FIBRA Macquarie México Reports Second Quarter 2022 Results

► FY22 AFFO per certificate guidance increased by Ps. 0.10 to Ps. 2.60-2.65

► AFFO per certificate growth of 2.3% QoQ and 10.6% YoY

► Record high occupancy of 97.1% for industrial portfolio and 96.2% for consolidated portfolio

► In progress industrial growth capex pipeline increases to approximately 1.5 million sqft of GLA

MEXICO CITY--(BUSINESS WIRE)--FIBRA Macquarie México (FIBRAMQ) (BMV: FIBRAMQ) announced its financial and operating results for the second quarter ended June 30, 2022.

2022 Guidance Updates

• FY22 AFFO per certificate guidance increased to Ps. 2.60 – Ps. 2.65, up Ps. 0.10
• FY22 distribution per certificate guidance of Ps. 2.00 reaffirmed

SECOND QUARTER 2022 HIGHLIGHTS

• AFFO per certificate Ps. 0.6707, up 10.6% YoY
• Consolidated occupancy at record 96.2%, up 185 bps YoY and up 14 bps sequentially
• Industrial occupancy at record 97.1%, up 216 bps YoY and up 6 bps sequentially
• Cash distribution of Ps. 0.5000 per certificate authorized, resulting in a 74.5% AFFO payout
• Strategic acquisition of a 55 ha land parcel in Ciudad Juarez, for a long-term industrial development potential of 10 buildings comprising 2.5 million sqft of GLA

“We delivered another strong quarter, with a 10.6% increase in AFFO per certificate, and an improved outlook for the full year,” said Simon Hanna, FIBRA Macquarie’s chief executive officer. “Industrial market conditions continue to be favorable even as global macroeconomic uncertainty increases, with low vacancy rates and strong demand from accelerating nearshoring trends due to supply chain realignments and increasing transportation costs, along with ecommerce-driven logistics needs. The lack of available quality inventory is resulting in strong lease renewal spreads and deliver compelling new development projects. At our retail centers, as economic activity in Mexico returns to normal, foot traffic has continued to rebound, retail occupancy increased by 60 basis points sequentially, and discounts to tenants have continued their downward trend.”

Mr. Hanna continued, “While benefiting from a lower LTV and a well-positioned balance sheet, we have advanced our industrial growth capex plans. The in-progress growth capex projects for delivery in the coming quarters has increased by approximately 0.5 million square feet to approximately 1.5 million square feet of GLA. This increase includes build-to-suit expansions, development, and stabilized acquisitions, and is expected to provide FIBRA Macquarie enhanced ability to sustainably increase earnings and total returns on a per certificate basis.”

FINANCIAL AND OPERATING RESULTS

Consolidated Portfolio

FIBRAMQ’s consolidated results were as follows:

TOTAL PORTFOLIO	2Q22	2Q21	Variance	1H22	1H21	Variance
Net Operating Income (NOI)	Ps. 919.1m	Ps. 879.4m	4.5%	Ps. 1,848.7m	Ps. 1,749.9m	5.6%
EBITDA	Ps. 851.8m	Ps. 811.6m	5.0%	Ps. 1,713.7m	Ps. 1,618.5m	5.9%
Funds From Operations (FFO)	Ps. 619.3m	Ps. 577.5m	7.2%	Ps. 1,243.8m	Ps. 1,145.0m	8.6%
FFO per certificate	0.8135	0.7583	7.3%	1.6338	1.5034	8.7%
Adjusted Funds From Operations (AFFO)	Ps. 510.6m	Ps. 462.0m	10.5%	Ps. 1,009.8m	Ps. 888.4m	13.7%
AFFO per certificate	Ps. 0.6707	Ps. 0.6066	10.6%	Ps. 1.3265	Ps. 1.1666	13.7%
NOI Margin	87.7%	87.9%	(22 bps)	87.9%	87.7%	22 bps
AFFO Margin	48.7%	46.2%	254 bps	48.0%	44.5%	350 bps
GLA (’000s sqft) EOP	34,514	34,533	(0.1%)	34,514	34,533	(0.1%)
GLA (’000s sqm) EOP	3,206	3,208	(0.1%)	3,206	3,208	(0.1%)
Occupancy EOP	96.2%	94.4%	185 bps	96.2%	94.4%	185 bps
Average Occupancy	96.2%	94.1%	211 bps	95.8%	93.8%	200 bps

Industrial Portfolio

The following table summarizes the results for FIBRAMQ’s industrial portfolio:

INDUSTRIAL PORTFOLIO	2Q22	2Q21	Variance	1H22	1H21	Variance
Net Operating Income (NOI)	Ps. 809.8m	Ps. 782.9m	3.4%	Ps. 1,631.6m	Ps. 1,554.8m	4.9%
NOI Margin	91.0%	91.2%	(17 bps)	91.4%	91.4%	(3 bps)
GLA (’000s sqft) EOP	29,931	29,952	(0.1%)	29,931	29,952	(0.1%)
GLA (’000s sqm) EOP	2,781	2,783	(0.1%)	2,781	2,783	(0.1%)
Occupancy EOP	97.1%	95.0%	216 bps	97.1%	95.0%	216 bps
Average Occupancy	97.1%	94.6%	251 bps	96.7%	94.3%	244 bps
Average monthly rent per leased (US$/sqm) EOP	$5.34	$5.12	4.4%	$5.34	$5.12	4.4%
Customer retention LTM	83.2%	76.5%	671 bps	83.2%	76.5%	671 bps
Weighted Avg Lease Term Remaining (years) EOP	3.3	3.3	(1.1%)	3.3	3.3	(1.1%)

FIBRAMQ’s industrial portfolio performance remains robust, with solid increases in occupancy and rental rates. For the quarter ended June 30, 2022, FIBRAMQ’s industrial portfolio delivered NOI of Ps. 809.8 million, a 3.4% increase year over year. This result was driven by record quarterly lease revenues of US$42.5 million, up 7.2% in USD terms YoY.

At quarter-end, occupancy was a record 97.1%, up 216 basis points on an annual basis, and up 6 basis points sequentially. New leasing activity comprised 150 thousand sqft of GLA, with four new customers across three northern markets, each denominated in US Dollars. New leases featured a US domiciled Tier 1 EV supplier, two logistics providers and a contract manufacturer of consumer durables. Renewal leases comprised 12 leases and 1.1 million sqft, driving a healthy retention rate of 83.2% over the last 12 months. Moveouts were an exceptionally low at 88 thousand sqft of GLA.

Cash collections continue to be strong, and through June 30, 97.0% of scheduled 2Q22 rental income has been collected. Total cash collections for the quarter totaled Ps. 996.0 million, up 6.2% YoY.

As of June 30, 2022, trade receivables net of provisions were Ps. 15.2 million (excl. VAT), lower by 26.3% over the prior corresponding period, reflecting solid cash collections along with prudent provisioning.

Retail Portfolio

The following table summarizes the proportionally combined results for FIBRAMQ’s retail portfolio:

RETAIL PORTFOLIO	2Q22	2Q21	Variance	1H22	2H21	Variance
Net Operating Income (NOI)	Ps. 109.3m	Ps. 96.5m	13.3%	Ps. 217.0m	Ps. 195.1m	11.3%
NOI Margin	68.7%	67.7%	94 bps	68.5%	66.4%	213 bps
GLA (’000s sqft) EOP	4,583	4,580	0.1%	4,583	4,580	0.1%
GLA (’000s sqm) EOP	426	426	0.1%	426	426	0.1%
Occupancy EOP	90.4%	90.6%	(15 bps)	90.4%	90.6%	(15 bps)
Average Occupancy	90.2%	90.6%	(44 bps)	90.0%	90.9%	(89 bps)
Average monthly rent per leased (Ps./sqm) EOP	$161.54	$153.92	4.9%	$161.54	$153.92	4.9%
Customer retention LTM	80.5%	62.9%	1,758 bps	80.5%	62.9%	1,758 bps
Weighted Avg Lease Term Remaining (years) EOP	3.2	3.4	(6.7%)	3.2	3.4	(6.7%)

FIBRAMQ’s retail portfolio benefited from improving trading conditions. Of note, average occupancy increased sequentially for the first time since the onset of the pandemic, up 66bps from the end of the first quarter, and up 41bps from the prior year average to 90.2% and closing occupancy of 90.4%.

• NOI was higher by 13.3% year over year. Excluding the impact of IFRS non-cash straight line rent amortization, NOI was higher by 20.6% year over year.
• Quarterly rent discounts of Ps. 0.1 million were lower sequentially and declined for the fifth consecutive quarter to the lowest level since the start of the pandemic. COVID-related rent discounts were down sequentially by 95.8%, and down 99.0% versus the prior corresponding period.
• Retail portfolio cash collections during the quarter totaled Ps. 167.1 million, an increase of 19.6% versus the prior corresponding period and the highest quarterly cash collection since the onset of the pandemic.
• During the second quarter, foot traffic at FIBRAMQ’s shopping centers was approximately 29% above the prior comparable period, and approximately 25% below pre-pandemic levels.

Lease renewal activity was strong for the quarter. FIBRAMQ signed 55 leases encompassing 13.8 thousand sqm of retail space during the second quarter of 2022. Leasing highlights included the renewal of an office space in Magnocentro, a new gym lease for Smart Fit in Multiplaza Cancún, and a new lease for MG auto dealership in Coacalco Power Center. The Retail portfolio also benefited from exceptionally low move out activity of 646 square meters during the quarter.

As of June 30, 2022, trade receivables net of provisions were Ps. 9.0 million (excl. VAT), lower 12.7% over the prior corresponding period.

Same Store Portfolio Results

For detail on FIBRAMQ’s industrial and retail same store portfolio results, please refer to Second Quarter 2022 Supplementary Information materials located at BMV Filings (fibramacquarie.com).

Lease Rental Rate Summary

Rental rates in the industrial portfolio increased by 13.4% for leases that renewed during the quarter, consistent with renewal spreads achieved in the first quarter of 2022. 58.7% of leases for FIBRAMQ’s consolidated portfolio are directly linked to either Mexican or US CPI.

For more detail on FIBRAMQ’s lease rental rate disclosures, including contractual rental rate increases and scheduled lease escalation, please refer to Second Quarter 2022 Supplementary Information materials located at BMV Filings (fibramacquarie.com).

CAPITAL ALLOCATION

FIBRAMQ continues to pursue a strategy of investing in and developing class “A” assets in core markets that demonstrate strong performance and a positive economic outlook. In addition, FIBRAMQ could pursue very selective acquisitions on an opportunistic basis where it believes it can create additional value.

Across expansions, development and opportunistic acquisitions, growth GLA of approximately 1.5 million square feet of GLA is expected to be added in the near term.

Industrial Development and Expansions

FIBRAMQ has approximately 1.2 million square feet of new GLA which in development across four markets, including four ground up developments and a build to suit expansion project.

Ciudad Juarez, Chihuahua

• On May 18 2022, FIBRA Macquarie completed the acquisition of a 54.5 ha land parcel in Ciudad Juarez for US$16.8 million including transfer taxes and closing costs of US$0.4 million. US$9.0 million of the purchase price was paid in May 2022, with scheduled remaining payments of US$4.9 million in May 2023 and US$2.4 million in May 2024.
• The parcel is located in the prime southeast industrial submarket and is ideally situated for a diverse and growing base of manufacturing for export customers. FIBRA Macquarie’s long-term development plan considers a phased, multi-year construction of a 10-property Class A industrial park with a total potential GLA of approximately 2.5 million sqft, incorporating best in class sustainability elements.
• Works are expected to commence in the third quarter of 2022 for the ground up development of the first property comprising 267 thousand sqft of GLA. The first phase of the project is scheduled for delivery in the first half of 2023.

Apodaca, Nuevo Leon

• FIBRAMQ currently anticipates completion of its 183 thousand sqft industrial property development in Apodaca, Nuevo Leon in the third quarter of 2022 and has received strong tenant interest in the property.
• This property is part of an approximately 800 thousand sqft development project.

Cuautitlán, Mexico City Metropolitan Area

• FIBRAMQ continued its industrial development project in the Mexico City Metropolitan Area. FIBRAMQ expects to deliver the two-building project comprising 734 thousand sqft of industrial GLA on the site by the end of 2022.

Hermosillo, Sonora

• FIBRAMQ is scheduled to complete a 46 thousand square foot build-to-suit expansion in the third quarter of 2022.
• This expansion comprises a US$2.0 million investment for a going-in yield of 11.8%. The expansion lease is denominated in US dollars.

Industrial Acquisition

Subsequent to quarter end, on July 22, 2022, FIBRAMQ acquired a property in the Cuautitlán submarket of the Mexico City Metropolitan Area. The strategically located property, coupled with attractive pricing, provided an opportunity for FIBRA Macquarie to allocate capital in a disciplined and accretive manner.

• The fully occupied industrial property comprises 293 thousand sqft of GLA. It was acquired for Ps. 319.7 million including transfer taxes and closing costs of Ps. 12.2 million.
• The property is leased to three tenants, with an in-place annual net operating income of approximately Ps. 26.0 million, equating to an initial NOI capitalization rate of approximately 8.2%.
• Based on prevailing market rental rates for comparable properties, FIBRA Macquarie expects to achieve important increases through the leasing cycle resulting in an NOI capitalization rate of approximately 9.5%, delivering meaningful transaction value creation.
• The existing leases are MXN-denominated and have a weighted average lease term remaining of 1.1 years.

Certificate repurchase program

At the April 2022 annual general meeting, FIBRA Macquarie received certificate holder approval for an extension of its Ps. 1,000.0 million CBFI repurchase-for-cancellation program through June 25, 2023. No certificates were repurchased during the quarter.

BALANCE SHEET

As of June 30, 2022, FIBRAMQ had approximately Ps. 16.7 billion of debt outstanding, Ps. 4.9 billion available on its undrawn committed revolving credit facility and Ps. 0.9 billion of unrestricted cash on hand.

As of June 30, 2022, FIBRAMQ’s indebtedness was 88.4% fixed rate, with 4.3 years weighted-average duration.

FIBRAMQ’s CNBV regulatory debt to total asset ratio was 32.2% and the debt service coverage ratio was 1.2x.

On a consolidated basis, NAV per certificate increased over the year by 25% to a record Ps. 42.3.

ESG

FIBRAMQ remains committed to protecting the environment, prioritizing governance, developing its employees, and serving its customers and the community. FIBRAMQ has been recognized for its ongoing focus on, amongst other things, green building and green leasing, stakeholder engagement and transparency, as well as the commitment to continual improvement.

• During the second quarter FIBRA Macquarie was selected as Green Lease Leader for second consecutive year by the Institute for Market Transformation (IMT) and the U.S. Department of Energy’s (DOE) Better Buildings Alliance. FIBRA Macquarie is being recognized at the Gold level, advancing from its prior Silver recognition, driven by its continued implementation of green lease guidelines in executed leases.
• During the second quarter, FIBRA Macquarie achieved the EDGE certification on 38 industrial buildings. Cumulative green building certification coverage on FIBRAMQ’s consolidated portfolio now represents 30.0% of GLA.

DISTRIBUTION

On July 27, 2022, FIBRAMQ declared a cash distribution for the quarter ended June 30, 2022, of Ps. 0.5000 per certificate. The distribution is expected to be paid on September 28, 2022, to holders of record on September 27, 2022. FIBRAMQ’s certificates will commence trading ex-distribution on September 26, 2022.

FY22 GUIDANCE

AFFO per certificate

Reflecting positive momentum in underlying financial and operating results, FIBRA Macquarie is increasing its FY22 AFFO per certificate guidance to a range of Ps. 2.60 to Ps. 2.65, from its prior range of Ps. 2.50 to Ps. 2.55.

This guidance assumes:

• an average exchange rate of Ps. 20.5 per US dollar for the remainder of FY22, compared to the prior assumption of an average exchange rate of Ps. 20.0;
• no new government restrictions regarding retail trading activities;
• no new acquisitions or divestments of stabilized properties, other than the 293 thousand sqft property acquisition closed on July 22, 2022;
• no issuances or repurchases of certificates; and
• no further deterioration in broader economic and market conditions.

Distribution per certificate

FIBRAMQ is reaffirming it guidance for cash distributions in FY22 of Ps. 2.00 per certificate at an expected rate of Ps. 0.5000 per certificate, per quarter.

The payment of cash distributions is subject to the approval of the Manager, stable market conditions and prudent management of FIBRAMQ’s capital position.

WEBCAST AND CONFERENCE CALL

FIBRAMQ will host an earnings conference call and webcast presentation on Thursday, July 28, 2022, at 7:30 a.m. CT / 8:30 a.m. ET. The conference call, which will also be webcast, can be accessed online at www.fibramacquarie.com or by dialing toll free [phone]. Callers from Mexico may dial 01-800-522-0034 and other callers from outside the United States may dial [phone]. Please ask for the FIBRA Macquarie Second Quarter 2022 Earnings Call. An audio replay will be available by dialing [phone] or [phone] for callers from outside the United States. A webcast archive of the conference call and a copy of FIBRA Macquarie’s financial information for the second quarter 2022 will also be available on FIBRA Macquarie’s website, www.fibramacquarie.com.

About FIBRA Macquarie

FIBRA Macquarie México (FIBRA Macquarie) (BMV:FIBRAMQ) is a real estate investment trust (fideicomiso de inversión en bienes raíces), or FIBRA, listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores) targeting industrial, retail and office real estate opportunities in Mexico, with a primary focus on stabilized income-producing properties. FIBRA Macquarie’s portfolio consists of 236 industrial properties and 17 retail properties, located in 20 cities across 16 Mexican states as of June 30, 2022. Nine of the retail properties are held through a 50/50 joint venture. For additional information about FIBRA Macquarie, please visit www.fibramacquarie.com.

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