Greetings, ladies and gentlemen. Welcome to the Vesta third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow today's prepared remarks, and as a reminder, this call is being recorded. Please note that you will need to connect via telephone if you would like to participate in the Q&A. It is now my pleasure to introduce your host, Fernanda Bettinger, Investor Relations Officer. Please go ahead.
Good morning, everyone, and thank you for joining us today. With me are Lorenzo Dominique Berho, Chief Executive Officer, and Juan Sottil, Chief Financial Officer. The earnings release detailing our third quarter 2023 results was released yesterday after-market, and it's available on the company's website, along with our supplemental materials. On today's call, management's remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that make those actual results differ. For more information on these risk factors, please review our public filings. Vesta assumes no obligation to update any forward-looking statements in the future. Additionally, note that all figures included herein were prepared in accordance with IFRS, which differs in certain significant respects to U.S. GAAP.
All information should be read in conjunction with, and it's qualified as in its entirety, by reference to our financial statements, including the notes thereto, and are stated in U.S. dollars, unless otherwise noted. I'll now turn the call over to Lorenzo Berho.
Thank you, Fernanda, and good morning, everyone. Recent geopolitical events have deeply saddened and affected the global community. We hope for increased stability and a peaceful resolution. While there is understandable concern regarding today's volatile capital markets, expectations of increased interest rates and enduring inflation, it's important to note that Vesta will continue to benefit from strong momentum on development front despite macro unpredictability. Our sector and our business are uniquely resilient, with a well-balanced portfolio of outstanding clients in diversified, high-demand industries. Vesta's business case remains attractive in an inflationary environment as we benefit from a natural hedge on inflation, with annual rent increases that are tied to CPI, an important competitive advantage. Further, Vesta's business is dollarized. While our third quarter results reflect foreign exchange headwinds, this will not materially impact our long-term performance, despite a strengthening of peso.
As always, we are vigilant to changes in market dynamics and plan for a range of outcomes to respond accordingly if we see current trends shift. However, outstanding nearshoring-driven demand continues, driven by deepening concerns about escalating risks and the rising costs of sourcing and manufacturing in Asia, particularly China. We believe today's turbulence and geopolitical volatility will not only strengthen this trend as manufacturers seek to future-proof their supply chain more than ever. INEGI reported that Mexico's July industrial production surged by nearly 5% year-over-year, which marks the 21st straight month of industrial growth and at a solid pace. Vesta's third quarter performance reflected strong execution across our organization, in line with our Level 3 Strategy goals on multiple fronts.
Before I get into the results, I'd like to underscore our team's commitment to excellence, which is enabling our success on the execution of our growth plan. Now, let me share more with you on our third quarter 2023 results. We saw vacancy rates at record lows, with strong leasing and increasing rental prices driven by tightening supply, particularly in Mexico's most desirable manufacturing hubs. During the third quarter 2023, we began construction on nine new buildings, equivalent to 2.6 million sq ft in Mexico's most strategically relevant markets, including three in Mexico City metropolitan area, three in Juárez, two in San Luis Potosí, and one in Aguascalientes. Note, we have increased our presence and continued traction in the Bajío region during the quarter.
CBRE remarked within its market analysis that the Bajío region saw acceleration in new demand and revived construction activity, particularly from the automotive sector. Starting price for space is trending upwards, in line with other key Mexico markets as logistic companies expand their presence, attracted to the Bajío's highly desirable and advantaged location, skilled labor force, and infrastructure. Half of the overall activity under construction within the Bajío market is pre-leased, with net demand therefore expected to continue to further increase for the remainder of 2023 and into 2024, which will drive up asking prices. For Vesta, part of our Aguascalientes building we're starting has already been pre-leased, and the development plans Vesta has in place for our land reserves will continue to capitalize on this trend to further close the gap between Bajío and other regions.
Our total development pipeline, therefore, reached 3.5 million sq ft for the third quarter, with a $291 million expected investment and a 10.2% average yield on cost. Third quarter 2023 deliveries of 2.3 million sq ft and buildings under construction increased Vesta's total portfolio to more than 40 million sq ft, an important milestone for Vesta. Our properties' appraised value increased materially during the quarter to just over $3 billion, as we've been incorporating new assets, while the total portfolio has also been increasing in overall value. Vesta's land bank decreased during the quarter as land holdings transferred to the current active portfolio.
Vesta's third quarter leasing activity reached 1.4 million sq ft, of which 736,000 were nearshoring-led contracts with multinational clients such as Foxconn, Sage Automotive, Sumitomo, BekaertDeslee, Gates, and Continental in markets such as Guadalajara, Juárez, Aguascalientes, San Luis Potosí, among others, and 626,000 sq ft in lease renewals during the quarter. I would like to highlight Vesta's strong balance sheet, reflected in our outstanding ratios, such as Net Debt to EBITDA of 3.1x and loan-to-value of 25.8%, with no significant near-term maturities. We're focused on maintaining our discipline to drive continued fourth quarter success. On the final stretch of Vesta's Level 3 Strategy, we expect a strong end to 2023, driven by continued robust leasing, while strategically and selectively executing on construction starts and potential asset sales.
We're maintaining high levels of vigilance on our tenant base, with a steadfast focus on sustainable growth to secure a solid foundation for 2024, that ensures sustained value creation for Vesta stakeholders. With that, let me pass our conversation to Juan, and I will return for some brief closing remarks.
Lorenzo, thank you, and good morning to everyone on the call. Let me begin with a summary of our third quarter results. Starting with our top line, total revenues increased 24% to $56 million, mainly due to rental revenue coming from new leases and inflationary adjustments on rental property during the quarter. As a reminder, most of Vesta leases are indexed to inflation. We therefore continue to benefit from a favorable effect of higher than expected inflation on our top line results. In terms of the current mix, 86.4 of the first quarter revenue was denominated in U.S. dollars, a slight decrease from 87.1 on the third quarter of 2022. Turning to our cost structure, total operating costs reached $5.9 million in this quarter from $2.9 million in the third quarter of 2022.
This was mainly due to an increase in real estate taxes arising from new buildings delivered in the quarter, insurance, maintenance costs, and other property expenses in connection with energy consumption at our Vesta parks. Adjusted Net Operating Income increased $20.4 million to $52 million, driven by higher rental revenue, while margin contracted 273 basis points to 92.1, mainly due to higher costs from rented properties. Administrative expenses were up 27.6%, reflecting the year-on-year peso appreciation impact on Vesta employees' benefits, legal and auditing fees, as well as higher non-cash expenses due to an increase in the company's long-term compensation plan. In turn, Adjusted EBITDA reached $45 million in the second quarter of the year, a 17.1 increase compared to the prior year's quarter.
While the margin decreased 407 basis points to 80.3, due to decreased gross profit resulting from increased costs and expenses. Moving down the P&L, total other income reached $88 million, compared to $52 million in the third quarter of 2022. This increase was mainly due to higher property revaluation gains and increase in interest income, resulting from a higher cash balance. As a result, we closed the quarter with a pre-tax income of $131 million, compared to $89 million in the third quarter of 2022, while Vesta FFO increased 26% to $34 million. Now, turning to our CapEx and portfolio composition, we invested $106 million in the quarter, mainly in construction of new buildings in the northern, Bajío, and central region.
As of September 30th, 2023, the total value of our existing portfolio was $3.1 billion, comprised of 214 high-quality industrial assets, with a total GLA of 37 million sq ft, and with 86.4 of total income denominated in U.S. dollars. Moreover, as Lorenzo noted, our total portfolio surpassed 40 million sq ft in this quarter, which combines our existing portfolio and the new properties under development in Mexico's most strategic markets. Year-over-year, Vesta stabilized occupancy, therefore, increased to 97.3% from 96.6%.
While total portfolio occupancy closed at 92.5%, and the same-store occupancy at 97.6%. Turning to our balance sheet, as Lorenzo mentioned, we are in a solid position, with extraordinary ratios and no significant maturities in the near future. Our total debt remained at a stable $929 million at the end of this quarter. Net debt to EBITDA was 3.1x, and our loan-to-value was 25.8%. Cash and equivalent increased to $408 million, reflecting the funds raised from our recent IPO transaction in the New York Stock Exchange. In addition, subsequent to quarter end, on October 16, we paid a cash dividend for the second quarter of this year, equivalent to MXN 0.32 per ordinary shares.
Finally, as a result of our strong leasing activity, supported by a continuing strong demand environment, we made the decision to revise our full year 2023 guidance. We now expect to achieve between 19%-20% year-over-year revenue growth, with an increase from our previous guidance from 17%-18%, while adjusted NOI margin was revised to 92.5% from 93%, and adjusted EBITDA has been revised to 81.5% from 82%. This reflects higher expenses year-to-date. This concludes our third quarter 2023 review. Operator, could you please open the floor for questions?
We will now open the floor for questions. As a reminder, if you would like to participate, you do need to connect by dialing on your phone. To ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, press star one again. We'll pause for just a moment to compile the Q&A roster. Our first question will come from the line of Juan Ponce with Bradesco BBI. Please go ahead.
Hi, good morning, everyone, and thanks for taking my question. Congrats on the strong results. How are you managing the infrastructure bottlenecks with the new development projects? We continue to see this as a significant headwind on overall supply. Have new projects finished the construction phase without securing sufficient energy sources, maybe with, you know, the expectation of securing them in a reasonable period of time? Lastly, are you seeing a similar pace of investments beyond what you have programmed through 2024? Thank you very much.
Thank you, Juan, for your attendance and your remarks and for your question. I'm sorry, no. Yeah. Juan Ponce from Bradesco, right?
Yes.
Yeah.
Correct.
Thank you, Juan. Well, definitely the development has its own challenges. Therefore, I like to highlight Vesta's expertise in this particular venue. This year was our 25th anniversary. We've been developing for more than 25 years now, and there's always bottlenecks, there's always challenges, but this is where our local expertise and our experience is a greater advantage. Energy, as you mentioned, has been one of the main challenges. However for the land that we have acquired, let's say, in the last years, we started and anticipated to the restrictions in terms of energy so that we have been able to secure for our clients enough energy for them to start and run operations.
I would like to invite you to visit any of our parks in Tijuana, for example, Guadalajara, Querétaro, and on other markets, and you can see the infrastructure we have invested in order to secure and anticipate to those energy demands for light manufacturing clients as well as logistic clients. We have been pretty successful in order to have the right energy infrastructure in place when the client starts operations. This is not an easy task, but I think that by anticipating to this issue and understanding the own requirements from the legal authorities, things can get resolved.
This is definitely a challenge for new developers that are coming into Mexico that do not have that expertise, that do not have that knowledge, and clearly, it's important that not only to acquire the right land, but acquire the right land, which has the feasibilities to have the clients connected and have them start their operations as soon as possible. Regarding your development pace, yes, I think this quarter, we were able to invest about $100 million, $108 million. This is quite an interesting number. If you remember back in the days when after the IPO of Vesta, this was an amount that we would be investing over a year. Now, this is what we're investing in just one quarter.
This is clearly increasing our pace of investment. 2024, we have not given any guidance. However, we know that the market dynamics are strong, fundamentals are stronger than ever, there's strong demand, and we will continue to develop in markets where we see that there's a great demand, limited supply, an increase in rents, and where we can secure long-term Class A tenants for our buildings, and in line to our disciplined approach towards high-quality tenants and high-quality income.
Thank you, Lorenzo. Just to confirm, all of the development portfolio and land bank that you currently have has the sufficient energy sources secured, correct?
Yes. These are all buildings that we have started construction. Many of these buildings are already inside of industrial parks that we have developed also buildings in the past. For the majority, we have secured the land, the energy, and or we are sourcing the energy enough for our clients. We feel comfortable about being able to deliver. If you can see the completion dates, which is in 2023 or 2024, for those dates when operations will kick in for our clients we're gonna have the right energy. Remember that many of our clients are in the light manufacturing sector, so we do not cater to heavy industries, for example, that require a lot of energy.
Normally, our clients have some certain requirements, and those are the ones that we like to address. That's one of Vesta's main advantages.
Very clear. Thank you, Lorenzo.
Your next question comes from the line of Pablo Ricalde with Santander. Please go ahead.
Hi, everybody. I have two questions. The first one is regarding the vacancy hike we saw in the quarter. I understand a lot of the GLA came, like, at the end of the quarter, but I don't know if you can explain a little bit further how you see dynamics and the leasing activity of that vacant space. The second question is regarding Juárez. I don't know if you can explain dynamics in Juárez as of today.
Absolutely. Pablo, thank you for being on the call. The stabilized portfolio actually had an increase in occupancy, which means a decrease in vacancy. Total portfolio, clearly, considers new buildings that have been recently developed. We're in the marketing stage, and that's why you might see an increase in vacancy there. However, we feel very comfortable with many of these buildings because all of them are in very strong markets such as Tijuana, Monterrey, Juárez, and Guanajuato. Those markets have been very dynamic.
Even that we have recently finished those buildings, we feel very comfortable that in a short period of time, we're gonna have some great results in many of these projects just because of how strong the dynamics are. I can even tell you we're already in negotiations with some of them. However, we will only let you know once we have finalized the lease agreements. We're very comfortable. These are very tight markets with rent increases, so these are gonna be very successful, very successful projects. Regarding the Juárez dynamics, as you could see, we started three new buildings, one of them a build-to-suit and two spec buildings. The reason being that we have a strong pipeline for Ciudad Juárez. We recently delivered two buildings. One of them was leased to DB Schenker.
DB Schenker, a logistics company, which is working for Microsoft and other electronic sector companies. There are strong dynamics in the region, and that's why we think that we have a great location, very close to the Zaragoza border crossing. Is, I would say, the best location in Ciudad Juárez, very unique, urban infill, and strong and very close proximity to logistics corridors and labor pool. That's why we believe that anticipating to strong demand is gonna be a key benefit, and that's why we started three new buildings, which actually we're already in touch with some potential clients to that.
We're gonna see a stronger dynamics in the border region coming from auto sector, with electric vehicles, coming from electric sector, electronic sector, which is increasing rapidly, and some other logistics and light manufacturing operations in the region. Sage Automotive is one of the clients in the auto sector that recently leased one of our buildings, and so this is a good example of Asian companies taking space for the supply chain and integration of supply chain in North America, and we're gonna see more of that in the region.
Perfect. That was very clear. Thank you, Lorenzo. Thanks a lot.
Gracias.
Your next question comes from the line of Hugo Grassi with Citi. Please go ahead.
Hello, everyone. Thank you for the opportunity to ask a question. Congratulations on the results, first of all. It should be a brief question. Can you actually explain a little bit more of the $13.57 million in current tax expense on the third quarter, the current tax expense? Is it a stronger peso on a year-on-year or Q-on-Q basis that typically causes that tax expense? Just to check on my intuition, the impact is that the U.S.-denominated debt becoming smaller in peso terms, right? That should be my summary.
That is correct.
Appreciation
A strong reason for the current tax expense is the fact that exchange rate, when compared to the close of the year, the peso has a strong appreciation, and that means that I have to mark-to-market my debt in peso terms, dollar times the dollar exchange rate of the end of the year, and the same operation as of the end of the quarter. That implies that I have to reserve a bigger amount on taxes. The second reason, however, is just the strength of the company. We're generating a lot of profits just out of the normal rental revenue that we have. Those two things are explaining the current tax increase pretty much.
All right, I appreciate it. Thank you.
Thank you, sir.
Your next question comes from the line of Jorel Guilloty with Goldman Sachs. Please go ahead.
Yeah, good morning. Thank you for taking my questions. I wanted to speak about your current development pipeline. Just looking at it, only 10% of it is BTS, and the rest of it is inventory. The majority of the inventory is not pre-leased. I mean, some of it is just because you recently launched it. I was thinking, are you looking to perhaps start pre-leasing that development portfolio, that inventory, as you go forward or do you rather continue with a focus on delivering the properties and then trying to attain the highest rent possible at the very end?
If you can provide some more color, if you would, on how you're looking at the undefined CapEx that you spoke about in the past in terms of land bank, land acquisition. If there's any further developments on that front that perhaps you can provide some color on. Thank you.
Great, thank you. Thank you, Yureli, for being on the call and for your question. Clearly, we're very happy that we were able to start several buildings throughout the quarter. We currently have a construction pipeline or construction starts of 3.5 million sq ft. This is roughly $300 million of investment, and as you could see, many of them are what we consider inventory buildings or spec buildings. The reason for spec buildings is pretty much a result of the strong demand that we're seeing in many of the markets and our ability to anticipate. We see strong demand and incredibly low vacancies. In many of these markets, between 0% and 1% of vacancies, and in other markets, also incredibly low, in the 3%-5%.
We think that we have an advantage of having been able to have great land with good infrastructure, where we can just start a building. We market the buildings throughout the development phase, understanding that we also may have to wait a bit, a little bit longer just in order to be able to secure the best rent possible, as you mentioned, but also the best client with good long-term, good term leases. That's the strategy of the company when it comes to spec buildings, and for that reason, we feel very comfortable with the inventory strategy. Many cases, we end up leasing them throughout the construction phase. Actually, many of them, we end up converting to what we call spec to suit.
The reason being that we think that Spec to Suit, you really have a nine-12-month advantage to what the final client will require, and this has paid off very well. We're very happy with the pipeline. This is in several markets. We are very excited that we were able to also start construction in the Mexico City metro area. We're gonna have probably the two most appealing buildings in the whole Mexico City area. One of them next to La Villa, clearly for same-day logistics and last mile, and another one in Punto Norte, a larger fulfillment center next to Periférico. These are gonna be iconic projects, and hopefully, we will be able to make a property tour so that you can visit the sites, too.
Regarding the land bank, yes, we are, we will continue to analyze for good land in several markets. When we find those or when we are ready to finalize those acquisitions, we will do them and kind of continue doing what we have done in the past: acquire land, get the infrastructure in place, start a building, and lease it up. It's kind of what we have done in the past has been very successful, and that's exactly what we will continue to do. Currently, we have about $150 million-$140 million of value in land and infrastructure. This will be reduced as long as we use some of this land, but I'm sure that we will contribute more land in probably soon to our land bank. That is also part of our advantage.
Thank you very much.
Gracias.
Your next question comes from the line of Gordon Lee with BTG. Please go ahead.
Hi, good morning. Thanks very much for the call. A couple of quick questions. The first, Juan, I wanted to follow up on the comments you made on the reserves or the provisioning you do for income tax and the degree to which the FX affects that. Because I guess you have to mark it at the quarter end. Because the peso has appreciated since quarter end, would it be safe to assume that there'll be a reversal, a partial reversal of that provision in the fourth quarter, assuming that the peso were to close more or less here, you know, sort of MXN 18.30 or so?
Yeah, absolutely.
Perfect.
Absolutely. I mean, if the peso goes back to the level of last year's December 31st closing, or even further, MXN 20, I will have significant, so I wouldn't call it negative taxes. Yeah, reversal of all these things, of course.
Sorry, now I just wanted to confirm that you had marked the peso at the end of the quarter and not at the date of the report, right?
No . We mark-to-market. Exactly. We mark-to-market at the end of the period and not at the day of the report. The mark-to-market is done carefully, and there's some accounting adjustments that we do make.
Perfect. Perfect. The second question, Lorenzo, you mentioned in your remarks that you're considering the sale of assets, right? I was wondering whether that was a comment in the context of this is something that Vesta always does, has always done. You look at your assets, and you decide from time to time to recycle, you know, to sculpt the portfolio into and to sort of plow back into development. Is that more a strategic comment in the sense that maybe you're looking at rebalancing the portfolio away from a certain region into another one? I was wondering just the context of that comment.
Great. Thank you. Thank you for the question, and thank you for being on the call, Gordon. Part of the Level 3 Strategy incorporated asset sales, as we have done in the past. Throughout the whole year, I think we have not sold anything, any assets. However, we are analyzing some asset sales, and we might have some asset sales coming up. It's part of the strategy. The company will continue to be strategic in capital allocation, in value creation. Our main driver is net asset value per share and FFO per share. Whenever there's an opportunity to sell an asset at a premium, we think that there could be a good way to continue to recycle capital and invest it smartly through other means, like development. For that reason, this is an activity that we will continue to pursue. We might have some more asset sales coming up soon.
Perfect.
In line with the Level 3 Strategy, I'm sorry, just to remind everyone, when we presented the Level 3 Strategy, we said that we were gonna be selling about $300 million. I think until now, we have sold approximately $200 million. The idea is to keep on selling. Clearly, let's say $300 million out of about $3-billion portfolio, this is not material. However, it's more the discipline of being able to sell whenever there's an attractive price and that it drives net asset value per share up.
Makes sense. Thank you very much.
Thank you.
Once again, to ask a question, simply press star one. Your next question will come from the line of Juan Macedo with GBM. Please go ahead.
Hi, thanks for the call, and congrats on the results. We saw you have $16 million spending payment for third-party acquisitions of land reserves or new buildings. We were wondering if you could give us some color on what is that related to, and whether do you expect to pay that out in the fourth quarter?
Look, we are negotiating some purchases of land reserve, and we just show good faith money on the potential purchases. If the purchase materialize, the seller will feel confident that we have the resources to execute, f inalize t he sales, to finalize the sales. Nothing more than that. This transaction has been going on for some time, and the seller wanted to have some assurance that we have the capital resources to do that. Obviously, right now it's obvious, but at some point in time, they just wanted to feel the confidence.
All right. That's very clear. Thank you.
Your next question comes from the line of Francisco Chavez with BBVA. Please go ahead.
Hi, thanks for the call and congrats on the results. My question is regarding the Bajío region. Can you give us more color on which submarket in the Bajío are recovering faster? Also, when do you expect Bajío to close the gap against the northern markets? Thank you.
Great. Thank you, Francisco, for your question. As mentioned in the remarks, we have seen an interesting dynamics in the region of the Bajío. As you can see in our results, we have all of our buildings in San Luis Potosí have been leased at very attractive rents with great companies. Therefore, we started a couple new buildings. We are seeing the auto sector increasing, particularly for electric vehicles, and that's why San Luis Potosí is really reflecting similar dynamics to the north part of Mexico. The same with Aguascalientes. We started another building just because we were able to lease for a couple leases.
Actually in Querétaro and Guanajuato, what we're, what we are starting to see is an important increase to an increase of rents. Just in throughout the this year, in the nine months of this year, we have seen an increase of 15%, which is quite attractive and appealing in line to what we have probably seen in the last years in the north part of Mexico, for example. We feel very confident that the Bajío region is recovering with great companies. We have a good pipeline for some of the buildings that we are currently in marketing stage, and we think that the nearshoring opportunity is it's not regional. We think it's national in the most dynamic markets.
Remember that the Bajío region has great infrastructure, it has great labor pool, it has good logistics, and actually, it has proven to be a great, a very good location for global companies in different sectors. For that reason, we believe in the competitiveness of the region, as well as the competitiveness of Mexico, to be a strong integrator of the North America region. We will continue to see good dynamics in the area.
Thank you.
Your next question comes from the line of Enrique Sojo with Fundamental Capital. Please go ahead.
Hey, guys, good morning. Once again, thanks for the call. My question comes kind of in two parts. First, to kind of dive in and.
Sorry, I'm sorry, we cannot listen to the question. What, sorry? We have some back noise. Enrique?
Give me a second. Can you hear me?
Yes, better.
I wanted to get your insight into the situation currently as prices increase and as rents increase. What is the situation with current leases whose contracts completely end? How are you guys are dealing with them? Are they going completely up to what is the market rate? What kind of fixed rates are you guys managing? Additionally, I wanted to get a little bit of insight. In the revenue section, you have other revenue for about $4.2 million. I want to see what that represents, as it does vary quite a bit. Thanks.
I apologize, Enrique, but it's really hard to listen to your questions, but probably what we were able to understand is about rent increases and other revenue. Is that correct?
Yeah.
Okay. Great. Well, definitely we have seen some important rent increases. Remember that our lease agreements have annual escalations according to CPI. We have seen important increases way above CPI, which is a combination of the annual adjustments on our leases, as well as some rollover increases of some of our clients and some of different regions. We think that the total spread is probably in the double digits, probably in the 10%-15%.
Additionally, we think that our constant ability to increase rents to get to market, I think that is gonna be shown over the next periods, over the next quarters, and will definitely be a main driver of value creation for our portfolio. Regarding other revenue, $4.2 million, would you like to comment, Juan?
Sure. Look, other revenue grew from $2.7 million, third quarter last year, to $4.2 million at this quarter this year, and sequentially, it also had an important $1 million increase. Most of the other revenue has to do with reimbursable services that we provide to the clients. More prominent is energy reimbursable services. There's other things, but that's the most prominent thing. Energy reimbursables grew significantly from rough numbers, $600,000-$2 million. They had a corresponding expenses that grew from $700,000-$2.2 million. Reimbursables are that. We actually get the money back from the clients, and in the case of energy, that has been growing rapidly.
That's kind of, broadly speaking, what you can see in my financials.
Great. Thanks, guys.
Thank you, sir.
There are no further questions at this time. I'd like to turn the call back over to Mr. Berho for his concluding remarks. Please go ahead, sir.
Thank you, operator, and thank you everyone for joining us today. We're executing our strong pipeline with an aggressive CapEx deployment program as planned. We're also well positioned to take advantage of new opportunities with a strong capital base and no upcoming debt maturities. Once again, a very special thanks to our outstanding Vesta team for your continued pursuit of elevating standards and for your focus on the innovation and value creation that will drive our continued success for a solid end to the year.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.