Good morning, and welcome to the 2023 fourth quarter Fibra Monterrey conference call. With us this morning from Fibra Monterrey, we have Mr. Jorge Ávalos, CEO, Jaime Martínez, CFO, Javier Llaca, COO, and Eduardo Elizondo, Legal Counsel. They will discuss the more important strategic, financial, and operating aspects of the quarter. 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 risks and uncertainties.
Actual results may materially differ, and the company advises not to rely on those forward-looking statements. Fibra Monterrey undertakes no obligation to publicly update or revise any forward-looking statement. I will now turn the call over to Mr. Jorge Ávalos.
Thank you. Hello, everyone, and thank you for attending our last 2023 quarter report. Since inception, we defined four core strategic milestones so we could become an outlier company in the public real estate market in Mexico. First, structure the best-in-class corporate governance company in Mexico. Second, consistently execute our business plan and deliver our promised profitability. Third, manage with discipline a strong and flexible balance sheet. Fourth, reduce our cost of capital by adding up scale to our asset size and increase liquidity in our daily trading volume. We have successfully and consistently delivered the first three strategic milestones for the past nine years. As made public, we are currently in the process of obtaining the authorization for a potential equity issuance, and for the first time, seeking international institutional investors.
I am confident that if we are successful in this transaction, we will achieve our fourth milestone of liquidity. During 2023, we executed the acquisition of the Zeus portfolio, enhancing Fibra Monterrey's potential in multiple aspects. This acquisition not only increased our presence in the industrial asset class, but also propelled our market capitalization to over MXN 1.3 billion by the end of 2023. I am also pleased to announce that for the ninth consecutive year, Fibra Monterrey met its earnings guidance, delivering cash distribution in the higher range of our commitment to investors. Today, our portfolio is not only more robust compared to the end of 2022, but we are also in a privileged position to continue capitalizing on market opportunities.
We are witnessing unprecedented activity in the industrial segment in Mexico, primarily driven by the reallocation of companies affected by supply chain disruptions to the U.S., and also by a growing trend towards regionalization. This activity is fueled by new companies starting operations in Mexico and by existing tenants seeking expansion. The accessibility to skilled labor, numerous free trade agreements, favorable rental arbitrage compared to the U.S., and Mexico being a strategic location led to a net absorption of nearly 5 million sq m in 2023. This has resulted in a 22% increase in rent per sq m across the 13 primary Mexican markets as reported by CBRE in the fourth quarter of 2023.
Historically, we have showcased our capability to efficiently execute accredited transactions through various means, including competitive dealings with institutional entities, sale and leaseback transactions with multinational companies, acquisitions from local developers, build-to-suit developments, and expansions of existing buildings. The year 2024 will be no different. As of this earnings release, we have identified and are assessing stabilized industrial portfolios exceeding $1 billion, predominantly comprising dollarized rents and located mainly in the northern and Bajío regions of the country. In addition, we are in the process of negotiating approximately $100 million in expansions for our existing tenants in industrial properties. It is important to note that as these are stabilized acquisitions and expansions of already developed properties, we anticipate no conflicts with access to energy or infrastructure. As I mentioned before, we are in the process of obtaining the authorization for a potential equity issuance.
Given the sensibility of the estimated distribution for 2024, which depends on the number of additional certificates that might be issued, the earnings guidance for the year will be announced in the first quarter of 2024 earnings release upon the completion of this process. Finally, in alignment with the ESG objectives for the third consecutive year, Fibra Monterrey among the Mexican Fibras participating and being evaluated in the Corporate Sustainability Assessment, the CSA, by S&P Global. We obtained the highest rating in the corporate governance criteria, and also for the first time, received the highest ranking in the entire economic and governance criteria. Moreover, the 2023 edition of the Global Real Estate Sustainability Benchmark, GRESB, awarded Fibra Monterrey the Green Star level, placing us in the top quartile compared to our peers, and acknowledging our global leadership in integrating sustainability criteria throughout the entire real estate investment cycle.
These results are proof that the strategy proposed by our management is appropriate, convenient, and effective for the sustainability and the development of the company, with a solid ESG foundation and fundamentals. Once again, I thank our equity and debt investors for placing their trust in Fibra Monterrey, and for allowing us to maintain our commitment to redefine the real estate profitability in Mexico. I will now turn the call to Javier, who will walk you through our portfolio performance and potential pipeline.
Thank you, Jorge, and good morning, everyone. I will start my piece of the presentation on page three with the composition and geographical distribution of our portfolio as of the year-end of 2023, which remained unchanged from the previous quarter. After full integration of all 46 properties of the Zeus portfolio, as well as the 9.5 million sq ft land bank in Puebla, Fibra Monterrey now owns and manages 116 income producing properties. Our footprint covers 15 real estate markets across 14 states in the northern, central, and Bajío areas. With a total GLA of roughly close to 18 million sq ft, out of which around 15.5 million sq ft are industrial, 2.2 million sq ft are in office buildings, and 215,000 sq ft belong to our small retail portfolio, in addition to our land bank. Overall occupancy in terms of GLA stands solid above 96%.
We continue to consolidate a strong presence in the markets with the most exposure to nearshoring in real estate transactions, and will continue expanding in such markets, particularly in the northern and Bajío areas. On page four of the material, we present a brief overview of our new key performance indicators as of the end of December and moving forward. In terms of percentage of revenues, these indicators remain like the previous quarter. 71.9% of revenue by asset class come from our industrial properties, while office and retail account for 26.5% and 1.6% respectively. By location, revenue from our Monterrey-based portfolio represents 41% of total income, followed by Guadalajara, Guanajuato, Saltillo, and Tijuana, which combined represented close to 34% of revenue. Occupancy rates as percentage of potential revenue at full capacity remains close to 93%.
Our dollar-denominated leases represent almost 83% of gross revenue, which could further expand if the peso exchange increases. Finally, lease maturity schedule and weighted average lease term is just shy of five years, with around 41% of revenue will begin expiring in 2029. As we mentioned during our previous earning calls, and should market conditions remain, we believe that during 2026 and 2027, positively spreads on industrial renewals and new leases could happen in the market. On page five of the webcast material, we present the same property performance analysis for the fourth quarter of 2023 compared to the same quarter of the previous year. For purposes of this analysis, we use all 60 investment properties in our portfolio prior to Zeus, which represent a total GLA of 8.9 million sq ft.
There is some marginal increase in the square footage of these properties as some expansions at our Filios, Fagor, and Catacha properties have been either completed or close to be completed. Compared to the fourth quarter of 2022, gross revenue contracted in 4.6% of MXN 17.5 million, with a decrease of 5.2% or MXN 17.1 million in our net operating income, mainly due to negative FX impact following the fourth quarter of the previous year. NOI margin contracted in 50 basis points to 86.1%. The composition of NOI variance will be explained in detail in the following slide. Once we incorporated additional revenue from Zeus, the aggregated portfolio generated total net operating income of MXN 551.9 million, compared to MXN 326.6 million in the fourth quarter of 2022. This is an increase of 69%.
Our NOI margin for the aggregated portfolio was of 90.8% for the quarter, well above our target of 88%. The fact that the NOI margin of the Zeus portfolio is almost 97% helps us to continue to accomplish substantial economies of scale in the operation of the portfolio. Slide six of the presentation explains in detail the MXN 17 million reduction in our net operating income comprised by the following: MXN 3.9 million decrease due to a negative FX impact between the fourth quarter of 2022 and the fourth quarter of 2023. MXN 22.9 million decrease due to vacancies from certain lease expirations. MXN 36.3 million increase due to inflation escalation on lease agreements and new leases. And MNX 500,000 increase due to savings in certain operating expenses.
As you can see, once we included additional revenue of about MXN 242.3 million from the Zeus portfolio, we reach the MXN 551.9 million NOI in our aggregated portfolio. On page seven of the presentation, I would like to address the variance in the valuation of our investment properties portfolio, in which we have seen a negative impact of about MXN 2.5 billion in FX change alone during the last 12 months prior to December 2023. Some CapEx expenses, as well as improvements in the operation and market conditions, current investment in expansions, and integration of the Zeus portfolio, boosted valuation from MXN 17.6 billion- MXN 27.3 billion at the end of the last quarter. As mentioned during our last earnings call, as Jorge mentioned, we have executed the first four agreements for certain expansions in our industrial portfolio, which are highlighted on page eight of the presentation.
The construction of these expansions has already started. These expansions in certain properties in San Luis Potosí, Monterrey, Querétaro, and Aguascalientes, with a total GLA of more than half a million sq ft, will represent a total investment of about $44 million. Should these expansions be successfully completed, they could generate additional NOI of $4.2 million. This is a yield on cost of 9.6% net of investment in tenant improvements, which are amortized throughout the lease term. If executed, these expansions also would allow us to extend the lease term for another 10 years with an attractive blend and extend lease rate close to market and above current rates. If executed, these expansions would increase the size of our industrial portfolio close to 4% in terms of GLA. It is also relevant to say that all required energy for this project has been already secured, as Jorge mentioned.
More expansions on our industrial buildings are well advanced in negotiations and are expected to be executed in the next few weeks. It would drive additional GLA of another 556,000 sq ft with an investment of around $54 million at a similar cap rate that the four previously mentioned. Finally, I would like to mention that positive lease spreads observed during this last quarter was 34% for renewal, new leases, and expansion. It is important to point out that there was one outlier in Tijuana from the Zeus portfolio, which drove most of these positive lease spreads. Moving on to page nine. Jorge also mentioned some of our underwriting activity during the quarter. We have currently under evaluation and/or negotiation a little more than $1.1 billion worth of potential target, satellite portfolio properties across Mexico.
These potential acquisitions are layered as follow: MXN 287.3 million on potential acquisitions already under non-binding agreements for a total of 3 million sq ft of GLA. MXN 460.5 million on potential acquisitions being negotiated for a total of 4.5 million sq ft of GLA. Finally, MXN 368.9 million of identified portfolios available for sale, currently being evaluated for a total of another 6.4 million sq ft of GLAs. All together, the pipeline accounts for 95 different properties with an awaited average lease term of more than nine years, a total of close to 14 million sq ft of GLA, and 94% of the revenue under dollar-denominated lease agreements. Subject to successful negotiations, before the end of the year, we may reach an agreement with respect of a substantial portion of this pipeline.
Finally, I would like to address the conditions of the office segment of our portfolio and share with you our strategy on this regard. To better understand the current situation of the office segment, we have divided the portfolio into three categories, and we will share it with you. First, overperforming. Those top quality buildings with high occupancy levels, reasonable weighted average lease terms, and predominant dollar-denominated lease agreements. This group of properties accounts for 11.6% of total assets, and we believe could continue to perform and contribute to cash flow of the company. Most of these buildings are in the Guadalajara market and currently occupied by tech companies, along with the office component of the Whirlpool campus in Monterrey. Second, performing. Those buildings that have been resilient to market conditions, maintaining reasonable occupancy with short-term weighted average lease term, and a mix of peso and dollar-denominated leases.
This group of properties account for 9.7% of total assets, and these were we're focusing our marketing efforts to increase occupancy and therefore cash flow for the company. Third, non-productive. These buildings with occupancy levels below market average, even fully vacant buildings. This group accounts for 4.1% of total assets and are currently being evaluated for its redevelopment potential for a subsequent sale or contribution for new development along with a third party developer. You can rest assured that we are committed to make the most out of our office segment, and we will keep you apprised on this matter in the next earning calls. At the end of today's presentation, I'll be more than happy to address any questions you might have regarding operations and acquisitions for our real estate portfolio. But for now, I will hand the presentation to Jaime Martinez. Go ahead, Jaime.
Thank you, Javier, and thanks everyone for joining the call. I would like to start my speech with a quick overview of our balance sheet. As you can see on slide 11, our outstanding debt fundamentals remain virtually the same since our last call. On December 15th, we signed an amendment to reduce our syndicated credit facility for charging 20 basis points. This is the second reduction we have had since we reached an investment grade rating. Also, during this quarter, we increased the outstanding amount of the Santander line of credit to continue investing in the industrial expansions on the development. As mentioned in the last earnings call, we aim to replace the outstanding balance of this credit facility with long-term debt following the beginning of the rental revenues for each expansion.
Moving on, we got our debt 100% unsecured with an interest rate well below 5% and U.S. dollar denominated. Average debt maturity stands at 4.3 years with no material maturity until late 2027. Furthermore, balance sheet remains strong with a loan to value around 27%. This results in various financial flexibility to size market opportunities of more than MXN 220 million, including expansions. The same flexibility remains true when looking to our net debt to EBITDA, which stands around 3x . Moving on, we have more than enough gunpowder in available credit lines that account for 20% of our assets. Regarding our bottom line results, as shown on slide 12, the main effect in year-on-year variations remain due to forex. As Javier already mentioned, considering our highly dollar-denominated leases and peso-denominated expenses, having a stronger peso has kept as a constraint in our AFFO once translated into Mexican pesos.
It is worth mentioning that isolating this FX variation, our annualized AFFO per share would have stood at MXN 1.02. I will emphasize this matter later in the call. Additionally, having fully paid for a huge portfolio, financial income partially transforming to rental revenue on an aggregate basis, this translates into a negative variation, given the spread between the short-term interest rate received through cash investments in the fourth quarter 2022 above 11%, and the going in cap rate of the acquisitions above 8%, which was further affected by the land reserve on paid in October. Which is not an income producing asset as of now. We are confident that even though this could affect cash flow in the short term, long term returns will more than compensate, given potential transactions in the land. In the next slide, you will find the same analysis but compared to the previous quarter.
The main variation was a lower financial income caused by the payment of the land reserve, which I already explained, which was partially offset by a slightly stronger dollar, as well as rental increases and stronger occupancy. As in previous quarter, on slide 14, there is selected information to compare and contrast our main financial indicators of the last 12 months to facilitate your analysis. Finally, on slide 15, I will emphasize the effect relevance for our local investors. As you can see on our graph on the left, this quarter's AFFO per share stood at MXN 0.90 on an annualized basis at the FX rate of around MXN 17.5 per dollar. Sliding on your right, you will see different effect scenarios ranging from MXN 18 all the way to MXN 21 for your analysis.
Our focus as management remains the same, to keep improving our risk-adjusted cash flow per share performance on a regular basis. Having said that, I would like to end my speech by mentioning that as it has been made public, we have an equity offering in progress, though we will only address the questions you may have regarding our results. For matters related to the offering, please refer to the prospectus and the prospectus supplements publicly filed. Available and currently under review with the Comisión Nacional Bancaria y de Valores, which documents are subject to change. Operator, please continue to the Q&A.
Thank you. 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 the line of Gordon Lee with BTG. Please proceed with your question.
Hi, good morning. Thank you very much for the call, and congratulations on the results. Two questions. The first is on the land in Nuevo Leon and in Puebla that is not adjacent to existing properties and for which you are exploring different options. If you were to decide to develop that as a greenfield, how large would these investments be? Would you undertake the development yourself, or would you bring in a JV partner to do that? The second question, just on the acquisition pipeline. If you could remind us roughly the cap rates that you are looking at. Thank you.
Hello, Gordon. This is Javier. Nice talking to you. Regarding your first question, most of our land bank, as you well mentioned, is in Puebla. The rest of the land bank is distributed along the portfolio on small lots adjacent to buildings with a potential expansion or expansion rights on the lease agreement. We are going to keep those for those potential expansions. Regarding Puebla, we are aggressively marketing the property for sale. Mainly, our first choice is to sell the land. We are moving into that front. If the land was not to be sold or not to be sold completely, we would expect to develop about 40% of the square footage of the land for a gross leasable area of new buildings. We are attending some RFPs from some companies that are looking for build-to-suit projects in the area.
It is hard to say a number on the investment, but if we were to develop the whole land, you could expect somewhere around $40 million-$50 million. If we were to develop that, we are going to partner or to contribute the land to a third-party developer to avoid, as possible, the development risk on equity. That would be to the land in Puebla. Let us keep in mind that this was part of the Zeus portfolio. We think that commercial prices for a land like that in Puebla are higher than what we paid for. We expect to capture some value there.
In regards to the pipeline, it's kind of early to talk about specifics, but I can tell you that the first layer of the pipeline that we have for the short term, you could expect a cap rate of slightly above 8%, around 8.1%, I would say, on the first tranche of the pipeline that we have.
Perfect. Thank you very much.
You're welcome.
Thank you. Our next question comes from the line of Francisco Suarez with Scotiabank. Please proceed with your question.
Hi. Thank you for the call. Congrats on the execution, gents. The question that I have is on your office portfolio. Thank you for that slide. That was very clarifying, very helpful. The question that I have is that you indicated that basically you will be increasing your overall occupancy rates by 100 basis points based on when you might expect to commercialize over this quarter. Can you give us a little bit of more guidance towards what would be the overall occupancy level that you may expect for the year-end of 2024? If these 100 basis points of improvement in occupancy are actually in those assets that you labeled as performing? The second question that I have, if I may, is what are your expectations on mark to market this year based on your roughly 8% industrial portfolio that is coming due this year?
Thank you.
Hello, Paco. This is Javier again. Nice talking to you. Regarding your first question, yeah, we expect occupancy levels in the office segment to improve, particularly on the performing assets. We are well advanced in negotiations to lease up one of the vacant buildings that we have. We expect the overall occupancy of the office portfolio standing right now at around 72%, 73%. We expect to be able to surpass the 80% mark by the end of the year. As we make progress on potential disposition of the assets, occupancy levels on a relatively basis would increase even more because your base would reduce. The short answer would be that we expect to surpass the 80% mark on occupancy by the end of this year. The second question for Jaime. Can you repeat the question for Jaime, Francisco?
Yes, of course. Thank you so much. On the leases expiring on your industrial portfolio, what sort of mark to market do you expect this year? In other words, what would be the overall lease spreads that you expect on your industrial portfolio that is expiring this year?
Okay. I'm sorry. Well, unlike the 34% positive lease spread that we had on the last quarter, let me give you some context. You capture lease spreads when you have the end of the lease cycle. At the end of the lease cycle, two things could happen. You can either renew the existing lease agreement, or the tenant would terminate it, and then you have to lease out the property to a new tenant. When the first case happens, then you have two options. In some cases, you have an automatic renewal option for the tenant on which you are obligated to renew, to extend the lease agreement under the existing and current terms of the contract. That accounts for about 35% of the expirations that we have this year.
The other 65% are open to either renew under a new negotiation with the existing tenant or to lease it up. Given that we have about 8% expirations this year, I would say that probably, we could expect, if this happens, an overall positive lease spread of around 10% on the conservative side.
Very clear. Thank you for that. Congrats again.
Thank you. Our next question comes from the line of Juan Macedo with GBM. Please proceed with your question.
Hi, thanks for the call and congrats on the results. My question is also regarding the office segment. We saw strong rents in operative offices. Although corporate rents didn't show the same results. Considering your strategy and the way you're categorizing office buildings, would you consider that maybe the unproductive segment is more sided towards the corporate side or the operative side, or is there a mix there?
Hello, thank you for the question. Let me go through the three categories. On the over-performing, we have seen a great performance overall of the market in Guadalajara. I can tell you that we fully leased up the La Perla project during last year. I can tell you that rents were, first of all, dollar denominated, and we saw a rental growth even compared to pre-pandemic levels, even in dollar terms. We're seeing a very strong market in Guadalajara, very dynamic. Net absorption and vacancy rates are overcharging Guadalajara. We are almost fully occupied in Guadalajara. We believe that's going to continue to be the trend. But with a small upside, given the fact that we almost have no vacant space in Guadalajara. We're seeing a very slow recovery in terms of net absorption in Monterrey and Mexico. Unfortunately, unlike Guadalajara, rental rates are still below pre-pandemic.
We expect to recover some of our upsides, particularly in the Monterrey market. Mexico City, we have a very small exposure to the Mexico City office. We have only one building in the Interlomas corridor, and we are actively marketing that property. But it's hard to give you a forecast on Mexico City.
Yeah, that makes sense. Thanks a lot for the detail, and congrats on the results.
Thank you.
Thank you. Our next question comes from the line of Edson Murgía with Suma. Please proceed with your question.
Hi, good morning, and thank you for taking my questions. This one is a follow-up on office segment. Those non-productive assets that you showed us in the presentation, are you considering a recycling process for the future or what would you differently? Because you already mentioned about this actively marketing strategy about the corridor in Interlomas, but it is not quite, don't get me wrong, but it is not quite feasible that it is happening or if the tenants are willing to be in those offices in spite of the outperforming, underperforming assets that you have. That would be the first one. The second one is regarding on the company as a whole, because it seems like you are more likely to become an industrial REIT rather than a mix of different type of assets. Could you give us a little bit more color about what would be the strategy?
Are you pursuing to become an only industrial company or what would the strategy behind it? Thank you.
Thank you, Edson. Nice talking to you. Thank you for the question. Regarding the non-productive assets, we have been conducting analysis on the best and highest use for those property, most likely for a reconversion of the properties. We are not a developer company. If you ask me, our plan A would be to dispose of those assets, but keeping the best and highest residual value for new development of the property. Most of those properties, if not all of the properties, have a great potential for redevelopment for a different use. Our plan A would be to sell those at a nice residual value. Plan B would be to contribute the property as equity to partner with a developer at REIT to contribute the development equity and eventually to try to make the most out of those. We are not planning to develop any of those ourselves.
Regarding your second question, the short answer is yes. As we continue to move forward, we believe that we might become a fully industrial REIT. We want to be very careful and very responsible on the value that we give our shareholders on the office component. So it's going to be a yes, but it's going to take as long as we need to make the most out of our office component.
Thank you. Last, if I may, one of the comments in the press release, I think it's interesting to know more details about the energy and infrastructure, because you mentioned in the press release that it's, well, you are not considering any material risk or what I understood as it's not a risk, but what have we sensed from other type of companies, one of the questions that we always receive, especially for international companies, is what about energy, what about infrastructure, and what about water? Could you give a little more detail about this?
Yeah, sure. As you all know, we are not a developer REIT. We are going to continue not being a developer REIT. We believe that the risk and the challenges of energy and water are more on the development side than the stabilized asset side. We are going to continue our model. What we have found out is that the spread that you have on the return between acquiring stabilized assets and developing a new speculative building, there's a gap, there's a spread, but we don't believe that the risk is worth that spread. So we're going to continue our model. We're going to continue to be disciplined. We're going to continue to stick to our investment guidelines, and that's going to be pretty much what you're going to see from Fibra Monterrey in the future.
Okay. Thank you so much, [inaudible], and congrats for the results.
Thank you.
Thank you. As a reminder, if anyone has any questions, you may press star one on your telephone keypad to join the questioning and answer queue. Our next question comes from the line of Mortenkotter with GBM. Please proceed with your question.
Hi, guys. Thank you for taking my question, and congrats on your results. Sorry if someone already asked it, I got dropped for a moment. We've seen most players looking for ways to access capital, raising money, potential IPOs, consolidation, and so on. Which would you say is your competitive edge when acquiring and growing your asset base compared to your peers?
Hello, Anton. Thank you for your question. Something that has characterized us during the past is our ability to execute. What we have proven to the market and recent transactions like the Zeus portfolio acquisitions is a very good example of that, is that I don't think that no one has the ability to close with the level of due diligence and the thoroughness of due diligence that we do. We have proven to the market that when we put an offer, either on an off-market deal or a competitive process, we put our money where our mouth is. That has been our trademark ever since inception. Something that is also our trademark is that we do not tap the markets until we are very confident to make a quick deployment and execution of the resources. As you heard throughout the presentation, we have a very strong pipeline.
We are very well advanced in negotiating some of them, and we truly believe that we can make a compelling story to raise that equity that Jorge mentioned on the opening remarks, and that's going to continue to be our trademark.
Super. Thanks.
Thank you. Our next question comes from the line of Francisco Chavez with BBVA. Please proceed with your question.
Hi. Thanks for the call and congrats on the strong numbers and also for improving the disclosure on the office segment. My question is regarding the underperforming assets. You can give us more color on where are those assets located, what is the average age, and also, what is the cap rate that you use to book those assets in your balance sheet? Is there a risk to see a lower valuation in coming months? Thank you.
Of course. Thank you, Paco. Nice talking to you, and thank you for the question. Yeah, the underperforming assets, I would say most of them are office buildings in Monterrey that used to be most of them back-office buildings. Cap rates is hard to answer to you right now. They are on the press release of each of the acquisitions. We can get back to you with that number. What I can tell you is that they were two digit cap rates. As I said before, we are very observant of the IRR that those buildings would have with a potential sale.
We are working with third-party advisors and consultants on trying to get the best and highest use for those properties under our redevelopment scenario, to sell those properties as close as possible to residual value for that best and highest use. Every time that we are close to a sale, we are going to disclose the financial performance of those properties. When you talk about non-productive assets, IRRs trend to infinite when you sell a property that is not producing any income. It is also going to save money for us on the expenses because we need to maintain those properties. We are going to roll over that income into income-producing assets from industrial. It is hard, I will give you a straight, concrete answer right now. We are working on that.
We are going to make sure that that money is put to work on industrial properties, and we do not make a write-off on those properties.
Great. Thanks so much.
We have one question from Pablo Ricalde from Santander. Hi, thank you. Can you share how are you seeing lead dynamics per region in Mexico? Where do you see the most recent growth potential? Thank you.
Thank you for the question. Definitely, we are looking at the Northern Mexican and the Bajío areas. When you look at the growth of the markets and the growth on rental rates according to companies like CBRE, these continue to be the most dynamic regions in Mexico. There is a very hard competition for tenants in those areas, and that makes the private developers to continue seeking for equity to continue developing. Most of these developers have no access to institutional equity. That is where we come into play. We have become the preferred exit strategy for these private developers. There is a continuous rental growth, although the spread between asking rates and closing rates have increased a little bit. I can tell you, cities like markets like Monterrey have more than 1 million square meters being developing right now.
Tijuana is close to 1 million. We see kind of a delay on rental growth in Bajío that are going to start kicking up. The short answer would be we are going to continue refocusing on the northern market and the Bajío markets, including Guadalajara and Aguascalientes.
Thank you. Our next question comes from Emiliano González from Infosel. How much do you expect nearshoring to boost your results in 2024? Are you optimistic about this trend despite some companies are delaying their investment plans?
Thank you for the question from Infosel. To try to give you a number of how much it's going to boost our growth is difficult. It's going to be the key driver, that's for sure. Right now, I would say that, including the potential pipeline that we have, we continue to grow our exposure to nearshoring. I would say that no less than 60% of our industrial portfolio has something to do directly or indirectly with nearshoring. We strongly believe that that's going to continue to be the trend. When we talk about the cycle, or the length of this cycle on the market because of nearshoring, we strongly believe that it's going to be more than five years. Probably longer than that. We're very optimistic about nearshoring.
There's a lot of challenges that I'm personally sure that are going to be fulfilled from Mexico, both from the public and private sectors. But yeah, we are betting a lot on nearshoring, but it's not our sole driver. Let's remember that some of the characteristics of our portfolio is that we are very focused on light manufacturing for export, and that's a mix of nearshoring and non-nearshoring activity. But definitely, we're optimistic about the future of nearshoring.
Thank you. With no questions in queue, I'd like to turn the conference over to the management of the company.
Thank you, everyone, for attending this call. We'll talk to you in the next conference call. Have a great week. Bye-bye.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.