Good morning, and welcome to the 2026 first quarter Fibra Monterrey conference call. All information presented in this conference is proprietary, and all rights are reserved. The information has been prepared only for information purposes and is not a solicitation of an offer to buy or sell any securities. It is important to note that the presentation related to this conference is available at www.fibramty.com, and recordings of the call will be available on the website of the company in the next two hours. If you are connected using our webcast tool, you have the option to download the presentation in order to move the slides at your own pace.
Let me remind you that the information discussed in today's call may include forward-looking statements on the company's future financial performance and prospects, which are subject to change, to risks, and uncertainties. Additionally, during this call, we may refer to certain non-accounting financial measures. Actual results may materially differ, and the company advises not to rely on these forward-looking statements.
Fibra Monterrey undertakes no obligation to publicly update or revise any forward-looking statements. With us this morning from Fibra Monterrey, we have Mr. Jorge Ávalos, CEO, Jaime Martínez, CFO, Javier Llaca, COO and CIO, Eduardo Elizondo, Legal Counsel, and Cesar Rubalcava, investor relations. They will discuss the most important strategic, financial, and operating aspects of the quarter. I will now turn the call over to Mr. Jorge Ávalos.
Thank you, and good morning, everyone, and thank you for joining us today. We started 2026 with strong momentum, positioning Fibra Monterrey for what we believe can be another transformational year. Successfully, we completed our eighth equity raise for almost $500 million , executing on acquisitions, and continuing to advance portfolio optimization. In slide three, let me begin by addressing the public tender offer we officially launched last Friday for Fibra Macquarie. This transaction represents a strategic step toward building a larger, more efficient industrial platform. Our proposal is grounded on a simple principle: delivering a holistic approach to value creation for both investor groups.
We believe our offer stands out across multiple dimensions. First, supported by the continued confidence of our investors, our proposal reflects the highest implied value among competing alternatives. Second, our lean cost structure and cash flow-focused model position us as the only offer in the market that delivers AFFO per share accretion for both investor groups, even before considering synergies. Third, we believe the combined entity offers the most compelling valuation upside as our AFFO multiple still has room for improvement.
Finally, if successful, this will demonstrate the strong demand for companies that privilege corporate governance that fully align their incentives with investors. For clarity, I would like to address two topics that have been raised by the investment community in recent weeks: the Fibra Macquarie breakup fee and the expected operating and administrative synergies. Starting with the breakup fee, our offer is already presented on a net-to-investor basis. Therefore, no adjustment is required to reflect the potential removal of external advisor.
Our analysis assumes an estimated net present breakup value of approximately $ 130 million-$160 million, which may ultimately be subject to negotiation with Macquarie Asset Management. Importantly, any payment would occur post-closing and therefore would have limited impact on a post-transaction AFFO with no impact on our offer price. Moreover, we expect this cost to be more than offset by the synergies generated by the combination.
Turning to the synergies based on 2025 financial information, we have identified approximately $35 million in annual savings. When capitalized at Fibra Monterrey's current twelve months economic value to EBITDA multiple of 16.5x , this represents the potential to generate over $550 million in incremental value for the combined entity. These synergies are derived from three main sources. First, the elimination of Fibra Macquarie's external management fee of approximately $30 million annually.
A structural and recurrent benefit that flows directly to [CBFI] holders under Fibra Monterrey internalized model. Second, operating and administrative efficiencies at the property level, where we estimate approximately $30 million in savings. This is supported by Fibra Monterrey's track record of operational efficiency with property-related expenses below 10% of revenues, compared to over 20% of Fibra Macquarie's. On a pro forma basis, property related expenses would total approximately $55 million, reflecting the larger combined G&A, yet remain below the aggregate expense base of both portfolios.
This highlights the efficiency gains achievable through scale and operational integration. Third, we estimate approximately $9 million in additional savings from general and administrative expenses, primarily driven by the elimination of asset management, overlap functions, and external services. Other than savings from external management fees that we expect to be seen immediately, we expect operational synergies to materialize progressively over time, supported by our proven track record of EBITDA margin expansion and disciplined cost management.
I would like to briefly note that given this is an ongoing transaction, we cannot address specific questions related to the tender offer during this call. We encourage investors to refer to the publicly available filing materials, where the terms, rationale, and detailed disclosures of the offer are presented in full. Moving on, I would like to turn the call to Jaime and Javier to expand on the execution of our business strategy during the quarter. Jaime, please go on.
Thank you, Jorge. As mentioned in the opening remarks, on March 11, Fibra Monterrey successfully completed its safe equity offering and raised approximately $500 million . Importantly, these proceeds are not expected to be used in connection with the tender offer of Fibra Macquarie. During the follow-on, we engaged with more than 75 investors across multiple geographies. The book was 2.1x oversubscribed, representing demand of over $800 million, which allow us to increase the base offering by 11%. This strong response reflects continued confidence in Fibra Monterrey from both domestic and international investors.
As shown on slide five, demand has remained solid as the pricing supported by favorable price performance and higher trading activity. We are proud to be included in MSCI's small cap index, which further enhances our liquidity profile and broadens our institutional investor base. During the quarter, our average daily trading volume exceeded $4.5 million, nearly double the traded amount in last year's fourth quarter. This positions Fibra Monterrey amongst the 30 most traded companies in the Mexican Stock Exchange.
Moving on slide six, our updated commitments to investors continue to rest on three pillars. First, we plan to invest approximately $750 million in industrial assets, which reflects the deployment of the follow-on proceeds together with incremental debt capacity to reach up to 30% loan-to-value. In this regard, our track record speaks for itself. On capital allocation, we remain guided by disciplined prudence and a clear focus on risk-adjusted return. Second, we will continue to optimize our portfolio through disciplined asset recycling with a focus on value realization.
To date, we have sold or signed sale agreements subject to certain conditions for approximately 46% of our office portfolio and 100% of our retail portfolio. Third, we maintain our commitment to increase market liquidity through investor engagement and capital market initiatives. I will turn the call over to Javier to discuss real estate M&A activity and pipeline portfolio performance and market conditions. Javier?
Thank you, Jaime. Page seven of the presentation provides a side-by-side comparison of CBRE key market indicators across the 13 primary industrial markets in Mexico and our portfolio as of the end of the first quarter. According to CBRE data, vacancy across these markets stood at 6.2%, while total net absorption during the quarter reached approximately 6 million square feet. In Monterrey, vacancy remained broadly stable below 7%, with rents holding flat quarter-over-quarter. In contrast, vacancy in Tijuana continues to increase, reaching 16% in the first quarter of this year, nearly 800 basis points higher year-over-year.
Still, asking rents remain stable when compared to last quarter. Guadalajara now stands as the fourth largest market and continues to show strong rental dynamics supported by sustained [audio distortion] city. Vacancy increased quarter-over-quarter following new supply deliveries, although market fundamentals remain healthy. Our portfolio continues to outperform the broader market in terms of occupancy. When comparing in-place rents to current asking rents, we maintain meaningful embedded mark-to-market potential.
In addition, a weighted average lease term of five point five years provides strong cash flow visibility and near-term rent fitness. As discussed in previous calls, while we do not have material exposure to Tijuana, and near-term fundamentals may present some challenges, the market may offer attractive opportunities in satellite assets given its long-term structural advantages. A similar perspective applies to Juárez and Mexico City, where we currently have no owned properties.
Moving on to page eight of the webcast material. During the quarter, we advanced in the deployment of capital through a sale and leaseback transaction of an industrial portfolio for approximately $100 million, which includes U.S. dollar-denominated rent, mandatory 15-year term with annual adjustments linked to U.S. inflation, and a land bank of more than 200,000 sq m, increasing its cash flow generation capacity over time. The portfolio is estimated to generate annual NOI of approximately $7.6 million during the first 12 months after closing. At the same time, we continued optimizing the portfolio.
We signed an agreement subject to certain conditions for the future divestment of our office and retail portfolio for $46.8 million across different geographies. With this transaction, we have already sold or executed sale agreements for approximately 46% of the office portfolio and the entirety of the retail portfolio. Including properties currently under negotiation, representing approximately $60 million in fair market value, and excluding the Filios office assets within the Whirlpool campus, which we do not intend to sell.
Our remaining non-industrial exposure would be approximately $120 million, concentrated in two office properties, including our best-in-class asset in Jalisco, [El Paraíso] Moving on to page 10. Our current acquisition pipeline totals approximately $700 million, focused on institutional quality industrial assets in core markets. Given its dynamic nature, assets within the pipeline have continued to rotate. We remain focused on assets that provide stable cash flows, supported by long weighted average lease terms and U.S. dollar-denominated revenues, and mainly focused on light manufacturing. Most opportunities are currently under negotiations, with expected entry cap rates broadly in line with our recent acquisitions.
We will continue to provide updates as these negotiations progress. Moving on to slide 11. We continue to see strong demand from our tenants to expand their footprint within our facilities, supported by new production lines and increased product demand, which reflects the quality of our tenant base and a high level of client satisfaction. Our non-speculative development pipeline exceeds $80 million and is expected to generate high single digit to low double-digit returns, complementing acquisition deals and supporting growth in cash flow per share. We expect this pipeline to be gradually deployed while continuing to expand in the coming months.
As shown on slide 13, our KPIs remain broadly stable compared to the fourth quarter. Industrial assets now account for more than 80% of total revenues, with a strong presence in core markets. Our tenant base is well diversified, predominantly U.S. dollar denominated, and supported by long-term agreements with inflation-linked escalations, providing resilience and cash flow visibility.
As mentioned earlier in the call, our weighted average lease term stands at five years, supported by a well-structured maturity profile. Importantly, approximately 20% of industrial revenues are set to mature across 2026 and 2027, where we expect to capture lease spreads of between 10% and 15% in contracts that can be mark-to-market. Over the last 12 months, retention stood at approximately 90%, while the absorption to maturity ratio reached 120% over the same period. Page 16 of the webcast shows our properties performance.
On a same-property basis and excluding FX effects, NOI increased year-over-year despite temporary vacancy pressures supported by inflation-linked escalations, new leasing activity, and expansion-related revenues. It is worth noting that for the industrial portfolio on a standalone basis, same store NOI grew 4.5% year-over-year, while overall rent per square meter increased by approximately 5% both in U.S. dollar terms, demonstrating solid NOI growth despite limited lease rotation. Furthermore, acquisitions completed over the past 12 months further supported NOI growth, while margins expanded to 92.2%.
Turning to valuation, investment properties, including assets held for sale, remained virtually flat versus 2025 year-end on a constant FX basis. Acquisitions added approximately MXN 1.9 billion during the period, bringing the balance to MXN 40.4 billion. After incorporating FX effects, the final balance stood at MXN 40.7 billion. The current implied cap rate for the industrial portfolio stands at 7.3%, while the combined portfolio remains above 7.5%. The valuation from our independent appraiser could be subject to adjustment as interest rates environments continue to unfold. I will turn the call back to Jaime to discuss financial performance and 2026 AFFO guidance. Jaime, go head.
Thank you, Javier. Operational and administrative margins remain strong at above 92% and approximately 85%, respectively, despite FX headwinds from a stronger peso. Excluding FX fluctuations, all key financial metrics recorded year-on-year growth. Revenues increased by approximately 12%, while AFFO grew more than 7%. It is worth mentioning that the AFFO growth slightly outpaced FFO, primarily due to adjustment related to the equity issuance, which isolates the 15-day dilution effect in March. Additionally, as part of Fibra Monterrey's preparation for the adoption of IFRS 18, representation and disclosure is in the financial statements.
The company implemented a release regrouping of FFO beginning in fourth quarter 2025, fully aligned with income statement line items. This change was purely presentation related and had no impact on AFFO or distributions. Moving to slide 18. Following the recent equity issuance, our balance sheet reflects a lower leverage profile with loan-to-value decreasing from 26%- 22%, as expected, net loan-to-value and Net Debt-to-EBITDA ratios reflect lower levels. As of quarter end, our firepower totals approximately $1 billion, with potential to expand at roughly $1.2 billion as assets held for sale are monetized.
During the quarter, we further strengthened our financial flexibility through an unsecured syndicated credit facility for up to $265 million on the terms that represent the lowest financial cost for comparable facilities in the trust's history. This outcome reflects the strength of our credit profile, supported by our global scale investment grade rating, as recently affirmed by S&P and Fitch at BBB- and stable outlook. As mentioned in our previous call, our existing committed facilities provide flexibility to extend our debt maturity profile, and we plan to do so at our year-end.
All other debt KPIs remain broadly unchanged compared to the previous quarter. It is worth highlighting that S&P published an opinion regarding our tender offer, noting that our rating would not be negatively impacted by the transaction, provided that the Net Debt-to-EBITDA remains below 6x and loan-to-value below 40%. Leverage provides an attractive carry when comparing investment returns to financing costs. As a result, the recent reduction in loan-to-value is expected to temporarily impact AFFO per share, which is an important consideration when reviewing our 2026 guidance presented on slide 19.
Using the same average FX rate as in 2025 of MXN 19.2 per dollar, our 2026 guidance stands at approximately MXN 1 per share, which represents a 2% decrease compared to 2025 AFFO per share. This reflects a modest impact relative to the benefit of increasing our investment capacity by approximately $1 billion. All things else constant, we expect AFFO per share to increase by an additional $0.03-$0.0 5 as proceeds are deployed and leverage returns to normalized levels, supporting our underlying organic growth and accretive investment. As it is customary, we present a scenario analysis for AFFO per share based on different average FX assumptions for year-end. Nicole, please proceed with the Q&A section.
Ladies and gentlemen, to ask a question, please press star one. If you are connected using our webcast tool, please write your questions in the chat section of the platform. Our first question comes from Pablo Monsivais . Please go ahead.
Hi, team. Thanks for taking my question. I have a broad question because as you are pointing out, there is some softness in the border markets. We would love to hear from you, what are you seeing in terms of new construction, the leasing pace, what clients are saying in terms of releasing? Is there any change in the trend that we are seeing or is it a continuation, perhaps? Any insight you can make that call will be useful. Thank you.
Hello, Pablo. This is Javier. That is a great question. Particularly in the Tijuana and Juárez markets, as I mentioned before, we see an increase on vacancy, I would say given two or three main causes. First of all, there was an excess of construction, while at the same time there was a decline on demand. Also, there were some buildings and some new developments that were either lacking enough energy or energy at all. To my own personal standpoint, or my view, some of the buildings were not the right quality of a building in terms of the size, the layout, and in general, the specifications.
I would say that both markets are going to continue pretty much flat or close to flat on new deliveries of space. When we talk about speculative space, there is some activity running in parallel on Build-to-Suit projects that might provide those markets with a small enhancement in the short term and mid-term. Also, I would like to point out that markets like Monterrey, Tijuana, and Juárez, they have an excess of offer of space.
To my own personal standpoint, I would say that probably 60%-70% of the existing offer of space in these three markets are truly class A space. So the rest of the non-class A space that is available in the market is also creating some distortions on the market. We see long-term strong fundamentals for all three markets, but it is going to be a tough mid-term in terms of displacing and allocating that space to new tenants.
Perfect. Thank you very much.
Our next question is from [Anton Modecado] with BTM. Please go ahead.
Hi, guys. Thank you for taking my question. It is just a quick one. Considering the size of the combined portfolios of Fibra Monterrey and Fibra Macquarie, I know you mentioned you foresee the possibility for improvement in cost of capital. I was just wondering on the debt side, is there any potential improvement or range that you could share?
Yes, thank you. Yes, of course, as we diversify our portfolio because of the size and because of the number of the tenants, that might reflect certain advantages in the cost of debt. That is definitely. I will add that it also may give us a possibility to go to other markets in which the volume is important. That will also help to reduce our cost of debt.
Thank you. Just a follow-up also, you mentioned potential additional synergies. If you could share a little bit of color of all of the improvements that you think you could do in the combined entity, that will also help us address the potential combination.
Yes. Thank you very much, Anton, for the question. Unfortunately, we cannot provide any further detail on the synergies as the one that Jorge already spoke about in his earlier remarks in light of this being an ongoing nature of the transaction. Nonetheless, you can go to the public filings that are in BMV or [DBM]
Super. Thank you, Cesar and Jaime.
Thank you, Anton.
Thank you, Anton.
Our next question comes from Felipe Barragán with JP Morgan. Please go ahead.
Thank you. Good morning, guys. Thanks for the call, for taking my question. Javier, you touched on having the flagship office property that La Perla coming to you get divested. Just get some color on sort of the reception of getting that property marketed and what sort of cap are you guys expecting for that property. Thank you.
Sure. Thank you for the question. You could say that we're saving the best for last. As we are immersed right now in several processes of divestments, as mentioned before by Jaime and myself, we want to be very careful with the last sale of the best asset. We think that that building, the way it's performing and the way it looks in the future, it's going to capture a cap rate, I would say, around 9%. That would be our expectation. But we believe that's not going to happen probably before beginning of next year.
Okay. That's very clear. Thank you.
Thank you.
Our next question comes from Enrique Cantú with GBM. Please go ahead.
Hi. Thank you for taking my question. Following the recent follow-on, could you provide more color on the expected deployment timeline? How are you thinking about capital allocation? Just a follow-up, in that context, which markets are you currently seeing with the strongest dynamics?
Sure. Thank you for the question. I'm sorry. We expect to fully deploy about $750 million in the following 12- 18 months. We have a very strong robust pipeline of both stabilized assets and potential expansions and Build-to-Suits. We believe it's going to be very close to what we did between 2024 and 2025 with the previous public offering. Allocation is going to be a mix of equity and debt. We have the flexibility to do both as our leverage remains low right now. The short answer is around $750 million in the following 12- 18 months, at a Cap Rate close to what we have been deploying recently. Just
Perfect. Thank you very much.
Our next question comes from Piero Trotta with Citi. Please go ahead.
Hi, team. Thank you for the call. My question is regarding the Michigan acquisition. You added this industrial portfolio at a 7.6% cap rate with land for future expansion. Do you have an estimated cap rate for this asset after the fully development of this land? Should we see this type of acquisition with an operating asset plus our land for potential expansion being representative of your further acquisitions? That is it. Thank you very much.
Yeah. We have a problem with Javier's line. Yes, we do not have any expected cap rate on the expansion of the Michigan portfolio, given that that would be, let us say, on a Build-to-Suit or expansion basis. Nonetheless, we could expect to add maybe 200 sq m in GLA. If you add to that maybe a 10% deal on cost, that could give you a rough estimate of how the NOI could expand if we were to do a Build-to-Suit or expansion within that plot land.
No problem.
Thank you. We have a question from Gordon Lee in our webcast. What would you estimate in the vacancy rate in Tijuana, Ciudad Juárez, and Monterrey if you exclude GLA that does not have access to power?
Thank you, Gordon, for the question. I believe that from what we have here from different brokers is that roughly half of the vacancy in Tijuana has no access to either energy or water. So you could cut that in half. We could expect the vacancy rate in these markets to be between 5%-10% on the longer term, given their strong dynamics and fundamentals.
Javier, I don't know if you want to complement. We can't hear you.
So we continue to have some technical issues with Javier's line, who is actually negotiating a portfolio. So I believe that that was the last question. Nicole, if you want to remind to the investment community if they have any questions to press pound. Thank you very much.
Yes. Yes, and as a final reminder, please press star one at this time for any questions. I do believe we may have Javier's line back in. And I do see our next question comes from the line of [Edson Mendoza] with [SUMA Cap] Please go ahead.
Hi. Good afternoon. I have two questions. The first one is related to the M&A activity and even with the divestment properties that you plan. My question is about the retail portfolio. Is when you are going to see them out from the balance sheet? Because you reported this for a quarter, but it is my understanding it is already done. So when we are going to see it out of the balance sheet? My second question is a follow-up on the Fibra Macquarie offer. If approved this transaction, are you planning to change the $ 750 million target of possible acquisition?
Sure. Thank you for your questions. In an accurate question, as Cesar mentioned before, in light of the ongoing nature of this transaction as I mentioned, we are not able to provide any further comments on the tender, so you can go directly to the filing to see what information is in that filing. Thank you for your inquiry. The next question, I don't know if Javier is on the line.
No.
Yes.
Sure. Go ahead, Javier. The question was how much time for deployment on the retail, given that there are signed agreements but still pending on some certain conditions.
The small retail portfolio that we have under negotiation, we are pretty advanced in negotiations. We expect to close that around September of this year.
Okay. Last, I remember that you mentioned that you want to become an industrial REIT. My question is that a plan still ongoing or because the office segment is in this process of revamp, are you planning to curtail those offices over performing?
No, that plan is current, and it's still the same. Our intention is to become 100% industrial REIT before the end of 2027.
Okay. Thank you so much, and congrats on the results.
Thank you.
Thank you.
As a final reminder, please press star one at this time if you have any last questions. Great. At this time, I am seeing no questions in the queue. I would like to turn the conference over to management of the company at this time.
Okay. Thank you everyone for being at this call, and I hope to talk to you soon. Thank you. Bye-bye.
Thank you.
Ladies and gentlemen, thank you for your participation. That does conclude today's conference. Please disconnect your lines and have a wonderful day.