Corporación Inmobiliaria Vesta SAB de CV Q1 FY2025 earnings call

• Broader operating environment: Uncertainty prevails with leasing activity slowed in Mexico, US, and Europe, but Vesta's tenants are staying and new tenants were gained. - Competitive advantages: Strategic positioning, operational excellence, long-term vision, diverse blue chip tenant base with long-term dollar-based lease structures, prudent leverage, ample liquidity, and agility. - Operational performance: Focused on maturing leases and renewals, achieving 11.5% trailing 12-month weighted average spread, same store NOI up 4.3% YOY, total leasing activity $1.4 million with 139,000 sq ft new contracts and 1.2 million sq ft in lease renewals. - Land acquisitions: Targeted and strategic new land acquisitions in Mexico City and Monterrey aligned with Route 2030 strategy. - Share buyback: Executed a major share buyback of 15.5 million shares or $36 million during the quarter. - Balance sheet: Cash and cash equivalents at $49 million, total debt decreased $801 million, net debt to EBITDA at 3.2 times, and loan to value at 20.6% at quarter end.

Total revenues for the first quarter were $60.6 million, a 10.7% increase. Adjusted net operating income was $62.1 million, an 8.5% increase, with a margin contracting 10 basis points. Adjusted EBITDA reached $55 million, a 9.3% increase compared to the prior year's quarter, with a margin increase of 50 basis points to 85.2%. Vesta FFO excluding current tax increased to $45 million from $40.4 million in the first quarter of 2024, an 11.4% year-over-year increase. Rental revenues came from new leases and inflationary adjustments on rental property, with 89.7% of first quarter revenues denominated in U.S. dollars, up from 87.8% in Q1 2024.

• Share buyback: Vesta shareholders approved a $150 million share buyback program, with $36 million executed in Q1 and plans to continue opportunistically repurchasing shares when opportunities arise. - Land acquisitions: Continued targeted and strategic land acquisitions in markets aligned with Route 2030 strategy. - Leasing activity: Anticipated an uptick in leasing activity for new leases and new tenants in upcoming quarters, with a low single-digit lease expiration rate in 2025 and ~10% expirations in 2026.

• Market volatility: Uncertainty in the operating environment affecting leasing activity and decision-making across industries. - Trade-related headlines: Impact on long-term commitments and potential adjustments in investment outlook by tenants. - Regulatory risks: Uncertainties around tariffs and other regulations affecting tenant decisions and market dynamics.

Q: Pablo Ricalde asked about leasing activity in April/May and expiration curve.

A: Lorenzo Berho said there's an uptick in pipeline activity, expecting new leasing activity to pick up, with 4.7% of total GLA expiring in 2025 and ~10% in 2026, and retention rate above 80%.

Q: Rodolfo Ramos asked about tenant engagement and energy regulations.

A: Lorenzo Berho said tight engagement with tenants, high conviction on Mexico from tenants, and adapting to new energy regulations with plans to implement solar panels and meet Route 2030 objectives.

Q: Alejandra Obregon asked about tenant behavior and ecosystems.

A: Lorenzo Berho said positive on conversations with tenants, auto industry in good shape, medical device and e-commerce/logistics industries strong, with Vesta's tenants being resilient.

Q: Adrian Huerta asked about greenfields in Monterrey and land bank.

A: Lorenzo Berho said high-quality greenfields in Monterrey will be leased well, with land acquisitions in key markets aligning with Route 2030 strategy and high returns on development.

Q: Jorel Guilloty asked about tenant target and development pipelines.

A: Lorenzo Berho said portfolio diversified across industries, auto industry at ~25% of portfolio, logistics/e-commerce at ~50%, and markets in north having slowdown but balanced fundamentals.

Q: Gordon Lee asked about land bank and uncertainty.

A: Lorenzo Berho said careful land acquisitions, maintaining credibility, and managing land bank to position for future with manageable investment in land.

Q: Andres Aguirre asked about land acquisition usage.

A: Lorenzo Berho said cautious approach to land development, analyzing market demand and underwriting before starting new projects.

Q: Francisco Suárez asked about development pipeline mix and Foxconn.

A: Lorenzo Berho said analyzing Build to Suit and spec buildings, electronics sector increasing, but no specific comment on Foxconn's plans.

Q: Alan Macias asked about share buybacks.

A: Juan Sottil said will aggressively buy back shares when opportunities arise, with objective to execute $150 million throughout the year.

Q: Bernardo Malpica asked about market dynamics in Monterrey and Tijuana.

A: Lorenzo Berho said vacancy rates in Monterrey ~7% and Tijuana ~8% in Q1, with healthy vacancy rates and rents continuing to increase/stabilize.