Grupo Gicsa S.A.B. de C.V. (GICSAB) Earnings Call Transcript & Summary

Good day, everyone, and welcome to the Gicsa conference call. [Operator Instructions] It is now my pleasure to turn the call over to Rafael Borja of i-advize Corporate Communications. Sir, you may begin.

Thank you and hello, everyone. I'm very pleased to welcome you to Gicsa's First Quarter 2020 Earnings Conference Call. Joining us today from Gicsa are Mr. Abraham Cababie, Chief Executive Officer; Mr. Mario Martin, Chief Operating Officer; Mr. Diodoro Batalla Palacios, Chief Financial Officer; and Mr. Avril Carenzzo, Treasury and Investor Relations Officer. They will be discussing the company's first quarter 2020 consolidated results per the press release distributed by the company yesterday. If you wish to be included in future distributions, please contact us at i-advize New York at (212) 406-3693 to be added immediately. A special note to any members of the media who are joining us today. We would like to remind you that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. If you're a member of the media and wish to direct any question to the company, please contact the company directly after the call. Also, I just want to mention that during this conference call, comments made by management may include forward-looking statements, which are subject to various conditions and uncertainties based on a variety factors. These forward-looking statements may differ materially from actual results. Thus, we ask that you refer to a disclaimer located in the earnings release prior to making any investment decision. It is now my pleasure to turn the call over to Mr. Abraham Cababie, Chief Executive Officer of Gicsa, who will begin his presentation. Mr. Cababie, please go ahead, sir.

Thank you. Good afternoon to everyone, and thank you for joining us. We will review the results for the first Q 2020. Before I begin my presentation, I want to express on behalf of Gicsa's management and employees our sincere condolences to the families of those victims and express our solidarity to those who have been affected by the pandemic. At Gicsa, we continue to monitor any changes to guidelines issued by federal and local public health authorities and adapt those to our health protocols. I would like to start my presentation by giving an update on the company's controlling measures and business continuity plans to curb the spread of COVID-19 as well as our company's business and operations under the current circumstances. First, let me touch on some actions implemented by the company as Gicsa's main priority is to preserve the health and safety of our employees, customers, visitors and their families. As such, Gicsa is continuously monitoring the progress of COVID-19 effects and have implemented protocols in line with the health measures enacted and suggested by our authorities across the different places where we operate. All our shopping malls and office buildings remain open with essential business, and we have reinforced our healthcare, sanitation and preventive efforts. Furthermore, we are constantly monitoring the health of our staff currently working in our facilities, and we have implemented extreme hygienic protocols in all our shopping malls and workplaces. Our business continuity plan is in place, and our employees are working remotely. Well, now let's discuss some operational and financial actions. As many as you know, in Mexico, on March 24, the Mexican Federal Government declared Phase 2 on the COVID-19 pandemic. And last week, April 21, the government declared the beginning of Phase 3, the more serious stage, and extended the restrictions to contain the pandemic until May 30 at the earliest. We are facing an ambivalent and ever-changing situation. Thus, we cannot reasonably foresee the magnitude and extent of the effects of this pandemic. These [ new health ] measures and practices adversely impact revenues of our tenants and consequently our business, of course. However, we will continue closely cooperating with our tenants and suppliers during this crisis to implement measures designed to maintain business continuity and to try to reduce an adverse impact on our business. We have a solid base of high-quality tenants diversified in terms of industry and geographical locations, which we have close, long-standing relationships, long-term lease and high renewal rate. As of today, we have implemented support programs to partially defer fixed rent payments for April, May and June. Additionally, in order to preserve liquidity, we'll review our budget for the 2020 fiscal year, reducing our operational expenses nearly 40%. And for the time being, we stopped all new development CapEx expenditures. Explanada Culiacan will be delivered after the contingency, and the construction of Grand Outlet Riviera Maya and Cero5Cien will continue at a lower pace. In light of the current circumstances and the impact of COVID-19 pandemic, we foresee significant challenges in our liquidity. In order to maintain such liquidity and protect the continuity of our business, we have entered into standby agreements with certain financial institutions and local bondholders identified with the following ticker symbols: GICSA 15, GICSA 16U, GICSA 17, GICSA 18U and GICSA 19. We anticipate that the common representatives will call for local bondholders' meeting [ in due time ] and such meetings, we will jointly propose, among other things, the ratification of standby agreement, approval of amendments to certain covenants and standstill on the enforcement of certain obligations. Always, -- we're always preserving the value of the note to the bondholders. And it is important to highlight that a majority of the local bondholders have informed us that they are intent to support the proposal. In addition, we have started some discussions with local and foreign lenders. Moreover, we reached out to principal holders of the senior secured bonds issued by Trust 2400 as well by junior PIK bonds issued by Trust 4377, in each case sponsored by Gicsa at the end of last year. We have started discussions with certain such holders, and we intend to continue to discuss measures to preserve the ongoing financial health and liquidity of that issuer trusts. I would like to state that we will take all necessary measures to preserve liquidity, safeguard and -- operations and business with a long-term view of the benefits of all our stakeholders by adapting to the challenging financial and economic circumstances caused by unforeseen events and seeking to maintain the value of our assets in order to honor all our financial obligations and preserve value for our investors. At this point, it is not prudent to set an [ actionable future ] scenario. However, Gicsa is a resilient company. Our management and all our employees are focused on navigating this crisis in the best possible way for the benefit of our society, community and stakeholders. We are convinced that we will come out stronger from this on unprecedented change of events. Now let me pass it over to our Chief Operating Officer, Mario Martin, who will discuss an overview of the company operational and commercial highlights of the quarter. Thank you.

Thank you, Abraham, and good afternoon to everyone. I would like to begin my presentation by discussing some important events that took place during this quarter. I will then provide an overview of the company's operational highlights before turning the call over to Diodoro Batalla, our CFO, for his financial discussions, after which we'll be happy to answer any questions that you may have. This quarter was characterized by good results, although towards the end of March, we began to perceive the first negative effects of the COVID-19 pandemic on our business. We perceived a significant decrease in foot traffic during the last 2 weeks of the quarter and expect this will continue until the end of the [ COVID-19 ]. As part of our continuous innovation, we not only signed a strategic alliance with RAPPI, a home delivery and buying platform, one of the most successful application in Latin America. With this implementation, the user of the application can virtually access our nearby shopping center, make purchases from their favorite shop and receive them in a matter of hours. With this alliance, we are providing our tenants with a new distribution channel, taking advantage of a successful platform of RAPPI. This is one of the many things that we are seeking to implement in order to help our tenants navigate through these difficult times. We closed the quarter we have total 911,000 square meters of GLA composed of 16 properties in operation. Total and proportional GLA increased 9% and 10.8%, respectively. In terms of occupancy rate, our portfolio reported 90%. The renewal rate remained at levels above 97%. Our lease spread closed the quarter at 3.3% (sic) [ 3.3% ]. Cost of occupancy closed the quarter at 12%, and the average fixed rent for the stabilized portfolio reached MXN 397 per square meter. Moreover, we made good progress in commercialization of our portfolio under operation and development. During this quarter, 48 contracts, which represent 10,300 square meters of GLA, were signed. Additional, during the quarter, a total of 36 new stores opened their doors. Finally, at the close of first -- 2020 -- first quarter 2020, we registered a total of 17 million visitors in our commercial portfolio of properties, which, in -- despite of COVID-19 effects that started in March, represented an increase of 1.2% compared to the same period of 2019. This concludes my presentation. Thank you for the attention. I will now turn the call over to my -- Mr. Diodoro Batalla, our CFO, who will review the final numbers and financial performance of the period. Diodoro, please go ahead.

Thank you, Mario, and good morning to everyone. I will now review the financial performance for the period. During this quarter, consolidated EBITDA was MXN 876 million, representing an increase of 12% compared to last -- to first Q of '19, while Gicsa proportional EBITDA reached MXN 697 million, also a 12% increase compared to the first Q of last year. Furthermore, consolidated NOI for this quarter reached MXN 955 million, while proportional NOI reached MXN 777 million, representing an increase of 16% and 17%, respectively. Regarding our balance sheet, total assets reached MXN 73 million while total liabilities reached MXN 41.9 million. Both remained stable compared to the end of 2019. In terms of CapEx, during the first quarter, Gicsa invested MXN 920 million for the projects that we have under development. And as Abraham explained, in the end of March, we stopped all new development capital expenditures until we are in the position to implement new plans for finishing Explanada Culiacan and continuing Cero5Cien and Grand Outlet Riviera Maya. Our management is focused on preserving liquidity and maintaining the operability of the business under the most favorable conditions possible. At this point, we cannot estimate with any degree of certainty the extent of the effects in our business in a medium or long term resulting from the pandemic and related regulatory and policy measures. The nature and magnitude of the impact in our business will depend, among other factors, on the duration and scale of the pandemic, the federal and state regulatory and discretionary measures adopted in Mexico, the impact of our employees, customers and suppliers, the cost and availability of financial and capital facilities and the general performance of the economy on a global and local scale. With that, we'll conclude our presentation. We appreciate your continued support and interest in Gicsa. Thank you for your attention. Now let me open the floor for questions.

[Operator Instructions] We'll take our first question from Nikolaj Lippmann from Morgan Stanley.

I have 2 questions. First, if you can provide any color on policies around discounts in these difficult months for different sectors. Or issue kind of your general thoughts about that a fairly substantial part of your portfolio is in the entertainment and restaurant area, one. And two, in terms of CapEx. I'm sorry if I missed it in the beginning, but could you give us the expected CapEx and then maybe a rerun down of the list of projects that will pause versus the projects that will continue?

About the projects that will continue, it's all the properties, the pipeline that we have on CapEx, on ongoing consumption. All of them now were stopped. The only ones that are going to be continued will be -- well, some have finished, Explanada Culiacan. That was going to be ready to open during this second quarter. We expect that we will open it before -- at the end of third Q or beginning of 4Q, Explanada Culiacan. And we will continue the review that we need to go slowly only on Cero5Cien and Outlet Riviera Maya. That's it, but on a lower pace.

Got it. And what is the expected amount in that -- you're looking for in terms of total CapEx for 2020?

Let me tell you. It is difficult to state at this moment a specific amount of CapEx that we are going to invest. But I can certainly tell you that for Culiacan, we are only MXN 50 million -- we only need to invest MXN 50 million more to conclude that. That -- those MXN 50 million, I think that we will invest after this crisis. And for Cero5Cien and Outlet Riviera Maya, we are going to wait until this contingency passes, and then we'll rephrase all our plans in that. We will continue at a very low pace, but it is not wise to tell you right now a number on a specific investment in those 2 projects for this year.

Makes sense. Okay. And in terms of the discounts, can you provide any color in terms of policies and/or thinking in relationship to discounts for tenants in this period?

Diodoro?

Mario, can you answer that?

Yes, of course. Nikolaj, I do not hear you. We're working in our -- very close with our clients to defer some part of the payments between April, May and June. In some cases -- specific cases in some projects, we'll give you time to pay deferred rent, and this deferred rent is around 30% or 32% of each month. I mean, April, June and -- April, May and June. That is around 1 month of rent in these 3 months. And we're working with them to pay in the last part of the year or even, in some cases, in the first quarter of the next year. In some cases, specific cases in some part of -- in some projects, we'll give some discount, no more than 1 month in the last part of the year.

[Operator Instructions] We'll take our next question from Francisco Chavez with BBVA.

I have 2 questions. The first one is a follow-up on the previous one regarding the rent deferrals. Can you give us an idea of how many of your tenants have approached you in order to get some relief? And if you can give us a percentage of your annualized rents that will be subject to deferrals? And the second question is if you can give us any color on the negotiations with the bondholders. What can we expect? Can we expect some standby for -- and how many months? Or -- and what will the company will -- give back to the bondholders in order to preserve the value?

And about -- and we're going to answer the first one about the tenants. Mostly, we started to approach them. Gicsa, as you know, we are not the biggest, but we are the fastest to react. And we have a very one-on-one relation with all of the tenants. So that helped us to have this personal one-on-one relation with mostly all of them. So we started all our area of [ commercial ] broker [ primarily ] with a person team to take care of each of their tenants, their -- our customers. So we approached them. And of course, some of them also come back with us. And while we're talking, it's, of course, only during this [ free ] period. The good thing in each is that, as you know, our map, we are not highly allocated in Mexico City, and we are in all of the different cities in the country. And the pandemic will go -- the longest will be -- as already said by the government, the last one to open is going to be Mexico City. But they already planned that for the first week -- after the first week of May, May 8, by the way, it's going to be starting to open some of the other states. So what we're going to -- what we can forecast, that we will have it in a few more weeks because, as you know, we just started. We are just finishing -- closing April, and it'll be situation of giving some term or giving some financing on the rent is going to be for April, May and, in some cases, in June, some cases. So the exact number, so we are not -- we cannot answer that number at this time. About -- what you asked, about the bondholders, please, Diodoro, can you explain what are we thinking with bondholders -- or with talking with the bondholders, please?

Yes, of course. Thank you, Abraham. Well, regarding the bondholders and also financial institution with the banks, what we are doing with them is, first of all, we are taking good care that we do not affect the original value of their investment. That is very important to us because in order to get them work with us -- we have been working together to assemble a way to make -- to give a relief to the different structures that we have for this temporal effect. It is very important that we all know that this is not a structural situation for the portfolio. It's only a temporary situation for liquidity in this -- during this pandemic. So with that in mind, what we are doing with them is, first, to have a -- we are not going to have any haircut. We are not going to move any of the initial investment. We are not moving the final maturation date for any of the bonds or the loans. And what we are doing is to defer the interest payments with capitalization in order to recognize the value of the money from all the bondholders. And so we are capitalizing as -- the interest in -- for the next 9 months up until the next 9 months because we can start paying earlier if there is -- if the -- if global situation gets better before we pay. And also, we are looking for a -- give them a special compensation in order to make them have additional compensation in terms of the -- for them to work with us. That is the general negotiations that we are having with the bondholders.

We'll take our next question from Guillermo Pacheco with Santander.

Sure. Just wondering, could you give us an estimate that with the current conditions, either if you negotiated with the tenants or the tenants come with you? Just with the current conditions, what is your estimated cash burn per month? And also, considering the nonrestricted cash that you have in your balance and given that number that you have in mind given the cash burn, how many months do you have of liquidity?

Yes. With the cash on hand that we closed for the -- at the end of March and considering all the expenses, we have around 4 to -- depending -- we are also cutting all our expenses. So taking into account that almost 40% cut in expenses, we have around 6 months of expenses already covered with the cash that we have.

And the safe...

Assuming...

Sure.

Assuming that we do not collect any money, which we are.

And it's Abraham, no?

Just that -- sorry, that is Diodoro. This is Abraham, sorry, to be clear so we don't end up confused. Our cash available, that's available, you can see -- you've seen our balance, we have a -- as you hold -- called, our cash balance, if we receive the answer to be 0, that is -- of course that's not logical and it's not real. We're already in April and we have received over -- almost, I don't know the number, but MXN 280 million. So if we receive 0, that is the answer. But of course, we'll go for much -- that is like a reserve just to get it. We are looking not to touch the reserve. And we think that the reserve is going to not be needed if we come to finalize the agreement of -- with the bondholders. So really, with the haircut that we did on the expenses, and, by the way, we are looking to keep them that way or close to that, we are getting this situation -- for us, it's called opportunity -- in not a good way. It's an opportunity that we will keep us on touch for working smaller and leaner with the same and better results. We were large. We were like saying we were size large. We're going to go to lean or extra small. So very clear. And this is a personal work day a day run by me as a director of the company. And I'll extend a little on your question, but this is very important for me to you and everybody to know. We are looking to have liquidity. All of you know that we were basically the only company 12 years ago that passed through a very bad situation on that economic 2010. At that moment, it was a Gicsa crisis, even though it was a world crisis in nominally. But in Mexico, it was almost only Gicsa with big, huge problem. There we did have problems of liquidity, of over-debt, of when -- many of you follow us and know our history. And doing a lot of things, we came back harder, stronger and cleaner. But this one, not a Gicsa situation. This is not a Gicsa situation. This is a worldwide situation. And it's not real estate situation, it's almost 98% of all the business. And I'm not going to expand on that, but you all -- everybody knows. Even though this situation personally for me and for our company is to have a very good strategy and to have an opportunity to become really, really, really stronger. We have it very clear, at this moment, we cannot be like very particular in the plans that we have. But we are going enthusiastic that we're going to keep on having a better EBITDA, even though I repeat, because the EBITDA compounds of all your income less all your money that you spend. So the money that we're going to save taking care of the expenses and other expenditures is going to come back very stronger on our numbers.

To your point, Abraham, and also considering Gicsa 10 years ago, obviously, the structural change was bigger. The debt was bigger. The loan-to-value was higher. And considering the situation now, we all think this is a shock -- short-term shock. It be -- can be 3, 6 or 9 months, but it's not a structural change. And also the loan-to-value is not as close to what was 10 years ago. So considering that wouldn't be more moderate just to pull a short-term line or to increase the long-term value -- the loan-to-value a little bit instead of pulling these massive negotiations with the debt holders? I know liquidity is important, but is that the correct signal do you want to launch to the market that you have to stop all your payments just because a shock of 3, 6 months is on the market? Given your tenant base, someone would consider that it's quite a high quality tenant base, and that they are used to make some remodelations that can last for 1 or 2 months and that they can still be paying rent. So wouldn't be aggressive just to call this debt negotiation right now for that amount of liquidity?

Let me tell you something. And again, this is opportunity, but I would say opportunity in a good way. Let me tell you, in the market, I'm strict with words. I never use the word always or nobody because those [ are not distinct ]. But at this time, really, nobody has what we have in our inside knowledge of working on a big crisis. At that time, during 2008 to 2011, almost, we were very, very complicated. As you said, our LTV today is less than 40%, 37%, 38%. That time, we were 92% LTV. Our numbers of projects are none yet, there were 3 and 4x of what the projects are today. Only our debt was over [ $2 billion and I'm talking in dollars ]. Our projects pipeline, I mean, on CapEx, we have at that time, 27 projects. So they were talking about 4 or 5. 27 projects for real ongoing. And a lot of situations that we have, debts and problems and our suppliers, a lot of it today. It sounds like we are -- maybe what you -- about your question sounds like we are doing too much trying to kill a fly with a bomb. Now let me explain you. Liquidity is very important. We will never ever pass nearby. We're not even close a situation that we passed last time. And in this case, what we did and we think very responsibly is that as we are to say before, nobody will get hurt. First of all, nobody. By the way, we are the ham of the sandwich. You all know that the income that we already receive income from 2 pages, rents and income of Cero5Cien by that way. I know there a lot of Cero5Cien people and they analyze and they didn't look at night about Cero5Cien when we launched it to the market. But let me tell you that Cero5Cien will be a big -- not going to tell it like [ Cero ], but a big good deal for Gicsa because it's going to give us a lot of income. And by the way, Cero5Cien is a product that we sell on pesos, but it's naturally a dollarized product. Incredibly but have [ been paid when they ] have a list of selling -- seller resident, I don't know, MXN 50 million when it was a MXN 19 for a dollar. Today, that is MXN 24 or MXN 23. Incredibly, we are, as we speak, we are closing 3 deals. Our business is in pesos. So we are saying if we close now, we will give you the last price list. And people who's intelligent that understand that the product is less dollars so -- by the way, we're closing the Cero5Cien of course, with the term to pay assets as usual. Well, coming back and answering clearly, sorry, because when I take the microphone, I extend a lot, sorry. A lot of you guys know me, and I was personally interested in having this conference with all of you. So you have a direct thinking of me that on top of the operation at the company that I guarantee you, we will come very, very strong and very solid because we are taking that decision responsibly. We are not doing this as it sounds like you feel too much that you're asking to the bondholders? No, because -- let me be clear. The income is going to be affected. It's going to be 2% of sale, whatever. It's going to be affected on time only. On time. It's going to be -- we are helping our tenant to pay and defer. We have 21, 22 portfolio on Gicsa ongoing and asking the bondholder just a little time and capitalizing the interest. But by the way, we are not losing a peso. And by the way, we are not asking. Let me tell you something because I went wrong with my speech. At that time 12 years ago, all of you can check. Nobody who didn't ask. Nobody gave it. We never had discount. We never ask give us [ a defer ]. Nobody give us, and we did not ask for nothing. We [ sell transfer of dues ] of the property, and we did a lot of extra job to came out strongly. Nobody can say that we paid them 99% of the debt. Nobody can say that we didn't pay our interest than we are told. We did that for no discount of nothing, not even to the gardener on the property. Nobody, no supplier. Believe me that this time is not going to be different. The only thing that we are doing, and by the way, we think it's very good to do -- sorry, but it's not correct, and it's not the way that if we are like a chain of everything. Now we do help our tenant and not our bankers because we have the government. We have to pay that taxes. We have the payroll. We have to pay to our people, and we are doing it. And the other third thing is the bankers the interest serve, we are going to pay them. And by the way, we're going to pay the interest on the interest, that is capitalizing. I don't think there's [ now cause, why it's actually ] -- it's a chain of command where everybody has to help. We are not putting a single peso or a single dollar. By the way, it's only a little error of few months. It's the same. But let me tell you, we can go -- and as you know, we have few assets that is on our pipeline, properties. We can go and ask to a bank. Hey, lend me, whatever, MXN 1 billion, MXN 2 billion, MXN 0.5 billion, whatever, under these assets. And with that money, we pay the interest of service our bonds. We can do that. But it's much easier on this time that we give you guys a call, and we value to sell from and help out on deferring and capitalizing the bondholders' interest of these few months.

Just finally, wondering, for example, Abraham, if the debt holders don't want to take this -- I know they are not going to lose a single peso, but they are obviously going to take the carry. And for example, they want to take -- they don't want to take the 100% -- take down the past. They can -- you are willing to negotiate a little less maybe 50%? Or would you be willing to take this exit, exit as you say that, let me go just to the bank and to take MXN 1 billion, MXN 2 billion loan collateralized with my asset, given now the quality of my assets and given my acceptable levels of LTV?

I'll give you that as an example. But as you know, all the bankers have closed to new loans. Definitely, all of the bankers, maybe here around the line -- well, a lot of you are bankers. A new loan, they are all 100% closed. Everybody is working with all their loans because every -- all the sectors, industrial, commercial, [ life plan ], the government, everybody is asking for this year around the services. So we are just doing just the same and for a very, very, very short period of time. I think that's most like everybody has to carry their share. I don't think it's correct. But I don't know, if I owe you a bond of MXN 1 billion, you think like nothing's happening, and I go to another bank and tell me, hey, hello. I'm here, give me MXN 1 billion or whatever to pay the other guys. I mean it's that quicker, simpler and fair is to believe that the same one that are doing business with us but they always have been doing. And they were going to keep doing business, and they have no harm, no harm on their investment. I mean if you know a bank that is working today with new loans, let me know. But especially, nobody on this pandemic in Mexico and in the real estate business, there's no loans at all. So the correct way is to do it, and we are doing it responsibly as we are doing it.

And let me just complement a little bit by telling that this measure that we are taking is a preventive measure. It is important to state that this is a preventive measure that we are taking. And with all the bondholders that we have talked, which is the majority of the loan holders, they'd be of this proposal with us because we all agree that we don't know how long this is going to be. And we -- the best thing that we can do is to direct the liquidity we have to preserve the source of the income, which are the properties. And that is why we are also stating that this is not a -- it is up to some time. If the crisis only last for 3 months, then we will start again paying and we don't have to take all the time, of course. This is a preventive measure, and that is very important to state that it is not a necessary measure. It is not something that we are doing only in our site. We developed this in accordance with the bondholders. And together, we came up with this solution with the majority of them.

And by the way, it's better, and we also learn a lot of things from the past. And by the way, this is our preventive measure and is better for sure to work preventively than correctively. So as Diodoro explained, we are doing it and what is preventive. If we don't need it, we're not going to use it because we are not looking to over -- have an over debt, because at the end, increasing and our goal today is to lower our debt, yes or yes. On the next 2 years or 3, we're looking to have 0 debt on the corporate side, only debt on project to project. So believe me, what we're doing to do this preventively and in case needed.

Sure. I think it's good that you emphasized that it's a liquidity condition, not a solvency because the signal that it sends, it may be another.

No. You read our balance. You will see that is just a matter of liquidity and not a matter of solvency. I mean the numbers are very clear. The numbers are very clear.

We'll take our next question from Erica Roa with Mackenzie.

I just would like to know what happened with the cash and cash equivalent because I see a 46% reduction from last quarter to this quarter. And then from my understanding, the look at Mexico is being just 1 month. So I would like to understand that. And my second question is related with the debt negotiation. Does that negotiation, it will be also cover the security bond that was issued in December?

Can you repeat your first question, please? I didn't catch the question.

The first question is about cash and cash equivalent. The earnings release, Page 20, and we can see there is a 46% reduction from the last quarter of last year and the first quarter of 2020. And I would like to understand what happened with the cash compared these 2 quarters because the lock-out and the measure of closing because of COVID-19 in Mexico start in March. So you have normal performance from -- in January and February. So I would like to understand why the cash reduced 40% and compare 1 quarter to the other one.

Yes, of course. Let me -- it's a very simple answer. First, the difference is around MXN 1.3 billion. Out of those, the near MXN 1 billion was invested in development because we started January, February and almost all March in order to stop the construction processes in an orderly manner. So we invested around, round numbers MXN 1 billion in development. And the other MXN 300 million, we prepaid a loan that we have for Cero5Cien that was -- it has a very negative carry cost for us. And so we decided to get rid of that loan. So that is mostly what composed the difference.

Okay. And the next question is the net debt negotiation is also going to cover the secure bond that were issued in December.

Abraham, you want me to answer or you can answer that?

Thank you, please.

Okay. Yes. Yes, Erica. We are -- we also -- we are well taking the same steps for all debt. I mean we are treating all debt in the same way. For the bond that we issued in December, that is comprised of a trust of 9 properties. We started in a different stage because of the steps that we have to take with the holders is different. We have to go by newer law. So we have to sign in the agreements with the bondholders and then we have to work across them in a different protocol. And we are right now in that process in order to work across the major bondholders and to start the process of what the general conditions that we are seeking are the same for all the debt that we have.

Okay. And I understand there is a measure that we have to be done in terms of preventing liquidity tardiness. But that is going to be very hard to assume for the international bondholders. So I know Mexico is in a special situation because the government doesn't support the private sector. But I think it has to be very well explained in order not to use like negative perception from the international bondholders.

Yes. Yes, you are right. That is what we are taking all the necessary measures accordingly to that market, and that is what we are going in a different pace with that specific structure. And we are having also counseling from specialist from international bonds, and we have very -- a lot of experience in conducting this kind -- this type of situation. And we believe -- and we are aware that we have to treat every portion of our debt in the different protocols that they have to be taken.

We'll take our next question from Adrian Huerta with JPMorgan.

My question has -- is related to, obviously, this -- we're seeing an impact in the short term a couple of months on the shopping malls. But what are your views on the more the mid-, long-term impact of this? I mean there's definitely going to be probably less traffic on stores. There's going to be less investments from many retailers as well going forward. What do you -- and where -- what do you think are the risk on the net asset values of your properties over the next 2 to 3 -- let's say, the next 2 years?

Adrian, this is Abraham. Your question, just to get it clear is what we see on the -- on our malls after this?

Yes. I mean what do you -- I mean, if we look at 2021, I mean, you think they will be operating with a little bit less occupancy or leasing spreads will be lower? There is going to be a little bit less traffic. And from 2 fronts, one is from what this pandemic might create, which is I mean, people might not be willing to be as often on malls like they used to be before? And second, on the back of the economic impact that this will have as well on Mexico because things will change as well for the overall Mexican economy.

Well, let me answer you that because it is basically more on numbers, it is strategic. And again, being on the side of fixed rate today, we are doing 20 projects when we were on all times over 50 or more. So believe me that we decide to be on this side just to have this one-on-one relation and to have clear time to do our best strategy. And today, again, it's an opportunity for us. What things were going to come? We are not sure of anything, but I am sure a few of them. People are going to come back and is going to buy, and they're going to spend. And they're going to go and have fun because people, and everybody definitely want to do is open our doors of the home, go out and live the life, and live the life in our centers. So people on the malls, recently, they're going to go to a mall. Opener projects that have a diversification different. But that classic 4 walls mall, like the old classic malls in Mexico or even in the U.S. are the malls that we all know. Most of them must -- you have a component of entertainment. So entertainment now is going to be more stronger than ever because people want to have fun. They want to enjoy family and our concepts are very family-oriented. People would like to have that differentiation. Now they're going to be more selective to where to go and where to buy. So we're going to choose a place that they will give them more space, more air because the virus [ become active ], going to stay for a while so everybody. Everybody was going to be more cautious. We are not going to be looking to be in closed spaces, in too saturated spaces. And our projects, like La Merida, Paseo Queretaro, [ Las Plazas Outlet ], all of them. We have worked and they are done with this concept of open air, big, big huge areas with a lot of space of tenants coming and a lot of entertainment. We are sure that we're going to do it. These exclusive deals that we signed with RAPPI, RAPPI is the biggest Latin America application of delivery, and this is the closing only with Gicsa, by the way, also going to help. And it's not that we're going to make our tenants sell from the workout or from our online. This is a system that we create, they're going to be that sales that is going to be done in our malls. And we're going to do also a system where doing pick up and you pick up or you buy through our malls. We're going to give you free rides on the go-kart on the globe. We have a lot of strategies we're doing, that's -- sorry, but almost, almost, nobody can do it because they didn't invest on what we did the last 3 years on our vehicle infrastructure of entertainment and now we're expensive by square meter construction of doing this open space concept. And of course, going to be reduced? Yes, we're going to be reduced, but you know what? Unfortunately, people forget and he comes out and forget what happened. And they're going to be but they're going to spend and they want to do all the things. But I think we're in a much better position in each of the cities that we are, that we can offer them more for less. And we're going to keep on doing more strategies to be stronger in our content, more entertainment, more promotion, better wages, lifestyle. That way, we been very strong, and we're already doing that work, working now. We have always been matter work on worst case scenarios. So we did this until we see that kind of time is coming.

[Operator Instructions] We'll take our next question from Froylan Mendez with JPMorgan.

So could you give us a little bit more details on the operating expense reduction that you've mentioned? What are the sources of these reductions? And if you expect them to be permanent? Or there are only the deferrals of these expenses? And secondly, have you -- are you being successful receiving maintenance quotas as of April? And have you received any request for early termination of any contract from your tenants?

Mario, can you answer this, please?

Yes, of course. And so with our booking, we have reductions that Diodoro mentioned, around 40% of our expenses and we try to maintain, of course, not when the pandemic finish. But we try to reduce, in a normal situation, around 20%. Not only in payroll, I mean, we're talking about everything. But we are working very hard in a safe saving program in every centers. About the tenant that want to lease right now, we don't have any -- asking for lease contracts, even commercial shopping mall or -- don't forget that you have 30% of our income in corporate office also. We, right now, working with them, try to negotiate the deferred payments about the next -- in the next quarter. More of them we're talking in negotiation try to pay attaining deferred during the last quarter of the year, or in some cases, in the third quarter of the next year.

And regarding maintenance quotas, are you being successful?

We don't have any quota with our tenants. Everybody are paying not only maintenance cost, also the [ policy ] cost that even there's no shopping mall or not a store or shopping malls close, we'll continue in the social media to visitors in shopping malls. So they are paying, too.

And Fernando, just to complement, it's also important that -- state that we also made temporary reduction. All the executives of the company deducted the salary up to 40% for the next 3 months, and the second level up to 30% for the next 3 months in salary.

We'll take our next question from Alejandro Chavelas with Credit Suisse.

Just a quick one. In terms of collection for April, I think you mentioned after 1 year of MXN 280 million so far in the month. Could you just perhaps cover -- just tell us what are you seeing in terms of collection for April as a percentage at usual levels?

Mario?

Alejandro, nice to hear you. We're working right now with our tenant, right, to collection. We estimate for April, May, June, it's around 50%, 55% of our invoice. Does it [ pay Alejandro ] with my answer?

Yes. Just -- if that's fixed and variable rent, right? That's only the collections, right?

Yes, only collections without any variable rent, because in the end of the March and also April, May and June, we don't have -- we don't expect to collect some variable rent.

We have a follow-up question from Francisco Chavez with BBVA.

Yes. Just a quick follow-up. I know that the attention has been focused on shopping malls, but if you can give us any color on the office segment. Are the tenants paying their rent on time or they are also looking for some relief?

Yes, Francisco, that I mentioned before. I don't have any relief or any petition or question asking probably for any corporate office right now at the moment. We are -- the majority of our tenants are AAA. Some of them, they are paying, even with the -- even in dollar when the exchange rate is high, they have to pay. Some of them, they ask us for some period of time to pay and we are working in turn with them to pay in the next quarter, or in some cases, in the last of the year.

And there are no further questions on the line at this time. I will turn the program to Mr. Cababie for any closing remarks.

On behalf of Gicsa and its team, I want to express our appreciation for your interest, and we thank you for taking the time to join us today. We look forward to speaking with you all over again and keep you updated for the latest developments in Gicsa. Please do not hesitate to contact us with this -- with any questions you may have. Have a good day.

Thank you to everyone. We'll get back to all of you.

This does conclude today's program. Thank you for your participation, and you may now disconnect.