Ladies and gentlemen, thank you for standing by. I woul like to welcome you to Fibra UNO's second quarter 2023 results call on the 27th of July, 2023. 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 quest ion and answer session. Without further ado, I would now like to pass the line to Mr. André El-Mann, the CEO of Fibra UNO. Please go ahead, sir.
Thank you, Michael. Thank you, everybody, for your interest and for listening to our results of the second Q of 2023. We are very excited of the results that we posted yesterday. I would like to give you some comments about that. Our income line grew 11.2%, despite the 50% appreciation on our currency that affects our dollar income rents. Our leasing spreads are showing a very healthy result. We have 1,600 basis points spread on the industrial side. We have 890 basis points spread on the retail side. We have finally achieved a 50% positive spread on the office segment. Our overall occupancy is 93.8%, which is very similar to what we had pre-pandemic. I am very happy to announce that we are finally out of the hole, even though our income has been a lot higher than what we used to have pre-pandemic.
Now also our occupancy has reached a better level. We already made the grand opening of our new shopping mall in Tapachula. Tapachula is a border town, south bounds, and a very active city. Tapachula has shown better-than-expected flow of visitors. Based on the information at hand, our retailers are beating their performance by a wide margin. We are very happy that it has begun as a very successful center. About the near shoring. The near shoring is still a growth engine. Due to the size and expertise from our management team, which is way above our market peers, we expect to continue to outperform the market. In that order, we are still working to improve on our disclosing, especially in the industrial segment, in order to unveil the real size and extraordinary value of our precious and gigantic industrial engine, and huge potential.
Again, way far from all of our peers. As our operational metrics continue to improve, we are setting up a very aggressive plan to contain expenses and be even more efficient. We are seeing some expensive lines growing faster than inflation at a very fast pace. For example, the property tax and the insurance premium. These increases are contagious to the other lines, to any and all lines of expense. To improve, we need to contain those to improve our operative results. In the ESG front, we are already again in the index of FTSE4Good Sustainability Index. We are ranked among top performers on ESG practices by Sustainalytics. Further on, Jorge will get into depth with this. This again only shows our commitment to better ESG practices.
Before I turn the mic to Jorge, I would like to take a moment to reiterate our deepest condolences to the Mulás family. We are deeply sad by the loss of our dear friend and independent member of the board, Alberto Mulás Alonso. May he rest in peace. Lastly, I would like to stress our commitment to continue working to consistently deliver solid results. Please allow me to pass the mic to Jorge. Jorge, please.
Thank you very much, André. Thanks, everybody, for joining our quarterly call. As usual, I will go into the MD&A discussion of our financial and operational results. As André mentioned, our total revenue line increased 1.1% compared to the previous quarter, but 11.2% compared to the revenues of a year ago, which is what we see as a very remarkable feat, especially considering almost a 16% appreciation of the peso. A stronger peso currency obviously dilutes our U.S. dollar-denominated income, and now we stand at roughly 80/20 mix in pesos of dollars. This is because the dollars are worth less pesos, and that is why the mix has changed. Even with that, and with the effect of the sale of some of our real estate assets, especially if you compare numbers from a year ago, we sold the retail portfolio last year, if you recall.
The industrial portfolio that we collected this year, and that we are using the proceeds for debt repayment. Even with those sales of assets and even with the appreciation of the currency, our top line grew double digits year-over-year. So we are very pleased with that performance. Obviously, the contribution to what explains the growth in our top line is basically rent increases resulting from inflation pass-through that is built into our contracts, rent increases in lease renewals. As André mentioned, we have very solid data on the industrial front, very solid data on the retail front. As I think we have been mentioning before, retail is posting a positive surprise of very healthy leasing spreads.
Even we are very pleased to see that although not a huge number, we did see a 50 basis points increase in the leasing spreads in the office sector while we are reaching 78% occupancy. So we are very pleased with that performance as well. Another contributor to the fact that our top line is increasing is the contribution of projects that were under development and are now ramping up their operation. In particular, the Mítikah development, given its size, this has the biggest impact on our numbers.
In terms of occupancy, as André mentioned, we are at 93.8%, which is pretty close to the number that Fibra UNO has reported quarter in and quarter out since our IPO, which is plus or minus 1% of 95%, which has been our target. So we are basically there. We still have quite a lot of room to improve in the office segment.
We still have a few basis points to increase occupancy in the retail segment as well. There is a lot of upside potential in our numbers. Going into the detail, the industrial portfolio decreased occupancy by 30 basis points. Basically, this is the process of lease renewals and just when you cut off the quarter, what is happening. Retail portfolio, we closed the quarter with 90.6%, so basically a 30 basis point increase in occupancy. The office portfolio, as I mentioned before, 78% occupancy. Again, 30 basis points compared to the first quarter of 2023. If we look at this number on an annual basis, it is almost 3 percentage points above from where we were. As we have been guiding the market, we expected to see flat rents in the office segment and improvement in occupancy. It is exactly where we are.
We are seeing flattish rents and an improvement in occupancy, but we are happy to see that we had a 50 basis point increase in the office rent for this quarter. The others portfolio, 99.1%, basically stable against the previous quarter. The in-service portfolio, 79.3%, 230 basis points above the first quarter. This is basically the inclusion of the Tapachula shopping mall into the in-service properties. It is starting at an 80% occupancy. As André mentioned, with extremely positive dynamics in terms of foot traffic and the sales of the retailers that have established in the shopping mall. We are very pleased with the performance of the shopping mall. Turning to operating expenses, property taxes, and insurance. We saw an increase of MXN 29 million, basically a 4% increase compared to the first quarter of 2023. Basically, it is a substantial increase quarter-over-quarter.
As André mentioned, we are focusing a lot of efforts on reining and containing our expense line and ensuring that we maintain or improve our margins from where we are currently. Property taxes increased by MXN 2.2 million, basically 1.1% against the first quarter. If you look at it on a yearly basis, obviously, the increase is substantially higher than that. Insurance premium increased 1.7% against the previous quarter. Again, compared to over a year ago, it is a substantial increase that we are seeing in our expense line. Basically, this leads to a net operating income increasing by MXN 23.5 million or half a percentage point. Again, another record NOI of MXN 5.023 billion. NOI margin calculated over total revenues of 86.2% and 77.9% over total revenues. These numbers, we are aware they are a little bit lower than what we would like them to see.
That is why we have a very strong focus on containing expenses. It is one of the initiatives that is currently ongoing at Fibra UNO. In terms of interest expense and interest income, net interest expense increased by MXN 47.1 million or 2 percentage points versus the first quarter. Basically, due to the high interest rate environment that we have and the effect that this has on our variable rate portion of our debt. It is offset by the exchange rate appreciation from 18.1 to 17.7 pesos per dollar on the U.S. dollar portion of our interest expense line. It is also offset by the capitalization of interest expenses of MXN 432 million that we had for the quarter. As a result of the above, funds from operations controlled by UNO decreased by MXN 44.6 million, or 2%, compared to those of the first quarter, reaching MXN 2.175 billion.
Adjusted funds from operation decreased by the same MXN 44.6 million, 2%. We did not record any sale during the quarter. We are on target in the execution of our asset recycling program. The expectation we had, and we continue to have, is to start seeing closings of some of these asset sales by the third quarter of 2023. We are on time and on track with the asset recycling program as we had anticipated. On a per CBFI basis, we issued 28,288,000 CBFIs related to the employee compensation plan, closing the quarter with 3,807,288,000 CBFIs outstanding. The FFO and FFO per average CBFI were MXN 57.38 in both cases, a 2.3% decrease versus the first quarter. Moving on to the balance sheet. Accounts receivable for the second quarter totaled MXN 2.99 billion, an increase of MXN 128 million, or 4.3%, against the previous quarter.
A consequence of regular business operation activities, which has led to an increase in invoicing. In terms of investment properties, the value of our investment properties, including financial assets, if you recall, the Memorial Portfolio is qualified as a financial asset given the repurchase option that the seller of that portfolio has. The total value increased by MXN 2.7 billion or 0.9% versus the first quarter of 2023. Basically, the largest component is a fair value adjustment that we do for properties. This is an estimation that is done internally by Fibra UNO during the first three quarters of the year. As of the fourth quarter of the year, we have the final official evaluation by an independent third party provider for this process. Also, normal progress in the projects under construction and development.
Largely, we have some expansions in certain properties, as well as the Tapachula development that we just included and the Portal Norte development in Satélite. Obviously, as I mentioned, CAPEX in our operating portfolio. In terms of total debt, total debt for the second quarter of 2023 ended up with MXN 128 billion compared to MXN 134 billion the previous quarter. The variation is mainly attributable to repurchase of full international bonds, which at the close of the quarter stood at $70.7 million . We have continued repurchases, and we are standing today at about $110 million of repurchased bonds. We are doing this on an open market purchase basis. As well as, obviously, the effect of exchange rate, which in this case reduces the peso value of our dollar-denominated debt.
All of the above result in total equity increasing by MXN 4.4 billion or 2.4%, including controlling and non-controlling participation. This is the result of net income generated by quarterly results, derivatives valuation, the shareholder distribution, and the employee compensation plans. In terms of operating results, without considering the inflation effect of gross leasing spreads, we had a 16.6% or 1,660 basis points increase in the industrial segment. Almost 9% or 890 basis points increase in the retail segment. As we have been discussing in prior quarterly calls, we expected to see very solid results from our retail segment, and the results are showing. We expected, obviously, to continue to show very positive results in the industrial segment, and we are continuing to see this.
We are very pleased to see a 50 basis point increase in the rent in the office segment, which has been pressured for quite a while, as we had expected for dollar-denominated leases. Rent increases were 680 basis points for the industrial segment, 560 basis points for retail, and 300 basis points for the office segment. Again, very pleased to see a 3% increase in U.S. dollar-denominated rents in the office segment. Obviously, some of this data turns negative if we compare it to inflation, but we are pleased to see the overall absolute numbers being positive on all three segments and extremely solid in the industrial and retail segment in particular. In terms of constant properties, the rental increase per square meter for constant properties was a nominal 2% compared to the weighted average annual inflation of 7.1%, so a 5.1% increase in real terms.
This is mainly attributable to the FX appreciation, which in the period that we are discussing was 15.2%. Very happy to see a 2% increase even when considering the FX appreciation of the peso. Moving on to the sub-segment data. At a sub-segment level, the portfolio's annual rent per square foot stood at $12.3 per square foot per year to $12.4, so 0.4% increase. Mainly due to the leasing spread activity, which is positive, and this is obviously offset, as we are describing this data in dollars, by the appreciation of the currency. Again, very pleased to see that even with the effect of the appreciation of the currency, we are seeing a very solid positive number in this data. Looking at the logistics segment, NOI decreased by 4%. Manufacturing decreased by 0.2%, basically stood flat. Business parks decreased by 1.7%, unlike manufacturing segments.
This is basically due to the FX appreciation. Excluding the FX appreciation, obviously all of these numbers would have been positive. In the office segment, NOI decreased by 2.8%. Again, this is the effect of FX appreciation, mainly on our U.S. dollar-denominated rents. The retail segment standalone increased by 1.9%. Regional centers decreased by 2.7%. Fashion malls decreased by 2.2%, and the latter is basically due to increases of inflation of some of the operational expenses more than the rental level. As André mentioned earlier in the call, we are focusing all of our efforts on containing the expenses to ensure that our margins return to normal levels. In the other segments, we saw an increase of 1%, mainly due to variable rent component in that segment.
Lastly, I would like to highlight that in addition to remaining, again, in the FTSE4Good Index, because it is one thing to get there, and it is harder to remain in these indices given the ever-changing and ever-increasing demands of the ESG world. We are pleased to see that we remain on the index. We also received the distinction of a top company by Sustainalytics, which is a very well-regarded third-party provider and analyzer of ESG data. With this, I conclude my remarks. Michael, I would ask you if we can please open the floor to Q&A.
Thank you very much, Jorge, for the presentation. We will now be moving to the Q&A part of the call. If you are dialed in via the telephone, please press star two. That's star two on your keypad and wait for your name to be called. If you are dialed in via the web, you may also ask a voice question. We will now give a moment or so for the questions to come in. Okay, we'll start with Mr. Gordon Lee from BTG Pactual. Please go ahead. Sir, your line is open.
Yes, hi. Good afternoon. Thank you very much for the call. Two quick questions that have to do with the dividend and with taxable income. The first is the 100% payout ratio for this quarter. I know that was all taxable income, but did you distribute 100% of the taxable income that you estimate for the quarter? Or do you think you're sort of building a surplus that might, if the FX stays here, lead to sort of an above 100% payout ratio towards the end of the year, similar to last year? The second question I had, as you conduct the asset sales in the second half of this year, does the premium over historical cost, is that taxable income as well, that would have to be distributed at least 95% of by the end of the year? Thank you.
Thanks, Gordon. Second question first. Yes, the premium that you pay, not over book value, but over your fiscal cost, is taxable income, and it's part of the distribution calculation. It's part of the profit and it's part of your net taxable income calculation. Important to mention that given where we are in terms of FX inflation and all of the different drivers that affect taxable income, we decided to distribute the FFO as 100% of net taxable income. But the reality is that net taxable income is a yearly calculation, and we will not know what that number is until December 31st when we know where the FX closes and we know exactly where inflation closes. But we are assuming that it's going to be 100% of FFO, and that's why we decided to distribute this as 100% of FFO.
Perfect. That's super clear. Just one quick follow-up on that. Then, given the uncertainty around that, right, and the fact that the peso just continues to strengthen almost daily, should we expect proceeds from asset sales to be applied towards debt reduction as we've seen so far? Or would you hold on to some of that cash to be able to make that additional extraordinary distribution if you had to?
That is a good question. I think we do not know at this stage. The strategy we have so far as of right now, and I do not think we have changed course, is to direct the asset sales to debt repayment. We will figure out what happens with the dividend later on.
Perfect. Thanks very much.
Thank you very much. Our next question com es from Mr. Antón Mortenkotter from GBM. Please go ahead, sir.
Hi, guys. Thank you for taking my question, and congrats on strong operational results. I just have one question. It is quite specific related to Turbo. I understand that with the delivery of the Tapachula project, there is now an outstanding balance from a capitalized service rendered with Parks Concentradora, S.A. de C.V. of roughly MXN 970 million . I just wanted to better understand what this means, if this is capitalized construction cost, or is this a fee? If you could walk us through, it will be really helpful. Thank you.
Honestly, I do not have that data right now, Ernst. If you want, I can ask Fernando and our finance team to give you a call back to address that.
Sure. Yeah, that will be really useful. Thank you.
Sure. We will get back to you. Thank you.
Thank you very much. Our next question comes from Mr. Francisco Chávez from BBVA. Please go ahead, sir.
Hi. Thanks for the call, and congrats on the strong results. Nice surprise on the office segment. Can you give us more color on this recovery in occupancy? What kind of tenants are demanding more space, and do you expect your office segment to gain momentum in coming months? Thank you.
Yes, I think, Francisco, that we are receiving requests for space from all over the world, all types of industries. We have also been receiving from the companies that are already established, that they need more space. This is a very common practice in the last 20 years in Mexico. All the companies that are established, eventually, if they are growing, they need to grow their footprint on their office. Of course, we had the pandemic and the new way of life of the workers, but I think that is already past, and we are heading back to what the uses and customs were. I think we are receiving from all different industries, and we are receiving strong from the currently established companies. They need more pace.
There's also people reshuffling from one place to another. People that was probably in the class E, class E minus buildings. They are moving, taking advantage probably of the pricing into a class A, class A minus type of buildings. For example, there's a large request on the market right now from a publicity agency that is taking quite a large amount of square meters. They used to be in a building that nobody knows, and they are moving to Reforma. That's the type of things that we are seeing on the market.
Again, as we have mentioned, I think it's for three or four quarters now, we expected to see recovery in occupancy. Once we get to a certain level as a market, we'll start seeing recovery in rents. We're not quite there yet in terms of recovery in rents, but we are getting there. At least in FUNO, we expected to continue to increase the occupancy, and that's what we are on track to that objective.
We have to be patient. This will not happen in the next quarter. This will happen probably in the next 18 months.
Great. Thanks so much.
Thank you very much. Our next question comes from Vanessa Quiroga from Credit Suisse. Please go ahead, ma'am. Your line is open.
Thank you. My first question is on the industrial segment. If you expect the leasing spreads to continue to be at the same level of strength in the coming quarters. The second question would be regarding your cost reduction strategies. Which segment or portfolio do you expect to deliver more or the biggest part of these cost reduction strategies? The third one would be if there is any progress in the lobbying, I guess, that the sector is doing with the tax authorities in order to change the way that the fiscal net income is calculated or the way that dividends are determined given the big impact that the FX is having on the Fibra. Thank you.
Thank you, Vanessa. We are in continuous communication with the authorities, and we hope that we can get to a change in the regulation that will help us fulfill the obligation that we have to distribute 95% of our fiscal income. I think that we need some changes, but I think that the authorities will cooperate in finding a solution for all of us who have this problem currently in the market. As for the industrial side, it is pushing very hard. I do not think that it is sustainable to have 1,600 basis points of [ easy] spread.
But I think it is going to continue to be pushing because we have lack of space all across the country. This lack of space, at the end, will have a price tag, and the price tag cannot be off the charts. I do not believe that 1,600 basis points of [easy] spread is sustainable. We got to that in this quarter, I think, by accident. I am seeing too much pressure on the prices, and I hope that we do not go far off the charts. If we fall off the charts, we will lose competitiveness. I hope that it will not be there for very long.
And cost reduction, like what sectors will be cost reduced?
Cost reduction all across the board. We are turning all the screws we can find in order to contain the increases on the cost. It is not cost reduction. It is containment of the increases on the expenses. It is a different way of doing it. The industry is a nice problem to have, but we would rather not have a continued explosion in rents because, as André mentioned, we become less competitive. The market is very hot. We will see what happens.
Thank you very much. It looks like Ms. Vanessa has dropped from the call. We will open her line once again when she comes back in case there are any follow-up questions. The next question comes from Mr. Pablo Monsivais from Barclays. Please go ahead, sir.
Hi. Good afternoon. Thanks for taking my question. The first one is on André's comment on the earnings release about the 500,000 sqm that you have for industrial space. This is not yet on the development pipeline. I just want to have more color on that, if you plan to develop that GLA soon or that is a medium-term project. My second question is to get your views on the inventory of office in Mexico City. In the last few years, there has been an excess of inventory. How much of that is already absorbed? Thank you.
Yes, regarding the land, as you know we have, with the different acquisitions we have made in the past, about 1 million square meters of shovel-ready land to initiate development. It is something that we can do, and I think that the short answer, Pablo, is that we will go with our tenants and whenever they demand space. We have well-located land because the land we purchased came in either existing parks that are already established and developed in the north part of the country where there is a lot of demand, so we have space there. We will work with our tenants. How fast we go with that, I think is more of a question of the demand side of the equation rather than on our capability of developing. We can do that very fast.
We will work more with our tenants to see where people want to establish, and we are able to develop that. It could be quick if the market is there. Let's put it that way.
In terms of the office inventory, as you know, since the last quarter of 2018, when Claudia Sheinbaum took place as the city mayor, she stopped almost every construction. After five years, we see this like a benefit because we stopped the supply of new inventory into the market. Due to the COVID, we saw a bunch of quarters with negative absorption. As of now, I can tell you that there has been three quarters with positive absorption. As of this year, the positive absorption is around 150,000 sqm . Take into consideration that back in 2019, the average positive absorption was in between 350,000 sqm- 500,000 sqm . So we are in the pace of recovering the occupancy.
As I mentioned, it will take two quarters, probably something that will take four to six quarters to get back to the occupancy where we were prior to the COVID.
Okay. Perfect. Thank you very much.
Okay, thank you very much. We saw Vanessa Quiroga from Credit Suisse drop in for a few minutes. We can see that you are back. Vanessa, your line is open in case you have any follow-ups to your previous question.
Thank you so much. I think that the last question that I had was about that cost. Where do you expect to deliver the biggest cost reductions, either by portfolio or line of expense? Thanks.
It's all across the board, Vanessa. As André mentioned, it's tightening the screws everywhere. It's more than cost control. It's reining in or controlling the increase in expenses.
Okay. Thank you very much.
Thank you.
Thank you very much. Our next question comes from Juan Ponce from Bradesco BBI. Please go ahead, sir.
Hi. Good afternoon, everyone. Thanks for taking my question. Can you comment a little on the relative performance between the quarters in Mexico City office market? What sub-markets are you seeing more demand? Where do you see the biggest challenges? Also, if you can share some of the nuances in the negotiations with tenants on these renewals. Thanks.
In terms of, as I mentioned, there's people that is moving from secondary corridors to primary corridors. Obviously, Reforma, Polanco are the ones that are seeing more activity. Obviously, for example, Periférico Norte are the ones that are struggling. They have a huge inventory, and people is moving from those into the more downtown places. Obviously, it's just a matter of time, everything will be back into the absorption. As of now, we are seeing more activity in Insurgentes, Reforma, Polanco. Even Lomas is behaving quite well.
As long as we see the occupancy where it is right now, it will be hard to push prices up. Some of the renewals that we have been doing, we are almost on a flat-ish or a few points above inflation, or in good cases, inflation will be the best case for us. We need the absorption to be better in order to increase prices.
Got it. Thank you so much.
Okay. Thank you very much. Next question comes from Mr. Jorel Guilloty from Goldman Sachs. Please go ahead, sir.
Good afternoon. Thank you for taking my question. I only have one question, and it is focused on leverage. We have seen the material improvement in that number. It was 6.8x now in 2Q 2023 versus 7.7x in 2Q 2022. Given the tailwinds you have been seeing for revenues, the strengthening peso, I just wanted to see if you could give us some color on how you are thinking about leverage today. At what leverage levels would you feel comfortable? How do you think you can get there apart from the expected asset sales in the second half of 2023? Any color you can provide would be helpful. Thank you.
Thanks, sir. The ideal sort of leverage target for the company between 35% and 40% LTV. This naturally should have LTV measured on a net debt free basis comfortably below 6. And with those two metrics, we should be in the BBB, Baa2 investment grade world on a stable basis, which is where we want to be. So the target for us is to be Baa2, BBB rated, and that leads to more or less between 35%- 40% LTV. The asset sales will contribute to that getting there quickly. This is a business that if we don't do anything to it, given the fact that it's inflation index, in a few years from now, naturally it will delever, and it will be closer to 35%, and in 10 years, closer to 30%, and in 15 years, closer to 25%, and so on and so forth.
The business, it delevers naturally over time. Obviously, high inflation is speeding up that process, and asset sales directed towards debt retirement are speeding up that process. We expect to be comfortably within the BBB rating world by the end of this year, the beginning of next.
Thank you very much.
Thank you very much. Next question comes from Peter Bowley from Bank of America. Please go ahead, sir.
Good afternoon. Thank you for taking my questions. I have two. You had mentioned total occupancy reached pre-pandemic levels and that retail could be a driver for improved occupancy rates going forward. Do you expect further occupancy gains in retail in 2H 2023, or is that more gradual expectation over the medium term, similar to office? My second question is, can you walk us through how you're thinking about addressing the 2024 USD bond maturity? Thank you.
Regarding retail, obviously, it's gradual. Not as gradual as we are seeing in office. I think retail is definitely stronger, and it's on a much improved situation compared to offices. Offices a little bit more challenging than retail. I think retail is boasting positive surprises, as we are seeing with the positive leasing spreads. We expect to continue to see occupancy gains that will lead us to being closer to the 92%-93% level of occupancy that we were pre-pandemic. All of that is significant upside to the existing numbers. Regarding the 2024 maturity, normally we look into those one year ahead, so we're still a little bit over a year ahead from that.
Historically, the company has always looked to refinance our debt with new issuance in the market. Eventually, you should expect to see us tapping the U.S. dollar market at some point between now and December of 2024. Exactly when, I think it's a question of how rates behave, what our bonds are doing, the secondary market, et cetera. We're going to be vigilant to windows of opportunity to tap the markets. Not committed to doing something right now, or committed to saying that we're going to wait till next year. We're going to see what makes sense at the appropriate time. Right now, it's normally early for us to be thinking about that bond, but we do have it on the radar.
Thank you.
Okay. Thank you very much. As a reminder, for any additional questions, star two. In the meantime, we will take a question from Jacob Steinfeld from Ashmore Group. Please go ahead, sir.
Hi, good afternoon. I have a couple questions. My first was on the bond repurchases, which you did prior to the quarter, and I guess subsequent to quarter end. Which series did you repurchase, I guess is my first question. Secondly, are you planning on canceling those bonds?
We basically bought open market across the curve, Jacob. All of the bonds that are five bonds, that we have outstanding. I do not think necessarily canceling is the best idea for us right now, because that triggers a taxable gain. So maybe we are keeping those bonds outstanding, especially the longer dated maturity bonds. The shorter ones, we may cancel them, given that if we bought the 2024s, and the 2024s are close to being redeemed, we may end up canceling those. From a market perspective, the idea is not to resell those bonds back to the market, but to delever the company. So even if we do not cancel them, we do not expect to resell them.
Okay, great. Can you remind us what your current availability is right now on credit facilities?
Yes. We continue to have the revolving credit facility, which is roughly $1.2 billion committed. We have another $12 billion in lines of credit with banks.
Okay. My last question.
Yes.
Okay, great. My last question was, I know you said you have a net leverage target under 6, but where do you expect to get to by the end of the year?
We should be close to 6. Slightly above 6, I think, but we should be very close to 6. 6.1 maybe, somewhere around there, 6.2.
Great. And on LTV?
Below 40. That will be like a 38-ish, 39, somewhere around there.
Okay. Thanks very much.
Thank you.
Thanks very much. Our final question comes from Andre Mazini from Citi. Please go ahead, sir.
Yes. Hi, André, Gonzalo, and Jorge. Thanks for the call. Two questions. One on land bank. Almost half of the land bank is in the Hidalgo region, pretty close to Mexico City. Do you think nearshoring has been happening there as well, or more so in cheaper regions such as Bajío or closer to the U.S., such as the North? Another way of putting it, is the current land bank optimal for the nearshoring boom, do you think? The second question is on Helios. Nice to see the extension by three years of that co-investment. What do you think will be the end game in two years' time? Will FUNO probably be increasing the stake in Mítikah from the 62%- 100%, or selling to a strategic? If there's tag-along and drag-along rights. Thank you.
There are no drag-along rights. There are tag-along rights. I think our objective would be to remain with that asset, to keep it. It's one of the crown jewels, and really an extraordinary asset in our point of view. It's doing extremely well. We're both, our investors and ourselves, very happy with that process and with the extension. I'll ask André to address the question on nearshoring, because the short answer is yes, but I think he has a lot more to say about it.
Thank you. Thank you, Andre, for the question. I think that nearshoring, and I've been very vocal about this, nearshoring is completely misunderstood. Also, I think that many people understand nearshoring only to be on the northern border. I think it's anything but the northern border. Of course, the northern border is included for many of the manufacturing companies. But in reality, people want to establish shop in Mexico. They want to set up shop in Mexico country. They are not really keen to be in the northern border. Especially having seen that the northern border has a lot of problems with electricity, a lot of problem with labor. They cannot find workers for that zone of the country. They can find everything, especially in roads—
Roads. Infrastructure.
—and transport from Mexico City area. I want including the Mexico City area, the Bajío area. The Bajío is one step behind the Mexico City area. The Mexico City area is the most important for the logistic distribution, and today also for the—
Light manufacturing.
—light manufacturing of every different product in the country. What we have seen is Mexico, it has a very high occupancy rate. Also you have 100% in Tijuana, but Tijuana is tiny. It is a very tiny market. Mexico City is a very large market. Even though the size of the market, we are in Mexico City at 98-ish, 97-ish percent of occupancy. If you take into account that we have never been there before, especially with all the supply coming every year, and we have a lot of supply. We still have the issue of the land. There is not too many land suitable to be developed immediately. For the rest of the players, because we have our aces under our sleeves.
But for all the markets, I think that the nearshoring is here to stay, and understanding nearshoring for what it is, for companies trying to set up shop in Mexico, period. Having said that, I think that the winners for that will be the sites or the cities with most infrastructure. You can name, of course, Mexico City. You can name Querétaro, maybe. You can name Toluca, which is adjacent to Mexico City nowadays. You can name Guadalajara, and you can name also Monterrey. But the rest are a commodity. The rest are the proximity. They have the proximity, but they do not have anything else. All the rest is among those cities that I mentioned. You have the transport, you have the security, you have the labor, and you have a much more developed market where to establish an industrial park.
So I feel that Mexico is in the right place at the right time. Mexico country, again. This nearshoring fever will be here for a while. We intend on capturing the opportunity. We have the means, we have the land, we have the right of first refusal for our company, and we will behave and we will perform much better than the rest.
Thank you very much.
Thank you.
Thank you very much. That is all we have time for in terms of questions. I will pass the line back to the team for their concluding remarks.
Thank you, everybody. Thank you for your attention to this call, for your interest in our company, and we look to see you and hear from you in the next report for the 3Q 2023. Thank you very much.
Thank you very much. This concludes today's conference call. We will now be closing all lines. Thank you and goodbye.