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

Welcome to GICSA's Third Quarter 2023 Earnings Conference Call. Joining us today from GICSA are Mr. Diodoro Batalla, Chief Financial Officer, who are here this morning to discuss the company's performance and answer any questions that you may -- after the speaker's presentation, there will be a Q&A session. Please be advised that today's conference is being recorded and will be available on the company's Investor Relations website. 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 today's call. Before we get started, let me remind you that information discussed on today's call may include forward-looking statements regarding the company's future financial performance and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions you not to place undue reliance on these forward-looking statements. GICSA undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. It's now my pleasure to turn the call over to Mr. Batalla, Chief Financial Officer of GICSA, who will lead today's presentation. Mr. Diodoro, please go ahead.

Thank you, operator, and good morning to everyone. Thank you for joining our 2023 third quarter earnings conference call. I hope you are all well. I'm happy to share with you that this quarter, Grand Outlet Riviera Maya opened its doors to the public with a soft opening and the first commercial stores began operations. This revolutionary project is the first luxury outlet mall in the region, the biggest in Latin America, and will bring emblematic brands offering a complete experience, being the only mall in the area with a wide range of indoor entertainment options. In the upcoming weeks, mall stores will complete their setups and open their doors. Additionally, we extend the maturity of Capital Reforma bank loan to June 2025, being the first -- being this one, the first of 2 terms extension options that we have. Next year, we expect to exercise the second extension established in the contract and the expiration will be in 2026. Now going into further detail to the analysis of the quarter, our properties continue to see a positive trend of visitors, growing 19% in annual basis. This was translated into a 24% of annual growth in tenant sales. Also, the occupancy rate in our portfolio remained strong at 86%, increasing 300 basis points on an annual basis. Embracing our CORR strategy on collect, operate, renew and rent, we have been able to enter into 2 new lease agreements. We managed to renew 89 contracts and our collection reached 96% of the invoice amount. Likewise, over the quarter, we also started operations of 104 lease spaces, adding up to 24,000 square meters of our total portfolio. This figure represents a 60% growth over the previous year. In this context, our total revenues in the quarter reached MXN 1 billion, recording a double-digit annual growth rate of 13%. The consolidated and proportional NOI [Indiscernible] 14% and 15% year-on-year basis, reaching MXN 861 million and MXN 712 million, respectively, and consolidated and proportional EBITDA stood at MXN 813 million and MXN 665 million with a 9% annual growth. Consolidated financial debt was MXN 27 billion, down 5% when compared to the same period of last year. While our loan-to-value ratio was 36%, decreasing 300 basis points compared to last year. Also, we are strategically focusing on reducing our debt levels and the sale of the remaining nonstrategic assets. In the next months, we expect in [Indiscernible] solid progress in that line. All in all, we are striving to accelerate deliveries, optimize occupancy and engage our financial position to improve profitability. In this sense, we are confident that our project under development and inside the sound operational performance of our system portfolio will be required catalyst to achieve our goals. I want to conclude our presentation by showing our solidarity to the Acapulco community, we are ending and we are looking to have more communication on our project La Isla Shopping Village. Unfortunately, communication hasn't been working so far. So we still don't have an evaluation of the damages, and we are primarily focused on localizing our personnel and being sure that they are safe and in a good shape. With this, I conclude my presentation, and we open the floor for questions.

Ladies and gentlemen, [Operator Instructions]. Our first question comes from Simon Fuenzalida.

Well, thank you for coming this time for asking questions. And the first question that I have is if you can provide an outlook in terms of occupancy rate for 2024 in terms of your retail, mixed use and office segment, please?

Yes, of course. We are -- at this point, our occupancy rate is 87%. We are very positive in the retail sector. We expect that our retail sector for the next year will go over 90%. Office spaces are more difficult at this point. So we are working very hard in order to have good deals with the clients. We have 2 buildings that we have space, which is Arcos Bosques and Interlomas. And on that, we have several clients that are interested in the property, and we expect that to close next year.

Thank you. And I don't know if you can comment regarding the drop in the occupancy rate in Isla Acapulco, which was 77% and now it dropped to 68%.

Yes. Well, La Isla Acapulco, we are doing some remodeling of the space because as you know this property is being prepared for sale in the Cebures agreement that we have with the bondholders. So we are working into renew some of the spaces in order to have a better shape for selling the property. And that is the main reason that the occupancies decrease a little bit. And well, we expect that with this [Indiscernible] just happened yesterday, we can hold a majority of the clients, but we still don't know what is going to happen.

Great. And my last question is, we have seen that over the quarters, we have seen a significant decrease in cash. So my question is, what will be your strategy in order to repay or refinance your debt maturities?

Well, our cash balances have been decreasing because we have been investing in order to open the new ORM project, the Outlet Riviera Maya project. So we spend CapEx on that and also in our sales in [Cero5Cien] project. So that is the main reason why our cash levels has been consumed in the last quarters. We have been very CapEx intensive in the last months. For the maturity of our -- for next year, we don't have maturities. We just sold -- the only one that we had that was Capital Reforma, and we extended it until 2025, and in our strategy for the levering the company, as we have been stating in this call, we are working in the sale of the nonproductive assets along with the La Isla Acapulco that we are with the [Indiscernible] holders. And that is the resource that we're going to use to deleverage that part of the debt. All the other debt is tied to the projects. So that -- and we don't have maturities for that.

Perfect. And if I can make my last question. What will be the main goal or priorities for GICSA for next year?

Well, we are mainly focused in 2 main priorities. The first one is our CORR strategy, which is collect, operate, rent and renew. So we are very focused in increasing our occupancy rate, improving our invoicing and our income and our cash flows and to maintain the properties in a perfect shape. That is the first focus. And also, of course, then to stabilize the Outlet Riviera Maya project. That is the first one. The second one is to conclude the commercialization of our nonproductive assets and repay to the Cebures debt.

[Operator Instructions] With no further questions, I would like to turn the call to the management for the close of the conference.

We are very pleased to have you here with us. And once again, we reiterate our solidarity to the people of Acapulco and all the real estate, and we look forward to how can we be helpful to the community. Thank you very much.

With this, we conclude our conference. You may disconnect.