Corporación Inmobiliaria Vesta Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 26, 2024

There are 9 speakers on the call.

Operator

Greetings, ladies and gentlemen. Welcome to the Vesta First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow today's prepared remarks. And as a reminder, this call is being recorded.

Operator

It is now my pleasure to introduce your host, Fernando Bettinger, Investor Relations Officer. Please go ahead. Good morning, everyone, and welcome to our Q1 earnings call. Presenting today with me is Lorenzo Dominique Vero, Chief Executive Officer and Juan Toth, our Chief Financial Officer. The earnings release detailing our Q1 2024 results was released yesterday after market closed and is available on the company's website along with our supplemental materials.

Operator

It's important to note that on today's call management remarks and answers to your questions may contain forward looking statements. Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ. For more information on these risk factors, please review our public filings. BEST 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 differ in certain significant respects from U.

Operator

S. GAAP. All information should be read in conjunction with and is qualified entirely by reference to our financial statements, including notes thereto and are stated in U. S. Dollars unless otherwise noted.

Operator

I'll now turn the call over to Lorenzo Verro.

Speaker 1

Thanks, Fernanda, and thank you all for joining us today. 2024 is off to a great start. Our team maintained Vesta's strong track record of leasing activity during the quarter, capturing increasing rents on new and renewal leases, securing Class A tenants for Vesta development and building out a solid pipeline for the future ahead. Probably our most exciting news for the quarter was Vesta's successful pre lease to 1 of Latin America's largest e commerce companies of our Mexico City, Vesta Park Punta Norte, for a substantial 890,000 square feet. This is another significant milestone for Vesta and an important proof of concept for our company.

Speaker 1

Vesta anticipated market trends in the early stages of Mexico's near shoring wave. We turned our strategic focus towards gaining a 1st mover advantage within Mexico's most strategically relevant infill locations, successfully leveraging time earned relationships and our outstanding balance sheet to acquire some of our country's most strategically relevant land. Today, Vesta has built privileged position within Mexico's most desirable locations. Latin America's leading online marketplace has again chosen to partner with Vesta and the robust consumer demand we're seeing continues to drive e commerce aggressive expansion, an important tailwind for Vesta in 2024 and beyond. Stabilized occupancy for the Q1 2024 increased 40 basis points to 97.1 percent with a strong and geographically diverse client base reflecting balanced sector exposure.

Speaker 1

1st quarter leasing activity reached 2,000,000 square feet, 1,000,000 square feet from new leases, among them the above leading Latin American e commerce company and nearly 1,000,000 square feet of renewals. Last 12 months, e commerce renewals and releasing spreads reached 8%. As a related comment, according to Colliers, Q1 2024 rental prices for Mexico's industrial space rose 22% year on year with an average cost of $6.89 per square meter driven by near shoring strength. Our focus for the Q1 was therefore on long term objectives and establishing a solid foundation for the year. We're evaluating land acquisitions with access to energy and utilities in urban and utility locations, replicating the successful process I just described.

Speaker 1

Acquire optimally located land, develop best in class spec buildings and lease and re lease to top tier clients. Meanwhile, we're expanding relationships with existing tenants and connecting with new clients, many of which are referrals, maintaining Vesta's proven disciplined approach to the continued development of state of the art facilities. This ensures we maintain the industry's best in class portfolio. The Vesta team has demonstrated ability to innovate to create value with the capital to execute and importantly develop aligned with our disciplined, sustainable and profitable growth path. Moving to the broader Mexico industrial real estate market, strong fundamentals continue to drive high rates of occupancy, particularly within our target markets.

Speaker 1

According to Kearny's 2024 Foreign Direct Investment Confidence ranking released this month, Mexico has returned to the top 25 countries attracting the most foreign direct investment in the 21st position. After having disappeared from the FDI confidence ranking for the last 4 years. This was driven by capital invested in construction of plants, factories and manufacturing production lines, which have migrated to Mexico from Asia and other places through near shoring. The Mexican economy is expected to grow between 1.8% to 2.5% in 2024 and new incentives designed to boost nearshoring investment in 2024 2025 will help the economy as well. Given that BEST's primary focus for new developments is on land constrained markets, we're well positioned in the current environment.

Speaker 1

Touching upon some other relevant highlights from the Q1 2024, Vestas' total portfolio occupancy increased to 94% from 93.4% last quarter, while stabilized and same store occupancy increased to 97.1% and 97.4% from 96.7% 97% respectively. We began construction on 3 new buildings in Monterrey and 1 in Bahquillo to 1 of Vesta's long time clients, aligned with our growth plan and reflecting today's strong market dynamics. Current construction in progress reached 4,100,000 Square Feet by quarter end and a $344,000,000 estimated investment and a 10.1% yield on cost in Mexico City, Ciudad Juarez, Monterrey and De Barrio. We again delivered strong financial results as Juan will discuss in more detail with a 20.1% increase in adjusted NOI to $57,400,000 and an adjusted NOI margin and adjusted EBITDA margin, which reached 96% 84.7%, respectively. Vesta ended the quarter with FFO at more than $40,000,000 a 32.4% increase year on year.

Speaker 1

In closing, it was a great start to what we expect will be another excellent year. And while the outcome of our country's upcoming elections are uncertain, this quarter's results underscore that Vesta's path forward remains unchanged. Both the U. S. And Mexico benefit from robust institutional frameworks, strengthening consumer demand and a broad range of industries that require premium industrial real estate to ensure uninterrupted supply chains.

Speaker 1

Vesta is optimally positioned to capture this and other exciting opportunities. Let me now pass our conversation to Juan, and I'll return for some brief closing remarks.

Speaker 2

Thank you, Lorenzo, and good day, everyone. Let me begin with a summary of our Q1 results. Starting with our top line, we have a strong start of the year with total revenues, which grew 21% to reach CAD60,600,000 mainly due to rental revenue coming from new leases and inflationary adjustments and rental property during the quarter. In terms of current mix, 87.8 percent of our first quarter revenue was denominated in U. S.

Speaker 2

Dollars, up from 86.7 percent from the Q1 2023. Turning to our profitability. Adjusted net operating income increased 20 percent to $57,400,000 while the margin decreased 35 basis points to 96%. This increase was primarily driven by higher rental revenue from our rental properties, as Lauren has described, including energy income. Adjusted EBITDA reached CAD50,600,000 in the first quarter, a 20% increase reported to the prior year quarter, while the margin decreased slightly by 21 basis points to 84.7%, primarily due to higher cost and expenses.

Speaker 2

And initiative expenses during the quarter were impacted peso appreciation relative to the same period last year and the increase in auditing, legal and consulting expenses driven from our recent equity transactions. We closed the Q1 2024 with a pretax income of 150 $600,000 compared to $43,100,000 in 2023, which benefited from higher gains on revaluation of investment properties and higher interest income. BESTA's FFO increased 32%, reaching $40,400,000 as Lauren described. Turning to our capital structure and balance sheet. Cash and equivalents stood at $445,000,000 and our total debt decreased slightly $914,000,000 at the end of the quarter.

Speaker 2

Net debt to EBITDA was 2.4x and our loan to value was 24%. As a result of our successful 2023 our disciplined approach to sustainable and profitable growth. Finally, subsequent to quarter's end, on April 16, we paid a cash dividend for the Q1, equivalent to COP 0.29 in pesos per ordinary shares. This concludes our Q1 2024 review. Operator, please open the floor for questions.

Operator

Thank you. We will now begin the question and answer session. Your first question comes from the line of Pablo Ricalde of Santander. Please go ahead.

Speaker 3

Hi, good morning, Juan Lorenzo, congrats on the results. I have two questions. The first one is on the rental growth we saw in the quarter. I don't know if you can explain on a per region basis how are you seeing rent growth? That's the first one.

Speaker 3

And the other one is on the peso denominated rents. I don't know if you have seen an increase of tenants asking for peso rents instead of USD?

Speaker 1

Paula, thank you very much for your question and being on the call. Regarding your first questions, we have definitely seen rent increase in most of the markets. Pretty much throughout the quarter, what we have presented and it's actually out of the supplemental package is the rent increase that we have had in general terms trailing 12 months And we saw an increase of 8%, which is based on renewals and releasing, which is a great spread way above inflation and reflects the importance on being able to mark to market rents coming from the spread between renewals as well as the spread between releasing. Pretty much the rate it ranges and it varies market by market. What I can tell you is that there continue to be very strong markets where we have been able to have spreads of 20% to 40%.

Speaker 1

Such markets are Tijuana, Chugad Juarez, Oluka, for example. But also in markets like the Bahia, we have also seen rents increase between 10% to 20%. Some of the renewals are at inflation. Remember that some of our renewals have to be at the in place rent plus inflation. But the combination of renewals that already have an increase on inflation combined with re leasing's new re leasing's, we get to a very attractive spread of approximately 8%.

Speaker 1

And regarding your second question, actually we have seen interestingly, we've seen that there is a huge interest for companies to lease in U. S. Dollars. And that was actually the example of some of the new leases that we recently did in logistics operations in Mexico City. And we think that the companies are agnostic on the currency.

Speaker 1

They want to lease good quality space and Vesta has great quality space in good locations and they rather have that particular location, which gives them a better functionality for their operations, makes them more efficient, more profitable and therefore are able to pay in the corresponding currency, which is rather in our case. So thank you.

Speaker 3

Thank you. So that was very clear.

Operator

Your next question comes from the line of Rodolfo Ramos from Protesco BBI. Please go ahead.

Speaker 4

Thank you, gentlemen. Good morning. Thanks for taking my question. My first one is, I have 2 the first one is a follow-up on Pablo's question. In terms of these leasing spreads that you're seeing, we're seeing some of your peers reporting higher numbers.

Speaker 4

Given that when you look at your expiration profile in 2025, we're going to see a pickup in expirations. I mean, how do you see these leasing spreads going forward in 2025 with these expirations? So that will be the first one. And second, we have seen more capital flowing to the sector, at least looking to enter, whether it's at the asset level or at the structured level. I mean, how does this greater appetite from investors increase competition for land?

Speaker 4

And how does this impact your growth trajectory more be it long term? Do you think that tenants will be able to absorb these costs and keep development yields stable at current levels? Thank you.

Speaker 1

Thank you, Rolfo, for your question. So regarding the 2025 expirations, we will maintain the same approach to be able to renew leases as well as re lease buildings at market rents, so that we can be able to catch up with some of the upside potential that some of these markets represent. So we are very proactive in our asset management team to be close to our clients, try to recover as much as possible. We have approximately between 2024 2025, we might have almost 7,000,000 square feet expiring. So for that reason, we see a great potential upside in terms of rent.

Speaker 1

It will vary market by market. It will vary according to the lease agreement that is in place or the situation of each of the expirations. But I'm sure that Vesta is doing the Vesta team is doing the right decisions and working in the right direction in order to capture value coming from rent increases and that has been a very good portion of the overall revenue increase that we have seen just this quarter increasing revenues above 20% is an excellent number, which is a combination of new leases, but also with our current and existing leases, which are increasing, which we have been able to increase rents and mark to market. Secondly, regarding your question on capital flow, absolutely there has been a lot of activity in the market And nevertheless, most of this activity is focused on acquisitions. Many of the players that have been raising capital do not have very well developed development capabilities and they are just in, I would say, in early innings on development and that's why their position is mostly going to be based on acquisitions.

Speaker 1

They have all expressed actually that. And doing acquisitions at cap rates in the 5.8%, 6% or even at 7% including a lot of tenant improvements and a lot of amortized investments that have to be done during a certain period of time. That's exactly that's completely a different approach. So we think that all of them have different investment venues and different strategies. And therefore, we think that for the sizable development transactions, the companies that have raised capital do not have those development capabilities and that's exactly a sweet spot where Vesta has been able to acquire land, which we are currently in that process to start construction as we have recently done, to lease up during construction or during the stabilized period lease up period and that's where we believe we can capture the most value, create spreads between 304 100 basis points on top of acquisition cap rates.

Speaker 1

And this particular trend towards being the other companies and actually new players coming into the market, that's going to be pushing cap rates down. So particularly for stabilized assets and that's going to be another important trigger that our assets will be better price a better price looking forward.

Speaker 5

Great. Thank you.

Operator

Your next question comes from the line of Jauriel Thaluri from Goldman Sachs. Please go ahead.

Speaker 6

Good morning. I have 2 actually pretty straightforward questions. So when we look into the release and we didn't see anything on guidance, so is it fair to assume that it remains unchanged from what you published in 4Q? And then the second question is around Guanajuato.

Speaker 5

Saw that there

Speaker 6

was a decline in occupancy Q on Q, it was about 400 basis points, whereas the majority of the markets saw an increase in occupancy Q on Q. So just want to understand what the dynamic is there and what we should expect going forward? Thank you.

Speaker 1

Thank you, Gerald, for your call. Regarding the Guanafato question, we recently developed a building, an inventory building in Porzio Interiors. We have been successful leasing up the rest of the space and probably that's why you see a small adjustment on the total portfolio because it's a brand new building that we recently incorporated. But if you look at stabilized portfolio as well as same store, we have kept that occupancy at 91%. And I would suggest that you follow the stabilized portfolio because that doesn't represent that doesn't have any major adjustments.

Speaker 1

The market is doing well. It's just probably the incorporation of a new spec building that is that we have recently developed and we have been announcing that throughout the last quarters. And regarding your first question, yes, we will keep firm the guidance that we gave in the last call without any adjustments for the moment.

Speaker 6

A quick follow-up just to understand because when I look at the GLP for Guanajuato, it remains unchanged for about 3 quarters. So you're saying it became incorporated right now? Or I'm just trying to understand how that works.

Speaker 1

Yes. So if you look at the numbers in Guanajuato, if you look at the supplemental package at Page number 10, you will see the new buildings that are currently as part of the lease up. We have one building in Guanajuato in Puerto Interiors, 231,000 square feet. And if you look at the total portfolio, total portfolio, we currently have 4,600,000 square feet. And last Q1 last year, it was 1,300,000 square feet.

Speaker 1

So it does change by 230,000 square feet, which is basically that building.

Speaker 6

All right. Thank you.

Operator

Your next question comes from the line of Alan Macias from Bank of America. Please go ahead.

Speaker 7

Hi, good morning and thank you for the call. Just if you can remind us on your land bank, what is the potential GLA that it represents? And just another question on recent spreads. I guess the assumption is that there's upside risk for 48% going forward? Thank you.

Speaker 2

Okay. Potential risk on the 8% going forward.

Speaker 1

Paula, Alan, thank you for your question. So I mean regarding your second question on the red spread, Well, I think that more than risk, I think that we believe that there is greater opportunities to have major rent adjustments. First of all, we think that the current inflation environment, we have shown that Vesta is very well positioned to hedge towards inflation very well because that's how the leases are structured. So the majority of the leases that will expire will have full adjustment towards inflation, either in U. S.

Speaker 1

Or Mexico. And I believe inflation currently is between in the 3% or 4% ranges depending on the currency. But in the end, I think that we are very well positioned. But getting to the so but the upside on rent is not only inflation, but it's our ability to be able to mark to market many of our leases at expiration of our releasing. And we believe that since rents have been increasing in many of the markets, maybe even probably all of the markets, we see a great potential to renew.

Speaker 1

The market is incredibly hot right now. There's good demand and companies that are established in Mexico are performing quite well. So we don't see this trend change in the near term.

Speaker 7

And

Speaker 1

regarding land bank, well, we currently have land bank that would help us to increase more than 10,000,000 square feet our portfolio. However, we are in the process to acquire more land. We are looking into land in the northern part of Mexico, Tijuana, Juarez, and Terre as well as Guadalajara, Mexico City to incorporate a potential larger pipeline opportunity as we have done in the past. Thank you, Alain.

Speaker 7

Thank you.

Operator

Your next question comes from the line of Gordon Lee of BTG. Please go ahead.

Speaker 5

Hi, good morning. Thank you very much for the call. Just very quickly, and this is sort of more out of curiosity, but in the last 2 or 3 quarters you've had, 2 or 3 properties, not many, but 2 or 3 properties that have in the pipeline that have seen some delays for delivery. And so my question is, is there a common theme in some of those delays? Or is each of them sort of its own particular driver, maybe tenant modifications, etcetera?

Speaker 5

Or is it more to do maybe with permitting and infrastructure and maybe that's a little bit more systemic? Thank you.

Speaker 1

Thank you, Gordon, for your question. And yes, I think one of the good things is that we're incredibly active on construction. We currently have under construction over 4,000,000 square feet, which is a great pipeline pretty much in many of the in all of the regions where we operate. In many of these cases, at the same time that we're in the construction, we are in marketing phase. A good example is what we recently did in Mexico City.

Speaker 1

It's a very large building for e commerce, very well located in Punta Norte. This building will be delivered end of the year and we were able to lease this quarter to a great e commerce company as mentioned. So in the process, sometimes we need to do a couple adjustments and sometimes that generates certain delays. That was actually the case of Queretaro, one of the projects which is leased to Italy. We're working by with them and there has been some minor adjustments, which represent some adjustments also on the dates.

Speaker 1

So it is a bit common that this might happen. And then there was another adjustment that we had to do and this was basically because it took us a little bit longer to start the building as forecasted and it was merely based on the start that it was later to start basically. And we will let you know every time there is a resuscitation with any of the dates, but we feel very comfortable that it doesn't represent a major impact to our potential income or value proposition.

Speaker 5

Perfect. That's very clear. Thank you very much.

Speaker 3

Thank you.

Operator

Pleasure. Your next question comes from the line of Francisco Suarez of Scotiabank. Please go ahead.

Speaker 8

Good morning. Congrats on the results. And the two questions that I have. I've noticed that Foxconn now is one of the most important tenants. Any plans to go beyond that?

Speaker 8

I mean, with that, perhaps offering a full park or consolidating other assets that OXXO may have in Mexico in a single park as they usually want? And the second question that I have is that if there is any reason that explains why the buildings in Tijuana and Juarez haven't been leased at all. I mean, these markets of Tijuana and Juarez are totally sold out. Perhaps it is related with the fact that perhaps you the tenants are willing to have more energy intensive buildings over there and you don't have the KBAs for those type of tenants? Anything missing that explains why these 3 buildings haven't been leased so far?

Speaker 1

Great. Thank you, Francisco, for your questions. Let me start by the latter. Yes, we have some buildings that we have that have been recently being finished and we are currently on the marketing stage. In both cases, Tijuana and Ciudad Juarez, these buildings are still on marketing, but bear in mind that, for example, in Ciudad Juarez, we have leased 4 buildings out of the 5 buildings that we developed throughout the last year pretty much.

Speaker 1

So there's only one building, which is currently on marketing stage out of the 5. The other four buildings are leased to DB Schenker, to BRP, to Sage Electronics and another one is currently on a letter of intent. So we feel very comfortable with our position to have one project available on a marketing stage and we're waiting until the best tenant to take this building. Nothing to do with energy, actually the building I mean the park is already running. A good example is the clients that we have already started operations.

Speaker 1

And the same situation for Tijuana, where we leased to Home Depot, we leased to Amphenol, Erez and other companies and we are currently working with some great companies to take this space and we sometimes are a bit more patient to take the best client rather to take immediately a client. This actually normally we give 12 months for lease of our underwriting considers 12 months of lease upstage. That's why we will be converting this to the Q3 of 2024 to stabilize, but hopefully before that we might close a transaction. Regarding energy, it's interesting, but for example in Iguana, we did a major investment in energy and probably Vesta is the Vesta Park Mega Rejion is a project with the most energy out of the whole region. So it has nothing to do with it.

Speaker 1

Actually, we have more energy available just because the type of clients that we have leased require our light manufacturing, which require a smaller amounts of energy. And that's why we feel actually very comfortable that we will have we have excess energy in Tijuana, which is a greater advantage and our marketing team in Pijuana knows that and is positioning that very well to be able to capture a great company.

Speaker 8

Regarding your question You're more selective in other words. I mean you can be more selective at current on how market conditions are at this moment. That's the reason why.

Speaker 1

Exactly. And if you look at our numbers on the truck portfolio, basically this is the only property we have available in Ciudad Juarez and in Tijuana these are the only properties. So it's part of the development process and hopefully we can have some closing soon, but we feel comfortable with the dates. So there is no major delay to underwriting. And then regarding Foxconn, absolutely Foxconn is one of the best examples of near shoring where they have been expanding rapidly in Mexico, particularly because since in Guadalajara, just because they already have presence before COVID and since all of these disruptions have happened in terms of trade, supply chains and adjustments, which have benefited near shoring, French shoring and Foxconn has been a great example of growth.

Speaker 1

They have taken several buildings inside of our campus of the Vesta Park Guadalajara. And so basically, they have a good position in several buildings where they're going to be incredibly active with several electronics manufacturing components. Hopefully, we see I'm pretty sure that Foxconn will continue growing, and I'm pretty sure that other companies similar to Foxconn will have the same we'll have a similar process going forward.

Speaker 8

Thank you. Congrats again.

Speaker 1

Thank you.

Operator

Your next question comes from the line of Felipe Landa from Citi. Please go ahead.

Speaker 7

Good morning. Congratulations, Resilots. My question is around 2024 guidance. First, how are P and L could be in track to beat 2024 guidance with higher revenue growth and why EBITDA margin cost 10% to 10% by 200 bps. That said, could we expect the same level of margin for the full year billing guidance?

Speaker 2

Your question was a little bit garbled. So I understand that you're asking about our rental growth, which was outstanding. I agree with you. And you were asking about the question itself. Can you repeat it, please?

Speaker 7

Yes. About the NOI and the margins too.

Speaker 1

They weren't up the guidance in

Speaker 7

the Q1. Should we expect the same level of market for the full year?

Speaker 2

Yes, I think that I mean NOI for sure we will continue to be expecting higher NOIs throughout the year. In terms of EBITDA, we have a higher impact of the tax exchange rate in those, but I feel confident that we will be on guidance throughout the years.

Operator

Your next question comes from the line of Alejandra Obregon of Morgan Stanley. Please go ahead. Hi, good morning, Vesta team. Thank you for taking my question. I just have one on capital allocation.

Operator

So I'm thinking as if you think of macro conditions, probably interest rates higher for longer. As you balance that with construction costs, your requirements for more land, you just dropped the Apodaca properties into the development pipeline. So you're probably looking at some acceleration there. So when you put that all those things together and your debt and equity program, when do you think you could potentially be tapping the markets either debt or equity again? And when you think of your capital allocation structure or your capital structure, where do you see equity and debt balancing for you and going forward, if that makes sense?

Speaker 5

Thank you.

Speaker 2

Sure. It's an excellent question. Look, we have a dry powder for more than $430,000,000 somewhere around there. I think that will we do expect to invest about north of $300,000,000 this year all in all. And so I think that we have about 18 months of or 20 months of dry powder to invest.

Speaker 2

We will tap the market at some point. I think that there are both opportunities in debt. I do agree that it's higher for longer, but longer we're leaving the longer. So at some point in time with inflation coming under control in the U. S, I think that rates are going to be more amicable.

Speaker 2

In regards of equity, we take equity decisions very carefully. So we will and we have a good and strong balance sheet. So we will see what's the best way to fund the company at some point in the latter part of next year. I don't see any competing offering in either of those in either of the equity or debt.

Operator

Got it. And do you mind reminding us how much is your debt program, how much has it been approved?

Speaker 2

Wow, I think that a 1,500,000,000 somewhere around there on our shareholder meeting of last year.

Speaker 7

I think that we did it for

Speaker 2

$1,500,000,000 give or take. We're checking. I will let you know in the conference.

Operator

Got you. Thank you very much and congratulations on the numbers. Your next question comes from the line of Isabela Sinazar of GBM. Please go ahead. Hello.

Operator

Thank you for taking my questions. I have two questions. The first one is, I was wondering if you could give a bit of color on the non tenant reimbursement during the quarter. I'm just trying to understand what this means. And the second question is, I saw you sold some land in Queretaro.

Operator

And I was just wondering what the driver for this sale was and also if you could share your thoughts on the dynamics in the Bahia region?

Speaker 2

Sure. The tenant, I mean, we invest on behalf of the tenants on tenant improvement. I mean, there are some investments that tenants want that we basically say that they are not part of our interest and tenants ask us to do them anyway. So we manage the construction process of those tenants. At some point in time, they reimburse us.

Speaker 2

That was the case on a larger amount in this particular quarter. It was about $25,000,000 somewhere around there and I'm sorry $14,000,000 So, well, we got reimbursed. It was a major investment. It has to do with the property that we sold in Queretaro some time ago for that REITs. That's why the number is so large.

Speaker 2

It's not common that amount of tenant improvement we manage on behalf of our tenant. On the other question, which was

Speaker 1

can you remember your other question? Regarding the land sale, well, basically this was a non strategic asset outside of an industrial park that it was Other small. It's always better to clean some assets. It's very small, below $1,000,000 and it was at a major premium. Nevertheless, it was a small transaction.

Operator

Perfect. Thank you very much. Your next question comes from the line of David Sotto of Scotiabank. Please go ahead.

Speaker 5

Hi, good morning. Thanks for taking my questions. Congrats on the results. I have a few questions. The first one is related to the asset recycling strategy.

Speaker 5

Should we expect divestments on other regions? And my other questions are related to the development program. Is there any environment that could affect delivery timeline? And what should we expect of leases up in the next quarters?

Speaker 1

What can we expect in the I'm sorry, leasing or what was the question?

Speaker 5

Sorry, the lease up for next quarters.

Speaker 1

Great question. Thank you, David, for your question. And so basically so we since we incorporated a Level 3 strategy, we decided to have an asset recycling program every now and then, and we have done that in the past. Nevertheless, right now, we are focusing on the capital deployment from the funds raised recently from the IPO in the New York Stock Exchange. And that's why we're more active on investment and development.

Speaker 1

And on that regard, we foresee a strong pipeline, as Juan mentioned, about $300,000,000 of investment throughout this year. And that's where we're going to continue seeing a strong development activity where we actually when we start the buildings, we don't see any major variables. As you remember, we have 3rd party contractors that take the responsibility on construction. We have different contractors, so we have managed very well the risk on development in that regard. The markets where we're investing spec buildings are very strong.

Speaker 1

Leasing activity is very good as was seen recently with some buildings being leased before construction ends. And for that reason, we think that we will continue to see a strong activity. Markets are at record high occupancies and supply is incredibly limited still for good quality buildings and that's why Vesta, we believe has a good advantage to take that opportunity. Lease of buildings, again, we have a strong marketing local team that is closed by existing clients that might grow and other new clients and the brokerage community, which is always helpful to bring new opportunities for our buildings.

Operator

And your next question comes from the line of Jeronimo Delgado from Santander. Please go ahead. Girona Modigladir from Santander. Your line is now open.

Speaker 1

It's very Giordano, it's very hard to listen.

Speaker 5

Apologies. Can you hear me now?

Speaker 6

Yes, perfect.

Speaker 5

Got it. Thanks. Congrats on the results, first of all. This is great for the company. Apologies if my question was already asked and I missed it.

Speaker 5

But just wanted to ask, given the current interest from multiple players in the market on Fever Terafina, Tera, is it something you are currently evaluating as well? Is it something you're interested or like to get some color? Thank you.

Speaker 1

Thank you, Geronimo. That's a good question. What I can say is that Vesta will continue focusing on its investment pipeline that we have presented. We believe that that particular focus and discipline is giving us the ability to capture opportunities at above market returns with higher spreads. And for the moment, we have a greater strategy through development, through higher rents and through being able to capture some leading position in many of these of these markets.

Speaker 1

It is a crowded transaction. I'm glad that there is a lot of interest that it's important for the sector. It's very important for the industry. For the moment, we think that we want to keep that discipline to our shareholders and keep the strategy that that we have maintained, which is giving us a great edge for the opportunities that Mexico is representing at the moment.

Speaker 5

Great. Thank you so much.

Operator

There are no further questions. I'd now like to turn the call back over to Mr. Perho for concluding remarks. Please go ahead, sir.

Speaker 1

Thank you, operator. 2024 is definitely is off to a great start and our portfolio results remain solid and the Vesta team continues to drive long term value creation. We're very well positioned to take advantage of new opportunities with a strong capital base. As a team, we are laser focused on execution and our long for our long term strategy. Thank you to the Vesta team.

Speaker 1

Thank you for our shareholders and see you on our next call. Thank you.

Operator

This concludes today's conference. You may now disconnect your lines. Thank you for participation.

Powered by Quartr
Earnings Conference Call
Corporación Inmobiliaria Vesta Q1 2024
00:00 / 00:00