Gordon Lee

Gordon Lee questioned the stability of market rents in northern markets like Monterrey, Tijuana, and Ciudad Juárez, despite rising vacancies, and whether there's a risk of this changing for the worse in upcoming quarters.

Answer

Lorenzo Dominique Berho Carranza, Vesta's CEO, attributed rent stability to a market slowdown at the beginning of the year rather than oversupply, disciplined developers, and historically healthy vacancy numbers. He sees no major risk to rents, expecting continued demand and competitive advantages in these growing cities.

Gordon Lee of Banco BTG Pactual inquired about the stability of market rents in Vesta's northern markets, including Monterrey, Tijuana, and Ciudad Juárez, despite rising vacancy numbers, and asked if there's a risk of this trend changing for the worse in upcoming quarters.

Answer

Lorenzo Dominique Berho Carranza, CEO of Vesta, attributed rent stability to a market slowdown at the beginning of the year that paused leasing decisions rather than a supply-demand imbalance, meaning there was no need for competitors to reduce rents. He noted that demand has since returned, and vacancy levels, while higher than record lows, remain healthy. Lorenzo expressed confidence that rents would hold up well or even increase, citing Mexico's competitive advantages and growing consumer habits in logistics.

Gordon Lee of BTG Pactual inquired about the lease renewal schedule for the next 18 months, asking for the percentage of GLA expiring in 2026 and the estimated gap between in-place and market rents.

Answer

CEO Lorenzo Dominique Berho Carranza stated that approximately 3% of total GLA is expiring in the remainder of 2025, with less than 4 million square feet of leases expiring in 2026. He expressed confidence in renewing these leases at significantly higher rents, similar to the 20-30% increases seen this quarter, which will continue to unlock value from the existing portfolio by closing the gap with market rates.

Gordon Lee of BTG Pactual asked about Vesta's lease renewal schedule for the next 18 months, specifically the gross leasable area (GLA) expiring in 2026 and the estimated gap between in-place and market rents.

Answer

CEO Lorenzo Dominique Berho Carranza estimated that about 3% of total GLA expires in the second half of 2025, with less than 4 million square feet up for renewal in 2026. He expressed high confidence in renewing these leases at significantly higher rates, similar to the 20-30% spreads achieved this quarter, which will continue to unlock value by closing the gap on legacy rents.

Asked about lease renewals over the next 18 months, specifically the percentage of leases expiring in 2026 and the estimated gap between in-place rents and current market rents for the portfolio.

Answer

Approximately 3% of GLA is expiring in the remainder of 2025, with expected rent increases of 20-30% on renewals. For 2026, less than 4 million square feet of existing leases are set to expire. The company is confident it can close the gap between these legacy rents and current market rates, which will unlock significant value from the existing portfolio.

Gordon Lee questioned whether market uncertainty was creating favorable pricing for land acquisitions and asked what level of land bank Vesta would be comfortable holding by year-end.

Answer

CEO Lorenzo Dominique Berho Carranza confirmed that Vesta is being opportunistic, finding some good deals while passing on overpriced ones. He emphasized that the land bank remains a manageable part of total assets and that Vesta will remain prudent and disciplined, without providing a specific year-end target.

Gordon Lee from Banco BTG Pactual S.A. asked if the current market uncertainty is creating a buyer's market for land acquisitions and inquired about the target size for Vesta's land bank by year-end.

Answer

CEO Lorenzo Dominique Berho Carranza responded that Vesta's credibility and patience allow them to find and close on good opportunities despite some high seller expectations. He emphasized that Vesta will continue to acquire land prudently and opportunistically, without giving a specific target number, to position the company for long-term growth.

Gordon Lee of BTG Pactual asked if the cautious outlook embedded in the Route 2030 plan from November is still considered sufficient given current uncertainties. He also questioned whether the market environment is creating more opportunistic terms for land bank replenishment.

Answer

CEO Lorenzo Dominique Berho Carranza affirmed that the Route 2030 plan had already incorporated the expected uncertainty for 2025, so the current environment is not a surprise. He stated that Vesta is using this period to better position the company for the next economic cycle. In response to the second question, he confirmed that Vesta is actively analyzing sites and will take advantage of the current climate to acquire prime land in its key markets, positioning the company for its long-term plan.

Gordon Lee from BTG Pactual inquired about the potential weakening of EU ETS targets and its anticipated impact on CEMEX's European pricing strategy and profitability.

Answer

CEO Jaime Muguiro stated that while the change is unconfirmed, it wouldn't alter their short-term pricing strategy for mid-single-digit increases in 2026-2028. He noted it might slightly flatten the long-term price increase curve but would not negate the need for price hikes. Muguiro also highlighted that it provides more time for profitable decarbonization, preserving cash and de-risking capital allocation for future CO2 prices.

Gordon Lee asked about the potential impact of the EU weakening or softening its ETS targets on CEMEX's European pricing strategy and profitability outlook.

Answer

CEO Jaime Muguiro explained that while the change is not confirmed, it wouldn't alter their short-term pricing strategy for mid-single-digit increases. He noted it might flatten the long-term price increase curve by about 1 percentage point, but also provides more time for profitable decarbonization and preserves cash, de-risking future capital allocation.

Gordon Lee inquired about the year-to-date decline in revenue and EBITDA for Cemex's urbanization solutions business, asking if it was due to project completion, strategic deemphasizing, or Project Cutting Edge.

Answer

CEO Jaime Muguiro clarified that the decline was primarily due to weakness in concrete block sales in Florida (residential sector) and reduced infrastructure activity in Mexico (concrete paving solutions), not project completion. He stated Cemex is reviewing the urbanization solutions portfolio, with some non-core businesses potentially being reclassified. He expressed excitement about the synergetic growth opportunities in admixtures, mortars, stuccos, renders, recycling, and concrete products.

Gordon Lee inquired about the urbanization solutions business, specifically the year-to-date decline in revenue and EBITDA, asking if it was due to project completion, a strategic deemphasis, or Project Cutting Edge implementation.

Answer

CEO Jaime Muguiro clarified that the decline in urbanization solutions' sales and EBITDA was primarily due to weakness in concrete block in Florida (residential) and concrete paving solutions in Mexico (infrastructure). He stated that CEMEX is reviewing the portfolio, focusing on synergetic businesses like admixtures, mortars, stuccos, renders, recycling, and concrete products, while reclassifying businesses not planned for growth.

Gordon Lee of BTG Pactual asked for clarification on the meaning of 'building a shareholder return platform' and sought confirmation on the company's geographic strategy, specifically whether the U.S., Mexico, and Europe remain core, with the SCAC region being a candidate for divestiture.

Answer

CEO Jaime Muguiro stated that the shareholder return platform centers on a disciplined capital allocation strategy, including progressive dividend increases and potential opportunistic share buybacks starting next year. He confirmed that the U.S., Mexico, and Europe are core, while the SCAC (South, Central America and the Caribbean) portfolio is considered 'core-ish' and will see further divestitures.

Gordon Lee from BTG Pactual asked about the new CEO's capital allocation priorities, specifically the ranking of share buybacks and whether the company would be more aggressive on that front.

Answer

CEO Jaime Dominguez outlined three capital allocation priorities: continued deleveraging, enhancing shareholder returns via dividends and opportunistic share buybacks, and pursuing small to medium-sized accretive acquisitions in the U.S. While confirming a $500 million buyback program is available, he stressed the importance of preserving cash and reducing debt in the current uncertain macroeconomic environment, signaling a shift away from large strategic CapEx.

Gordon Lee from BTG Pactual asked a housekeeping question regarding the Spanish tax fine, seeking to confirm if payments would extend into 2025, if they were included in cash tax guidance, and the status of the related provision.

Answer

CFO Maher Al-Haffar confirmed that the 2025 cash tax guidance of $450 million includes the expected payment for the Spanish tax fine for the year. He clarified that while a portion was paid in 2024, a $200 million provision remains on the books for payments expected over the next four years, which will be reversed on the income statement as they are paid.