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 First Quarter 2023 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, and hello, everyone. I'm very pleased to welcome you to GICSA's First Quarter 2023 Earnings Conference Call. Joining us today from GICSA are Mr. Isaac Cababie, Co-CEO; and Mr. Diodoro Batalla Palacios, Chief Financial Officer. They will discuss GICSA's first quarter 2023 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 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. Isaac Cababie, Co-CEO of GICSA, who will begin his presentation. Mr. Cababie, please go ahead.

Good morning, everyone, and welcome to our first quarter 2023 earnings call. I want to begin today's review by providing an update on key operating areas of our first 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 this quarter, we showed signs of recovery and progress in the company's financial and operational indicators. We welcomed 18 million visitors to our properties, a year-over-year increase of 25% and an increase of 9% compared to the prepandemic levels. Our tenant sales increased 30% and 15%, respectively, demonstrating an evident recovery in the retail environment. The occupancy rate during the first quarter was 84% in our total portfolio, an increase of 5% year-over-year. During the quarter, we signed 73 new leases equivalent to 20,000 square meters and MXN 106 million of annual fixed rent and 43 new leases began operations, adding 11,000 square meters and MXN 40 million of annual fixed rent. Consistent with our growth plan, projects under development continued their progress. Construction of the Grand Outlet Riviera Maya, Cero5Cien and Paseo Metepec were 93%, 73% and 50% complete at the end of this quarter. We expect to finalize the construction of the Grand Outlet Riviera Maya and Cero5Cien during the second semester of 2023 and the Paseo Metepec project in the first half of 2024. Thank you for your kind 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 showing signs of recovery and progress in our CORR strategy. During the first quarter, consolidated and proportional NOI increased 13% year-over-year to MXN 901 million and MXN 757 million, respectively. Consolidated and proportional EBITDA for the quarter were MXN 848 million and MXN 703 million, which, excluding the Cero5Cien residential project, represented a year-over-year increase of 14% and 13%. In our balance sheet, total assets at the end of the quarter were MXN 75 billion, while total liabilities were MXN 44 billion. Consolidated financial debt was MXN 28 billion, and our loan-to-value ratio was 37%. Regarding our CORR strategy, I'm pleased to inform that at the end of the quarter collection levels remained at 90%. We also maintained our operational efficiency with margins of 80%. In summary, our operating and financial results for the first quarter of 2023 reflect the effort and continuous commitment of the administration to achieve the established goals. Our collect, operate, renew and rent strategy, CORR, remains our primary focus as well as the sale of nonstrategic assets and further improvement of the efficiency in our financial structure. This concludes my presentation. Thank you again for your attention. Now let's open the call for questions.

[Operator Instructions] We will take our first question from Simón Fuenzalida with Moneda Asset.

I would like to know when should I expect the financial statement from the [ trust ] for the fourth Q 2022?

Simón., we just -- the process is first to finalize the audit of the old GICSA financial and then the auditors starts to finish the review of the ARCs portfolio. So we expect to have that during this month -- during May.

And can I ask another question regarding your cash position? Do you have any target in terms of cash for the year?

Well, our cash collections are increasing accordingly to our occupation rate. And in our strategy for reducing our debt levels, every -- almost all the cash that we have available is redirected to reduce our debt, specifically in our corporate debt in the Cebures. So our cash level will be at the minimum that we need to operate for this year.

[Operator Instructions] And it appears that we have no further -- oh, actually, yes, we do have a follow-up from Simón with Moneda Asset.

Can you talk a little bit about your fair value adjustment to the investment properties? Are these done regularly quarter-over-quarter with the same auditor or with another independent auditor?

We update that value every quarter. And normally, as we have development and the development projects goes to that value, most of the increase of the value each quarter is the money that we invest in that development projects. Let's call them Metepec and Outlet Riviera Maya. And the adjustments in the value are mostly at the end of the year when the auditors review more from the calculations.

And we will take our next question from Francisco Chávez with BBVA.

My question is regarding the development component of the company. Once you finish the current Riviera Maya project and Cero5Cien and Metepec, what are your plans? Do you expect to stop developing for some time? Or do you have any project ready for future development right now?

Thank you, Francisco, for your question. The strategy, as we speak, is to prioritize development, so we can start receiving cash flows from those properties as soon as possible. And afterwards, we will focus all our efforts into stabilizing those projects and stabilizing what we have in our current portfolio, efficientize our balance sheet by reducing debt. And afterwards, we're in a more solid debt position, we will see if there is appetite for new developments in that moment in particular.

[Operator Instructions] And it appears that we have no further questions at this time. I will turn the call back to Mr. Batalla for any closing remarks.

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 in GICSA, we wish you a great day.

And this does conclude today's program. Thank you for your participation. You may disconnect at any time.