FIBRA Prologis (FIBRAPL14) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the FIBRA Prologis Holders' Meeting Announcement. My name is Laurie, and I will be facilitating the audio portion of today's conference. [Operator Instructions] At this time, I would like to turn the show over to Kosta Karmaniolas, Head of Investor Relations. Please go ahead, sir.

Hello, and thank you for joining today's call. This call includes forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties. Actual results could differ materially and adversely from the forward-looking statements. These forward-looking statements speak only as of the date of this call, and FIBRA Prologis and the managers undertake no obligation to update or revise any forward-looking statements. This morning, we posted the notice of the call for the holders' meeting and proxy statement, which can be found in the Investor Relations section of our website at www.fibraprologis.com. With that, it is my pleasure to turn over the call to Jorge Girault, Senior Vice President of Finance.

Thank you, Kosta. Thank you for joining us in today's call. As you have seen by today's announcement and filings, FIBRA Prologis has called for an ordinary certificate holders meeting, seeking approval to: use up to 200 million certificates of our existing shelf registration program; grant the preferential rights to existing certificate holders to subscribe and pay for additional certificates on a pro-rata basis to ownership levels; and increase the shelf registration for an additional 200 million certificates to maintain the level currently authorized under the program. The certificate holders' meeting is scheduled for February 10. Should we be successful, the subscription period would begin on February 18, results will be announced on March 5, and settlement is expected between March 13 and 17. The use of proceeds, assuming we are successful, would be to purchase a portfolio of property from Prologis development pipeline and for general corporate uses. The acquisition would consist of 10 properties: 8 in Mexico City, Prologis Park Grande; 1 [ in making ], Monterrey; and 1 in Ciudad Juárez. We believe there are several merits to this transaction. This allows FIBRA Prologis to acquire an industry-leading Class A industrial portfolio without diluting existing holders that participate. The acquisition captures growth from the development pipeline of our sponsor, Prologis, we don't expect changes to annual distribution policy; expand our relationship with existing customers and adding additional new relationships; enhance our focus on consumption and will increase our concentration in e-commerce from 5% of the portfolio to 9%; and improve balance sheet metrics, providing significant debt capacity for future acquisitions. Before opening it to questions, please note, we will not discuss guidance other than what is mentioned in our proxy statement. With that, I'll turn it to the operator for questions. Thank you.

[Operator Instructions] We have a question from the line of Froylan Mendez from JPMorgan.

First, how fast can you close the acquisition once the right offering is done? Would it be just a couple of days or a couple of weeks? Can you give us some more color on how fast can the acquisition be actually closed? And secondly, what's the outlook on rent increases for this specific portfolio? Is it higher than what your current portfolio is? Or what explains the relatively low cap rate at which you would be acquiring the asset? And finally, how did you get to decide that the timing was right at this moment to do it, considering the 10% discount to NAV? I mean would you have done this if it was 15% or 5%? How did you get to that 10% discount to NAV?

Thank you, Froy. Let me tackle each of your questions. The first one on how fast we can close acquisition, as you can see in the proxy statement of the acquisition, if we are successful, it's subject to normal due diligence process and antitrust approval. So as we have said in other calls regarding the acquisitions that we do, those processes can last between 1 and 2 months. So you can take that into consideration, according -- regarding your first question. On the outlook on rent increases, I cannot comment on that. It's [ this call ] and what we are seeking right now is the vote at the holders' meeting. As you can see, 8 of the 10 properties are in Mexico City. So you can make your math regarding what the information we have given publicly in past calls and in our supplemental information. And your third call is on timing. Why now? It has to do with -- I mean as you know, FIBRA Prologis, when it acquires properties from its sponsor, they need to be [ stabilized ], they need to be finished and so on. These properties have been recently finished, so we put this together as a way of, as you can see in the proxy statement, to avoid dilution to existing shareholders that participate. We feel comfortable with the level that -- of discounts that you mentioned that we are launching. That's basically it.

Your next question comes from the line of Adrian Huerta from JPMorgan.

My question was answered.

Okay. Gracias, Adrian.

Your next question comes from the line of Vanessa Quiroga from Crédit Suisse.

My first one is regarding the closing costs that you are estimating for the acquisition. Are you including those closing costs in the amount that you provided? And what would it be without these estimated closing costs? And the other is, according to the numbers that we made and the numbers you provided, the higher rent -- the rental -- the average rent for the acquisition portfolio is higher than your Mexico City or your Central portfolio currently. What explains the higher rent?

Gracias, Vanessa. As you can see in the proxy statement, I think it [ sort of like ] takes when we talk about how the assets under management increase. It goes from $2.4 billion to $2.8 billion, so that increases the acquisition of the portfolio. Closing costs are going to be covered with the proceeds that our -- that are raised. If we are successful, more or less, the number on closing costs that we have said in our past calls when we do these type of acquisitions, is around 3% to 3.3% because when you buy in a real estate, there is transfer tax, and that accounts for 85% or 90% of the total closing costs, and it depends by state. That's around the number in terms of closing costs. So if you do the math, it's about $11 million or $12 million. Regarding your question on higher rent, I cannot comment on that, Vanessa. But as you know, as it's said in the proxy, the portfolio is a state-of-the-art Class A portfolio, especially in Grande, which is the one you're referring to. There's nothing like that in Mexico that we are aware of. And that, you can do the math to answer your question regarding that, but I cannot comment more on that right now.

[Operator Instructions] We have a question from Pablo Monsivais from Barclays.

My question has been answered. Thank you.

Gracias, Pablo.

Your next question comes from the line of Francisco Suarez from Scotiabank.

I'm sorry, I just came out late. The question is, if your private company, PLD, is going to participate in the deal -- sorry, if this was already answered, and if the [ use of ] proceeds is going to be for Grande.

Thank you, Paco, for your question. No, that question was not made before. The proxy statement states that Prologis will participate with its 47.1% as it holds today. If you see in the proxy statement, there is a table with the same buildings that we -- that are proposed, 8 of those 10 buildings are in Grande.

There are no further questions at this time. I would like to pass the conference over to Jorge.

Thank you very much, operator, for the call. To all the people in the call, I just wanted to thank you for being here. Obviously, me or Kosta are available. You have our contact information to answer any further questions you may have. Right now, as you know, the next step for us is to go to holders' meeting to ask for this authorization. Thank you very much everybody, and have a nice day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.