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

Good day, everyone, and thank you for standing by. Welcome to GICSA's Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to turn the conference over to Rafael Borja from InspIR Group. Sir, you may begin.

Hello, everyone. I'm very pleased to welcome you to GICSA's Second Quarter 2022 Earnings Conference Call. Joining us today from GICSA is Mr. Diodoro Batalla Palacios, Chief Financial Officer. He will discuss GICSA's second quarter 2022 consolidated results for the earning release distributed by the company last Friday, July 22. If you wish to be included in future distributions of press releases, please contact us at InspIR Group in New York at (212) 710-9686 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 are a member of the media and wish to direct any questions to the company, please contact the company directly after the call. Also, please note that during this call, comments made by management may include forward-looking statements, which are subject to various conditions and uncertainties based on a variety of factors. These forward-looking statements may differ materially from actual results. Thus, we ask that you refer to the disclaimer located in the earnings release prior to making any investment decision. It is now my pleasure to turn the call over to Mr. Diodoro Batalla, Chief Financial Officer of GICSA, who will lead today's presentation. Diodoro, please go ahead.

Thank you, Rafael, and hello, everyone, and welcome to our second quarter earnings call. I will briefly review our operational and financial results for the second quarter of 2022 as well as the recent tactical and strategic measures that we have implemented to improve our company's balance sheet. After that, I will be happy to answer any questions you may have. During the second quarter, we continue implementing strategies focused on preserving liquidity and reducing our debt leverage while advancing in the growth plan under our business strategy. As a result, we achieved 2 milestones during the quarter. First, as we communicated in the first quarter earnings report, GICSA completed the sale of Lomas Altas. The proceeds reduced to prepaid bank loans contracted with Fondo H, Sofoplus, Ficein, Exitus, well as the loan related to the Lomas Altas property. These prepayments totaled approximately MXN 742 million. Currently, we are evaluating the use of the remaining proceeds, which will be used to improve the company's debit profile. As a result of the prepayment, we made -- we closed the quarter with MXN 28.2 billion in debt, a decrease of 1% compared to Q1 '22, resulting in a loan-to-value of 38%. Secondly, consistent with our financial strategy on July 7, 2022, we announced the signing of an agreement to sell our Explanada Aguascalientes property for approximately MXN 400 million. The amount of this transaction will be payable in 4 equal installments and the proceeds as agreed with the bondholders will be used to partially prepay our local GICSA 15, 17 and 19 bonds. Half of the proceeds from this sale will be allocated to the partial prepayment of these bonds with the remaining balance held in reserve until the release date when the transaction will be completed, in accordance with the agreed terms. Upon completion, the reserve amount will be used as partial prepayment of the bonds. We will still -- we are still working in the commercialization of the remaining nonstrategic assets agreed with the local bondholders, and we expect to announce solid progress over the upcoming months. Now moving to our operational performance. We closed the quarter with 951,000 square meters of GLA comprised of 17 properties in operation, with GICSA's portion of GLA, representing 85% of that amount. During the quarter, we continue to see a recovery in the number of visitors to shopping malls within the portfolio in operation. We welcomed 18 million visitors, a year-to-year increase of 33%, and which represents 97% of our prepandemic leverage. The adjusted occupancy rate during the second quarter was 82% in our portfolio. We signed 79 new leases equivalent to 28,000 square meters and 69 new leases were opened corresponding to 12,000 square meters. Regarding the Cero5Cien residential project, up to date, 61 units have been sold and 18 units have been delivered to the clients. Moving to our financial highlights. During the second quarter, consolidated and proportional NOI were MXN 800 million and MXN 665 million, respectively, year-over-year increases of 7% and 8%. Consolidated and proportional EBITDA were MXN 762 million and MXN 627 million, increasing 12% and 13% compared to the same period last year. We reiterate our commitment to developing and successfully execute the strategies that strengthen GICSA's financial position by continuously analyzing our debt structure and monetizing nonstrategic assets, we expect to reposition our company for long-term success. Also, we still have many challenges ahead of us. We are convinced that the soundness of our property portfolio and the experience of our team will enable us to continue effectively address them in medium term. This concludes my presentation. Thank you again for your attention, and let's now open the call for questions.

[Operator Instructions] And we'll take your first question from Simon Fuenzalida from Moneda Asset Management.

My first question would be, how was the cash collection during this quarter?

Cash collections in this quarter was about MXN 380 million a month, which is roughly -- and we are still like 10% below before the pandemic levels in collection and in invoicing.

Perfect. What was the reason of the increase in other expenses of about MXN 286 million. That is the result of the property sales that we did for Aguascalientes. We sold the property at the commercial value of the land. But in accounting, we have -- we capitalized a lot of expenses and that, of course, [ doing it for ] part of the transaction, and that gives us other expenses in results because the value that we have in the balance sheet is higher than the price that we set.

[Operator Instructions] And it appears that we have no further questions at this time. I will now turn the program back over to our presenters.

Thank you, everyone, again, for joining us today for our results conference call. As a reminder, we are always available to answer any and all of your questions. So please do not hesitate to contact us if you have any after today's call. On behalf of everyone and GICSA, we wish you a great day. Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.