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 Third 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 call over to Rafael Borja of InspIR Group. Sir, you may begin.

Thank you, operator, and hello, everyone. I'm very pleased to welcome you to GICSA's Third Quarter 2022 Earnings Conference Call. Joining us today from GICSA are Mr. Isaac Cababie, Deputy Executive Director, and Mr. Diodoro Batalla Palacios, Chief Financial Officer. They will discuss GICSA's third quarter 2022 consolidated results per the press release distributed by the company yesterday. 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're 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. Isaac Cababie, Deputy Executive Director of GICSA, who will begin his presentation. Mr. Cababie, please go ahead, sir.

Good morning, everyone, and welcome to our third quarter 2022 earnings call. I would like to begin today's review by providing an update on the measures we have taken to improve our balance sheet among other aspects of our business strategy as well as discuss key operating areas of our third quarter performance. I will then turn the call over to our CFO, Diodoro Batalla, who will discuss our financial results. We will then be happy to answer any questions you may have. During the third quarter, we remain focused on managing the upcoming maturities of our debt to preserve liquidity and reduce leverage while advancing the growth plan under our business strategy. As a result, we achieved 2 important milestones during the quarter. We successfully completed the restructuring of our junior notes issued in December 2019 and signed an agreement to extend the maturity of the Explanada Culiacán loan. Diodoro will go into further detail on this subject during his presentation. With these 2 significant measures to improve GICSA's debt profile, we once again reaffirm the confidence that investors have in GICSA's future, and we greatly appreciate the time and effort of all the teams involved, particularly our policy holders for their support that led to the successful conclusion of the restructuring negotiations. Moving to our operating results. Despite challenging macro conditions, GICSA was able to deliver consistent results during the quarter in line with our expectations. Thanks to the high-quality nature of our portfolio and our cost discipline, while we can ignore the impact of inflation, that consumer remains resilient for now. During the quarter, we welcomed 17 million visitors to our properties, a year-over-year increase of 34%, which represents 95% of pre-pandemic levels, demonstrating a steady recovery in the retail environment. The adjusted occupancy rate during the third quarter was 83% in our total portfolio, including Grand Outlet Riviera Maya. On the commercial front, we signed 72 new leases equivalent to 13,000 square meters and MXN 52 million of annual fixed rent, and 51 new commercial spaces began operations, adding 15,000 square meters and MXN 80 million of annual fixed rent. To conclude my remarks, fortunately, to the best of our knowledge, the pandemic appears to have entered a more manageable phase and people are, in large part, returning to their routines. However, the impact of the pandemic has had a lasting effect. Although we know that we still have many challenges ahead of us, we reaffirm our commitment to continue working on strategies to mitigate the impact of the pandemic effect and any new challenges ahead. As such, we will continue to focus our efforts to recover our historic occupancy level and cash generation as well as gradually reduce our debt leverage. Also, we are still working on the sale of the remaining nonstrategic assets that were agreed upon with our local bondholders. Additionally, as you may know, once the construction of the Cero5Cien residential project is completed, the project's remaining cash flow will be used to reduce our leverage as part of our complete strategy. Despite current economic challenges, we remain optimistic about the performance of our property portfolio. We believe Mexico still has very attractive opportunities to explore and the adoption of new business models that can drive sustainable growth. Thank you for your candid attention. I will now turn the call over to Diodoro to discuss more of our quarterly results. Diodoro, please go ahead.

Thank you, Isaac, and good morning, everyone. Thank you for joining us today. I'm pleased to report this quarter saw a series of successful measures focused on preserving liquidity and reducing leverage under our business strategy. As Isaac mentioned, we achieved 2 significant milestones to strengthen the company's long-term financial position and improve the balance sheet. In this regard, in October, we restructured the junior notes issued by the company in December 2019 in relation to the Arcade portfolio. We used the remaining proceeds from the sale of Lomas Altas property to prepay MXN 1,150 million of the junior notes and reduced the aggregate amount we owe to holders for this month. We also come from approximately MXN 455 million of notes that GICSA previously acquired, reducing the amount of junior notes by MXN 1,605 million to an outstanding remaining balance of MXN 1,784 million, a reduction of 48%. By restructuring the junior notes, we have extended the maturity to May 2028 and lowered the interest rate to 12.9% from the previous 15% subject to the fulfillment of certain conditions. Also aligned with our strategy, in August, the company signed an agreement to extend the maturity of the Explanada Culiacán loan by approximately 4 years to July 2028 and refinance the amortization schedule. Now let's cover the quarter's financial guidance. During the quarter, consolidated and proportional NOI were MXN 753 million and MXN 618 million, respectively, representing year-to-year decrease of 1% and 4%. However, consolidated and proportional EBITDA were MXN 744 million and MXN 608 million, increasing 6% and 4% compared to the same period last year. Moving to our balance sheet. Total assets at the end of the quarter were MXN 76 billion and total liabilities MXN 45 billion. Consolidated financial debt was MXN 29 million and our loan-to-value ratio was 39%. With respect to collection with [indiscernible], we remain at a recovery rate of 90%. However, we must not lose sight of the fact that we still have not reached and any occupancy levels. And consequently, we still have inventory that represent approximately MXN 700 million of annual income yet to be leased. Although we have a completion a lot under our improvement plan, we still have work to accomplish 3 specific actions: deliver as a company, generate more cash by renting [indiscernible] spaces, and delivering our 2 development projects. This concludes my presentation, and thank you again for your attention, and let's open the call for questions.

[Operator Instructions] And there appear to be no questions over the phone at this time. I would now like to turn the call back to Mr. Batalla for any closing remarks.

Thank you again for joining us today and to 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 calls if you have any after today's call. On behalf of everyone in GICSA, we wish you a great day.

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