Good afternoon, and welcome to Fibra UNO's first quarter 2023 results conference call. We are joined by Mr. André El-Mann, Mr. Gonzalo Robina, Mr. Fernando Alvarez Toca, and Mr. Jorge Pigeon. I will now hand over to Mr. El-Mann to begin the presentation.
Thank you, Tim. Thank you everybody for your interest in our quarterly call. We are here to provide light on the results of first quarter 2023. Before I pass the mic to Jorge to go in depth on the numbers, I just would like to comment on the excitement that we have all across the company about the results on this quarter. We have been recording very solid numbers on income and NOI lines. Of course, we are aware that the FFO line has been affected by the interest rates. But we have been seeing in perspective, the company after the pandemic, we have been overcoming all difficulties. We are in a very good shape right now, and we have been absorbing the steep interest rate hikes that we have been seeing in our market in the last 15 months, where the base rate went from 4% to 11.5% currently.
We have been absorbing that blow in our numbers. We have been distributing. We recorded record FFO and yield distributed last year. We have been seeing our company performing extremely well, recovering from the pandemic. Remember that 2022, last year, was the first year after the pandemic, and we recorded record numbers last year. Today, again, we recorded a record number for one quarter. It was for us a milestone, recording more than MXN 5 billion in income for this very quarter. This comes due to an improvement in the occupancy after the pandemic, and also improvement in all operating costs and operating service for the company. We have been really, very active trying to contain the increases in the costs, and we have been achieving a lot of success in that front.
We have not reached yet our level of occupancy, pre-pandemic occupancy, as where in the retail sector, we were recording 93% occupancy level pre-pandemic, and today we are sitting almost on 91%. So we are still yet to get to the pre-pandemic levels, and we feel very comfortable that we will reach that level in the coming months. In the office segment that many of our counterparts are worried about, we are not that worried. We are not yet reached the pre-pandemic levels. Pre-pandemic, we were sitting at 83% occupancy level, and today we recorded close to 79%. So we feel very comfortable that we also in the office sector world, we will capture and get to the pre-pandemic levels in the coming months. In terms of income per sector, we are also very excited about the results.
Of course, as you know, industrial sector is still very hot, it is still very active. And we feel very comfortable with the close to 40% of our company income coming from industrial sector. We feel comfortable about that. We feel comfortable on our level of rent rate. Remember that we want always to be in a comfortable level for our tenants. We usually are just below the market. We feel comfortable about that, and this comes for the service of our tenants. We want our tenants to feel comfortable that they will receive a very competitive level of rent, aside of being receiving the best location possible. If we continue with that policy, I am sure that we will surpass our pre-pandemic levels, and we will continue to be delivering very good results.
I am sure that the numbers are improving, and we will improve even further and continue to deliver the results to our investors. Also, we feel that we have reached peak levels on interest. We do not think that it will go much further, and we have been absorbing all the blow. I think that from now on, all the improvements that we will continue to receive due to occupancy and stabilization of the properties that we just add to our incoming portfolios and increases on the rent, will help us deliver the solid results we have been delivering in the last six quarters. So with no further ado, I would like to pass the mic to Jorge Pigeon to give us a sense on the numbers. Jorge, please.
Thank you very much, André. Thanks, everybody, for joining our quarterly call. Indeed, we are very happy and very excited about the very solid, very strong operating and financial results that we are posting this quarter. And the milestone that we reached of breaking the MXN 5 billion mark for one quarter of net operating income, I think is very remarkable for our company. I am very pleased with that. So going into the quarterly and the MD&A, I will start as usual with our P&L and then move on to the balance sheet and operating metrics. In terms of the P&L, starting with the revenue line, we increased MXN 146 million to MXN 6.377 billion for income of the quarter, 2.3% above the fourth quarter of 2022. This is a little over 9% growth for the revenue line on an annualized basis.
If we compare that to where inflation is today, which is around 6.5%-ish, we basically have, if you look at it this way, 50% growth on top of inflation. So very happy and very solid income line that we are recording as a company. Where is this coming from? As André was mentioning, it comes from an increase in consolidated occupied gross leasable area of 10 basis points, which is a combination of increases primarily in the office and retail sector. Rent increases resulting from the inflation pass-through in our active contracts. Rent increases in renewal of contracts, the famous leasing spreads. We had very solid positive leasing spreads in peso terms and also solid in dollar terms, and we will talk a little bit about those in a second.
The initial contribution of some projects under development, in particular here, obviously, the highlight of the new projects that are coming online is the development of Mítikah, which is one of the crown jewels of Fibra UNO. It is with great pride that we are happy to see that development has been a success that has gone above and beyond our initial expectations. We have in there a world-class mixed-use property, and we are very happy with the great success that this has been doing. All of these positive effects was offset by the peso-dollar exchange rate appreciation, which obviously had a negative effect on the U.S. dollar-denominated rents, particularly in the industrial and office segments, and we will touch a little bit on those in a second.
Going into the details of the occupancy, the operating portfolio reached 93.8%, so we are getting close to the historical average target of where we want to be in terms of occupancy for the company. If you recall, we have always been very vocal about being ± 1%, around 95% for the company as a whole, knowing that this is a cyclical business and there is a different time cycle for office retail and industrial. Today's turn is industrial is the market that is the darling of the real estate sector.
Office is not so much today, but 15 years, 20 years ago, industrial was not the darling of the market, and office was doing well. So we like the diversification as part of the core strategy of Fibra UNO. Again, we are very happy that we are getting close to that 94% mark, 93.8%. Industrial portfolio decreased 10 basis points.
Basically, it is part of the normal process of contract leasing and renewal. Just when the quarter cuts, we ended up with this number, but it is a market that, as you know, is extremely hot in Mexico as a whole. Obviously, our portfolio is great part of what is happening in the market. The retail portfolio reached 90.3% occupancy, 30 basis points above the previous quarter. The office portfolio almost reaching 78% and well on its way to what we expect to be somewhere probably around 80% towards the end of this year. If you recall, we have been very vocal about the expectation that the office was going to recover in occupancy in a period of 18, maybe 24 months, depends on how absorption is looking. It is looking positive for us.
As you have seen, we have seen a couple of quarters with increase in occupancy in the office sector, and we spent about three or four quarters with stable occupancy of 75%. So we feel that the worst part of the cycle is now behind us, and we are in recovery mode. First, in occupation. We do not expect to see increases in rents as of yet. I think we still need to see the market overall gain occupancy significantly higher from where it is today in order for us to start seeing upward pressure in rents in the office sector. But that eventually will happen.
So we are comfortable with where we are sitting today and with the directionality of the trends that we are seeing exactly as we expected and I have commented with you in prior quarterly calls. The office sector, 99.1% occupancy, basically stable, as well as the in-service property also stable.
In terms of operating expenses, property taxes, and insurance, this has been a strong area of focus and obviously a big challenge for us to rein in the inflationary pressures that obviously, as you can imagine, go above and beyond what Banco de México publishes as an inflation. We saw this total operating expenses decrease by MXN 92.6 million, or 11.5% from the fourth quarter of 2022, mainly due to the seasonality of some expenses. As I mentioned, obviously, there are inflationary pressures to deal with. Property taxes increased by 16.7%, or 9.4% compared to the previous quarter, mainly due to the update in municipality of the property tax rates at the beginning of the year, as well as some inflation pressures. Insurance expenses close at MXN 96.5, basically remaining stable compared to the prior quarter. This results in the net operating income increasing MXN 128.1 million, or 2.6%.
Again, significantly above the inflation. If we compared this 2.6% on an annualized basis, it is almost 50% above the current level of inflation. We are breaking the MXN 5 billion peso mark, which is something that we are very pleased about. NOI margin calculated over rental revenues, 86.5%, and 78.4% compared to total revenue. There has been a little bit of margin pressure, which we think is normal. I think we have done a solid job in reining in expense inflation to contain that and maintain our margins close to where they are today. In terms of interest expense and interest income, we had an increase of MXN 134.4 million pesos, almost 6% compared to the fourth quarter of 2022. This is no surprise.
It is mainly due to the increase in the variable debt base rate, which as André mentioned in the initial comments, we have seen 7.5% or 750 basis points increase in the base rate for our variable debt. So we have been able to swallow a lot of that increase without affecting FFO in prior quarters. This increase was offset by exchange rate appreciation of the peso from 19.4 at the beginning of the quarter to 18.10 at the end of the quarter. Also offset by capitalization of interest expenses of MXN 439 million pesos. As a result of the above, FFO, funds from operation controlled by UNO decreased only by MXN 29 million pesos or 1.3%, reaching MXN 2.2 billion pesos. Adjusted FFO remains stable. With FFO, it is a decrease of MXN 627 million pesos, 22%.
This is obviously due to the fact that we did not close on the sale of any properties during this quarter. So AFFO and FFO are basically the same, MXN 2.2 billion pesos. On a per CBFI basis, we also did not see any movement on the CBFI count, either repurchases or issuances of new CBFIs. So we have a stable number of 3,779 million CBFIs outstanding. The FFO per average CBFI, MXN 0.58, MXN 0.74 in both cases. A 1.3% increase and a 22% decrease, obviously in the FFO, as I mentioned, resulting from the lack of sale during this quarter. In terms of the distribution, we paid out of the MXN 2.2 billion pesos, MXN 1.4, resulting in MXN 38.91 per CBFI. We were required to pay some taxes based on the net taxable income result of 2022, to the tune of MXN 441 million pesos.
However, since we made some of those payments on behalf of the CBFI holders of FUNO, the effective tax rate that should be deducted for this quarter for CBFI holders, instead of the normal 30%, given that 100% of the distribution will be from taxable income, is only 18.99%. Moving to the balance sheets. Accounts receivable remain basically stable. A very minor increase of MXN 19.8 million, or 0.7% from the previous quarter, basically normal business operations. In terms of investment property, the value of our properties, including financial assets, as you recall, in particular the Memorial Portfolio we had to reclassify as a financial asset given the nature of the contract for that acquisition. All of this increased by MXN 2.6 billion, or 0.8%. So we're not even increasing inflation in the value of our properties.
Fair value adjustment, as you know, is something that is done once a year by a third party, and we are calculating this as an estimation done by ourselves during the year. It includes this, it includes normal progress in construction projects under development. We have still some investment to do in Galerías Valle Oriente. We continue to invest in some TIs and things of that nature in Mítikah. We continue to invest in the development of Portal Norte. So there's still some ongoing CapEx in the operating portfolio, as well as CapEx in the operating portfolio, which there's a lot of things that we end up doing that add to that CapEx line. In terms of total debt, we saw the quarter close with MXN 134.6 billion compared to MXN 140 billion recorded the previous quarter.
The variation is mainly due to the prepayment of the FUNO 18 bond for MXN 5.4 billion. The prepayment of bilateral lines of credit for MXN 1.6 billion. We issued MXN 6.7 billion of sustainability-linked bonds on a seven-year fixed and four-year floating rate basis earlier this quarter. Very successful placement, and we extended the maturity of that. With that, we reduce significantly the amount of risk financing that we have pending for this year. Also, exchange rate variations of the peso moving from 19.4 to 18.1 resulted in a lower number. As of the close of the first quarter of 2023, we still have outstanding receivable for the $205 million of sales of properties that we announced in the fourth quarter of 2022. There was some delays with authorities giving the permits for the transaction to go through.
We have surpassed that, and we expect that transaction to close and receive the proceeds from the sale during the second quarter of 2022. The proceeds of those asset sales will be directed to repaying existing debt. We have some alternatives as to what debt to repay, but we'll go to repay debt. We also have a pipeline that's further down in our results lines, a little over MXN 5 billion, that we expect to use also to repay down debt. You can see page 40 for the specific details on the pipeline. In terms of total equity, we saw an increase of MXN 2.8 billion, 1.5%, including controlling and non-controlling interest. This is basically the combination of net income generated from the quarterly results, the revaluation, the shareholder distribution, and the employee compensation plan provision. Moving to the operating results.
The leasing spreads, as I was mentioning earlier, we are very pleased to see a very healthy 1,560 basis points peso leasing spread in industrial, 15% basically, 9% in retail. Very solid. Let me stress that. Very solid performance, not just in the industrial sector that we all know is hot, but also on the retail segment. Even we saw an increase of 110 basis points in the office segment. Obviously, if you compare that to inflation, it becomes a negative leasing spread. But being able to increase the rent in office when you have occupancy of 77% by even 1% is a very solid result. We are very pleased with the leasing spreads we are seeing. For dollar leases, 600 basis points. Retail, 510 basis points . The industrial sector, 310 basis points for office.
In terms of constant property performance, we saw an increase of 4.2% compared to the previous year. It is a decrease of 3.5%, mainly due to the FX appreciation almost 10% in the quarter. There is obviously, as you know, a natural lag in the recognition of inflation. Moving to the sub-segment level. Total portfolio and our rent per square meter moved from $11.50 per square foot to $11.60, a 0.8% increase, mainly due to increase in both current contracts and renewals, which was again offset by the FX appreciation. Given that we report in pesos, in this case, the appreciation of the currency has a negative effect on our income and net operating income. This resulted, for example, in a decrease of 1% in logistics in peso terms, a decrease of almost 6% in light manufacturing, which, as you know, is much more heavily weighted towards dollar contracts.
However, considering that the appreciation of the currency was almost 10%, only having 5.9% decrease, we see as a very successful and positive number. Office decreased by 2.9%, again, mainly due to the effects of appreciation. The retail segment standalone increased 1.4%, regional centers 4%, and obviously you see a very significant increase in fashion malls of almost 30%, 28.2%, which is largely driven by the inclusion of Mítikah in that segment. Standalone, and the regional standalone segment was due to delayed property taxes for the first quarter of 2023. The other segment decreased 14.9%. This is a seasonal effect. It is a sector that is highly dependent on variable income. As you know, hotels are included in this segment. We just passed one of the high points of the season, which is the year-end vacation time, so normal to see that type of performance.
With that, I conclude the presentation of numbers. Tim, if we can open the floor to Q&A, please.
Yes. Absolutely. Thank you very much. We will now move to the question and answer section. If you would like to ask a question, please press star two on your phone and wait to be prompted. If you are dialed in by web, you can either type your question in the box provided or request to ask a voice question. Our first question comes from Carlos Peyrelongue at Bank of America. Please go ahead.
Thank you. Thank you gentlemen for the call. Two questions, if I may. The first one, I believe you mentioned something on your expectation for occupancy in the office portfolio by year-end. I was not able to get that. If you could repeat, that would be helpful. If you could make any comments as to how you are seeing the Mexico market on the office side in terms of absorption. The second question is related to your leverage. If you could comment, what is the total amount of debt that is due this year, and the breakdown between fixed and variable. On that same note, if you can comment of any plans to reduce your debt. In particular, if you could provide any estimates of a range of potential asset sales for this year. Thank you.
Sure, Carlos. Yes. I will try to remember all of the questions. If I miss one, please remind me. Starting from the last to the first. We have a pipeline of pending properties to sell of about MXN 5.6 billion, roughly. It is on page 20 of the supplement. We expect to close those sales this year, and that money will go directly to repay down debt. In addition to $205 million, I am going to round numbers, it is about MXN 9.5 billion of proceeds that will be directed to repaying debt, so it will be a net de-leveraging of roughly MXN 9.5 billion for this year. We expect to collect on the $205 million in the next month or so. The remainder is something that we have a good feeling of execution and the ability to close the remaining part of this year.
In terms of maturities for the year, we have roughly left about MXN 16 billion, including bilateral lines of credit. The two non-bilateral lines of credit marks that we have is the peso bond that matures in December, that we can prepay as of June of this year. As of today, we still cannot prepay that bond. There is also a credit associated with our headquarters. Part of the acquisition of the property came with that credit and some derivatives, and that is outstanding and matures this year. Basically about MXN 16 billion left for this year. The peso bond, and the credit on our headquarters are fixed rate. The rest, obviously bilateral lines of credit is floating.
We're still yet to decide in terms of what is the most effective use of our monies, but clearly not rocket science that if we pay down variable rate debt, it's a very high direct impact to the bottom line, and obviously that has been the priority. In terms of the office market occupancy, more or less 80% is where we expect to end the year. We'll see how things continue to develop. In terms of absorption, Gonzalo and André, you can help me with commenting a little bit more on that.
Yeah. Absolutely. Thank you, Carlos. As we have been really active on the office market, what we are seeing is that, if you may recall that all the construction in Mexico City was stopped once the city mayor took place at the end of 2018. That means that since then, really there has not been new inventory into the market. Any demand that we are seeing on the market, it's absorbing existing buildings. We are seeing that. I think that all the acomodo that the offices have been suffering since the pandemia has stopped, and everyone is taking new spaces, or there's definitive area that they will be using in the future. As Jorge mentioned, the only thing that we see from now on is that the office market will be improving in terms of occupancy. There is a lag in terms of price per square meter.
Probably, we will be struggling with that for the next 18 months. As soon as we don't hit around 83% occupancy in the market, 85% occupancy in the market, we will be seeing that cap on the market. We will be seeing the same prices per square meter in the next 18 months.
Understood. Thank you, Gonzalo. Thank you, Jorge.
You are welcome. Next question. Do we have more questions?
Team, can you help us, please?
Yes, apologies for the delay. Our next question comes from Pablo Monsivais at Barclays. Please go ahead.
Hi. Thanks for taking my question. Just probably the same question that I have been asking for quarter- after- quarter, but just wanted to understand, what are your growth plans? Nearshoring is impacting the industrial market. You guys have shown that you can actually capture the opportunities on markets in the past. What should we expect for you to keep growing? The development pipeline is not large. The M&A pipeline is not also relevant as well. What do you have in mind to capture these opportunities? Thank you.
Well, given the situation that we are in, Pablo, this is obviously no news. We are trading at a level that issuing new equity is something that would be very highly diluted. We have not been able to tap the equity markets since our last issuance in 2017. We are at a leverage level that, with the liability management activities we have, we feel comfortable with. And obviously, going forward, given that the company has this inflation indexation in our contract, is going to generate more cash, and it will naturally continue to delever over time. But this is a capital-intensive business, and in order for us to be able to capture substantial growth opportunities, we need new capital. I am not saying anything that should be a surprise. Asset recycling is something that we can do on the margin.
But in order for us to really be able to grow, we would need a substantial amount of capital. What we do have as a company, and I think this is something that is extremely valuable, is that we have a right of first refusal that the founders of Fibra UNO have granted to Fibra UNO on all of their properties that is suitable for Fibra UNO. In this regard, the largest owner and developer of industrial real estate in Mexico is our sponsor by a wide margin. This was published recently. I do not remember if it was Colliers or CBRE came up with a report showing the different developments and the size of developments that the different parties are carrying. The potential that our sponsor has could be extremely significant. That is sitting at our sponsor's table. They have been investing in that portfolio.
Ideally, it is their wish since the IPO, and it would be our wish as a company as well, to be able to do that inside of Fibra UNO. We need to be able to figure out a way of how to tap that growth. The good thing is that no one else can tap it because no one else has that right of first refusal, only Fibra UNO. So it is something that is there for us to capture. But we need new capital. We need to find a way to access new capital.
Okay. Thank you. Our next question comes from Adrián Huerta from JP Morgan. Please go ahead.
Thank you. Good morning, everyone. Most of my questions were answered. I think I just have one left, which is there anything else in your portfolio that you would probably like to dispose? Basically, can we think about further asset sales on top of what is planned already for this year?
Thank you, Adrián. We have been receiving unsolicited offers for some of the assets. The ones that are disclosed, you already know them. On top of that, we still have some offers, for example, in the industrial sector, that obviously we are thinking twice of getting rid of the industrial at this stage. Yes, definitely, we are still seeing some unsolicited offers. We have office buildings, two of them, that will be reconverted for a third party, another one that will be converted into a hospital. There's some action going on there. We are seeing also a request of retail, mainly in the Jalisco State. Yes, definitely we are still seeing and receiving a lot of unsolicited offers for some of our assets. We will be selling non-core assets only.
Just to complement what Gonzalo Robina is saying, it's becoming a common practice for a company to recycle some of our assets, and you'll be seeing during the next quarters, always being active in recycling non-core assets.
Good to hear that, André. I think it's also a good strategy and thing to do as well. Difficult trade-off on the industrial side. Great. Thank you.
Thank you.
Thank you.
Thank you. Our next question comes from Juan Ponce at Bradesco. Please go ahead.
Hi. Good morning. Thank you, everybody, for taking my question. It's similar to the leverage and growth questions. What level of loan-to-assets would you feel more comfortable to begin putting in new developments? Thanks.
What level of what, sorry?
Loan to assets.
Okay. Sorry.
Could you say again?
What level of-- We couldn't get no one in the room could hear what you-- What level of-
No problem. Loan to assets.
Loan to assets. I think that the company strategically would be comfortable in the 35%-40% loan-to-value range. Obviously, the closer we are to 35%, on a stabilized portfolio, the closer we are to being below 5x, between, let's say 4.75x and 5 x net debt to EBITDA, which is something that rating agencies are looking at. That would be sort of a very comfortable zone for us to be working with.
Got it. Thanks.
Thank you. Our next question comes from André Mazini at Citi. Please go ahead.
Yeah, sure. Thanks everyone for the call. Also on the asset recycling program, who do you think are the main buyers in this environment of higher interest rates? Would it be AFOREs, pension funds, other pension funds, PE funds, strategics? It seems that the asset type you want to sell the most in the short term is retail, right? As per page 20 in the supplemental. In addition to that, when do you think is the lifetime, the cycle of a property is complete, so that it is up for sale? So when does it become non-core, right? Is it by age or when the rents are at or above market? I know you guys like to have rents a little bit below market. Any metrics you can provide for when the property becomes non-core and then you want to sell it? Thank you.
Actually, the type of buyer that we are seeing, for example, for the industrial portfolio that we sold at the end of the year, that was an institutional fund that bought it with pension fund's money, with AFOREs money. What we have on the pipeline are mainly final users that will be using the asset for themselves or wealthy families, family money, that are buying assets that is producing a nice level of income and looking for the long run, an estate asset for them. Not really trying to get the leverage up top and trying to be accretive with the leverage or whatever. It is mainly family owned estate for a long time. Which was the second one?
What is a definition of what a non-core asset is?
When do assets become non-core?
No. It's not a matter of age. I always put the example, a building like Torre Mayor, no matter the age, will be an iconic asset. The Empire State Building has been for 100 years in New York. It's not a matter of age, it's a matter of market circumstances, probably the location, probably that won't be improving that much due to its location. It's not a book definition of how does it become non-core. It's just a matter of different factors that makes them non-core for us.
Jorge and Gonzalo . Thank you.
Thank you, André.
Thank you. Our next question comes from Jorel Guilloty at Goldman Sachs. Please go ahead.
Yeah. Good afternoon, everyone. Thank you for taking my questions. I wanted to focus on two things. One on NOI margins over rental revenue and on distribution. Looking at your NOI margin, it was 86.5%. It was flat sequentially, but it's 200 basis points down year-on-year. I was just wondering if you can provide us some color on how we should think about that dynamic. If it's somewhat due to perhaps cost inflation or something else, and what should we expect going forward for that specific metric? Then, on distribution, I was just wondering if you could give us an update on how you're thinking about distribution. There's a lot of factors, including FX and inflation and what have you.
Then I just wanted to see if there's any updated views on how you're thinking about payout ratios through the end of the year. That's it. Thank you.
Thank you very much, Jorel, for the questions. In terms of the margins, obviously, it's been a struggle and a key focus of the team to rein in or control expenses. Because obviously the inflation that you see published by Banco de México is not necessarily the inflation that our suppliers want to reflect in their services and goods that they sell to us. So, the decrease of 200 basis points in the margin comes primarily due to inflationary pressures that go beyond the inflation that is published by Banco de México. It is a struggle to contain that.
And obviously, to the extent that we see inflation normalize closer to more stable levels of 4% or something like that, you will see that we will be able to have an even better management of our expenses, and we should be able to return to those 78, more or less, margins. So it is due primarily to inflation. No doubt about that. In terms of distribution, I think we have to be very careful, because of the combination of arrivals that we saw during 2022 is something that was completely unexpected. I think even by the people who wrote the law did not expect ever to see a scenario where you have monetary position gain and an FX gain at the same time.
Normally, those two end up offsetting each other, because when you have a depreciation of the currency, you have high inflation, but it is difficult to have high inflation and an appreciation of the currency, which we continue to see this year. In addition to that, there is the element of interest rates. We feel we are, and if I go with the comments of the governor of Banco de México yesterday, we are at peak rates in Mexico, which means that we should start with rates going down at some point in the not-too-distant future.
And obviously, that is going to feed through to the FFO, and that is going to be an improvement for us. And if rates are going down, it is because inflation is going down, and it is because the monetary position gain is going to be smaller. The big wild card that we are facing is the FX.
Every research report I have read from experts is quoting the FX at 19.50 by year-end. If indeed ends at 19.50, then we would have no FX gain for the year. Basically, we will be glad with where the FX began the year. But we have to be very careful with the distribution. One thing I do anticipate is that it is very likely that distributions this year will be net taxable income. Whatever monies we distribute this year will come from net taxable income. There will be no return of capital this year. In terms of how we manage distribution, we usually like to keep some cash in our hands.
So not necessarily paying out 100% of FFO every quarter, also dependent on what happens with asset sales. And by year-end, you should expect us to pay obviously 100% of the 95% net taxable income result, whatever that number is.
Unfortunately, I wish that I would be able to tell you with a crystal ball where that number is going to be. But we cannot do that. What we are very comfortable with is the expectation where we are heading in terms of the NOI. The revenue growth is going to beat inflation this year. We are very positive on that. How FFO behaves is going to be largely dependent on the deleveraging and the level of interest rates. And the final payout, obviously, we have to measure how, inflation and the effects behave in combination during the year, and those two are the most critical driving factors.
As of where we are sitting today, it looks like we are going to have to distribute something similar to what happened last year, which is more than what we generated. The peso remains where it is. If it depreciates, then we will have a different scenario.
Thank you, very, very clear.
Okay, I think we're going to take one more question. The final question comes from Antón Mortenkotter at GBM. Please go ahead.
Hi, guys. Thank you for the call, and congrats on your good dynamics on the quarter. A quick follow-up on Jorel's question. Getting a bit more into detail, and sorry if it's a bit repetitive, but just wanted to confirm that the distribution announced for this quarter corresponds to 100% of what you calculate your fiscal result was during the quarter, or if you are taking a different strategy and will distribute below that amount and if needed, do a catch-up later in the year or not, depending on effects and inflation. As you mentioned, I know it's impossible to know without a crystal ball, but just wanted to better understand how you are approaching this.
Well, let me respond differently. The distribution corresponds 100% to net taxable income. Whatever money you receive, MXN 0.30, MXN 0.20, whatever, is going to be net taxable income. That is one message. The second message is that our legal requirement is to distribute 95% of the net taxable income once a year, and that obligation is due by March 15 of 2024. By March 15 of 2024, we have to distribute 95% of the net taxable income of the fiscal year 2023. Since we're not going to know that number until the end of the year, everything we are doing right now is an estimation or an approximation that we're trying to do with the numbers that we have today. If things change, then obviously the numbers change. But the money received is 100% net taxable income.
The calculation of the net taxable income is only done at the end of the year. It's not a quarterly calculation.
Okay. Great. Thanks.
Thank you. We'll close the Q&A there, and I will hand back to André for closing remarks.
Thank you, team. Thank you, everybody, for your interest in our results of the first quarter 2023, and we'll be happy to hear from you and for you to hear us in the second quarter results next quarter. Thank you very much.
That concludes the call for today. Thank you and have a nice day.