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FIBRA Macquarie México Reports Fourth Quarter and Full Year 2018 ResultsFIBRA Macquarie México (FIBRAMQ) (BMV: FIBRAMQ), owner of one of the largest portfolios of industrial and retail property in Mexico, announced its financial and operating results for the quarter and year ended December 31, 2018. FOURTH QUARTER 2018 HIGHLIGHTS
FULL YEAR 2018 HIGHLIGHTS
"2018 was a productive year for FIBRAMQ as we delivered solid AFFO growth, enhanced our portfolio composition through active asset management and recycled capital into accretive expansions, certificate buybacks and debt reduction," said Juan Monroy, FIBRA Macquarie's chief executive officer. "It was also an extremely active leasing year, where we increased occupancy in strong market conditions that allowed us to continue to accelerate renewals into the fourth quarter." "As we move through 2019 we remain focused on value-enhancing initiatives. Despite some lingering macroeconomic uncertainty, we are encouraged by a number of positive indicators related to trade and consumer confidence. We remain confident in our portfolio and strategy, the attractive supply-demand dynamics in our key markets, and the proficiency of our internal property management platform. With a conservative and strong balance sheet, we continue to take a disciplined approach to growth. Drawing on our well-established relationships, we maintain a growth pipeline and anticipate continuing to pursue expansions along with selective development opportunities, with a managed risk profile." FINANCIAL AND OPERATING RESULTS Consolidated Portfolio FIBRAMQ's total results were as follows:
FIBRAMQ's same store portfolio results were as follows:
Industrial Portfolio The following table summarizes the results for FIBRAMQ's industrial portfolio:
For detail on FIBRAMQ's same store industrial portfolio results, please refer to the Fourth Quarter 2018 Supplementary Information materials located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings. For the three months ended December 31, 2018, FIBRAMQ's industrial portfolio delivered net operating income (NOI) of Ps 681.8 million, an increase of 4.1% compared to Ps 655.0 million in the prior comparable period. NOI margin expanded by 164 basis points to 89.9% compared to 88.3% in the prior year, driven by higher occupancy and rental rates. For the year ended December 31, 2018, industrial portfolio NOI was Ps 2,731.4 million, a 2.3% increase from the prior year. The industrial portfolio occupancy rate as of December 31, 2018 was 94.5%, up 187 basis points from the same quarter last year. The increase in occupancy was driven by leasing activity along with the third quarter sale of 35 non-strategic industrial assets, which had an occupancy lower than the portfolio average. Rental rates at the end of the period improved compared to the same quarter last year, with a weighted average of US$4.79 per leased square meter per month, a 3.9% increase. This rate increase was driven primarily by contractual increases, positive renewal spreads, and the positive impact of the sale of 35 non-strategic industrial assets which had rental rates lower than the portfolio average. FIBRAMQ signed 35 new and renewal leases in the fourth quarter of 2018, comprising 3.7 million square feet. Signed leases included four new leases totaling 248 thousand square feet and 31 renewal leases totaling 3.5 million square feet. Notable new leases in the quarter include a shelter operator in Ciudad Juárez, a hardware distributor, a scrap metal and plastic recycling center in Mexicali, and an industrial tool and equipment manufacturer in Puebla. Renewal activity was robust with diversified representation across geographies and customer types. Renewals included the retention of a global home appliance manufacturer in Monterrey for a 1.0 million square foot property used as a key logistics hub. For the twelve-month period ending December 31, 2018, FIBRAMQ achieved a record retention rate of 87% due to strong underlying market conditions and the proactive approach to pursuing early renewals. Retail Portfolio The following table summarizes the proportionally combined results of operations for FIBRAMQ's retail portfolio:
For the quarter ended December 31, 2018, FIBRAMQ's retail portfolio delivered NOI of Ps 141.6 million, a 1.2% increase from the prior year period. For the twelve months ended December 31, 2018, the retail portfolio NOI was Ps 575.8 million, an increase of 4.5% from the prior year period. Year-over-year growth was driven by a 3.7% increase in average monthly rent, partially offset by a reduction in occupancy. During the fourth quarter, FIBRAMQ signed 40 leases, representing 4.8 thousand square meters. This activity included 23 new leases and 17 renewals resulting in a sequential increase in occupancy of 32 bps to 94.0%. PORTFOLIO ACTIVITY FIBRAMQ continues to maintain a disciplined approach to portfolio growth as it executes its strategy to deploy available capital into accretive investments including expansions and selective developments. Expansions A key element of this strategy is the targeted expansion of existing properties on a pre-leased basis. In addition to generating attractive yields, these expansions allow FIBRAMQ to improve customer retention, satisfaction and lease term. For the full year of 2018, FIBRAMQ deployed or committed US$9.9 million to expansions generating a projected 15.4% NOI yield. In the fourth quarter, FIBRAMQ continued a 47 thousand square foot expansion for a manufacturer of lighting products in Reynosa. FIBRAMQ also obtained permits to build a new approximately 2,200 square meter expansion at Multiplaza del Valle in Guadalajara, including 1,400 square meters for a leading cinema operator. It is expected to be completed in the second half of 2019. Development In January 2019, FIBRAMQ began construction of an industrial development project in Ciudad Juárez, Chihuahua. Given its strong economic and demographic trends, Ciudad Juárez is a strategic location to pursue FIBRAMQ's long-term objective of developing class A buildings in core markets. Over the medium term, FIBRAMQ intends to increase its investment in development projects to be not more than 5% of GLA, which will be the maximum volume of development at any point in time. The project involves the construction of up to two buildings, totaling approximately 445,000 square feet. Development will be completed in two stages with an expected total investment, including land, of approximately US$20.4 million. The first-class A industrial building is expected to be completed in 2019 with an approximate investment of US$9 million. Retail center remodeling During 2019, as part of its proactive approach to asset management, FIBRAMQ will remodel three shopping centers in order to improve their image and vibrancy to maintain current tenants and attract new, high-quality tenants. FIBRAMQ expects to commence these projects during the first quarter of 2019, with completion in the second half of 2019. These projects include shopping centers in the Mexico City metropolitan area with a total GLA of 179 thousand square meters. The expected total capital to be deployed for these remodels is approximately US$9.3 million. The centers will remain fully open with no major disruptions during renovation. BALANCE SHEET As of December 31, 2018, FIBRAMQ had approximately Ps 16.5 billion of debt outstanding, Ps 5.1 billion available on its undrawn revolving credit facility and Ps 588.0 million of unrestricted cash on hand. FIBRAMQ's indebtedness was 95% at a fixed rate with a weighted-average debt tenor remaining of 5.2 years. FIBRAMQ's CNBV regulatory debt to total asset ratio was 35.5% and the debt service coverage ratio was 5.3x. Subsequent to year end, on January 31st, FIBRAMQ repaid a Peso-denominated secured loan of approximately Ps 284 million, further improving the capital structure and flexibility of the balance sheet. CAPITAL MANAGEMENT The following table provides an overview of how FIBRA Macquarie has funded and deployed its cash to execute on its initiatives to maximize value to its certificate holders. FIBRA Macquarie remains committed to its disciplined approach of deploying capital across property expansions and developments, certificate repurchases for cancellation, and repayment of debt.
Note: Other includes US$2.2m of income-generating Above-Standard Tenant Improvements. Uses average FX of Ps 19.13 for 2017 and 2018. CERTIFICATE BUYBACK FOR CANCELLATION PROGRAM FIBRAMQ continued executing on its certificate buyback program, generating highly accretive returns as the certificates continue to trade at a discount to NAV. In November, the Technical Committee and the Board of the Manager approved an increased buyback program of Ps 1.2 billion. Certificates will be repurchased on an opportunistic basis, taking into account other accretive opportunities, including expansions and development.
1. Includes the certificates repurchased from June 30, 2017 to February 21, 2019. DISTRIBUTION On February 21, 2019, FIBRAMQ declared a cash distribution for the quarter ended December 31, 2018 of Ps 0.41 per certificate. The distribution is expected to be paid on March 13, 2019 to holders of record on March 12, 2019. FIBRAMQ's certificates will commence trading ex-distribution on March 11, 2019. From FY19 onwards, two of FIBRAMQ's four scheduled quarterly distributions will be paid in the first quarter of the subsequent fiscal year. As FIBRAMQ's historic retained tax losses may be exhausted in 2019, FIBRAMQ is proactively modifying its distribution schedule to ensure ongoing compliance with applicable FIBRA regulations pursuant to which FIBRAs must, on an annual basis, distribute at least 95% of their taxable income to investors by March 15 of the following year. As FIBRAMQ's taxable position is highly dependent on year-end FX, the new distribution schedule provides two distributions following year end when our taxable position will be known, allowing us to designate such distributions as return of capital, which are not subject to withholding tax, or distribution of taxable income, which may be subject to withholding tax, as may be required to comply with the distribution requirement. This flexibility reduces the risk of making unnecessary tax withholdings or unscheduled distribution payments. The new distribution phasing has the added benefit of reducing the maximum interval between any two quarterly distributions. The new distribution schedule is below:
All distributions paid in respect of FY2018, including the current quarter distribution, are designated as a return of capital and no withholding tax will be deducted. Further detail of FIBRA Macquarie's taxable position for FY2018 and its FY2019 taxable position outlook are provided in the Fourth Quarter 2018 Supplementary Information materials, located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings. 2019 GUIDANCE FIBRA Macquarie is introducing its guidance for 2019. FIBRAMQ estimates total AFFO of between Ps 2.45 and Ps 2.50 per certificate for the year. This guidance is driven by the following assumptions:
For full year 2019, FIBRAMQ expects to make cash distributions of approximately Ps 1.70 per certificate, to be paid in equal quarterly payments of Ps 0.425. This represents an expected increase of 6.3% from the prior year, while maintaining a prudent and stable AFFO payout ratio. The payment of cash distributions is subject to the approval of the board of directors of the Manager. FINANCIAL REPORTING IMPROVEMENTS - ANNOUNCING AFFO METHODOLOGY UPDATE FOR FY2019 FIBRAMQ recognizes the important contribution that financial reporting and transparency provides in enhancing corporate governance. As part of this endeavor, and following a review of global REIT industry best practice measures, FIBRAMQ is updating its AFFO reporting methodology with effect from 1 January, 2019. The updated methodology continues to reflect the guiding principal of FIBRAMQ fully including within AFFO all actual incurred expenditures in connection with sustaining and maintaining our existing portfolio. Backward-looking actual maintenance expenditure and related items will now be reported in AFFO, rather than the current FY18 methodology which used a mainly forecast-based approach. In addition, actual maintenance capex expenditure and related items will be reported on a rolling three-year average, allowing for continued stability of results. Given that the FY18 AFFO methodology was already substantially representative of long-term maintenance capex requirements, the updated methodology impact to AFFO is relatively small. FIBRAMQ estimates that, had this methodology been implemented at the beginning of 2018, the pro forma AFFO result for 2018 would have been negatively impacted by Ps 0.03 per certificate. A comprehensive overview of the FY19 AFFO reporting updates, along with the pro forma FY18 AFFO results, has been provided in the Fourth Quarter 2018 Supplementary Information materials, located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings. WEBCAST AND CONFERENCE CALL FIBRAMQ will host an earnings conference call and webcast presentation on Friday, February 22, 2019 at 7:30 a.m. CT / 8:30 a.m. ET. The conference call, which will also be audio webcast, can be accessed online atwww.fibramacquarie.com or by dialing toll free +1 (877) 304 8957. Callers from outside the United States may dial +1 (973) 638 3235. Please ask for the FIBRA Macquarie Fourth Quarter 2018 Earnings Call with conference number 5574545. An audio replay will be available by dialing +1-855-859-2056 or +1-404-537-3406 for callers from outside the United States. The passcode for the replay is 5574545. A webcast archive of the conference call and a copy of FIBRA Macquarie's financial information for the fourth quarter 2018 will also be available on FIBRA Macquarie's website, www.fibramacquarie.com. ADDITIONAL INFORMATION For detailed charts, tables and definitions, please refer to the Fourth Quarter 2018 Supplementary Information materials located at www.fibramacquarie.com/investors/bolsa-mexicana-de-valores-filings. About FIBRA Macquarie FIBRA Macquarie México (FIBRA Macquarie) (BMV:FIBRAMQ) is a real estate investment trust (fideicomiso de inversión en bienes raíces), or FIBRA, listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores) targeting industrial, retail and office real estate opportunities in Mexico, with a primary focus on stabilized income-producing properties. FIBRA Macquarie's portfolio consists of 236 industrial properties and 17 retail/office properties, located in 20 cities across 16 Mexican states as of December 31, 2018. Nine of the retail/office properties are held through a 50/50 joint venture. For additional information about FIBRA Macquarie, please visit www.fibramacquarie.com. Cautionary Note Regarding Forward-looking Statements This release may contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ significantly from these forward-looking statements and we undertake no obligation to update any forward-looking statements. None of the entities noted in this document is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities. THIS RELEASE IS NOT AN OFFER FOR SALE OF SECURITIES IN THE UNITED STATES, AND SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED. THIS ANNOUNCEMENT IS NOT FOR RELEASE IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA. FIBRA MACQUARIE MÉXICO AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT DECEMBER 31, 2018
AND 2017
* The Group has initially applied IFRS 9 and IFRS 15 at January 1, 2018. Under the transition methods chosen, comparative information has not been restated.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS
AND YEARS ENDED DECEMBER 31, 2018 AND 2017
* The Group has initially applied IFRS 9 and IFRS 15 at January 1, 2018. Under the transition methods chosen, comparative information has not been restated. **Real Estate Trust Certificates (Certificados Bursátiles Fiduciarios Inmobiliarios)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED
DECEMBER 31, 2018 AND 2017
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER
31, 2018 AND 2017
* The Group has initially applied IFRS 9 and IFRS 15 at January 1, 2018. Under the transition methods chosen, comparative information has not been restated. **Includes restricted cash balance of $nil (2017: $50.3 million) as at December 31, 2018. View source version on businesswire.com: https://www.businesswire.com/news/home/20190221006069/en/ |