Alan Macias

Alan Macias asked for the cap rate of the recently sold building and if Vesta is seeing increased demand or offers to buy buildings. He also inquired about trends in real estate taxes and insurance costs, and any indications of potential government tax increases next year.

Answer

CEO Lorenzo Dominique Berho stated that insurance costs are secured for 18 months with no major adjustments, and real estate taxes haven't seen significant changes, with most costs transferred to tenants via triple net leases. He noted the sold vintage asset had a 6.2% cap rate to in-place rent, sold at $68/sq ft, and a 10% premium to appraised value, confirming continued asset sales to reallocate capital to higher-return developments.

Alan Macias asked for the cap rate of the recently sold building and if Vesta is seeing increased demand or offers for building acquisitions. He also inquired about trends in real estate taxes and insurance costs, and any potential government tax increases for next year.

Answer

CEO Lorenzo Dominique Berho stated that Vesta has secured insurance costs for the next 18 months without major adjustments and has not seen significant changes in real estate taxes. He noted that most costs are transferred to tenants via triple net leases, representing a competitive 7%-9% of total production or operation costs. He confirmed the recently sold vintage asset in Ciudad Juárez had a cap rate of 6.2% to in-place rent, sold at $68 per sq ft, and achieved a nearly 10% premium to appraised value, aligning with Vesta's strategy to recycle assets and reallocate capital to higher-return development projects.

Alan Macias of Bank of America Merrill Lynch asked for Vesta's current portfolio breakdown between manufacturing and logistics/e-commerce, and if this mix is expected to change in five years.

Answer

CEO Lorenzo Dominique Berho Carranza estimated the current mix at approximately 55% manufacturing and 45% logistics, with e-commerce being a growing part of the latter. He stated that Vesta plans to maintain a balanced 50/50 split going forward, as both sectors are thriving. He also stressed the importance of Vesta's disciplined strategy of focusing on high-credit global tenants and maintaining a high percentage of dollar-denominated leases.

Alan Macias of Bank of America Merrill Lynch asked for Vesta's current portfolio breakdown between manufacturing and logistics/e-commerce, and whether this mix is expected to change over the next five years.

Answer

CEO Lorenzo Dominique Berho Carranza estimated the current mix is approximately 55% manufacturing and 45% logistics, with a long-term goal of maintaining a balanced 50/50 split. He highlighted the flexibility of Vesta's buildings to serve both sectors and reiterated the strategic focus on high-quality tenants and a high percentage of dollar-denominated leases.

Alan Macias asked whether Vesta intends to continue its aggressive share buyback program at current stock price levels.

Answer

CEO Lorenzo Dominique Berho Carranza affirmed that Vesta will be watchful and act aggressively on buybacks when opportunities arise, with the goal of executing the full $150 million program throughout the year as market conditions permit.

Alan Macias from Bank of America asked if Vesta intends to continue its aggressive share repurchase program at current stock price levels.

Answer

CEO Lorenzo Dominique Berho Carranza confirmed that Vesta will be watchful and will 'buy aggressively' when opportunities arise. While not committing to specific price levels, he reiterated the objective is to execute the full $150 million buyback program throughout the year as opportunities are identified.

Alan Macias of Bank of America asked about the decrease in stabilized portfolio occupancy in the North region, seeking to identify which markets beyond Monterrey faced pressure. He also inquired about the capital deployed to date for the current development pipeline and whether a $200-$250 million CapEx assumption for 2025 would be conservative.

Answer

CEO Lorenzo Dominique Berho Carranza identified Tijuana and Ciudad Juarez as the markets in the North region experiencing a slowdown in demand, affecting both Vesta's portfolio and the broader market. He noted that while vacancy rates are moderate, leasing for new buildings has taken longer. Regarding CapEx, Berho stated that $140 million of the $214 million development pipeline has been invested to date and confirmed that 2025 will be an active year for capital deployment, including land acquisition and infrastructure improvements, without providing specific guidance.

Alan Macias asked for an overview of international traffic performance across GAP's main airports, specifically addressing the weakness observed in Puerto Vallarta year-to-date and its underlying negative impacts.

Answer

CEO Raúl Revuelta acknowledged a decrease in international passengers for Puerto Vallarta during the first nine months of the year, primarily due to reduced capacity from American Airlines and Spirit. However, he expressed optimism for the coming year, citing a stronger winter season with increased seat capacity from Canadian markets and other international routes returning.

Alan Macias asked for an overview of international traffic performance across GAP's four main airports, specifically addressing the weakness in Puerto Vallarta year-to-date and its negative impacts.

Answer

Raúl Revuelta, CEO of GAP, acknowledged a 5% decrease in international passengers for Puerto Vallarta in the first nine months, primarily due to reduced capacity from American Airlines and Spirit. He expressed optimism for the coming year, anticipating a "much better winter" with additional seats from Canadian and U.S. routes returning for the winter season.

Alan Macias of Bank of America Merrill Lynch sought clarification on whether the 38% figure mentioned represented the company's exposure to potential U.S. DOT restrictions on Mexican airlines and confirmed if GAP was maintaining its annual guidance.

Answer

CEO Raúl Revuelta Musalem clarified that the 38% exposure relates specifically to the VFR market, not the entire international segment. He also noted that GAP's diversified portfolio, particularly the Tijuana airport's CBX, provides a natural hedge. Management's earlier remarks confirmed that they expect to maintain their initial annual guidance.

Alan Macias of Bank of America asked for the GDP growth assumption underlying the traffic guidance and questioned if the EBITDA margin expansion is limited by the consolidation of the lower-margin cargo business.

Answer

Executive Raul Musalem stated the GDP growth assumption for 2025 is between 1% and 1.3%. Saúl García explained that the primary constraint on the EBITDA margin is the concession fee increase from 5% to 9%, which is very relevant. He noted the cargo business margin is different but not significant enough to be the main driver, representing only about 5% of total revenues.

Alan Macias from Bank of America asked for a timeline on when the Pratt & Whitney engine recall problem is expected to conclude and inquired about revenue expectations for the new cargo business.

Answer

Executive Raul Musalem stated that while the full impact of grounded planes will extend to December 2026, a significant number of aircraft are expected to return to service by summer 2025, boosting passenger numbers. Executive Saúl García added that the new cargo business is expected to maintain or slightly improve its current revenue levels, targeting an EBITDA margin of 50-55% through cost and revenue optimization.

Alan Macias from BofA Securities inquired about the company's dividend policy, asking if a change or an increase could be expected given the planned CapEx for the next five years.

Answer

CFO Ruffo Pérez Pliego affirmed that the company expects to maintain its current policy of distributing 85% to 95% of net income. He noted that as EBITDA and net income grow, the absolute dividend amount available for distribution would also increase.

Alan Macias from Bank of America requested an estimate on the level of Capital Expenditures (CapEx) expected for the next Master Development Plan (MDP).

Answer

CEO Ricardo Duenas explained that it is still in the early stages of planning the next MDP and too early to provide specific figures. However, he emphasized that the company is working closely with its team to ensure a 'very optimized CapEx' for the upcoming cycle.

Alan Macias requested an early indication of the expected capital expenditure level for the next Master Development Plan (MDP).

Answer

CEO Ricardo Duenas explained that it is too early in the process to provide specific numbers for the next MDP. However, he stressed that the company is working closely with its team to ensure the future CapEx plan is 'very optimized.'

Alan Macias questioned whether the technical assistance expense recorded in the first quarter represents the expected level for future periods.

Answer

CFO Ruffo Pérez del Castillo confirmed that the technical assistance fee formula has not been modified and remains at 3% of the EBITDA generated by airport concessions. He clarified that the absolute amount will fluctuate based on the performance and EBITDA generation of those concessions.

Alan Macias from Bank of America Merrill Lynch asked about the drivers behind the strong double-digit international traffic growth in Puerto Rico and Colombia and whether this performance is sustainable.

Answer

CEO Adolfo Castro Rivas attributed Puerto Rico's strong performance to its growing popularity as a destination for concerts and music events. He noted that the growth in Colombia is primarily driven by traffic from the United States.

Alan Macias asked about the key drivers for the strong double-digit international traffic growth in Puerto Rico and Colombia and whether this performance was sustainable.

Answer

CEO Adolfo Castro Rivas attributed Puerto Rico's strong performance to its growing popularity as a destination for concerts and music events. He stated that growth in Colombia was primarily driven by traffic from the U.S. The call ended before he could comment on sustainability.

Alan Macias asked for confirmation that the Mexican tariff increase was fully implemented in 2024 and whether any spillover effect is expected for the current year.

Answer

Executive Adolfo Castro Rivas provided a direct response, confirming that the tariff increase was 'basically implemented last year,' implying no significant spillover.

Alan Macias asked about potential policy changes affecting Mexican airports under the new administration and whether to expect continuity or shifts from past policies.

Answer

Executive Adolfo Castro Rivas stated that he expects policy continuity from the new administration. He also expressed hope for a positive change regarding the capacity reduction at Mexico City's airport, anticipating a reversal of the reduction from 52 to 43 movements early next year.