Thank you. Thank you for standing by. Welcome to Vesta's 3rd Quarter 2021 Results Conference Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session.
Instructions will be provided at that time. I'll now turn the call over to your host for today's call, Ms. Fernanda Bedinger, Vesta's Investor Relations Officer, please go ahead.
Thank you, Rob, and good morning. Welcome to Vesta's conference call to review our Q3 2021 results. On today's call will be Lorenzo Amuls Pero, Chief Executive Officer Pastor Sophy, Chief Financial Officer and Laura Ramirez, our ESG Director. Our results were released yesterday afternoon and can be found on the Investor Relations sector of our website along with our supplemental package and our prepared filings with the Mexican Stock Exchange. A replay will be available shortly after the conclusion Certain comments we make during today's discussion may be deemed forward looking statements within the meaning Please describe by the securities laws, including statements related to the future performance of our portfolio, financial activities, Our pipeline and other investments.
All forward looking statements represent Vesta's judgment as of the date of this conference call and are subject to risks and uncertainties that can cause actual results to differ materially from our current expectations. Investors are urged to carefully review various disclosures made by the Including the risks and other information disclosed in the company's filings with the Mexican Stock Exchange. Finally, note that all Figures included herein were prepared in accordance with IFRS and are stated in nominal U. S. Dollars unless otherwise noted.
With that, I will now turn the call over to Mr. Vero.
Thank you, Fernanda. Good morning, everyone, and thank you all for joining us. I'd like to begin our commentary by discussing the environment we're seeing in the industrial real estate sector and how some of our key operating metrics have trended for the quarter. Today, we have reached the point where we can confidently say Manufacturing has reawakened and BEST's clients are assertively moving forward and committing to long term plans. Vesta has hit the ground running in a revitalized market environment, reflected in outstanding 3rd quarter results driven by considerable year on year increases in rents, occupancy and leasing activity.
Revenue for the Q3 increased 9.4% year on year to BRL 41,000,000 With NOI and EBITDA margins, which reached 94% and 83.8%, respectively, also reflecting our prudent approach to cost and expense management. Vacancies and availability within Mexico's Industrial real estate market has fallen to the lowest levels we have seen in decades, with demand for warehouse and distribution space Considerably outpacing supply as manufacturers expanded footprints to supply mostly U. S. Based customers And strive to keep pace with exploding e commerce sales of consumer goods. We saw the e commerce trend accelerate during the COVID-nineteen And it's clearly here to say, resulting in demand for larger logistics and warehouse space.
The supply chain issues we saw in recent months further underscore the benefits of near shoring and businesses are urgently stockpiling inventories To mitigate shipping and delivery risk, what's good for the consumer also translates into a reduction in freight and logistics costs, which improves profitability and proximity to the North American consumer that yields several benefits and compares favorably To offshore producers, enabling reduced delivery lead times and freight costs, while also reducing manufacturers' environmental impact. Now in particular, lead times are critical to the retailer's ability to make sales. Dealers can complete the sale when the consumers' product is stocked somewhere in a container from Asia. It's important to note that Investors industrialistic clients in a variety of industry sectors, some have experienced supply chain issues. Our results this quarter are a reflection of clients' results to secure Vestas' high quality buildings For much needed space, it is more critical than ever to ensure their success.
BESTE's 3rd quarter leasing activity Total 1,800,000 square feet during the Q3, with 1,000,000 square feet in new contracts. Leasing activity during the quarter included leading global e commerce, retail, transport and logistics And light manufacturing companies such as O'Reilly Auto Parts, Thyssenkrupp, CUNY NEGO and Cobro. We also saw the most significant renewals to date for the year to reach more than 800,000 square feet. PEMSA's inventory building in Guadalajara and Tijuana were pre leased by Oueli Auto Parts and Copel, respectively, During the Q3 2021 to become a spec to suit building, both of them. The company began construction of 3 new Buildings totaling 505,000 square feet, including a 78,000 expansion with diesel crude and 2 new inventory buildings.
1200,000 square foot construction in Monterrey and 12,200 and 20000 square foot building in Guadalajara. As of Q3 2021, the company's development pipeline reached BRL1.8 million with an expected BRL98,800,000 investment, 70% of which has already been leased today.
We are excited to announce
That the second phase of our best of park in Vodala Cara is in progress. And during the quarter, we acquired 89 Additional adjacent acres in land reserves, ensuring we're well positioned to capitalize on the important demand We're seeing for the highest quality industrial real estate at prime urban locations, which provide coveted last mile logistics and demonstrate Vesta's ability to penetrate in the most attractive markets in Mexico. Vesta has closed more than 18 new leasing transactions since June, signing more than 3,000,000 square feet in new leases year to date, The highest numbers since 2017. This is a clear sign that today's real estate fundamentals are stronger than ever. Increased occupancy, leasing activity and rents and the opportunity we're seeing have enabled us to confidently upwardly revise our year end guidance, increasing our revenue guide to above 6% where NOI and EBITDA margin increased 94% 84%, respectively.
We're also focused on ESG related deliverables And during the quarter, achieved social investment strategic alliances with Mercado Libre, with PNUD and others during the quarter. Also, 95% of new construction within best of development pipeline are in the process of LEED certification, fully aligned with our bond commitments. Finally, our annual Vesta Challenge cycling event, Sponsorship and registration registrations resulted in $130,000 Directed to 15 more consumer initiatives related to education, inclusion and community development In the 12 states where we operate, 500 cyclists and more than 100 employees and partners participated in this year's live Thanks for calling Cinta, it was also an excellent return to normalcy. Looking ahead, We're seeing today's strong realty fundamentals continue. Vacancies in the investor market are approaching 0 with clear advantages for our company As a well established, well capitalized developer, uniquely positioned to capture today's exciting market opportunities.
With that, let me pass over the discussion to Juan to review this quarter's financial highlights. Thank you. Thank you, Lorenzo, and good news to everyone. Let me begin with a summary of our Q3 results, beginning with our top line. Total revenue increased 9.4 percent to BRL 41,000,000 mainly due to rental revenue coming from new leases.
In terms of currency mix, in the 3rd quarter revenue, dollars 83,900,000 was denominated in U. S. Dollars, decreasing from $86,100,000 Recorded in last year's comparable period. Turning to our cost structure. Total operating costs reached 2,800,000 in this quarter from 2,300,000 in the Q3 of 2020.
This was mainly due to an increase Real estate taxes, insurance and other property related expenses related to property condition assessment and green property condition assessment, commonly known as PTA during the quarter. Net operating income increased 8.6% €38,500,000 driven by higher rental revenue, while the margin contracted 68 basis points 94%, mainly due to higher costs from occupied properties. While administrative expenses were 28.5%, This was mainly explained by noncash expenses due to an increase in the company's long term compensation plan. In turn, EBITDA reached BRL34,300,000 in the Q3 of this year, a 7.1% increase compared To the prior year quarter, while the margin contracted 179 basis points to 83.8% As compared to 85.6 percent for the same period of last year. Moving down the P and L.
Total other income reached BRL 14,600,000 compared to BRL 1,600,000 in the Q3 of 2020. This increase was mainly due to a $26,600,000 revaluation gain on investment property Arranging from better lease contract spend renewals, improved discount rate and capitalization And the successful execution of new leases and building developments in the quarter, this was partially offset by exchange rate loss And a higher interest expense. As a result, we closed the quarter with a pretax income of $47,200,000 Compared to BRL32,700,000 in the Q3 of 2020, while pretax FFO increased 2.6% 22,700,000 and Q3 2020 of this year NAV per share increased 5.7% $2.53 from $2.39 in the Q3 of last year. Now turning to our CapEx and portfolio composition. We invested BRL30,400,000 in the quarter, Mainly in the construction of new buildings in the Northern and Bahia region.
At the end of the third quarter, the total value of the portfolio was $2,280,000,000 comprised of 189 high quality industrial assets with a total GMA 31,600,000 square feet and with an 83.9 of total income denominated in U. S. Dollars. Year over year, our stabilized portfolio grew 5.6% to 31,300,000 square foot With occupancy up to 93.1%, down from 91.9% in the Q3 of last year. We ended the Q3 of this of 2021 with a land bank of 40,900,000 square feet, Up 9.1% sequentially due to the acquisition of 89 Acres in Guadalajara, adjusting To our existing best apart, which will enable us to expand our presence in the logistics and e commerce sector in that city.
Turning to our balance sheet. We closed the quarter with a total debt of BRL934 million and our cash position stood At $374,000,000 net debt to EBITDA was 4.25 and our loan to value ratio was 35%. The successful completion of our debt and equity offering provide us with significant financial flexibility We deploy capital and make strategic land acquisitions to anticipate demand while maintaining a prudent capital allocation strategy. Along this line, I'm committed to continue delivering strong shareholder value subsequent to quarter end. On October 15, We paid a cash dividend for the Q3 of 2021, equivalent to MXN 0.416 cents per share in pesos or ordinary shares.
Finally, as a result of the successful execution of our Level 3 strategy And the strong performance we are expecting for the coming quarter, supported by high occupancy levels and rate increases, We decided to raise our full 2021 guidance. We now expect to achieve a 6% to 6.5% year on year revenue From our previous guidance of 4.5% to 5.5%. We're also raising full NOI margin guidance 94% from 93% and EBITDA margin to 84% from our previous indication of 83%. That concludes our 3rd quarter review. Rob, let's open the floor for questions.
Absolutely. At this time, we'll be conducting a question and answer session. We ask that you please limit to one question and one follow-up. One moment please while we poll for questions. Our first question comes from the line of Gordon Lee with BTG.
Please proceed with your question.
Hi, good morning, everybody. Thank you very much for the call. A couple of questions. The first On land prices, if you were to consider the type of land that you're buying in the regions that you're focusing on, how much has land inflation been Year to date or let's say over the past 12 months. And then the second question, just thinking of the supply chain issues, in industries That you service or that your tenant service that might be affected, and I'm thinking specifically of the auto industry where you've had production stoppages.
Is there a risk you think that if this continues that later down the road you'll have to offer concessions on the rent front to some of these clients? Or do you think that this is It's nowhere part of the conversation that you're having with them at this point. Thank you.
Thank you, Gordon, and thank you very much for being on today's call. I will, first of all, answer your question regarding supply chains. Given that we see that there is clearly a disruption and most of the different business sectors are Planning to time solutions for the particular problem, we actually see that with the industrial sector, They might benefit from getting some space for some of their safety stock or safety inventories, as we call them. And I believe that more than asking for some rent relief or whatever, I think they're asking more for that type of support. What do you have available?
What can I use? Well, definitely, I think that not necessarily they will have to push on margins by trying to There's really no conversation. There's no conversation regarding giving any grants whatsoever. Actually, We are currently, I think that all of the concessions we did, we gave in COVID last year, it has been currently well Taken by our clients, we're very happy with our approach to support them on deferrals. And today, I think have recovered 99% of all of the referrals because it was part of the strategy to defer over time.
So with that, I think that clients are currently actually happy with What we did last year and for the rest of the restrictions regarding supply chain, I think they are working with other vendors or Our suppliers. Regarding land values, it's really coming more in house Thanks, guys. To acquire new well located land, I think that the example of the acquisition we did in Guadalajara It's a good example of that we really want to buy the best land in the best market Because we think that we can differentiate very well from our competitors by having great located land. The land we acquired in Guadalajara It's an extension of our successful vessel party in Guadalajara, where we did the MercadoLibre project and the 2 expansions. We recently signed a new lease with a subsidiary of O'Reilly Auto Parts, which is a fantastic company.
And that's why it's key for us to keep on Acquiring land, having those land reserves and, and of course, securing the best possible pricing because in the end, that's why we believe We can achieve attractive risk adjusted returns, double digit return on costs, and that's the way we can develop on our strategy of Spread investing. Just to give you an idea on the spread investing, which part of the value of the land We're developing a 10% return on costs. And currently, we're seeing transactions We take 6% cap rates, 6.5% cap rates. In markets such as Guadalajara, for example, or in Central Mexico, Pretty much in the markets in the most dynamic markets in Mexico. So that's why for us, it's so important To keep emphasizing that we want to keep on doing accretive investments, mostly with some form development And acquiring and securing good pieces of land at good prices is still going to be key for our strategy.
Thank you, Doug.
Thank you very much. And just a follow-up. If you were looking at a piece of land today in, say, Guadalajara
or Mexico City, and you were looking
at the same piece of land
a year ago, how much more expensive And you were looking at the same piece of land a year ago. How much more expensive is it today?
I mean, if inflation has been, I don't know, probably 5%, I think that from last year actually, many of these initiatives have been already from last year. So definitely, we're seeing some price increase. And interestingly, is we have seen it also in markets where land has already infrastructure. For example, in Queretaro, we have seen an incredible increase in land prices, mostly inside of industrial Because they have the infrastructure, and we saw that this year with some transactions being where we sold land that probably Double the value that we actually developed. So from last year to this year, I think that it It depends market by market, but clearly, I think that it's an upward trend in terms of values.
Perfect. Thank you very much.
Thank you.
Our next question comes from the line of Adrian Huerta With JPMorgan, please proceed with your question.
Hi, Lauren, Juan and Fer. Thank you for taking my question. Two quick questions. Number 1, on new construction. We saw a nice pickup on new construction during this quarter, So 50,000 square meters of new GLA.
What can we expect in the coming quarters
in terms of the pace that we can
see on average per quarter? Is this $50,000 something that you're aiming to have at least for the next couple of quarters? And the second one is the this On land investments, you did this investment in Guadalajara, you did recently one in Monterrey. How much have you spent so far year to date? And what can we We expect for the rest of this year and for next year.
Sure, Jorge. I think that we're very active in starting new construction soon in different markets. In some of those markets, we already have land, which is great because we can make sure that we can start construction. Just to give you an idea, now with the new building that we released, pre leased for in Tijuana for an e commerce company, We're out of stock. So we're starting a new part, a new vessel part that's where we will develop 1,200,000 stripping.
In the and that's over time. That doesn't have to be immediately, but that's over time, but we have the capacity to develop. And currently, with vacancies, frankly, close to 0 in Tijuana. This is exactly what we want to achieve. So we're going to be very active in Fana.
The same for Ciara Pareos. It seems like to Monterrey, we are starting a new park Where we are going to be able to develop approximately 2,000,000 square feet. And in the back here, market by market, We're going to be cautiously looking at where it makes sense to develop. But very interestingly is that we are seeing a very High level of pre leased buildings, which is great because this is a way that we can convert some of these State buildings or inventory buildings immediately to these buildings or any completion properties, and we can even leave them before finishing the buildings. Currently, we have 70% of our buildings under construction are already leased.
That's a very good number, A very healthy number. And I think that we can match pretty well today buildings under construction With the pipeline that we have, we're going to be able to match with good clients and we do not Sometimes even before starting the construction. That's why we really like the model of spec buildings, but now Actually, we call this tech to suits where we can leave them even before finalizing the construction of the buildings. All in all, I think we believe CapEx for next year without the guidance, we believe it could be above $200,000,000
Perfect. Thank you, Loren.
Good afternoon.
Our next question comes from Vanessa Quiroga with Credit Suisse. Please proceed with your question.
Hi, Laura and Juan, Fernanda, all the team. My question is regarding your Investment plans for land acquisition. We saw the acquisition in Guadalajara, and it seems a larger amount Than the originally planned in this presentation that you published for the follow on For the reasons following, so I'm wondering if since then the dynamics of the markets have changed or the land prices Have changed in a way that you are adjusting your regional investments. And then also I'm wondering if you can comment on how sustainable you think the rent increases that we saw in the quarter are
Thank you, Vanessa, and thank you for being on the call. We are seeing So pricing is high number in terms of rent increases. We actually see we foresee increasing rents For the foreseeable future, for the as inflation is picking up, As supply is limited, as demand is picking up from strong demand from e commerce sector, From our near insurance trends, we see that rents are only going one way, which is up. How much? Depends market by market.
Our approach is to increase, of course, to have the best possible rents, but also to be very disciplined with type of tenants and the type If you look at the names of companies we have recently closed from June until today, we have fantastic meetings. So we want to keep on being disciplined at attractive rents with very good corporate credit ratings, Dollar do not enable leases, and we are very disciplined in that. And we like long term leases because over time, Inflation hedge, inflation adjusted leases, we have a natural hedge, and we have seen that discipline with existing clients So we have been we are increasing rents 5% every month just by contract because the contracts, as you know, Our link to inflation, which is a fantastic increase in revenue contribution, Actually, so with that regard, I think that we're going to keep that discipline and keep observing with the clients. On our strategy to certain markets, our focus is to invest in urban areas, which is Mexico City, As we mentioned in our follow-up, dollars 350,000,000 Surprisingly, We have seen that some of these markets have behaved even better than expected, and we're just moving quicker to that.
That's our strategy in Monterrey. That's why we acquired several pieces of Lam in Guadalajara. And as long as we see strong demand, we are continuing to be developing and being very active in this market. So it was part of the Level 3 strategy. We're executing well.
We like last mile locations, and we see good demand for that.
That's great, Loren. Are you still expecting to invest in Mexico City?
Yes. It's part of the level 3 strategy, part of the plan. It has taken us a little longer. However, I think that the execution is going to be Similar to Monterey, similar to Baralacara, we're looking for good pieces of land where we can really find attractive returns and Make it be part of this training, execute well on this training.
Excellent. Very clear. Thank you.
Thank you.
Our next question comes from the line of Francisco Suarez with Scotiabank. Please proceed with your question.
Thank you so much and congrats to see that the conversation on spec to suit is back again in your calls. It's Great. And also on the pro leasing activity in your pipeline, it's impressive. You have been mentioned before The importance of having the strategic importance of having the right pieces of land, the right plots of land With infrastructure and particularly on electricity, can you disclose how much of your land reserves does Have access to electricity. And also, if there is any constraint on your side on that Particular blocks of land that may get in the way with your plans to develop property on the key markets that you are Allocating
capital. Great. Thank you. Thank you, Francisco, We'll take questions to elaborate further on part of our development strategy. Most of the lines that we acquired has the capacity feasibility.
However, it requires a process in order to, let's say, electrify the parts. And all of them are in different markets with different restrictions, and we have different strategies for each one. One of the things that we that are internally as a structure and you know that we are a vertically integrated company, We decided to have a team focusing on the energy components for the Vesta, for the development projects. So we currently have a part of the development team, a leader, which is Analyzing the different alternatives, and I can use the example of Queretaro, which is the one that has been a great example in terms of energy. When we acquired the piece of land in Costa Ranch, there was nothing in the area, and we invested an important amount Not only on the infrastructure of the pipe, but also on the substation, on the transmission and the Distribution capabilities inside of the pipe.
And that has been a major decision driver for many companies To establish themselves in parts like ours. So understanding that situation, that's exactly what we are doing in markets like Barrancada, Tijuana, So it is important to have a Strong department because in many clients, before asking what's the rental price, they're asking what's your electricity strategy or availability. And that's why for us, it is very important not only to have the availability, but also the reliability in terms of energy. With that, having said that, Mexico is really facing major restrictions in terms of energy, in terms of distribution, And many of the companies is one of the challenges they are facing. We have seen that they might find solutions.
However, sometimes they might it might take us longer than expected. But for that, I think that it's a good collaboration that We as a company and developers have to deal with the clients together with the authorities in order to find ways to get energy In most of the regions. And this is something not only for Delta, but also for our industrial price that We're facing and we're trying to find the best possible solutions.
Great answer. Thank you for that. One last question. You have been very clear that all the basically all the entire pipeline of your new properties are going to be Having a certification on their list. Considering The outlook that we have on lease spreads in the future and so on, would it be economically feasible to think that You might also conduct certain retrofits to your existing buildings to increase the share of certified buildings in your portfolio.
I'm not thinking about perhaps using Level 1 Edge certified certifications and the like And not necessarily or the lab certifications.
Thank you. You're We will on top of this. I like it, Francisco. I think this is a very important matter that for us, definitely the new buildings I have missed the indications, but also we're analyzing in some of the other buildings without necessarily being retrofits, but we assess Property Green we call it Green Property Conditions Assessment to analyze what We can do in many of these buildings to improve them and have them
at a high standard
in terms of Energy efficiencies as well as other water consumption And other processes that might lead to have certain recertifications. And I believe this is not only important for them. I think this It's getting very important for our clients too. As we are seeing that rents are picking up, Clients, which actually are focused on great companies, they're also focused on these type of considerations. And additionally, I'm finalizing on because how eco efficient they want to become and because they also have corporate commitments.
But this and just to finalize on the chain, and this is where I think you guys are doing a very good job is, this is what we match very well with the investors base And capital markets, which today are every time more and more on top of what companies are doing, what Strategies are taking the type of certifications. And I think that on TrafficGuard, this is becoming really a virtuous A virtuous cycle between companies, investors and clients.
Very clear. Thank you very much. Take care.
Thank you.
Our next question comes from the line of Valerio Haltito with UBS. Please proceed with your question.
Hi, Laurie and Juan, thank you for taking my question. Fernando, 2 quick ones on our side. First one, if The original plan to deploy the capital from follow on, 50% in the year, there's another 50% in another year. It's an amendment despite the construction costs. And a second one on the new Negotiations for contracts, if the energy reform has been already has been a subject
Regarding our CapEx investment, Luca, I think that we will invest up to $200,000,000 per year starting next year. We have around Almost $400,000,000 in cash and remember that that takes into account the sale of properties in December. So we will take on 18 months, 24 months at tops to invest and proceed from the third one. I do take into account that most of our investments that we have the billings that we have sold have been released. Our returns on calls are double digits.
So I think that the environment is helping us to displace this money In a way, quicker than the expected mode. So we're pretty satisfied. We have the financial resources and we have the financial flexibility. So we'll stop at that. And the second question, the energy reform is an important issue for the company, for our clients, so We're very watchful.
As Lauren pointed out, it's very important that we have The best product in the market, and that implies not only having the best building, but the best availability of electricity and the best locations. And availability of electricity is Clearly, a differentiating factor and it represents a significant investment of the company. And I have to say that there's few developers in Mexico that can Have both types of commitments to invest in the connectivity to the grid. So that's clearly a differentiating factor On top of that, let me add to Fang's comment because this is a very important matter, Not only for Vesta, but for also other industrial developers. I have been heading the Mexican Association of Industrial Thanks.
Many of our peers are also participating in terms of our part of the Board. And we together I'll collaborate in order to find the best ways and the best means to lobby with Different congressmen who require or who are actually the decision makers in how this initiative will evolve over time. It will be voted to follow it for the end of the year. So us as an organization, together we're also with other organizations. This is a very, very top priority for the competitiveness of Mexico.
And definitely, this is going to be it is one of the most important factors of why companies are coming to Mexico. One of them is the proximity to the U. S. Secondly is, of course, the competitiveness in terms of labor, logistics and another important component is energy. And that's why energy is so critical for industrial power developers.
It's so critical for companies that want to establish themselves. And with that, I think that it's going to be part of our agenda in the next weeks months So that we get the best outcome out of this particular initiative.
Our next question comes from Naoki Otsuka with GBM. Please proceed with your question. The
results, my question is regarding the Constant Land acquisition That's the answer has made. We still cash in hand, these GMV buying opportunities in the northern part of Mexico, where And your sourcing train has listed the industrial activity?
Can you repeat the question, please?
Yes, of course. So with still catching hands, Do you see any buying opportunities in the northern part of Mexico?
Okay. Thank you for your question. BESTA has the opportunity to be An important developer and finding accretive returns to development. That's why our strategy Has been and still is to develop in the most attractive markets, and that's what we're doing, for example, in Tijuana. Tijuana, we are developing 1,200,000 square feet.
We have land, and we have a strong pipeline, and we have attractive returns on costs, 10%, even 11% return on costs. Acquisitions, we believe, are still in the Lower yields, they are probably trending in Ipana, for example, below 7%. And therefore, we think that Our main objective is to develop in the markets like Tijuana or even to acquire. Having said that, We are clearly seeing that replacement costs are also increasing, and we always have analyzed opportunistic acquisitions In many markets, so we're always going to have our eyes open. If it makes sense from a replacement cost perspective From a return perspective, we might have those acquisitions.
We have been actually very successful in opportunistic acquisitions In one of the markets, it has been Tijuana. Tijuana currently, Meta, has the largest footprint of GLA being above 5,000,000 So, Jason, part of that growth has come from acquisitions. So the acquisitions in our strategy are only opportunistic I'm not the core of the long term strategy.
Our next question is from Marnita Cabral with Citi. Please proceed with your question.
Hi, good morning everyone. Thanks for taking my questions. My question is just a follow-up about the NRE topic, We see the hot topic today in the world because of the short game scenario. We do following the debate about the We will call you next so that we know it is still under discussion. But we would like to know how could this And with this scenario of energy in Cartesi, you already mentioned the We do like to know that solar panels could be
I did not hear very well. I don't know, Barbara, were you able to hear better?
Yes, sure. Can you hear me better, Noss?
A little better, yes. Thank you. Sorry for that.
Okay. Not a problem. Thank you. Mike, this is just a follow-up about the energy topic. We've seen the debate about the energy reform in Mexico that we know it is still under discussion.
My question is how could this potentially impact the business? And the other one, you already mentioned the Development is about the Energy Fund. You may want to know if in the future the solar panel could be part of the solution that
Okay. So I do understand if solar panels have been helpful In the situation of the implications of the energy reform, I believe, and also
Exactly. Correct. And thank you
for your time. I'm sorry, there's a we were not able to hear very well, but let me try to elaborate a little further. So definitely, this energy reform initiative has Different limitations. However, focusing a little bit on the type of clients that we have and focusing a little bit On our implications in Industrial Parts, we believe that definitely, there's it It will be a huge mistake to eliminate private investment in Renewable Energies. As you may know, Renewable Energies in Mexico have needs to be done by private investors, not by CFE, not by the government.
So by eliminating private investment and eliminating renewable energies, immediately, we will know that we will Have to rely only on CFEs and what they generate, what they transmit and that will probably have a Negative impact to the many of our clients and potential clients. I personally think That affecting the renewables, it will be a major mistake because many of our clients already have good commitments To get a good portion of their energy from renewables, solar panels, as you mentioned, or even from Wind turbines and wind generation. So because of their or because they also have commitments. And on that regard, by affecting the production and generation of renewable energies, You are taking immediately the clients and they will have to rely only on, let's call them fossil fuels or Traditional, traditional meeting. So anyways, I think that's a very big implication on top of the Other indications on having, again, a monopoly from CFP because that CFP that We've had a monopoly in the years back in the years, but today, I think that they don't have the capacity to invest.
Mexico requires 4 megawatts per year, that's a huge investment that somebody has to do. And we don't think that CFPs have the ability to do that. I think they need to rely on private investors. And in the end, that will affect not only industrial parts, but that will also affect All sorts of industries and sectors and the total infrastructure in the country. So hopefully, This particular report finds ways to not only have attractiveness in renewable energies, We also have the reliability to have enough energy for companies that need to have operations in Mexico.
That's it.
We've reached the end of the question and answer session. I would now like to I'll turn the call back over to management for closing comments.
Thank you, operator. Thank you, everybody, for joining the call. In closing, we believe that together, we have weathered the storm. Vista has successfully emerged stronger than ever from particularly challenging years by continuing to focus on what we do best, Develop the world's best and most strategically located buildings, leverage our prudent balance sheet to make targeted strategic land acquisitions, Employ capital and recycle assets while anticipating clients' needs by carefully reading the market and future demands. We will continue our Level 3 strategy discipline and prudent execution as we need to adapt and invest for future growth.
We prioritize our investments to the entire exchange opportunities and remain committed to capital efficiency. As our forward outlook unfolds, we expect to deliver On the revised guidance we shared today with the industry leading returns for our shareholders. Finally, before you go, We're looking forward to celebrating Vesta's 10th anniversary as a public company during 2022, commemorated with our annual face to face Best of all. In the following quarters, we will let you know the details for this event. Thank you very much.
This concludes today's conference. You may disconnect your lines at this time and we thank you for your