Good morning, and welcome to the 2023 first- quarter Fibra Monterrey conference call. With us this morning for Fibra Monterrey, we have Mr. Jorge Ávalos, CEO, Jaime Martínez, CFO, and Javier Llaca, COO. 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. A recording 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 differ materially, 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 statement. I will now turn the call over to Mr. Jorge Ávalos.
Thank you, everyone, for attending our first quarter 2023 conference call. As previously announced on our last call, we successfully completed one of the most important milestones in Fibra Monterrey history, the acquisition of the Zeus portfolio. It is worth noting that in 11 mandates, we were able to tap the market 2x and obtain $545 million, secure a $300 million long-term syndicated loan, and underwrite a $662 million transaction comprised of 46 industrial buildings located in 11 states. We couldn't have achieved this if it wasn't for the great effort, dedication, and willingness of our management team, the sellers' management team, our banks, and the support of our stockholders. Putting into perspective the transformation that resulted from the transaction, we were able to: one, increase our NOI by close to 80%. Two, surpass 100 investment properties. Three, exceed 1 million square meters in GLA.
Four, diversify our income by sector, tenant, and geographic location. Five, reach an investment- grade status by a global credit agency. Six, raise equity at a price in line with our NAV, becoming the most active equity issuer among the stock issuers configured us in Mexico. Seven, successfully complete the second-largest industrial real estate acquisition in the Mexican market in the recent years. With the completion of this transaction, we deliver on the promises we made to our investors in our September 2022 follow-on. However, there is a continuous commitment to improve our cash flow generation in a sustainable manner. On the other hand, for organic growth, we ratify our objective of maintaining solid lease indicators such as loan maturity profile, high occupancy rates, primarily dollarized and inflation-linked revenues, as well as a high-quality multinational tenant base.
In this regard, alongside our efforts to make vacant space deliver the expansions required by our current tenants and realize both operating and administrative efficiencies, we continue to assess market opportunities, primarily in the industrial sector. As mentioned in the fourth quarter of 2022, in this earnings release, we are announcing our 2023 cash distribution guidance, which Jaime will address during his remarks. It is worth mentioning that, as a result of our orderly growth strategy, the increase in dollarized revenues, the greater participation in the industrial sector, and the diversification resulting from this acquisition, investors will benefit from a more predictable and quality-based cash distribution since Fibra Monterrey's inception. Additionally, the new asset scale, rated market cap, and better credit rating open the opportunity to reduce our company's comprehensive funding cost, which could translate into greater value for our investors.
Lastly, following our sustainability strategy in the most recent corporate sustainability assessment by S&P Global, Fibra Monterrey held the highest rating in the corporate governance category among Mexican Fibras, as well as being the Mexican issuer with the highest rating in the biodiversity category. We also received the Gold-L evel Green Lease Leader recognition from the Institute for Market Transformation and the U.S. Department of Energy's Better Buildings Alliance. With it, we stand out as the only landlord in the Mexican market to have a gold-level recognition and whose program distinguishes landlords and tenants that modernize their leases, promoting collaborative actions focused on energy efficiency, savings in operation costs, air quality, and sustainability for real estate.
Moreover, aware of our duty to act in the long-term interest of our holders, Fibra Monterrey is now a signatory of the United Nations Principles for Responsible Investment, publicly committing to the adoption of these principles in order to strengthen the performance of our portfolio and incorporating environmental, social, and corporate governance issues in our investment analytics and decision-making process. I will now turn the call to Javier, who will walk you through our portfolio performance. Javier?
Thank you, Jorge, and good morning, everyone. Given that we assume that there are many questions regarding the Zeus transaction, I will keep my section brief to allow enough time for the Q&A section of the call. I'll start my piece of the presentation on page three with the composition and geographical distribution for our portfolio as of the end of the first quarter of this year. As Jorge mentioned during his opening remarks, on March 29, we successfully concluded the acquisition of the Zeus portfolio, and we have already integrated 43 out of the 46 of the total portfolio, with a transformational impact on our geographical presence in the Mexican market.
Our footprint now spans into 15 real estate markets across 13 states in northern, central, and the Q areas, with a total GLA of roughly 1.6 million square meters, out of which almost 1.4 million square meters are industrial, 200,000 sq m are in office buildings, and 20,000 sq m belong to our small retail portfolio. We have doubled the size of the portfolio in terms of GLA of income-producing properties. Overall occupancy in terms of GLA stands strong in around 95%. We expect the Zeus portfolio to generate around $53.3 million of additional net operating income during the following 12 months after its full integration. As Jorge mentioned, this is an increase of close to 80% in an operating cash flow.
It is worth noting, and we will address that in more detail further in the presentation, that the Zeus acquisition was only possible thanks to the commitment, willingness, and professionalism of the parties involved, particularly all of the different areas of Fibra Monterrey showing once more our unparalleled capacity of execution. On page four of the material, we present a brief overview of our new key performance indicators as of the end of March and moving forward. In terms of percentage of revenue, this indicator reflects a deep positive disruption from this milestone transaction. 72.1% of revenue by asset class will now come from our industrial properties, while office and retail will account for 26.3% and 1.6%, respectively. By location, revenue from our Monterrey-based portfolio will dilute down to 42%, followed by Guadalajara, Guanajuato, Saltillo, and Tijuana, that will now account for 33.1% of revenue altogether.
Occupancy rate as a percentage of potential revenue at full capacity stands now above 91%. Our dollar-denominated leases will now represent more than 83% of gross revenue, which could further expand if the peso exchange rate increases. Finally, the lease maturity schedule and weighted average lease term is about five years, with more than 40% of revenue will begin expiring in 2028. On page five of the webcast material, we present the same property performance analysis for the first quarter of 2023 compared to the same quarter of the previous year. Let's keep in mind that, given the fact of having closed the Zeus transaction on March 29, it only impacted on the last two days of the quarter. Therefore, the first- quarter results reflect pretty much the performance of the previous portfolio.
For purposes of this analysis, we used all 16 investment properties in our portfolio prior to Zeus, which represent a total GLA of 818,000 sq m. Compared to the first quarter of 2022, gross revenue contracted in 2.9% or MXN 10.9 million, with a decrease of 5.1% or MXN 17.3 million in our net operating income, mainly due to a negative FX impact followed in the first quarter of last year and recent vacancies in one of our office buildings. The latter should revert during the second quarter of this year as we are closing the new lease of such vacant space. NOI margin dropped 200 basis points to 88.5% due to certain reserves on accounts payable delays in one of our industrial properties in the San Luis Potosí market, currently in the process of being reverted, and some leftover non-recurrent expenses in the portfolio.
However, NOI margin is back above our 88% target and will improve above that in the second quarter. The composition of NOI earnings will be explained in detail in the following slides. Once we incorporated additional marginal revenue from Zeus, the aggregated portfolio generated a total net operating income of MXN 330.6 million compared to MXN 339.2 million in the first quarter of 2022, a decrease of 2.7%. Our NOI margin for the aggregated portfolio was of 88.7% for the quarter, again, above our target of 88%. I would like to make a pause and point out that our guidance for this year does not consider three additional sources to increase our short-term distributions for late 2023 and early 2024. On the one hand, our potential organic growth from additional occupancy in the office component, which continues to recover rapidly in Guadalajara and Monterrey.
Could add between 4% and 6% to our FFO per share, as these new leases start to land later this year and generate additional rents a few months after its commencement. On the other hand, additional acquisitions to be executed with our current firepower from committed lines of credit and rollover of proceeds from potential sale of assets, such as some of the land reserve, could also generate an additional 5%- 6% to the bottom- line cash flow. And finally, we are currently developing some expansions for existing tenants in our industrial component with estimated investments of around $50 million that will generate additional rents at cap rates above 9%. We expect these additional rents to commence during the second half of 2024. Al together, these upsides could represent as much as MXN 0.12 per share once finalized.
Slide six of the presentation explains in detail the MXN 9.3 million reduction in our net operating income, comprised of the following. MXN 23.8 million decrease due to a negative FX effect between the first quarter of 2022 and the first quarter of 2023. MXN 8.1 million decrease due to vacancy from certain lease expirations. MXN 5.9 million decrease due to increases in other operating expenses, and MXN 20.5 million increase due to inflation escalation on lease agreements and new leases. As you can see, once we include additional revenue of MXN 6 million from the Zeus acquisitions, we reach the MXN 330.5 million NOI in our aggregated portfolio. We will address some specifics on the Zeus transaction and an update of our growth strategy later during the presentation.
But for now, I will turn the presentation to Jaime to discuss the most relevant aspects of our business for the first quarter. Go ahead, Jaime.
Thank you, Javier, and good morning to everyone. I would like to start by going over the usual topics of the earnings call. If you go to slide seven, you see a quick review of the main year-on-year variation of our adjusted funds from operations, excluding the same property NOI variation, which were already mentioned by Javier a few moments ago. As shown on the graph on the right side, Fibra Monterrey first- quarter adjusted funds from operations increased around 45%, largely driven by a higher financial result given our abnormal cash investment balance due to the equity follow-on carried out in September. This balance was fully used for the acquisition of the Zeus portfolio, which I will address once Javier walks you through the transaction later on the call. Additional to the financial results, first- quarter FFO benefited from the three days of this acquisition.
The increase was partially offset, mainly due to the unfavorable FX effect in revenues and higher administrative expenses, mostly due to inflation. Other variations remained non-material and as expected. On the next slide, you will find the same analysis but compared to the previous quarter. This sequential comparison reflects a smaller increase, but with the main variations remaining in the same direction as the ones I just mentioned. A higher financial result, three days of Zeus acquisition, and offset by lower same- property NOI due to FX variations. As in previous quarters, on slide nine, there is selected information to compare our main financial indicators of the last 12 months to facilitate your analysis. While we talk about regular business, I would like to ask Javier to talk about the Zeus acquisitions and its effect on our operational KPIs.
Thank you, Jaime. Coming back to the transformational effects of the Zeus transaction, and to give you some context, we present on page 10 of the presentation some key indicators comparing the previous quarter before and after the completion of this acquisition. First, we have a shift from our revenue by asset class from 50.54% to 72.1% in the industrial component of the portfolio, becoming a predominant industrial real estate operation. Then we are becoming even more dollarized in our revenue, increasing from 77% dollar-denominated leases up to more than 83% after the acquisition.
Occupancy in terms of potential revenue is increasing from 87.3% up to 91.3% overnight, with strong long-term visibility in our cash flow. Lease maturity and expiration schedule stretches off to 2037, increasing our overall WALT to more than five years, up from four and a half years as reported in the previous quarter.
In terms of industrial sectors, our portfolio is well-positioned in the automotive and component sector, which continues to consolidate as the key driver and main activity of Mexico's manufacturing exports, currently accounting for more than 38% of the external trade balance in our country. Lastly, but not less importantly, we have reduced our gross revenue from our top tenants from 45.1% down to 33.3% by the end of the first quarter, therefore reducing our exposure to potential risk factors in our ability to generate cash flow from our rent stream. Jaime will now address in more detail the sources and uses for the successful execution of the Zeus transaction. Jaime?
Thank you, Javier. The size of the Zeus acquisition for Fibra Monterrey, while previously undervalued, had several challenges from the financial front. The most relevant was to keep our capital structure with the same strong fundamentals that distinguish Fibra Monterrey. Following was to finance the acquisition in an equity manner, considering the interest rate environment and equity market conditions. As you can see on slide nine, we were able to accomplish these two main challenges thanks to the confidence invested in us by our investors and bankers, for which we are deeply thankful. The first payment, which comprises 93% of the full agreement to acquire Zeus, was held on March 29 and was paid with the following breakdown. Almost 60% of the amount was paid with the proceeds of equity issuance, comprising both last year's follow-on and the first half of this year's rights offering.
Roughly 26% was paid from revolving credit facilities, which were used given that the payment took place just a week before receiving the proceeds of the second half of our rights offering. The remaining 24% was paid from unsecured term loans with maturities in May 2027 and 2030. Once the full proceeds of the rights offering landed in our banking account, we arranged to prepay almost 15% out of the 26% of the revolvers. The lasting revolver will be paid in full with the Value Added Tax reimbursement, which, given our track record, could expect to occur in the third quarter. The remaining balance of the Zeus transaction will be paid out with the proceeds of the second half of the rights offering. It is worth noting that we have already sold an FX forward to ensure an attractive exchange rate and reduce market volatility for this payment.
Once the exchange rate is on the table, recent peso appreciation has a bittersweet taste regarding our results. On the short term, we can expect to have lower cash flow in pesos. Nonetheless, the same appreciation allows us to buy a larger amount of U.S. dollars with the proceeds of our current equity issuance, which will translate into larger cash flows if the dollar returns to previous levels, having a more lasting effect for investors. To summarize, the funding of this acquisition demonstrates once again the benefit of keeping a prudent balance sheet, enough credit lines available, and a professional team committed to deliver results efficiently.
Considering our corporate governance bylaws, we needed our investors' approval for raising additional equity to issue a new credit facility and to carry out the acquisition. Far from considering these approvals as constraints, we appreciate the constant support of our investors throughout the process.
Moving on, given the outstanding results of our rights offering, our balance sheet will be stronger than ever. As seen on slide 12, debt indicators as of quarter- end, which are displayed on your left. Please consider the revolving credit lines I just mentioned were prepaid a few moments ago. Here, loan-to-value, net debt to EBITDA, average debt maturity, and our weighted average interest rate indicators are higher than usual. Therefore, we included our debt indicators reflecting the prepayment at once we have concluded the second and final payment of the Zeus acquisition and the VAT reimbursement is fulfilled. As seen on your right, pro forma debt indicators are in line with the scenarios we talked about in our last call.
Our loan-to-value will stand at 26% and net debt to EBITDA in just above 3x, which gives us enough flexibility to seize opportunities going forward without tapping the markets. Another highlight is our weighted average interest rate, which will stand at 4.8%. This is just 60 basis points above our previous interest rate. It is worth mentioning that as of today, all our debt credit loans have been hedged, and therefore, this 4.8% will stay fixed going forward. Moving on to the debt maturity profile, we will have our first expiration on May 27th. With enough outstanding balance to choose from banking loans, private placements, or debt markets, whichever offers the best terms at the time.
In addition, given our lasting indicated facility, we have $150 million available with a maturity until 2030 for future acquisitions, which could expand even further the average debt maturity and balance our debt expirations. Following to the next slide. As a result of our rights offering, we reached a milestone that was set in our IPO, becoming a billion-dollar market cap company. During the last seven months, Fibra Monterrey's market cap has nearly doubled by adding more than $545 million in equity, and we become the most equal issuer in Mexico in the last decade. This demonstrates that a company focused on accountability and alignment of interests can and will earn the trust of the investors market, which translates in growth capacity. We have a clear view on what's next from a financing perspective.
With our insight, proven track record, and regional banking position, Fibra Monterrey as an investment-grade issuer and current market momentum, there is an opportunity to lower our cost of capital to further increase the risk-adjusted return of our investors. Let me emphasize by adding that our commitment remains the same, focusing on cash flow growth and predictability. I would like to continue this webcast by retaining the yearly guidance set by our board. As you can see on slide 14, 2023 guidance exceeds 390 basis points above the 2022 yearly cash distribution, once adjusted to reflect foreign exchange rate conditions. Despite increasing our outstanding shares in almost 50% year- to- date, a higher debt interest rate in our additional debt, a lower cash balance that translates in a lower financial income.
The financial cost due to the VAT reimbursement and greater corporate costs, such as acquired outsourcing of services and the reinforcement of certain business teams needed to operate a larger portfolio. We are calling to our investors to keep their cash flow per share growing and with an attractive premium above our weighted average risk-free rate baseline. The aforementioned will be accomplished with organic growth and certain economies of scale as revenues are increasing in a larger amount than our expenses. As detailed on the graph on the right, 2022 cash flow distribution stood at MXN 0.99 per share at an exchange rate of MXN 20.17 per U.S. dollar. Once adjusted to reflect current exchange rate conditions, the same cash flow would be stood roughly about MXN 0.20.
Accounting for estimated organic growth and the effects of the acquisition and its funding, the target distribution for 2023 stands above MXN 0.95 per share, considering an exchange rate of MXN 18.25 per dollar. Another 4.2- point increase. For comparative purposes, if the exchange rate would be the same as 2022 guidance, it would translate into MXN 1.03. In benefit of transparency, as one of the key cash flow strains remains in the financial cost of the acquisition, but value-added debt financing. The second and third quarters should have a decline when comparing them to the first quarter, which will be more than compensated in the fourth quarter once the reimbursement and debt payment is completed.
Having said that, even though AFFO per share may look similar to last year, let me highlight that given the benefits of our recent transaction, cash flow resilience is at its highest since inception. In addition to the balance sheet fundamentals I mentioned earlier, I am quoting Javier on our increasing share of dollarized revenues while growing our industrial footprint and further diversifying our income by location, tenant, and economic sector. Not only we have a greater quality in cash distribution, but we have also managed to reduce certain risks along the way.
I would like to end my speech by mentioning that, given our firepower capacity, organic potential in the office space and industrial expansion, our strong fundamentals such as a highly dollarized revenue stream and inflation adjustments, and considering the dynamism and growth experienced in our balance sheet, AFFO per share has more upside potential that will be materializing throughout the upcoming months and going forward. To conclude, I would like to return the floor to Javier for him to mention the adjustment to our growth strategies. Thanks, Javier. Go ahead.
Thank you, Jaime. Let's take this final moment before the Q&A to note that with the few portfolio transactions, we have already achieved 76% of the amount for our original 2022-2026 growth strategy presented last year to our board. Therefore, we have announced our decision to increase our target by MXN 15 billion of additional acquisitions of investment properties by the end of 2026. This will bring the value of our portfolio at that point to more than MXN 42 billion or $2.3 billion at the current exchange rate. We will continue the discipline and investment guidelines that have branded Fibra Monterrey for the last eight years. That concludes our earnings presentation for the first quarter of 2023, and we will be more than happy to answer any questions from the audience. Rob, back to you.
Thank you. Ladies and gentlemen, to ask a question, please press star one. If you are connecting using our webcast tool, please write your questions in the chat section of the platform. Thank you. Thank you. We have our first question coming from the line of Gordon Lee with BTG. Please proceed with your questions.
Hi. Good morning. Thank you. Thank you very much for the call. Two questions. Well, I guess three. I will take advantage of the call to ask three. The first is, with your new scale, you mentioned obviously the opportunities to improve funding costs. But I was wondering whether you think there may also be opportunities to improve operating costs given your scale, in terms of property management costs or insurance costs, things of that nature. If you only see the improvements on the funding side, or if you see it on the operating side as well. The second question, just to clarify, Javier, on your comments in terms of the three potential incremental drivers of distributions. When you say that could add an additional MXN 0.12 per CBFI, would that be on top of the higher end of the guidance range for distributions for 2023?
The final question is on this 2026 target that you just mentioned in terms of adding another MXN 15 billion in properties. I know it is difficult to know what the next six months hold, let alone the next three months. But do you have a sense of how that would be distributed by asset class? Thank you.
Hello, Gordon. Nice talking to you, and thank you for the question. Let me start with the second question, if you like. These three additional sources of increasing our cash flow organically and inorganically, those MXN 0.12 could be added to the higher end of our guidance. That would mean around MXN 1.12- MXN 1.15. I want to emphasize that that would be at full capacity. We believe that these new leases from our vacant space or office are already moving along. Some of them we expect to close in the next few quarters. As you know, the cash flow stream would start a few months later. The deployment of the existing firepower, and I think that will also address your last question. It is around $220 million, plus the proceeds of recycling some of our assets, including, and starting with, the land reserve.
We believe that those would be allocated in totality on industrial transactions. We haven't seen attractive opportunities in the office arena. We don't discard the possibility of this happening as soon, but as of today, I would say that a quarter of a million will be mainly invested in industrial properties of the same profile and characteristics and specifications of our current portfolio. Going back to your first question on the funding, I think our funding profile will remain pretty much stable under the same conditions that we have secured so far. The second part of your first question-
Scale and operations.
Yeah, and the opportunity of operating on economies of scale. The answer is yes. The higher the size of the portfolio, the lower are the scale opportunities that we have on operating expenses. We have some margin to maneuver on the corporate side of the expenses. The short answer to the question is yes. We expect to have some additional economies of scale given the size of the new portfolio. Particularly, the fact of the matter, the vast majority of our portfolio is now a triple net-based operation. As you know, our NOI margins will increase. We would expect to run NOI margins in the next few months to be around 90%, if not higher, given the size of those two transactions. Yes, we do expect some economies of scale.
The MXN 15 billion.
The MXN 15 billion growth strategy that we have adjusted, that would represent roughly about $250 million per year, including the remaining of 2023. We believe that there will be a lot of opportunities in the industrial market, as this market needs to be capitalized. I am talking about the owner's Europe, not only here in Fibra Monterrey; it should become the main source of investment in this arena. We expect some new players to arrive from private firms, particularly the U.S. and Canada. This will add additional capitalization to the market, and that is going to kickstart this virtual cycle that we have always talked about. As you know, there are some CKDs and closed firms that are going to expire in the next few years.
The demand on the industrial market: we estimate that right now the demand stands in around 12 million-15 million square meters, and that represents a lot of new development that needs to be done. That development is going to be funded by sources from the acquisition and sale of already stabilized assets. We continue to see a strong pipeline right now. We are being very selective on what we are aiming for right now. There is a lot of build-to-suit activity in the country, particularly in the northern area and Bajío-Aguascalientes. We expect to be able to deploy around $250 million in acquisitions per year, on average for the next four and a half years.
Perfect. That is great. Thank you very much.
Thank you.
Our next question is from the line of Francisco Suárez with Scotiabank. Please proceed with your questions.
Good morning, gents. Thanks for the call and congrats for the several milestones that you have achieved. This is remarkable. I have a follow- up question on Gordon's question a few months ago. If I understood correctly, you are open for acquisitions on the office space, considering what you see up to 2026, isn't it? Along these lines, if you can help me to understand on the specific guidelines that you shared with us in your presentation on how the organic growth linked to office space might play out? Because first, when I saw that in your slide, which is very helpful for sure, I do not know to what extent you are reflecting fully these ideas that it seems that in Monterrey, and particularly in Guadalajara, the office market is actually far better compared to what we see in Mexico City.
My last question would be on your land reserves. Any idea now that you own the portfolio if any of this land might be put on sale? Or, any thoughts to use that as another way to issue equity in another way? Thank you.
Sure. Hello, Francisco. Nice talking to you. Thank you for your questions. Let me start with the organic capacity of growth that we have seen, particularly in our office component. Let me try to break it down for you. As of today, we have an occupancy of about 71% in our office component. It is going to go back to close to 73%, hopefully in the second quarter, as we are securing a couple of material leases. Our vacancy rate, our occupancy rate on the portfolio component right now stands at 98.5%. It is going to be 99% by the end of the second quarter. So there is, if nothing, close to no offsite right now on our existing industrial portfolio. So, our offsite on organically stands almost completely on our office component. We are moving pretty fast, 10 weeks, on lease demand in our Monterrey portfolio.
That doesn't mean that the Monterrey market is more active than the Guadalajara market. What happens is that we are close to 100% occupancy in our Guadalajara office component. We have no vacant space right now in our portfolio in Guadalajara. So the offsite stands pretty much in the Monterrey component. Mexico City, we're not seeing any movement right now. Because of the activity that we have in Monterrey, I believe that we could achieve north of 80% occupancy levels in our office component overall. That would represent those 4%-6% organic growth that we thought we could start capturing right away. It's going to reflect in cash flow later on because of the structure of the leases.
I would say that almost the totality of our offsite organically that we have right now in our portfolio stands on the office component. We are seeing in Guadalajara, for instance, positive lease spreads. In Monterrey, there are still some negative lease spreads. Right now, when you have a vacant property, the lease spread tends to be infinite. We believe that the lease rates are going to remain stable in the office arena. Going to your last question on the land reserve, the short answer is yes. We're already entertaining the possibility of selling some of the Zeus land reserve. The proceeds of that land reserve would roll over into new acquisitions of satellite assets.
We are very positive and very optimistic about the possibility of selling an important part of the land reserve in the next few quarters, and that money is going to roll over into another acquisitions. We are also open , Francisco, to the possibility of contributing part of the land reserve for new development that wouldn't be developed by us, of course. It would be contributed to a partner that would be a developer that would contribute with the development itself and development capital. We would contribute capital in the form of land, and that would also give some additional hybrid between organic and inorganic growth because technically it would be an acquisition on top of the land, but that way we could put the land to work on generating additional cash flow. So we're already working on that.
We're moving forward, and we're making progress on this potential recycling of assets on the land reserve. I hope those answered and covered your three questions.
They do, actually. That is very interesting, and glad to see the flexibility that you guys have. Congrats again. Take care. Thank you.
Thank you, Francisco.
Thank you. Our next question is from the line of Edson Murguía with Summa Capital. Please proceed with your questions.
Hi, good morning. Thank you for taking my questions. The first one is related to a follow-up on the land reserve. If I understood correctly, you are expecting to sell that land, but in the press release, you mentioned that probably it is possible that you are developing some land reserve from the Zeus acquisition. Just trying to understand: are you selling, or are you developing? That will be the first question. The second question is regarding on this repositioning asset, because you mentioned in the press release that you are considering, and it is related to the probable acquisition looking ahead. You are planning to do some repositioning in order to fund those $250 million that you are expecting to expend on acquisition per year for the following three or four years, regarding on the expansion plan. Lastly, could you give it? Yes?
Yeah, go ahead.
Lastly, could you give us a little bit more color about the MXN 103 million credit facility, revolving facility cap. Just trying to match with my model the soldiers, how will be the impact on the cost of the revolving facilities? Thank you.
Thank you, Edson. Good morning, and thank you for the question. Regarding the first question on the land reserve, there are mainly three different aspects of the land reserve that we are acquiring with the Zeus portfolio. There is a portion that relates to, let's call it, smaller pieces of land that are adjacent to a satellite building that were bought, given the fact that those existing and satellite buildings have a right or an option on their lease contracts to expand into additional GLA. So we're going to keep those in order to be able to honor those contractual obligations up to a certain point. I can tell you that we are already in talks to one of the few tenants to start an expansion for them pretty soon . So those, again, are kind of smaller pieces of land are going to be kept for additional development.
On the bulk of the land, which is located in the Puebla market, we believe that we would sell at least between 30% and 50% of that land. Could be to a user, could be to a developer. Right now, we're talking to a few of those. But if that sale, if that disposition goes through, the remaining of the land, we're going to decide at that point if we want to keep it for further development or if we continue to sell the land. I would say that, in absolute terms, from the close to 90 hectares that we have of land reserve, I would say that we would sell at least half of that. 20% of the total land is going to be kept for sure for expansions, and the remaining 30% is yet to be decided what we're going to do with that land.
Then your second question refers to your question on the firepower. The $220 million is our current firepower, with the remaining committed lines of credit that have nothing to do with the rollover of any potential recycling disposition. Those $220 million are currently being pursued with additional pipeline and current pipeline that we are evaluating and negotiating, so the proceeds of the dispositions would be on top of those $220 million. I'm going to ask César Rubalcava from our investor relations group to answer your last question.
Hi, thank you. Thank you, Edson, for your question. Regarding the interest rate of our revolvers, the $103 million that we could pay on the first half of April, there was $60 million from the BBVA revolving credit line that had a SOFR+ 195 basis points. We had a $20 million revolving credit line from Actinver that had a LIBOR+ 335 basis points, and a $23 million with a SOFR+ 200 basis points.
All of these three credit lines were already prepaid. So the weighted average interest rate has already declined from the picture of the end of the first quarter of 2023. And the remaining revolver has a SOFR+ 225 basis points as of the first quarter. This remains in a variable rate because we intend to prepay it with a VAT reimbursement. Just to give you some color regarding the weighted average interest rate as of the first quarter and going forward, we closed with 5.68%, and as of today, we have roughly 5.28%.
And once we prepay the remaining revolver, we'll be standing at 4.8%. So that's the way we're going to be looking the interest rate going forward. Just to give you a heads up, this does not include possible dispositions from other credit lines because we don't know how interest rates will kind of play out going forward.
Okay. It was really helpful. Thank you.
Thank you, Edson.
Our next question is from the line of Francisco Chávez with BBVA. Please proceed with your questions.
Hi. Thanks for the call. I have two questions. The first one is regarding the office segment. We saw a setback in occupancy this quarter. If you can give us more color on this regard. The second question is on the NOI margin. When can we expect to recover the 90% mark? Thanks.
Hello, Francisco. Nice talking to you. Thank you for your question. This is Javier. Yes, we saw a drop in occupancy in our office component in the first quarter because we had an expiration of a tenant in Monterrey that is consolidating in another of our buildings. That space was vacated during the first quarter. We already executed a letter of intent to lease off that space to a new tenant, and the contract is in the works. What happened is that the rollover of the space was cut off between quarters.
I was mentioning, and I believe it was to [Rohan] before, that our occupancy in the office stands right now on 70.8%, and it is going to increase to close to 73% in the second quarter of this year because of that particular lease. It is going to stand flat if you consider the two quarters altogether.
That's regarding your first question. The second question regarding the level of NOI margin. We are right now at 88.7%. There are two issues that I would like to point out. The first one is that, according to IFRS norms, the information is considered. We have accounts receivable delay on one of our buildings in San Luis Potosí that had to go as an operating expense in terms of reporting. That's an important issue, on having kind of high operating expenses in terms of NOI calculation. That's going to recover as this tenant keeps up and catches up with the payment of that particular tenant. We expect that once we fully include the Zeus portfolio on the second quarter of this year, it's going to increase our NOI margins substantially because it's MXN 53 million annually on net operating income, and those are triple net.
The margin for those 46 buildings is well above 95%. You could expect that we should get back, if not to 90%, but very close to 90%, around 90%, as soon as of the second quarter of this year.
Great. Javier, just a follow-up on the office segment. Can you give us an idea on the lease spread that you are seeing in this specific contract? Thank you.
Well, that's an interesting answer. In Guadalajara, I can tell you that the last vacant space of La Perla that is being leased up as we speak has a positive lease spread of around 10% in dollars. I mean, that's amazing. Our underwriting was below that. That's already happened. What is happening in Guadalajara is that we have 120% demand for office space in our portfolio. We have a pipeline of tenants that want new space that we don't have available. The demand is driving prices high on lease rates in Guadalajara. I have to say, Guadalajara, at least in our portfolio, in La Perla particularly, all new leases have been signed in dollars, dollar-denominated leases. That's something interesting to point out. Lease rates on the Monterrey market are pretty much flat.
We have seen a slight increase in some of our buildings, but it is very marginal. Most of the leases that are being negotiated in our Monterrey component are peso-denominated, unlike Guadalajara. This particular lease that we are working on, that we just mentioned, our lease rate is going to be marginally positive, probably around 3%-5%. You could say that is flat to inflation. There are no market drivers for positive lease rates in the office market right now in Monterrey, and we expect to behave pretty much aligned with inflation.
Great. Thanks so much.
Thank you.
Just a final reminder.
We have one question from André Mazini from the research team at Citi.
How do you see the MXN 10 billion investment from Tesla and MXN 2 billion from Bosch affecting your portfolio?
Well, that's a great question, and I'm so happy that Hugo brings out the Bosch investment because Tesla has been the buzz lately. Of course, it's the most, I would say, mediatical- glamorous transaction, not only for Monterrey but probably for the whole industrial market in Mexico. Bosch is currently building an even larger building than Tesla in Salinas Victoria, Ciénega de Flores, in that area in Northern Monterrey. I have to say that we have some presence in the Santa Catarina market. Actually, the Monterrey portion of the new portfolio that we just acquired is in that area. I mention Santa Catarina because that's going to be the main influence area for the Tesla operation. We want to see a very positive impact on the activity for us in that area. We don't have any vacant space in our Santa Catarina portfolio.
We do have access to some land, so it could be an interesting opportunity for us in terms of build-to-suit for providers or for some Tesla-related operation in that part of Monterrey. Even further, I can say that we are also seeing a potential positive impact of the Tesla operation not only on industrial. You could expect some service companies, some providers of Tesla that could be looking even for a back- office space in that area. We do have some vacancies in that part of the city for office space demand. The Saltillo market is also going to be very benefit from the Tesla operation because of the proximity to Monterrey and being the kind of the twin city for Monterrey in terms of the pole of development. I could say that we could face some positive demand for new industrial space in Saltillo.
We do have some presence in Saltillo, not on the outskirts of Saltillo towards Monterrey, but we are looking at some opportunities in that area, so it's going to be very interesting. Regarding the Bosch operation, the new Bosch facility is being built in Interpuerto. Interpuerto is a multimodal complex between Ciénega de Flores and Salinas Victoria. That's going to drive some demand. As you might know, we have some buildings in the Ciénega de Flores corridor. All of them are fully leased. We could expect the rise of some opportunities for build-to-suit and even speculative development that we could eventually partner with a developer specialized on that in the Ciénega de Flores corridor. Ciénega de Flores is becoming pretty interesting because it's becoming a very attractive alternative to the Apodaca market.
If you consider that Ciénega is on the way to Santa Catarina through the northern arc in Monterrey, that could represent a very interesting synergy and symbiosis between Apodaca, Ciénega de Flores, and Santa Catarina. Operations like those highlighted on Tesla and Bosch, as well as some other nearshoring operations in Salinas Victoria, particularly from Chinese companies such as Hisense, that is developing a large facility in Salinas Victoria, that is going to detonate and trigger very interesting activity from supplies for these companies on those parts of the city.
Thank you.
Thank you. As a final reminder, press star one at this time for any questions. We do have a question coming from the line of Edson Murguia with Summa Capital. Please proceed with your question.
Thank you. Just to follow up, regarding on the $ 80 million of VAT, when are you expecting to have this $80 million?
Yes. Hi, Edson. Given our track record, we could expect to get the reimbursement in the late third quarter of this year.
Okay. And those profits are going to be part of the prepayment of debt that you are expecting to the portfolio, right?
Yes. Immediately when we receive the reimbursement, we're going to prepay the revolving credit line of the new syndicated loan that we just signed in March of this year.
Okay. Thank you so much.
Thank you.
With no questions in the queue, I'd like to turn the conference over to the management of the company.
Thank you, everyone, for attending the call, and we'll see you next quarter. Bye-bye.
Thank you so much.
Thank you to everyone who joined us today. This will conclude today's call. You may disconnect your lines at this time. Thank you for your participation.