rather than a structural deterioration, favoring stabilized well-located assets with long-term leases and strong tenant credit profiles. Tenant sentiment remains broadly stable with occupiers continuing to prioritize deeper supply chain integration and the productivity advantages that Mexico offers, including attractive returns relative to labor cost compared with other manufacturing locations. The investment decisions continue to be made with a long-term perspective rather than in response to short-term geopolitical headlines. Consistent with this view, our approach to renewals and new investment remains unchanged. We continue to prioritize high-quality locations, low-risk tenants and strong leasing fundamentals, including long weighted average lease terms and clear predictable cash flow visibility. Moving on to our portfolio indicators. As shown on Slide 11 of the webcast material, our geographic presence across Mexico has expanded following the acquisition of. We now operate across 17 states with a portfolio of 383 properties, totaling approximately 60 million square feet of GLA and an occupancy rate of around 94%. It is worth noting that despite the significant increase in GLA, our exposure across border Central and Majio states remain broadly consistent. As shown on the following slide, based on our peers' first quarter '26 report, Fibra Monterrey's industrial portfolio has now the largest presence in important markets with almost 40 million square feet, representing approximately 63% of our total GLA across 242 properties. It is worth mentioning that FIBRA -- I'm sorry, that Monterrey remains our largest market with 14.5 million square feet that hold almost 1/4 of total portfolio revenues for leases. Moving on Slide 13 of the presentation. Despite a meaningful increase in GLA, core fundamentals of our portfolio remain largely unchanged, which was a key driver in the real estate rationale behind the tender offer. Industrial assets continue to represent more than 80% of total revenues now with greater geographic and industry diversification across core markets. The portfolio continues to be predominantly supported by U.S. dollar-denominated leases with creditworthy tenants and with inflation-linked escalations. Together, these characteristics provide resilience across economic cycles. Moving to the following slide. The top 10 tenant share of total revenues now stands slightly above 20%, a significant quarter-over-quarter reduction resulting from the combination of the portfolios. FIBRA Macquarie's maturity profile is shorter than FIBRA Monterrey's historical profile. As a result, approximately 30% of the revenues are set to mature during '26 and '27 with industrial leases representing most of those maturities. We remain cautiously optimistic about capturing mark-to-market opportunities while gradually the combined weighted average lease term increases. Page 15 of the webcast material summarizes our property year-over-year performance. Same property NOI growth remained strong despite limited lease rotation, supported by inflation-linked escalations and renewals, new leasing activity and expansion-related revenues. Together, these factors drove approximately 6% growth year-over-year in same-property NOI in U.S. dollar terms. Excluding FIBRA acquired, acquisitions completed over the last 12 months further supported NOI growth by contributing more than MXN 90 million. As a result, Fibra Monterrey's stand-alone NOI margin remained above 90% Acquired 1-month contribution added approximately MXN 288 million of NOI and resulted in a consolidated NOI margin growth of -- I'm sorry, NOI margin of 88.5%. As integration progresses and we begin to maximize the platform capabilities, we expect the consolidated NOI margin to gradually converge towards historical levels. Moving to Slide 16. I would like to briefly address Wrle's announcement regarding its manufacturing operations in Apodac. Werle announced plans to gradually relocate of the 5 business units operating at Apodaca campus beginning in the second half of 2027. Production will be transferred to Ramos Arista campus, where we own the related distribution facility. Importantly, the lease agreement has a fixed maturity until December 2031 and the expected exposure associated with the relocation remains limited to approximately 1.5% of Fibra Monterrey's total revenues. Therefore, based on the information currently available, we do not anticipate an immediate impact on occupancy or AFFO preservation. In the meanwhile, we have been in contact with companies located near the campus for potential move-ins. The property is located on one of Mexico's most active industrial corridors with competitive in-place rents and strong releasing potential. These characteristics should support an efficient commercialization process if required and help limit potential cash flow downtime. Moving on to Slide 17. We continue to observe strong demand from existing tenants seeking to extend within our properties. These expansions are being driven by new production lines resulting from supply chain optimization and increased demand for our tenants products, underscoring both the quality of our tenant base and the strength of our long-standing relationship. As shown in the graph on the left, to date, we have delivered approximately $68 million on nonspeculative development, generating returns above 10%. During the quarter, we signed a new expansion within the ATech portfolio, representing an investment of approximately $27 million and an expected yield on cost above 9% -- including this project, we currently have nearly $50 million under construction, expected to generate a high single-digit average yield on cost. These investments complement favorably acquisition yields and support growth in cash flow preservation. In addition, we have under evaluation an expansion pipeline of almost $60 million, which we expect to sign gradually. Moving on the graph on your right, as you all may be aware of, Fibra Monterrey has a dedicated development team. Since 2013, it has reported development deliveries that represent an investment of more than $0.25 billion with an average yield of 11%. The integration of this team is expected to strengthen our development capabilities. At quarter end, development projects under construction in Fibra acquired's portfolio totaled approximately 240,000 square feet of GLA, representing an estimated investment of $50 million. Additionally, Fibra acquired has almost 800,000 square feet under stabilization and a land bank of more than 8 million square feet of additional potential GLA, which could eventually bolster portfolio returns. That said, our primary focus will remain on stabilized assets and pre-lease development. Nevertheless, the combined increased scale creates an opportunity to generate incremental returns through limited speculative development in primary markets where strong long-term fundamentals justify the commercial risk. I will be pleased to address markets, the portfolio and investment during the Q&A. But before that, I will return the call to Jaime to discuss financial performance. Go ahead, Jaime.

Thank you, Javier. From the acquisition date, Fibra Monterrey's consolidated financial statements includes 100% of Fibra Macquarie's assets, liabilities, revenues and expenses. They also separately recognized the noncontrolling interest associated with the FIBRA Macquarie shares not owned by Fibra Monterrey and those already recognized in FibRA Macquarie's financial statements. For analytical purposes, the financial performance metrics include FibRAac in its joint venture and exclude noncontrolling interest. Operational and administrative consolidated margins decreased to 89% and 81%, respectively. This decrease was mainly attributable to the inclusion of 1 month and FIBRA Macquarie operations. Excluding this effect, FibRA Monterrey' second quarter NOI and adjusted EBITDA margins would have been 90% and 83%, respectively, in line with our target levels and broadly consistent with the first quarter. Excluding FX fluctuations, all key financial metrics increased year-over-year, mainly reflecting the contribution from the FIBRA Macquarie acquisition. In large acquisitions, EBITDA has typically grown faster than NOI as economies of scale materialize -- in this case, because FIBRA Macquarie's management has not yet been internalized, we are initially experiencing the opposite effect. As Javier mentioned, as we internalize FIBRA Macquarie's management and begin to maximize the combined platform capabilities, we expect margins to converge to our historical levels with the potential to exceed over time as EBITDA benefits from greater scale. Before moving to AFFO per share performance, I would like to clarify that the first half of this year distribution figures shown in the presentation already include the cash flow distributed by FIBRA Macquarie that were generated before the tender offer. This explains the quarter-over-quarter increase in distribution is lower than the increase in other metrics. Moving to the next slide, we can see that both Fibra Monterrey and FIBRA Macquarie on a stand-alone basis remain on track relative to their last publicly available guidance. Beginning with FIBRA Macquarie in the first bar on the left shows the annualized second quarter AFFO per share standing approximately MXN 2.60, near the upper end of the last publicly available guidance range. For Fibra Monterrey, the second bar from the right shows annualized stand-alone AFFO per share of approximately MXN 0.90, also near the upper end of the applicable guidance range based on the quarter's average exchange rate. After excluding Fibra Macquarie's noncontrolling interest, as shown in the middle bar and dividing it by the shares issued as a consideration for the tender offer, the transaction annualized AFFO per share is approximately $0.98, almost 10% above Cibra Monterrey stand-alone performance. Furthermore, as shown in the financial bar on the right, consolidated annualized AFFO per share for the full second quarter would have been approximately $0.93 per share, more than 3% above the upper end of our latest guidance range. This provides an initial indication that the transaction is also accretive on cash flow per share basis. We will report fully capturing the benefits from the internalization and combination of both companies. With that, we will conclude our prepared remarks and open the call for questions. Operator, please proceed with the Q&A session.

[Operator Instructions] Our first question comes from the line of Adrian Huerta with JPMorgan.

The question has to do with how post the acquisition of Macquarie, how your shareholder base has changed in terms of concentration percentage of foreign shareholders? -- how it changed within and how it has changed over the last couple of years and what we should expect in terms of liquidity going forward on that basis?

Thank you, Adrian. That's a very interesting question. Third, let's focus on international investments, which is mainly the main change that we have in our shareholder base. It changed from around 13% to 18%, which represents in terms of -- in absolute terms, we were at around $300 million before the tender. And now we are at 18%, which is around $800 million, which is a significant increase, of course, more than double. We assume that it might increase the number of international investors as well as the attention because of the size of the company. But that is we can it by the normal investigation. We will see that in the next month, and we'll go to and we will let with more investments. The other important part is that we think that with that scale and the increase in the favorability of the company, we might accept or increase our participation in certain indexes, we will give an additional increase to the liquidity of the company. As you remember, before the the first 1 that we be back in 2024, we were trading at around per day. After the follow-on, we were at let's say, $2.5 million per day. And as of now or as last quarter, we were at around $5.6 million a day, which is a significant increase. So we think that there's an additional prices that we might see in the following months.

Great. And then if I can just follow up very quickly. What are those that you're not participating on at the moment and that will have chances to be included over the next 12 months?

Sure. So the next review on the indices, it could be on MSCI. We are writing the let's say, at the to be improving our participation from small cap indices to the standard index. So importantly enough, quickly just improved in the last 2 months. So if we're not able to enter this in this review, we're hoping to enter in that coming on.

Our next question comes from the line of Alton Mortnekotter with GBM.

I have 2 questions. One, maybe too soon still with the consolidation process, but I was wondering if -- is there any surprise positive or negative that you find out as you get more involved in Macquarie? And the second 1 is -- and the second 1 is related to the extraordinary costs that we saw. I was just wondering if should we win -- are these all the expenses that we should see? And when should we see this normalize?

We've seen in the discovery space based on the information reviewed today and the portfolio's recent operating performance, we have not denied any material that changes our strategic rationale for transaction. We are closely reviewing the combined lease expiration profile for 2016 and 2017 and proactively amici the near and maturities both remain manageable and preserving venting and financial continuity is central model integration plan. And maybe your other question Sorry, Anton, can you repeat your second question?

Yes. I was just wondering if any extraordinary expenses related to the acquisition are already finalized or if we should see something still forward.

Well, I mean, basically the same. We haven't found anything material. Of course, we have some expenses related with the transaction, but I don't think that there's something that special that we should mention.

Our next question comes from the line of André Mazini with Citi.

So 2 questions as well. So the first 1 is around the capital recycling strategy, I mean after the incorporation of Macquarie. So what can we expect on that front in particularly with regards to the retail portfolio, we portion of the retail portfolio has JV partners, which is the JV partners be interested in your portion of the retail portfolio that makes any sense at all? And also, the second question around the listing Macquarie. I think nowadays, you guys have 81% directly, close to 5% to Macquarie Group has been selling to you guys and sold to you guys. So you need to reach 95% ownership in order to delist. So any kind of -- if there's a time line or where can we expect that to happen?

Yes, right now, it's too early to say on the recycling of the assets from the. As Jaime mentioned, we're still on the discovery phase. Our intention continues to become a full in most platform soon. But right now, we're in the discovery process. We will continue with the divestment of the legacy in Fibra Monterrey portfolio, nonindustrial properties and we're starting to do the analysis and the assessment of the minutia properties on the Fibrant portfolio, but we will keep you apprised. We progress on that. Too early to say right now. As for the second question, as you know, we already have the 81% of the certificate, and we are about to launch the second offer for the remaining certificate -- we had -- I think 5% of those certificates holdings. So they are going to be participating in the offer as we have agreed the -- and when we reach the 95%, we will believe, of course, there are certain conditions that need to be completed. We have to obtain certain approvals at Macassa we see. And we still have to obtain the authorization from the TNBC but once those missions are at side, we will proceed with one remaining steps.

Our next question comes from the line of Alisa Goma with BTC Patel.