Ladies and gentlemen, thank you for standing by. I'd like to welcome you to Fibra UNO's Fourth Quarter 2025 results conference call on the 27th of February, 2026. At this time, all participant lines are in listen only mode. The format of the call today will be a presentation by the management team, followed by a question and answer session. Without further ado, I'd like to pass the line to the CEO of Fibra UNO, Mr. André El-Mann. Please go ahead, sir.
Thank you, Luis. Thank you, everybody, for your interest in our call regarding fourth quarter of 2025. I would like to begin that we are very excited again to release these numbers for you of the fourth quarter of 2025, which has been a very busy year for us at FUNO. This is the first report after the drop-down of our industrial portfolio. I would like you to bear in mind that we are considering only a few days of the complete revenues in this new structure in this particular quarter. Nevertheless, we made sure that everything goes as planned, as we will be able to report a complete quarter this very first quarter, 2026, in the next few weeks.
That will allow us to reveal that all the efforts made last year will pay back, and our shareholder will be able to see the positive impact that the carve-out of our industrial portfolio will have on the future of the company. I would like to express our excitement on the numbers released yesterday that show a consolidated company with assets close to $25 billion. These are the big numbers, but we are also taking care of the little numbers. 95.5% are historic high of occupancy level across the board. NOI margin growing by more or less 300 basis points, and looking good for this year. A healthy growth above inflation on all the significant lines of the balance. I would like to remember you about last year's achievements.
We made the liability management of the company, having renewed close to $800 million at the beginning of the year of the U.S. dollar bonds. We renew also MXN 12 billion of the Mexican peso bonds. We made a repayment of close to MXN 10 billion of short-term bilateral revolving lines of credit with the issuance of an unsecured line long-term. We made the exchange of our bonds across the corp to complete the transference of debt to Fibra NEXT. We finalized the internalization process, and we expect savings in the order of MXN 400 million- MXN 500 million this year. We did the carve-out of our industrial portfolio, first with the IPO of Fibra NEXT, in which we raised close to $430 million. Then we made a follow-on equity offering of Fibra NEXT, close to $400 million.
We did the exchange of the bonds, and then finally, at the very end of last year, we finally made the drop-down of the industrial portfolio of FUNO into NEXT. All of these done last year, during which we managed to maintain and excel in our metrics. Mainly total income, total NOI, total FFO, total dividend yield. All of them improving in a healthy way, and also we improved at the end of the year in an overall NOI margin. I would like to thank all the team here at Fibra UNO, because none of this would have been possible. We made last year very difficult choices and very strong effort in order to get where we are today.
I will make sure to be reporting the first quarter this year, which will be much clearer of all the effort that we did last year and will reflect on the balance and the performance of the company and of course of our subsidiary company, Fibra NEXT. Thank you for your attention. I would like to pass the mic to Jorge to go in depth with the numbers. Jorge, please.
Thank you very much, André, and thanks everybody for joining our call. As usual, start with the MD&A for the quarter. Fibra UNO's total revenue increased by MXN 348 million or 4.6% compared to the previous quarter, primarily driven by a 50 basis point increase in the total portfolio occupancy, inflation driven increases on active contracts, rent increases, and on lease renewals. This was offset by the peso- dollar exchange rate appreciation, and the effect that this has on our U.S. dollar-denominated rents. In terms of occupancy, our operating portfolio stood, as André mentioned, at 95.5%, which is a 50 basis points increase compared to the previous quarter. If we look at the retail portfolio, we recorded an occupancy of 93.7%, 10 basis points above the previous quarter. The office portfolio recorded 82.9% occupancy, 10 basis points below the previous quarter.
The other portfolio recorded 99.3% occupancy, remaining stable vs the previous quarter. The industrial portfolio, 97.7%, which is 30 basis points above the previous quarter, and the in-service portfolio recorded 87.7%, which is 330 basis points above the previous quarter. In terms of operating expenses, property taxes, and insurance, total operating expenses increased by MXN 97.1 million, or 9.8% vs the third quarter of 2025. This is mainly due to increases in the cost of some of our supplies and services that are above inflation. As you know, we've mentioned this before, a lot of our expenses are linked to service providers that have a high degree of correlation with the minimum wage. This has kept some of those expenses higher. In terms of property taxes, this increased by 6.1%, or 3% above the previous quarter, mainly due to consolidation of Fibra NEXT.
Insurance expenses increased by MXN 10 million, or 7.6%, vs the previous quarter, due to the consolidation of Fibra NEXT. In terms of net operating income, our NOI increased by MXN 498.3 million, or 8.9% vs the third quarter of 2025, to reach the amount of MXN 6.079 billion. NOI margin calculated over rental revenue was 85.1% and 77.2% compared to total revenues. In terms of interest expense and interest income, the net interest expense line increased by MXN 51.9 million, or 1.8% compared to the third quarter of 2025. This was mainly due to Fibra NEXT debt consolidation and the interest related to this consolidation. As André mentioned, this was not a complete quarter, so we will see the complete effect on our financials in the first quarter of 2026.
This increase was offset by interest rate reduction in pesos, and the effect that this had on our variable rate debt. The appreciation of the exchange rate, which went from 18.38 to 17.97 quarter-over-quarter, and obviously the effect that this has on our net expense line during the quarter. A decrease in the interest capitalization and the impact of the pricing of our derivative financial instruments. The bottom line on our funds from operation as a result of the above, FFO controlled by FUNO increased by MXN 157.4 million or 6.6% compared to the third quarter of 2025, reaching MXN 2.55 billion. Adjusted FFO recorded an increase of MXN 121.1 million or 5% compared to the third quarter of 2025, reaching MXN 2.55 billion.
A slight difference against FFO is due to the update in the cost of a property that was sold in the third quarter of 2025. FFO and the FFO per CBFI calculation during the fourth quarter of 2025, we put in circulation 5.3 million CBFIs corresponding to the EPC. With that, we closed the quarter with 3.810 billion CBFIs outstanding. The FFO and AFFO per average CBFI were 0.6690 and 0.6712 respectively. Variations of 6.5% and 4.9% compared to the third quarter of 2025. In terms of the quarterly distribution, we reached MXN 2.55 billion or 0.67 per CBFI with a quarterly AFFO payout of 99.8% and a payout of 94% compared to the annual AFFO. Moving on to the balance sheet.
In terms of accounts receivable, we total MXN 2.131 billion, a decrease of MXN 260 million or 10.9% from the previous quarter, reflecting the organic growth related to the consolidation of Fibra NEXT, as well as an improvement in collections that we have had in the quarter. Investment properties. The value of our investment properties, including financial assets and investment in associates, increased by MXN 32 billion, or 9.3%, compared to the third quarter of 2025. This obviously, as you can see, reflects the consolidation of Fibra NEXT on the balance sheet as of December 31st, 2025, CapEx invested in our portfolio, and fair value adjustment of our investment properties. In terms of total debt, we finished the fourth quarter of 2025 with MXN 152 billion compared to the MXN 147 billion we had the previous quarter.
The variation is primarily due to the consolidation of Fibra NEXT, which included additional debt devaluation of the maturity effect of financial instruments and the exchange rate effect appreciation that I have mentioned before. In terms of total equity increased by almost MXN 56 billion or almost 30%, 29%, including controlling and non-controlling interest. As you know, this is obviously the effect of the consolidation of Fibra NEXT, which is one of the things that we wanted to achieve. We finally have completed that in the previous quarter. This gap includes the consolidation of the Jupiter Portfolio, the second part of Jupiter Portfolio, net income generated from quarterly results, the revaluation, shareholders distribution related to third quarter result and the employee compensation plan. Moving to the operating results in terms of leasing spreads.
Leasing spreads, we had increases of 16.4% or 1,640 basis points in the industrial segment, 8.2% or 820 basis points in the retail segment, and 500 basis points in the office segment. If we look at dollar-denominated leasing spread, we saw 13.9% or 1,390 basis points for the industrial segment, 460 basis points or 4.6% in the retail segment. We saw - 220 basis points in the office segment. As you know, this is something that we are very pleased with and something that we have come to expect in terms of what has happened in the office portfolio. In terms of constant property performance, the rental price per square meter for constant properties increased by 5.3% compared to the weighted annual inflation of 3.6%. So we had 170 basis points growth. This despite a depreciation of the peso of 13%.
If we had not seen this appreciation, we probably would have been closer to about 8.4% constant property performance. Again, very pleased with the performance that we saw in this area. In terms of the NOI at the property level, we saw, for the fourth quarter, an increase of 2.9%. It can be divided in fashion mall segment NOI decreased by 2.5%, regional segment decreased by 3.5%, standalone segment decreased by 3.6%. The decrease is mainly due to extraordinary income recorded in the third quarter of 2025, which is obviously at one office and not present in the fourth quarter of 2025. The office segment NOI increased 5.2%, and the others segment decreased by 1.2%. The industrial segment NOI increased by 11.2%. With this, we finalize the MD&A. Now, Luis, if we can open the floor for Q&A.
Perfect. Thank you. We will now be moving to the Q&A part of the call. If you would like to ask a question, please press star two if you are connected from the phone. It is star two if you are connected from the phone. If you are connected from the web, you can type your question in the box provided or request to ask a voice question. We will give it a few moments for the questions to come in. Okay. Our first question is from Igor Machado from Goldman Sachs. Your line is now open. Please go ahead.
Hi, team. Thanks for taking my question. My question here is on leverage, as we have seen a relevant deleverage process for FUNO in the last quarters. I just want to better understand here, how does management view the debt leverage target for the end of 2026? What is the long-term strategy for maintaining these improved ratios? That's it. Thank you.
Well, as you know, there were many drivers for the carve-out of the industrial portfolio, and the capitalization and the consolidation, let's say, of that industrial portfolio into Fibra UNO. One of them is the deleveraging effect that we have by adding roughly $2.3 billion of new equity, which is a combination of the value of the Jupiter Portfolio, as well as the equity we raised from the market. Ideally, we feel comfortable obviously below 40%, and we feel comfortable having an investment-grade credit rating, which is where we are today. Both stable outlooks from Moody's and Fitch. The trajectory that we have for the company will delever it even further based on a couple of events. One is, as you know, this business is inflation indexed, so that will have a deleveraging effect over time.
The other one is that NEXT will continue to roll, and we expect that to come with additional equity issuances further down the road. That equity is going to be consolidated into Fibra UNO. So that is going to delever the company even further. So at this point, we don't have additional deleveraging strategy, so to speak. We would like to maintain our investment-grade credit rating going forward. So the metrics that we need to be in that world is what we're going to aim to maintain. So let's say, LTV below 40% is where we feel comfortable. Around 35%-40% is, say, the sweet spot.
Thank you.
Thank you. Our next question is from Mario Simplicio from Morgan Stanley. Your line is now open. Please go ahead.
Hi. Fibra UNO team, thank you for taking my question. My question is, well, in 2025, you achieved a lot of milestones of your long-term strategy, and you have the internalization, you have Fibra NEXT. I wonder, what are the next targets that you are aiming for, let's say now 2026 and for the future years? How is the long-term strategy for Fibra UNO now that it has already achieved so many milestones? Thank you.
Thank you for the question. We have many plans for the future. I hope that we, first of all, will reduce the gap between the NAV and the price of the share. Once we do that, all of our opportunities will open wide, and we will act on it.
That is clear. Thank you.
Thank you. Our next question is from [Diego] from Citi. Your line is now open. Please go ahead.
Hi, everyone. Thanks for taking my questions. I have one on my side regarding CapEx. In the fourth quarter, the CapEx reached MXN 2 billion . How this level of investment support for those growth pipeline, including expansions and asset stabilization. Additionally, what you guys expect for CapEx in 2026? Thank you.
I think that the MXN 2 billion is a good number for CapEx for the company, let's say, on a normal operating year, on the normal status of what we have been doing, which is keeping up or trying to keep up with the demand for new space that we have from our tenants. It's a reasonable number to expect again for 2026. Obviously, as you know, this does not include any new developments or anything of that nature. Some minor expansions at some of our properties, but not large-scale development. For that, I think that's where we need to open the doors for additional capital for the company.
Okay. Thank you.
You are welcome.
Thank you. Our next question is from Pablo Mulas from GBM. Your line is now open. Please go ahead.
Yeah. Hello. Sorry, you already answered my question.
Okay. Thank you.
Thank you.
Our next question is from Gordon Lee from BTG. Your line is now open. Please go ahead.
Hi. Thank you very much for the call. Just a quick question. I was wondering whether you have an estimate or even just a ballpark figure of what the total operating expenses that we saw this quarter that were associated with either the NEXT transactions or the internalization transactions that should be non-recurring on an ongoing basis, just to get a sense of a more sort of stabilized EBITDA margin for, let's say, the new FUNO? Thank you.
Not yet. I don't think we ran that number. I'll get back to you on that. We'll work on it and get back to you.
Okay, perfect. Just a ballpark is fine. Thank you.
Thank you. Our next question is from Anton Mortenkotter from GBM. Your line is now open. Please go ahead.
Hi, guys. Thank you for taking my question. Just a quick one. As everyone mentioned, you really reached a lot of milestones for FUNO, mostly focused on the industrial side. I was wondering, what are your plans for the retail and office and the other segments? Do you expect to do any acquisitions there, or what's the overall strategy? Thank you.
More than a strategy, let me tell you what we think about what's going on in the retail sector. If you see our logistics portfolio, it's at 98% occupancy, and the rents in the Mexico City market have continued to grow. There is very strong demand for logistics assets. Why? Because the companies that demand that logistics, which is basically consumer-driven in Mexico, have been doing well and expect to continue to do well, and there's a lot of growth coming in that sector. That means that there's going to be demand for new shopping malls, new stores, new Walmart, and so on, so forth, down the road. Obviously, we want to be able to capture those opportunities.
Opportunities, we have been seeing them the last years, and we have had to let those opportunities pass at Fibra UNO because with the deep gap that we have to our NAV, this is a capital-intensive business. We want to close that gap in order to be able to issue equity. Then, as I mentioned earlier, that will open up a lot of opportunities for us for acquisitions and for developments, et c. We see a very strong and attractive retail market in Mexico.
Super. Thank you.
Thank you. We will give it a few more moments for any new questions. It is star two if you are connected from the phone, and if you are connected from the web, you can ask a voice or text question. We will give it a few more moments. Okay, we have a question from Felipe Barragán from JP Morgan. Your line is now open. Please go ahead.
Good morning, guys. Thanks for the call and for taking my question. I have a question on an update on the office segment. Just wanting your thoughts on the trends on what's going on in that segment? Thank you.
Actually, as you have seen on our report, we have been increasing the occupancy that we have there. I think that it's not just us, it's just a tendency already on the market. Obviously, we are above the average of the market in terms of occupancy. But I think the trend is that the offices are getting occupied, and probably we are at 83% occupancy. Once we hit the 85%, we will be seeing increasing the rent levels that we have as of to date that has been almost flat in the last two or three years.
Okay. Thank you very much.
Thank you. Our next question is from David Soto of Scotiabank. Your line is now open. Please go ahead.
Hi. Thanks for taking my question. Just a quick one and a follow-up on the retail side. Should we expect variable rents to start contributing to your portfolio any time soon?
They are already contributing. We have a very interesting mass of contracts that we change. If you remember, I've been saying that in the past, that we change our contracts, some of the contracts for a dual rent. One fixed rent, which was lower than the previous rent that the tenant was paying, or a percentage of their sales, which has been paying off in the last couple of years. But right now, given that we finished, for example, the Luxury Avenue in La Isla, Cancun, we have been receiving the fruits of that, and we have been receiving already percentage of rent. If you add to that we exchanged many of the regular contracts of regular shopping malls from fixed rent, pure fixed rent, to fixed rent plus a percentage of the sales, whichever becomes higher. We have been already receiving that in our portfolio.
Given that we exchanged many of the contracts, we think that we will continue to be receiving those percentages in the near future.
Perfect. Thanks.
Thank you very much. We'll just give it a few more moments for any further questions. Okay, looks like we have no further questions. I will now hand it to the Fibra UNO team for the concluding remarks.
Thank you very much. Thank you, everybody, for your interest in our call, and I hope to hear from you in the next call about the first quarter of 2026 in the future. Thank you very much.
That concludes the call for today. We'll now be closing all the lines. Thank you, and have a nice day.