Fibra UNO (FUNO11) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Fibra UNO Q2 2020 Financial Results Conference Call on the 24th July 2020. [Operator Instructions] The format of the call will be a presentation by Fibra UNO management team, followed by a question-and-answer session. Our host today from Fibra UNO team are Mr. Andre El-Mann, the CEO; Mr. Gonzalo Robina, Deputy CEO; Mr. Fernando Álvarez, VP of Finance; and Mr. Jorge Pigeon, VP, Capital Markets and Investor Relations. Please go ahead.

Thank you, operator. Thank you, everybody. Sorry for the delay. I am pleased to be able to share with you the solid financial and operating results for the second quarter 2020 of our company. As you are aware, one cannot avoid seeing and discussing the devastating effects this COVID-19-induced crisis is having around the globe. We've seen this crisis defined as one of the worst crises in the history of mankind, and especially in recent history. However, situations like this challenge our mind and our capabilities to come up with creative solutions, to think outside the box and to put ourselves and are key -- are counter for issues in order to try and find solutions suitable to all of the difficulties at hand. This time, this crisis is challenging us to rise above the occasion. We must reinvent ourselves and emerge renewed and strengthened for this -- from this. We, at FUNO, have the fortune of having lived through many crises in the past. The DNA of our company has, at its core, the knowledge and experience acquired in the midst of difficult times. Understand crises happen frequently. No one knows when or what will trigger them, but we do know that eventually, it happens. True, we know that no crises are like to one another. And this one has dropped from the blind side, but we are certain that this one will also go away. We just need to be patient. Real estate is a long-term business. And as such, we need to be patient, level-headed, cool and calm when we have to make decisions about the direction of our company. More than ever, we need to be patient making sometimes difficult decisions to keep our company heading in the right direction. I can't stress enough that we stand with you, with our tenants, with our investors, with our suppliers and with our team at FUNO. I want to comment on some of the key operating and financial metrics that, once again, highlight the resilience, strength and defensiveness of our company. Our second quarter results showed just one more very strong quarter for the company. However, this one being in the midst of a sanitary financial and macroeconomic storm is something else. From an operating point of view, we have managed to maintain the occupancy practically intact. We have positive leases spread in peso terms across the board. Also, we saw positive same-store rent performance in our portfolio. I am pleased to be able to show such a strong operating quarter in the middle of this storm. We have worked side-by-side with our tenants, trying to find solutions suitable for everybody. We've decided to grant relief to our tenants in different ways, either as discount or as rent deferrals. Our team has been very meticulously examining case-by-case each tenant situation in order to achieve fair results. Everything taken in account, our 3 fundamental principles: one, ensure to be helping the most of tenants to get back to their feet ASAP; two, minimize the impact to FUNO; and three, keep our account receivables in check. In addition, I want to highlight that we have added a provision for future gains in our P&L. That goes beyond what we have been required to register in our books this quarter. We have done so out of prudence given that we are still navigating choppy waters. In the meantime, we are keeping our operating expenses in check with rigorous controls. And after all of this, we still generated a healthy and strong FFO. I am more convinced than ever that diversification is one of our core strengths and that we will prevail. We will emerge stronger once this is over. After all those from second quarter sales, we have been able to maintain a positive FFO. It is because of the depth of experience and knowledge that our management team has acquired to past crisis and decades of experience that we've been able to show such a strong set of results in the midst of this crisis. Now on the good news. Later on, I will ask Gonzalo to walk you on the details of an agreement we've reached to sell around USD 100 million in property at a price to net NAV times 1.44 -- wait, 1 44, I think misspoke -- no, 1.44x NAV. On yet another post-quarter announcement, we signed a long-term lease for a new logistics state to one of the global leaders in e-commerce. The state is located at Fibra UNO's brand new state-of-the-art development located right in the heart of Mexico City's logistics corridor. No surprise there. The lease is for around 0.5 million square feet of GLA. We are pleased to provide, yet again, real estate solution towards leading e-commerce companies. Gonzalo will walk you through this as well. This only highlights that we continue to work steady on all fronts. It is the consistent hard work of the FUNO team that enabled us to deliver such outstanding results in operations, finances, M&A, leasing, development, et cetera. That's our business. Also, after the second quarter closed, we re-taped our 2030 and 2050 bonds for a total of $650 million, mainly for liability management proposes. I will ask Javier Elizalde to walk you through the specifics later in this call. I am proud of the ability of our company to cope with this storm. And I am sure that we'll be able to come out of this strengthened. We need to reinvent ourselves and adapt to a constantly changing environment, and we will. We need to emerge even stronger than before, and we will. We will prevail. We will. Thank you for your support of our company. We thank to our tenants, our investors, our suppliers and our collaborators. We stand with you. We will go on working even harder to ensure FUNO continues to be the world-class leading real estate company in our country and more. I will now pass the mic to Jorge Pigeon. Jorge, please.

Thank you very much, Andre. Thank you, everybody, for joining us for this second quarter call. As usual, I will walk you through the MD&A discussion of the quarterly results from the financial and operations point of view. And then I will ask Fernando and Javier to delve into further detail on certain specifics of the quarterly results, as Andre mentioned. Starting with the total revenues for the company, they decreased by MXN 871 million to MXN 4.29 billion or almost 17%, 16.8% below the first quarter of 2020. Obviously, this is mainly attributed to COVID effects. Rent relief, discounts, et cetera, granted during the quarter for MXN 251 million. We also created a COVID-19 reserve for future rent reliefs for MXN 699 million. I'll ask Fernando later to delve a little more into detail specifically on those 2 lines. Obviously, the loss of variable rents and the life from kiosks that decreased during the quarter, slightly lower occupied gross leasable area for the company. We also had, on the good side, new additional revenues from properties that were acquired during the quarter, such as Tajuelos II, Guadalajara Park and La Presa, both -- all of them state-of-the-art logistics facilities. The effect of rental increases, as Andre mentioned, positive leasing spreads that we have during the quarter as well as increases in active contracts. And the occupancy rate increase of the in-service properties. I would like to highlight that excluding the COVID relief effects that we had for revenue during the quarter, we would have reached MXN 5.25 billion, which would have been an increase of 1.5% over the previous quarter to give you an idea of more or less what would a normalized quarter for the company would have looked like. So very well on track of where we were before the crisis blindsided everybody. I'm very happy with the results. Now moving to occupancy, we had a total occupancy at the close of the second quarter of 2020 of 93.8%, which is basically in line with that of the first quarter, only a 70 basis point decrease compared to the previous quarter. Retail was at 92.2%; industrial, 96.2%; and office, 81.8%. Other properties remained steady at 99.7% and in-service property had a slight increase of -- from 71.2% to 74.5%. Basically, the delivery of the medical tower at the Mitikah project, which is not part of the in-service category. In terms of operating expenses, property taxes and insurance, we've worked very hard to try to maintain all of these lines in check. Operating expenses increased by only MXN 500,000, or 0.1% from those of the first quarter of 2020, mainly due to a cut in marketing expenses and other nonessential expenses that we have reflected since the first quarter of 2020 as a preventive measure given what we saw are the effects of the COVID-19 pandemic. Insurance expenses remained stable at MXN 68.4 million, and property taxes increased by MXN 4.8 million or 3.6%, mainly due to new acquisitions and properties that recently started operations. In terms of net operating income, we saw a decrease in the second quarter of 2020 of MXN 915.1 million or 22% to reach MXN 3.245 billion, an NOI margin calculated over property revenues of 83.5% and an NOI margin over total revenues of 75.5%. Excluding the COVID-19 effects, NOI would have increased 1.4% versus the previous quarter with margins of 88.7% of our rental revenues and 80.4% of over total revenues, respectively. So again, very healthy margins for our company. Interest expense and interest income. Overall, we saw a net interest expense increase of MXN 375 million or 23.3% compared to the first quarter of 2020, mainly the largest portion of this increase comes from the drawdown of our revolving credit facility, 50% of the revolving credit facility. If you recall, this is a dual currency credit facility, and we drew down $205 million and MXN 6.75 billion, half of that revolving credit facility. The cash of that revolving credit facility is sitting in our balance sheet. We saw a decrease of MXN 260 million in interest capitalization, meaning we are running MXN 260 million of additional interest through our P&L. And this is basically because some of the properties that were in development are no longer considered to be in development from an accounting standards point of view. Therefore, we're increasing the amount of interest expense that is running through our P&L. The income obviously of cash investments primarily related to the resources of our revolving credit facility as well as the cash that we withheld from the payout of distributions in the first quarter. And the net effect of the appreciation of the foreign exchange from the previous quarter of MXN 24.28 to MXN 23.13 during this quarter. The result of all of the above is that we reached funds from operations that decreased by MXN 1.28 billion or 56% from the previous quarter to reach a very solid MXN 1 billion of FFO. And I want to stress, again, that we are very proud to see MXN 1 billion of FFO after including discounts, reserves, reserves for the current quarter, reserves for future quarters, additional interest expense and still, all in all, we're able to generate positive funds from operation. Adjusted FFO remains at the same figure, MXN 1 billion, roughly. On an AFFO and FFO per CBFI basis, we had MXN 0.2554 in both cases. Now moving to our balance sheet, accounts receivable, which I'm sure you're going to want to delve a little bit into this, also Fernando is going to tackle this section in greater detail in a second, reached MXN 2.29 billion, increasing by MXN 331 million or 16.9% from the previous quarter, mainly due to deferred payment based on agreements, reaching some clients due to the COVID relief efforts of the company as well as delayed payments of some tenants, which is just basically consequences of the COVID-19 pandemic and the global and Mexican deceleration of economic activity. In terms of investment properties, the value of our investment properties increased by MXN 10.5 billion from the first quarter of 2020, including investment in associates, which is basically the result of asset revaluation, including investments in associates. And if you recall, the first quarter, we did not do any movement in asset valuation. The second quarter, we are including largely the revaluation of property generating U.S. dollars as well as other properties from the portfolio. Also, the effect of the acquisition of Tajuelos, Guadalajara Park and La Presa for MXN 1.1 billion and the normal progress in construction of projects under development. In terms of debt, net debt for the second quarter of 2020 totaled MXN 122.8 billion compared to MXN 125 billion recorded in the previous quarter. This reduction is mainly due to a net increase in the bilateral lines of credit of MXN 1 billion for advanced acquisition payments and investment properties under development. The exchange rate appreciation, which, as I mentioned before, went from MXN 24.28 to MXN 23.13 per dollar. And the drawdown of the revolving credit facility and the cash of that facility as well as the cash from the dividend distribution payout that we withheld put the company with the net debt position of MXN 122.8 billion that I mentioned. From an LTV point of view, if we take the total amount of the company, we stand at 45%. However, if we deduct the revolving credit facility, which, as we have mentioned since we drew down on this debt, but it's just for prudence. We are keeping that -- those monies in cash. Net leverage for the company is 42.9%, roughly 43%, which is the LTV of the company. Total equity increased by MXN 11.5 billion or 7.8% in the second quarter of 2020. Basically, that is a reflection of net income generated from the quarterly results, the effect of derivatives valuation, shareholder distribution related to the first quarter results and the provision for the executive compensation plan as well. Now moving to operating results. Leasing spreads in pesos was 580 basis points higher in the office segment, 520 basis points higher in the retail segment and 510 basis points higher in the industrial segment, all of them compared to the peso inflation rates. For dollar-denominated contracts, we saw an increase of 180 basis points in the retail segment, basically flat in the Industrial segment and a negative 530 basis points for the Office segment. For more detail, we can look at the report later in Page 21, if you want, during the Q&A session. Constant property performance. On the price per square meter of the constant properties increased by 340 basis points above inflation, again, positive and solid results for our company. At a subsegment level, we consider the total rent per square meter of the company decreased by a peso basically or stayed stable. This is mainly due to a number of factors that are varying in different directions. Some of them offsetting the others. Total NOI for the quarter was basically flat from the previous quarters. And the variations are mainly the Industrial segment, Logistics and Light Manufacturers NOI increased by 14% and 17%, respectively, mainly due to the acquisition of new properties and positive leasing spreads. The Office segment's NOI increased by almost 12%, which is basically due to the stabilization of some of the properties that were in ramp-up phase, basically the ending of the deferral -- the discounts that you give tenants when they move into the -- to their facilities. In the Retail segment, stand-alone subsegment was stable. Fashion Mall and regional subsegments decreased by 13.7% and 16.9%, respectively, but this is mainly due, obviously, to the COVID-related effects. And Others segments, the Others segment dropped 16%, mainly due to the decrease in variable rent components. With this, I finished my presentation, I would like to ask Fernando now to go over the details of the -- how we manage discounts and accounts receivable, et cetera, for the quarter. Fernando, please.

Sure, Jorge. Good afternoon to everybody. A very simple and straightforward way to understand the results of the second quarter is to consider that we registered an impact -- a total negative impact to our revenue of north of MXN 1 billion in the form of either relief credit notes, relief reserves and additional preventive allowance for doubtful accounts reserves. Those 3 forms of revenue reduction or expense total north of MXN 1 billion. Around 2/3 of that would correspond specifically to the second quarter, and the remaining amount is an additional reserve for future reliefs. That's a very simple way to understand it. And with that, I'll give the mic to Javier Elizalde to explain the recent issuance that we did in the market.

Thank you, Fernando. Good afternoon, everyone. On last Wednesday, the 15th, we reopened our senior notes '30 and '50. We did a $650 million reopening. The breakdown is $375 million for the '30s and $275 million for the 2050s. The reopening was at a rate for the '30s at 4.95% and for the '50s at 6.25%. We have a demand of 3.5x. We are very pleased in -- with issuances that we did. The situation is not easy, and we are very pleased that we did successful or very successful issuance. This is very good for the market and very good for FUNO.

Thank you very much, [ Javi ]. If now we can open the floor to Q&A, please?

[Operator Instructions] The first question comes from Ms. Sheila McGrath from Evercore.

I wanted to get a little bit more detail on the rent release, how it varied by property segment? Is most of it in retail? And should we view this as mostly free rent? Or are there deferrals that FUNO will get paid back?

Sheila, this is Fernando. As Andre explained at the beginning, we have several types of reliefs because we did tailor-made solution for each and every single one of our tenants because every client has a different level of impact in this -- during this crisis. Most of the reliefs came in the form of discounts, but we have some of the reliefs also in the form of deferrals, but the vast majority of that were discounts. And as you are pointing out, the portfolio that was -- that needed the largest size of relief was retail, but we have some cases in the other portfolios that also required relief from our behalf. But the retail portfolio and specifically the nonessential -- the tenants in the nonessential activities portfolio were those that require most of the energy and the effort from our behalf.

And just adding on Fernando's comments, Sheila, there were some cases that we gave discounts or deferrals. But at the end, we also negotiated leases extensions. We have a large one for 20,000-plus square meters of office space where we gave them some discount during the second quarter, then it was rent deferral for the second half of 2020. But we extended the lease for additional 6 years. The original expiration was on 2023, and we extended to 2029. With this, I'm trying to express you that we did really a tailor-made relief for each one of our tenants. And obviously, on the retail was the most impact. And this is just the nature of the business. If you compare the percentage of the cost of the rent for a light manufacturing plant in the Northern states compared to a small boutique in the Fashion Mall in Cancun or in Mexico, Guadalajara, definitely, the proportion of the rent for them is higher than for industrial building. So at the end, we haven't done the calculation of factor percentage, but definitely, on retail is where -- there were more impact.

Just to add on the comments, I would like to say that we are starting with rigorous and meticulous care case by case of every one of our tenants. There's no one-size-fits-all solution for everybody. So we need to study one by one, and we are doing that. It's a very hard and very difficult work, but we are doing it and I think that we are getting the best results.

Andre, I have one more question. If you could give us a little more detail on the asset sale, what the property type was, maybe the cap rate, the type of buyer for that asset?

Yes...

Gonzalo will talk about that.

Yes, Sheila, in terms of the sales, we are talking about 2 sales both on the industrial sector. One is coming from the buyers international private fund with a combination of co-investment with Mexican CKD, and it includes 2 industrial buildings, one in Reynosa and one in Juárez. I can tell you that it's non-crown jewels assets, good assets but not crown jewels. And this package also includes some of the land reserve that we acquired from TITAN portfolio just a few months ago. And we expect the closing to happen on mid-August and meaning -- closing means title transfer and full payment. And this transaction is around $40 million. The second one is also an industrial sector. It's an industrial building on the real estate for around 50,000 square meters. We expect the hard closing of this by the end of the quarter, and it's a $60 million transaction. And the buyer is a global financial institution. And just going over some of the figures that Andre already mentioned in terms of the multiple. The multiple that he explained, which is 1.44x our NAV, that's in pesos. And since we keep our accounting in pesos, that's the way we should show it, and the NAV, it's also pesos. But if you are curious in terms of -- if we do it in dollars, this factor will be 1.25x NAV in U.S. dollars. And let me do a simple analysis. If we consider that our NAV is at MXN 100, and we are selling at a multiple of 1.44x, that means that the private market is paying MXN 144 for those assets. And our stock price is at MXN 40, we can conclude that the share price is 27% of private market price of those assets. I hope that I was clear with this example. And just to finalize getting deeper into the sales, the use of proceeds will be to repay debt around the company's LTV proportions, and the remaining, I'm pretty sure that after explaining to you this analysis that I did, we will be buying back some shares of Fibra UNO.

Our next question comes from Mr. Nik Lippmann from Morgan Stanley.

I wanted to go back into Fernando's point on the deferrals in the discounts. It looks like you're having about -- so it's about MXN 1 billion in the quarter. I understand that the different time frames. And it looks like the increase in your accounts receivable is about MXN 331 million on a quarter-on-quarter basis. So about 25% of it looks like deferrals and 75% of it looks in, one way or another, some sort of a discount or write-off. Is that the right way of looking at it? And then in relationship to the different segments, if you can provide any color, one would imagine, looking at results from peers that the vast majority of the deferrals would be the Industrial segment, and the vast majority of the discounts would be in retail, followed by office. But if you can provide any additional color on that, that would be very helpful.

Thanks, Nik. That's a good way to see it. I would just add to what you just said that not 100% of the increase in rents to collect is due to deferrals. One part of that increase is also due to the fact that the Mexican economy has been slowing down, the impact of the COVID, et cetera. But that breakdown that you said, 75-25 is probably a little larger in terms of discounts compared to deferrals, probably a little bit larger than what the ratio that you just mentioned. And the breakdown by asset class, the exact breakdown, I don't have it right now here, but it's fair to assume that deferrals were more allocated in other types of assets than retail.

Just to try and add-on on Fernando's comment, Nik. All the crises brings you, in our business, 3 main tipping points: first, your account receivables go skyrocket; second, you give discounts, so the rent is not there anymore; and third, you see your vacancy increased. And that's why I always said that we need to take care of the 3 points of our fundamentals. We need to help our tenants in order to maintain the occupancy and make them get back on their feet. Help them to get back on their feet. The second one is to have them -- to minimize the impact for the company because it's easy to give away money. And that's why I've been repeating time and time again that we analyze very meticulously and very carefully case by case in order to minimize the impact for the company. That will need to be done without having our account receivables go skyrocket. So every crises is the same, only this one is different. But it will have the same impact. So we need to be very careful. And we do not know the exact extent of the relief we are going to give right now because at the beginning, even in the second quarter when it -- and the second quarter, we believed that July will be open for business. July is not opened yet. Many of the states in Mexico are still closed. So we need to review again with the tenants. But I mean, I'm not scared of that. I'm used to that. I'm used to that in times like this. This crisis came from the blindside, but it's all the same. It's all the same. So we don't have the exact calculation of the extent, but we feel very comfortable that we will endure. This is how we see it. And we will get back to you whenever we need to report, and we will report to the extent of our knowledge at the moment that we are finishing every quarter in order to give you clarity at the extent that we can. I don't know if I made myself clear.

That makes sense. And I think we have a fair amount of data to understand the industrial dynamics, where you have large clients that might need a little bit of time to pay and then you have different segments. I think while I personally have less data today is on the Office segment and the degree to which your clients need discounts or deferrals there. Could you provide a little bit -- we also have a lot of details on retail, I think, but could you provide a little bit more color on the dynamics sort of discounts versus deferrals in the Office segment and how you see that market in Mexico specifically, please?

Let me answer it like this. Let's see, it's a little folklore, but I will tell you this. You wouldn't believe what is happening to us -- to everybody, not to us, what is happening in the market. Because I am still receiving from companies that are open and running and companies that are selling even more than they were selling before because they are opening and they are essentials, et cetera, et cetera, et cetera. I am -- I have been receiving requests for discounts. I'm still receiving requests for discounts. In the Industrial segment, in the Retail big box segment, companies that are still open, you need -- in our position, we need to be close to our tenants and keep an open ear, always, an open ear and an open shoulder because everybody is crying right now. But it's only understandable. The situation is very difficult. So I would like to say that you wouldn't believe the names of the companies that are still requesting for discounts on the rent, for whatever the reason, because they need to have a very large payment, which is a supermarket operator. And he said, yes, I'm selling more but I'm selling more money on the products but I have less profit. And the products that I have more profit, I don't sell anything. So I need to replace that profit. I need you to help me. So in a way, it's understandable. It's getting close to the suppliers. In this case, we are the supplier of space. And we need to listen to them, and we need to examine the situation and come up with a fair solution. But it's not -- I wouldn't like to tag not a sector and certainly not a client. All the sectors have the different types of suffering. Of course, it makes more sense, seeing it from far away that industrial will need only deferrals. The factories and the distribution centers will eventually pay the debt. And the retail is open because the retail is closed to the public, and they are not producing anything and just carrying on with the expenses. But from far away, it's true, but I'll tell you that when you are in the middle of it, you know that's right. So we still have, in the office space, we still are receiving -- and again, companies that are still open, the office is open because the company is essential, their office is open because they need to support the consumer centers. And they are still asking for discounts and deferrals. So we need to be careful, giving away money is pretty much very easy. And we have, twice a week, committee to review and authorize and approve any discount that we need to give because this count that we give away is one that we are not going to see back ever. So I think I made that -- a short answer very long, but that's the way how we see it.

And Nik, in terms of the office, there are 2 theories on the market. One is that there will be companies reducing personnel. So probably, they will be reducing their needs of square meters. But on the other hand, even they reduce their number of employees, at the end, those employees will be moving more space due to the final extension. And obviously, I can tell you a fact that, of today, I haven't received any of our office building any type of space reduction. Obviously, they have been framing discounts of reliefs the deferrals but not reducing their space as of today. I'm pretty sure that will happen, yes, but it's not the ruling or the majority that will be asking for it because we haven't received as of to date any reduction due to COVID.

One last comment on that, Nik, the reduction of what we saw in vacancy or the increase in vacancy in the office space is something that happened before COVID. It has nothing to do with COVID.

COVID, yes.

And obviously, you can see the trend of these service properties, which continues to increase in occupancy and, in particular, in the Office sector. So we're not in the business of speculating about the future, but we feel pretty comfortable with where we're sitting today.

And just another thing, and I didn't answer Sheila on our sales. The cap rate -- the combined cap rate on -- that we are selling those 2 industrial portfolios, just on the buildings, on the lease space, it's 7 1/4%. I mean if we take under consideration the land that it's attached to them will be a 6.43%. But just the GLA, which is the buildings, will be 7.75% cap rate. No, 7.25%, 7 1/4%.

Our next question comes from Mr. Carlos Peyrelongue from Bank of America.

Question is related to CapEx and dividends. If you could provide an update on your CapEx plans, particularly on expansion, would be very useful.

Carlos, when you mean CapEx and expansion, you mean development?

Yes.

I think -- I think that we have said before that we are going to finish what we started and we cannot stop. Everything new is on hold. But we are going to finish the transactions that are underway. We are in the middle. We gave -- we signed a contract, and we are waiting for the approvals. And those, we are going to finish them. Where we are building and we are at the middle of the construction, we are going to finish it. But everything else is on hold.

And just to -- I'll take the opportunity to give you on things that we are under construction. Andre already mentioned we have signed a lease, a U.S. dollar-denominated lease with a global leader on e-commerce on the Tepozpark, the FRIMAX portfolio for almost 45,000 square meters on the 10-year lease. And another one similar to this with the top milk producer for an additional 50,000 square meters on the same park, on Tepozpark. So that's on the middle of the COVID, we are signing those leases. So the demand is there for those type of buildings, which is mainly what we are -- we have under construction process right now.

Our next question comes from Mr. Gordon Lee from BTG.

Two quick questions. The first is I was wondering in the exercise of seeking to preserve and maximize financial liquidity if the suspension of the distribution was ever under consideration and if it's something you'll consider going forward, temporarily, of course. And then the second question, and I think if you look historically at recessions, obviously, we haven't seen a recession of this particular magnitude in many, many years. But if you look at '95 and you look at 2009, '10, it seems that retail occupancies stabilize in the mid- to high 80s. Do you think that's a reasonable level to assume for the retail portfolio once the oxygen of these deferrals and discounts has ended and tenants have to face the economic reality of a contraction in GDP of the magnitude that we're likely to see?

I will now take the first one first. I think we have said this before, we answered to 2 different constituencies. In our pool of investors, we have identified investors that are dedicated to the dividend and investors that are dedicated to growth. In general, I think we need to decide on whatever is best for the company. But I think it's best to take care of all of our investors and take care of all of our tenants. So the decision to continue to distribute at least some of the results, even though it's very appealing to buy back shares, as Gonzalo has explained earlier, I think that we need to be very concise on what we want to do to the future. First of all, let me remind you that we are buying to distribute at least 95% of the fiscal results. This particular year, I don't think that would be a problem because the fiscal result is pending on the valuation that the currency has had up to date. But on the other side, I think that we will make decision based on our pool of investors and on whatever is best for the company. I don't see in the future to withhold all the dividend. And the second question was about...

If you think -- what do you think of the retail vacancy or occupancy?

Once the discounts have been digested by the market...

I remember very well -- pardon, Jorge. Sorry, Jorge. I remember very well '95, and we expected, as you say, to see our occupancies on the 80s. It didn't happen that way. We didn't get back the 90s. But in this case, I think we can breach a 90, but in this time, I think that there's triggers that can help everything gets back to normal and better than normal, pretty quickly. I mean all the large nations in the world are seeking for a cure or a medicine or a vaccine. And if they get it, I think it will be a game-changer. And everything will get back to normal faster than it usually take to get back to normal. I don't -- I won't be pessimistic, I'm more optimistic.

Our next question comes from [ Mr. Anton Montre Cotter ], GBM.

My question regarding capital allocation and leverage. Can we expect debt prepayment, the [ million ] bond repayments of last week? And do you plan to repay the credit line in the foreseeable future?

Your question was about debt repayments and the use of proceeds of the recent bond?

Yes, in terms of capital allocation.

Okay. Yes, the objective obviously is of the bond that we recently launched in the market is to repay short-term indebtedness. As we've always mentioned, part of the strategy of the company is to have long-term debt as long as it is possible. We've already paid all of our short-term bilateral lines of credit. So we have those fully available for the company right now. I mean as of today, we've already made those payments. Obviously, you'll see those reflected in the following quarter. And the idea is to use the vast majority of the proceeds received from the bond to repay debt. We're in the middle of negotiations right now, a couple of our secured loans. And without getting into a lot more detail, depending on how those negotiations go, we'll decide which we end up paying. But yes, the idea is to have as much of the proceeds as possible used for debt repayment.

Our next question comes from [ Jose Carlos Armand ], Silao Mexico.

It's a quick question. In your last report, you mentioned the acquisition of 5 properties from Hercules portfolio. Could you give us more color on the location and what kind of tenants have you signed with? Are they more related with manufacturing or logistics?