Good morning, and welcome to FIBRA Macquarie's third quarter 2023 earnings call and webcast. My name is Alicia, and I will be your operator for this call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If at any time you require operator assistance, please press star followed by zero and an operator will be happy to assist you. I would now like to turn the conference over to Nikki Sacks. Please go ahead.
Thank you and good morning, everyone. Thank you for joining FIBRA Macquarie's third quarter 2023 earnings conference call and webcast. Today's call will be led by Simon Hanna, our Chief Executive Officer, and Andrew McDonald-Hughes, our CFO. Before I turn the call over to Simon, I would like to remind everyone that this presentation is proprietary and all rights are reserved.
The presentation has been prepared solely for information purposes and is not a solicitation of an offer to buy or sell any securities. Forward-looking statements in this presentation are subject to a number of risks and uncertainties. Actual results, performance, prospects, or opportunities could differ materially from those expressed in or implied by the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements after the completion of this presentation, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, on this conference call, we may refer to certain non-IFRS measures as well as to U.S. dollars, which are U.S. dollar equivalent amounts, unless otherwise specified. As usual, we have prepared supplementary materials that we may reference during the call as well.
If you have not already done so, I would encourage you to visit our website at fibramacquarie.com and download these materials. A link to the materials can be found under the Investors Events and Presentations tab. With that, it is my pleasure to hand the call over to FIBRA Macquarie's Chief Executive Officer, Simon Hanna. Simon?
Good morning, everyone, and thank you for joining us. On today's call, we will discuss our third quarter 2023 results and our growth initiatives. Andrew will also provide an update on our balance sheet, robust capital position, and our outlook for the remainder of 2023. Our third quarter results demonstrate our sustained financial performance, driven by strong demand for our high-quality, well-located assets and supported by continued positive nearshoring tailwinds. With this backdrop, we saw solid growth in our industrial portfolio, a sustained recovery in our retail shopping centers, and ongoing successful execution of our development program. We have built a leading industrial platform that is delivering best-in-class product, which in turn is contributing to per certificate earnings and NAV growth, and which we expect to accelerate in the coming quarters as our pipeline under construction is added to our stabilized portfolio.
Building on our demonstrated track record of delivering new developments at accretive yields, we most recently leased up our 210,000 sq ft facility in Monterrey to a global auto parts manufacturer at a strong 11.9% yield on cost. This followed the lease-up of our 0.5 million square feet Mexico City development project earlier in the year to an e-commerce tenant at an 11.8% yield on cost. These dollarized leases will meaningfully contribute to earnings growth and reflect our capability to deliver market-leading product at attractive returns to our investors. In addition to the two projects I just mentioned, we have an additional 1.2 million square feet of premier industrial GLA under construction, which we anticipate delivering in the coming quarters, bringing our total development product under construction or in stabilization to 2 million square feet.
Whilst we are excited to see our most recent deliveries exceed our target yields, we believe the current pipeline is well-positioned to be completed and leased up in line with our target development yield on cost of 9%-11%. Whilst the financial returns we have delivered are impressive, I would also like to call out the quality of the lease and product that is equally relevant. For example, this year, the U.S. Green Building Council completed the LEED for Core and Shell certification of our 183,000 sq ft Monterrey development that was delivered last year with a 10.4% yield on cost. We are immensely proud to say that this achieved a LEED Platinum certification with a 90-point score.
Notably, this is the only industrial property in North America that has achieved Platinum certification and was awarded the highest point score of any building globally for this particular LEED industrial development category. Accomplishments such as this do not happen by chance. They are the product of a tremendous level of planning, focus, and hard work in optimizing sustainability features that also enhance commercial performance. Delivering what arguably could be called the best-in-class sustainable developments for any developer around the world at double-digit yields in core markets is a fantastic example of how the FIBRA Macquarie team is leading the Mexican real estate sector. I look forward to sharing more news on the upcoming LEED certification outcomes of our development portfolio in future updates. In terms of our quarterly performance, consolidated NOI was up 14% year-over-year in underlying U.S. dollar terms.
This result is reflective of the continued strength of our portfolio and performance, especially as this 14% increase is also on a per certificate basis, which is the ultimate reflection of value creation. We continue to see real annual rental rate growth play an important role in higher NOI for both our industrial and retail portfolios, along with continued strong occupancy. In our industrial portfolio, we maintained a high occupancy of around 98%, up 84 basis points year-over-year, with leased GLA also increasing through the quarter. Renewals in the quarter reached 2.2 million square feet, the highest quarterly renewal volume since 2021, driving a solid retention rate of 92% over the past 12 months. Even more impressive is the fact that this was achieved whilst increasing real rental rates and lease term.
Furthermore, our re-leasing spreads on commercially negotiated renewals reached 16.3% in the third quarter, which is a very nice improvement from the 10% re-leasing spreads we have been striking in prior quarters. New leasing activity comprised 641,000 sq ft of GLA, the highest recorded quarterly level since 2016. Highlights included the lease up of our development property in Mexico City that I mentioned earlier, as well as an electronics manufacturer in Saltillo, a market which has been gradually improving and where, in fact, we have actually experienced the highest percentage occupancy gains over the past 12 months for any of our markets. Of note, we have approximately 25% of our lease book scheduled to roll for the next five quarters through to the end of 2024, which also provides new term opportunity to continue with positive momentum on leasing spreads.
We continue to see favorable supply-demand dynamics in our key markets. We derive almost 80% of ABR from northern and border states, a high industrial demand region, benefiting from compelling nearshoring tailwinds. Even with this positive backdrop, we recognize that the sustained high interest rate environment and energy infrastructure challenges could impact companies' capital decisions to make new investments in Mexico. While there could be some demand risk associated with this, we are pleased to see continued new investment announcements in Mexico, and also welcome the recently announced fiscal incentives by the Mexican government to continue to attract new investment. Turning to our retail portfolio. As we have been discussing throughout the year, recovery is ongoing and we are seeing our portfolio of necessity-based shopping centers continue to perform well and indeed ahead of our expectations. Occupancy improved both year-over-year and sequentially, and ended the third quarter at 91.7%.
Additionally, average rental rates increased by 6.1%, collectively contributing to an annual growth of 17% in retail NOI. Foot traffic continues to build, and we are seeing improvements in leasing conditions. We signed 62 new and renewal leases during the quarter, totaling 17,000 sq m across a diverse range of tenants, including cinemas, entertainment centers, banks, and homewares. With this strong leasing activity, the retail portfolio benefited from strong retention of 87% over the last 12 months. In summary, I am pleased with the execution of our strategy, which combines the delivery of reliable organic growth from our in-place portfolio, as well as contributions from our accretive development program. We have 2 million square feet of development GLA in stabilization or under construction, representing a 6% increase in our industrial portfolio footprint, and more than 5 million square feet when each of the industrial parks are completed.
Furthermore, one of our key priorities is maintaining a well-positioned balance sheet, which provides us with the liquidity and flexibility to invest in our growth. We are proud of our track record of pursuing disciplined growth and delivering attractive returns. We have both organic and new investment opportunities to continue to deliver value to all of our stakeholders. I want to thank the entire FIBRA Macquarie team for their valued contributions, and I would now like to turn the call over to Andrew.
Thank you, Simon. For the third quarter, we delivered AFFO per certificate of MXN 0.6121, or $0.0359, which represents a 2.3% increase on a dollar basis from the prior year. Our balance sheet remains well-positioned, with prudent leverage metrics and strong liquidity to support our growth strategy. As of September 30, our real estate net LTV was 33%, and our net debt to EBITDA multiple was 5.1 x. Taking into account committed undrawn credit lines and surplus cash, FIBRA Macquarie has available liquidity in excess of $350 million. Our NAV this quarter reached a record high of MXN 43 per certificate, which in part reflects the contribution of gains recognized upon stabilization of our leased-up development properties. FIBRA Macquarie's portfolio-wide valuations imply an in-place cap rate of 7.9% for the industrial portfolio and 9.6% for the retail portfolio.
In line with the release of our quarterly results, we declared a third quarter distribution of MXN 0.5250 per certificate, in line with guidance. In addition, we are reaffirming our full-year distribution per certificate guidance of MXN 2.10. We are also taking this opportunity to update our AFFO guidance for the full year to MXN 2.58 per certificate, being the top end of the prior guidance range. Finally, I would like to provide an update on our taxable result for FY 2023, which establishes a baseline for managing our distribution levels. Taking into account expectations for our FY 2023 taxable income, if we consider prevailing FX levels were to hold through to December 31, we anticipate that FIBRA Macquarie will be subject to a full-year taxable result in excess of our scheduled FY 2023 cash distribution.
While the final taxable result cannot be determined until after year-end, we have identified a number of options with regard to timing and type of payment, either in cash or in kind via certificate, and we continue to maintain a strong balance sheet with ample liquidity. As we move towards the end of the year, we will keep the market informed of any updates in such regard. Along with Simon, I want to thank all of our stakeholders for your ongoing support. With that, I will ask the operator to open the phone lines for your questions.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star, then one to ask a question. If you would like to remove your question from the queue, please press star two. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Hugo Grassi with Citigroup. Please proceed with your question.
Hi, everyone. Thank you for the opportunity to ask a question, and congratulations on the results. This is Hugo from Andre Mazini's team in Citi. The question is the following: Will the recently approved tax incentives for nearshoring move the needle in terms of tenant demand? If you could provide perhaps any color on what are the incentives in particular? That should be on my side. Will the approved tax incentives for nearshoring move the needle for tenant demand?
We very much welcome the incentive package. The primary form of the incentive is to do with accelerated depreciation on some of the CapEx coming in, particularly for new investments or even upgrading on existing investments. That is going to be something which is, as I say, available on an accelerated basis than otherwise would have been the case. I think certainly it is quantifiable in an amount which I think in aggregate hopefully will move the needle. It has only just been announced, so I think we still need to see exactly what the industry action will be to that. I honestly think there has been so much tailwinds anyway, and I think pent-up demand that will be coming through in following quarters and years, that alone I think will be more than sufficient to hold up demand-supply fundamentals.
This will definitely help and can only help support, I guess, those borderline decisions to be real. Let us see how that goes.
All right. Thank you for the answer.
Thank you. Our next question comes from the line of Felipe Barragán with BTG Pactual. Please proceed with your question.
Hey, Simon, Andrew. Good morning. Thanks for taking my question. I have a couple. One is just to understand the 100 basis points decrease in industrial in the north in occupancy. Is it just a scheduled lease that maybe moved out and may be coming back this quarter? Any color on that would be great. I would just like to hear your thoughts. We heard last week that Danhos was going to go into industrial. Obviously, they are more focused on retail and office. You guys also have retail. Obviously, your stake in retail is significantly lower, but just want to hear your thoughts on that play from Danhos.
Yeah. Thanks, Felipe. Answering those in turn. Look, I think on occupancy and markets, I think continue in general to perform well. We saw a little bit of scheduled roll-off, nothing unusual or ordinary course. We are at that level, at that sort of 98% level, which is effectively subject to frictional change. So, I would say that overall, we are very comfortable with the overall occupancy profile across all our core markets. They remain in that sort of 98%, 99% level in the main. We have one or two markets there which are obviously below that. So Monterrey for us remains a very strong market in particular. Obviously we announced the lease up of our 210,000 sq ft development.
We have another building next door around that 200,000 square feet range, which we are currently constructing for delivery in the early part of next year, which will only add to our inventory there, which we are looking forward to leasing up hopefully next year. So yeah, overall, nothing really there from a, I guess, quarter-on-quarter movement to note of a peculiarity. With regards to Danhos, yeah, look, I think obviously it is very much a reflection of, I guess, the strength of nearshoring, and I guess a lot of people wanting to get exposure to that. That is great. We have retail, as you say, which is also performing well and actually ultimately should also be, I think, subject to any trickle-down benefit, if you want to call it that, with regards to nearshoring. So retail continues to perform well.
Same store NOI, again, in that sort of 9% on a cash basis up year- over- year, which continues to reflect the solid recovery, not just on rental rates, but also occupancy hitting 91.7%. So it has been quite a few quarters now, sequential progress there. So NOI coming together well, and we think that the opportunity for retail to continue to perform well through to the end of the year and into 2024, that is a real opportunity.
Great. Thank you guys for the answers. Yeah, and definitely 98% occupancy in the north is still very good. Thank you, guys.
Thank you.
Thank you. Our next question comes from Isabella Salazar with GBM. Please proceed with your question.
Hello. Thank you for the call and for taking my question. I saw that you are expected to deliver your whole current development pipeline by the first half of next year, but still hold a hefty land bank. Are you planning on further development, or would you focus first on the stabilization of recent delivery? Also, does your land bank already have the necessary infrastructure, or does it need investments before development? Thank you.
Thanks, Isabella. Yeah, look, I think, development very much on track. We have the 2 million square feet, as I say, which is either subject to stabilization with some of those lease-ups in progress. So seeing the full impact of that lease-up coming through, particularly in FY 2024 NOI. Then the delivery of the remaining inventory of that 2 million square feet, call it around 1.3 million square feet, which will be put into our inventory over the coming quarters, for ultimate lease up. You could say that NOI contribution FY 2024 or FY 2025 on a more annualized basis. So that is very much on track. We have another 3 million square feet of potential GLA, in core markets that we are yet to start on over and above that 2 million square feet.
I think we will obviously take a view as to when we put that 3 million square feet, in terms of our construction. It is something where we are always, I guess, taking that dynamic view where we are generally looking to have around 1 million square feet-2 million square feet of GLA in construction through the year. So I guess as we deliver the 2 million square feet, there is an opportunity to start on some of those other buildings with that coming out of that 3 million square feet potential.
With regards to infrastructure, again, I think something where we feel comfortable that things are moving along in line with underwriting and investment plans. So I would say that, for the main part, nothing there from an underwriting perspective, which is necessarily causing us any concern. But obviously, we are cognizant of broader countrywide challenges with regards to energy investment and infrastructure.
Thank you.
Thanks, Isabella.
Thank you. Our next question comes from the line of Pablo Monsivais with Barclays. Please proceed with your question.
Hi, guys. Thanks for taking my question. I have a quick one. Fibra Uno is moving to internalize its structure, and Terrafina said that probably they are following that path. What is the read-through for you of your competitors moving and doing that? Thank you.
Yeah, look, I think, don't necessarily want to comment on others, but I think from our own perspective, what we feel is a model that we have a very good alignment. For us, this is all about alignment. So I think from a fee structure, skin in the game, we think that we've got that set up well, to continue with the current business model. We also think that from a balance sheet and growth point of view, that obviously puts us in a very good position to continue with our current strategy. So as far as we are concerned, we are very much focused on execution of that strategy and feel, I guess, quite comfortable with the current position that we have. Thanks, Pablo.
Thank you.
Thank you. There are no further questions at this time. I would like to turn the floor back over to Simon Hanna for closing comments.
Thank you, everyone, for participating in today's call. We look forward to speaking with many of you over the coming days and weeks, as well as updating you again soon at the end of the fourth quarter.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.