Corporacion Inmobiliaria Vesta, S.A.B de C.V. American Depositary Shares, each representing ten (10) Common Shares

Greetings, ladies and gentlemen. Welcome to the VESA First Quarter 2025 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. It is now my pleasure to introduce your host, Fernanda Bettinger, VESA's Investor Relations Officer. Please go ahead.

Good morning, everyone, and welcome to our review of VESA's First Quarter Earnings Results. Presenting today with me is Lorenzo Dominique Gueron, Chief Executive Officer, and Juan Sotil, our Chief Financial Officer. The earnings release detailing our first quarter 2025 results was released yesterday after market close and is available on VESA's IR website along with our supplemental package. It's important to note that on today's call, management remarks and answers to your questions may contain forward-looking states. Forward-looking statements address matters that are subject to risk and uncertainties that may cause actual results to differ. For more information on these risk factors, please review our public filings. VESA 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.S. DACs. All information should be read in conjunction with and is qualified in its entirety by reference to our financial statements, including the notes thereto on our status in U.S. dollars unless otherwise noted. I'll now turn the call over to Lorenzo Herrera.

Thank you, Fernanda. Good morning, everyone, and thank you for joining Vesta's first quarter 2025 earnings call. Before we begin our review of Vesta's results for the first quarter, I'd like to take a moment to reflect on the broader operating environment. As can be expected, uncertainty prevails. This volatility and ambiguity continue to shape, and in most instances, halt decision-making across industries and markets, particularly around long-term commitments during the quarter. Leasing activity has slowed in Mexico, as it has in the U.S. and Europe. However, while market-wide absorption has essentially paused and new leasing decisions are being delayed, vested tenants are staying while we also gain new tenants in the first quarter of the year. Most of our clients have not altered their long-term plans despite trade-related headlines. Recent conversations we have had show that a substantial majority have not adjusted their investment outlook because of tariffs or regulatory risks. Vesta remains focused and disciplined. Our company has a demonstrated history of successfully weathering headwinds, and the steps we have taken underscore our resilience, not just in navigating through volatility, but adapting, reacting, and executing with clarity in uncertain times to emerge stronger. Vesta's competitive advantages in the Mexican industrial real estate sector are rooted in a combination of strategic positioning, operational excellence, and long-term vision. Let me briefly reiterate these advantages, which are particularly relevant in today's operating environment. First, the exceptional quality of our assets across strategic markets is a compelling differentiator with powerful client stickiness. Vesta has cultivated a diverse blue-chip tenant base with long-term dollar-based lease structures This drives tenant retention with visibility into future cash flows. We are Mexico's go-to partner for global firms entering or expanding in Mexico, and our company operates with prudent leverage, ample liquidity, and a track record of disciplined capital allocation. Finally, we have demonstrated our ability to be agile when needed and to be grounded in making decisions in both reaction and anticipation. We therefore view the current environment as one of opportunity. Companies like ours are uniquely positioned to take advantage of change by being close to our markets and close to our clients, which will drive renewals and releasing opportunities whenever the dust settles in reaction to new realities and in anticipation of demand. That combination of quality, agility, and discipline has served us well. Jorge Mancilla- best of the lever solely operational performance in first quarter, despite the macro backdrop during the first quarter 2025. Jorge Mancilla- best of focus and maturing leases and renewals which has enabled us to mark to market rents and generate a 11.5% trailing 12 month weighted average spread for the quarter, the highest since 2022 some of these renewals have seen rental uplifts of over 20%. And same-store NOI has increased by 4.3% year-over-year, reflecting the strength of our tenant relationships and the quality of our portfolio. Total leasing activity for the first quarter reached 1.4 million, comprising 139,000 square feet of new contracts with three new tenants and 1.2 million square feet in lease renewals during the quarter, levels which we have sustained over the last two years. Our team is focused on expense discipline and cost control, also in property management, which supported growth in both NOI and EBITDA, which reached 95.7% and 85.2% respectively during the quarter. Meanwhile, we are capitalizing on the current environment to leverage our strong balance sheet to pave the way for future growth. As you read in last night's results press release, we made targeted and highly strategic new land acquisitions in Mexico City and Monterrey. Urban infill markets align with the Route 2030 strategy and particularly relevant for e-commerce and last mile logistics, which remain among the most resilient sectors in our portfolio. We're also making high conviction decisions to put our capital to work the best way possible to drive value for Vesta shareholders. At our March annual shareholders meeting, Vesta shareholders approved a $150 million share buyback program. During the first quarter, we executed a major share buyback, 15.5 million shares, or $36 million, taking advantage of the significant disconnect we're seeing between our share price and the intrinsic value of our existing operating portfolio, which today is at 95% stabilized occupancy with rents indexed to inflation and the sustained growth recurring income, and long-term maturity profile of Vesta's portfolio represents. These share repurchases were made at an attractive entry point from a replacement cost, yield multiple, and net asset value perspective. And I'd like to underscore that the shares we're acquiring will be canceled, enabling us to opportunistically repurchase our shares at a considerable discount, returning value our shareholders at a substantial discount to net value. As I noted, we have maintained one of the strongest balance sheets in the industry. Our loan-to-value ratio is 20.6% during the first quarter, one of the lowest ratios of the company following a 50 million debt repayment. That gives us flexibility to invest when the time is right without sacrificing liquidity or financial stability. In short, we're doing what resilient companies do, protecting downside, remaining patient, and putting capital to work where it drives the most long-term value. In closing, it's a uniquely challenging and unpredictable environment, but Vesta has a long history of demonstrating our resilience. We adapt, we react, and we lead. During uncertain times, we will remain focused on what's in our control, discipline capital allocation, tenant engagement, and strategic land banking building for the long term. With that, Let me turn our conversation over to Juan to discuss our financial results. Juan?

Thank you, Lorenzo. Good day, everyone. Let me begin by summarizing our first quarter results. Starting with our top line, we have a solid start of the year with total revenues up 10.7%, reaching $60.6 million, mainly due to rental revenues, coming from new leases and inflationary adjustments on rental property during the quarter. In terms of the current mix, 89.7% of our first quarter revenues was denominated in US dollars, an increase from 87.8% from the first quarter 2024. Regarding our profitability, adjusted net operating income increased 8.5% to $62.1 million, while the margin contracted 10 basis points to 95.7%. This was mainly due to higher costs during the quarter related to rental income generating properties, including real estate taxes, insurance costs, maintenance, and other property-related expenses. Adjusted EBITDA reached 55 million in the first quarter, a 9.3% increase compared to prior year's quarter. And the margin increased 50 basis points to 85.2%, primarily due to lower expenses relative to total income during the first quarter 2025. Moreover, we maintain a strong focus on cost discipline to help and sustained profitable growth. We closed the quarter with a pre-tax income of $28.6 million compared to $150.6 million in 2024. This decrease was mainly due to lower gains on revaluation of investment properties, as well as reduced interest income due to a lower average cash position during the period. Vesta FFO, excluding current tax, increased to $45 million this quarter from $40.4 million in the first quarter of 2024, an 11.4% increase year over year. Moving to our capital structure and balance sheet, cash and cash equivalents, $249 million. And our total debt decreased $801 million as of the end of March 2025. Subsequent to quarter end in April 2025, we drew down $100 million from the $345 million syndicated loan secured in December 2024, furthering strengthening our financing position. With our net debt to EBITDA at 3.2 times, and a historically low loan-to-value of 20.6%. At the closing of the first quarter, we maintain significant financial flexibility to capitalize on future opportunities as market conditions improve. Given today's dynamic environment, as Loren described, we are taking decisive action to deploy capital in the best way possible to ensure the most significant shareholder return, reiterating that Vesta's shareholders approve 150 million share buyback program. During the quarter, Vesta's share repurchase program reached $36.4 million, equivalent to 15.5 million shares. We remain committed to discipline capital allocation, opportunistically buying back shares, and investing selectively in land acquisition that supports our future growth as Lauren has noted. Finally, and subsequent to quarter's end, on April 15, 2025, we paid a cash dividend for the first quarter equivalent to 41 cents in pesos per ordinary shares. This concludes our first quarter 2025 review. Operator, could you please open the floor for questions?

Absolutely. Ladies and gentlemen, we will now begin the Q&A session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Thank you. Your first question comes from the line of Pablo Ricardo with Itao. Please go ahead.

Hi, good morning, Vesta team. Thanks for taking my question. I have a question on the leasing activity we saw on the quarter. As most of it was related to renewables, I don't know what you're seeing like April and May in terms of leasing activity. Should we expect once again most of the leasing activity to be renewables? or are you seeing finally like new tenants coming into your parks?

Thank you very much for being on the call. Yes, we are seeing an uptick and an increase in activity coming from an increased pipeline. And we believe and we expect that leasing activity for new leases and new tenants might pick up in the upcoming quarters. Having said that, it's important to mention that definitely the first quarter was a quarter of high uncertainty, which made companies put their projects on pause or maybe just delay part of the decision making. And for that reason, most of the projects that we have in the pipeline and we see in the market will materialize at a later stage. Having said that, I think that not only the value that we create is through leasing activity of new spaces, which we will think will pick up, but also from the renewal activity that we see. And actually, we were very active with renewals and releasings of existing spaces with existing tenants. And we were positively surprised with the longer, long-term commitments that the companies are still making. Also, on our ability to market many of these rents and therefore have an increase in weather average lease expirations as well as leasing spreads and rent spreads. So all in all, we think it's positive and sets up a positive trend probably for the upcoming quarters. Thank you, Pablo.

Thanks. And one follow-up on that. Can you remind us on your expiration period for 2025?

Expiration for 2025 is in the low single digits. Let me try to be a little bit more specific. Give me one second. So we have 4.7% of total GLA will be expiring in 2025 still. So less than 5%. Thank you, Adam. And maybe just to follow up, and out of the total portfolio for 2026, which in many cases we tried to anticipate those renewals, and companies want to make commitments in advance, those stand currently at approximately 10%, which is also a very comfortable number. Maybe also to your question, to follow up too, I think that it's important to mention that retention rate remains quite high, above 80%, which means that there is a high interest of companies not only to stay with us, but also to have a continuation and even in some cases, expand operations.

Perfect.

Gracias. Your next question comes from the line of Rodolfo Ramos with ProDesco. Please go ahead.

Thank you, Mesta, Tim, for taking my question. I have a couple, if I may. Can you give us a little bit more detail of this tenant engagement that you're having? And when do you expect to see occupancy stabilizing? Should we be looking at when the USMCA review is completed? I don't know if how those tenant engagement discussions are going. And secondly, we now have the secondary legislations in terms of energy. There are some provisions that make it easier for solar panel installations and certain self-supply schemes. I was wondering if your development team across Mexico has brought up new ideas as a result of these new rules and regulations.

Thank you. Thank you, Rodolfo, and thank you for being on the call and the questions. Well, first, regarding tenant discussions, we have had a very tight engagement with existing tenants. We have a broad base of high-quality tenants, as well as potential tenants. As for the first ones, what we have perceived is that they have a high conviction on Mexico the majority has a very, it's for many companies very complicated to even analyze relocating their manufacturing facilities to other parts of the world. So it's basically companies analyzing the different scenarios and adapting to the different scenarios so that they can continue to be manufacturing and producing and integrating supply chains from Mexico. Other countries are having other issues too. So sometimes we look into detail only into Mexico, but if we look in relative terms, to what's going on in other parts of the world, some of those countries that have had a manufacturing footprint too are facing even more challenges. So with that in mind, I think that the ability of companies being established in Mexico for many years is giving them an advantage and hopefully now that we start getting a bit more clarity on what the new rules in terms of trade and tariffs will be, I think that companies will quickly start making decisions. As an example, we recently, right after some of the tariffs, I would say tariff releases, releasing in tariffs impacts were done, immediately we started seeing our pipeline increase of companies interested in analyzing further expansions and further space. Nevertheless, all of these companies are considering the uncertainties that we're experiencing still coming from the tariffs. And I think that in the upcoming quarters, when the noise starts to dissipate, we'll start to see more transactions. And regarding energy, definitely we define as part of our Route 2030 strategy, we did define a plan where we can establish more energy coming from solar panels, coming from renewals and sustainable energy, and we are adapting some we are adapting to the new regulations and the new laws which are beneficiary for us. And I think that soon, throughout the year, we will start to see more projects with solar panels and eventually have the objectives of the Route 2030 being met. Thank you. Thank you, Lorenzo.

Your next question comes from the line of Alejandra Obregon with Morgan Stanley. Please go ahead.

Hi, good morning. Thank you for taking my question. I was sort of trying to get your pulse of things on the ground through your lens, if that's possible. I'm interested more in your existing portfolio as opposed to the new conversations and the new listings. So if you can perhaps elaborate on how those conversations are going And more in particular, if you're seeing any ecosystem or group within your tenants that is perhaps holding back more on the decision making, that could perhaps be thinking that they might be more affected on the tariff front directly or indirectly, and perhaps any other ecosystem that feels more comfortable, so to speak. Anything on the color of how tenants are behaving and your conversation with customers, that will be great. Thank you.

Great. Thank you, Alejandra, for your question. Yes, I think that it's very important to have that communication with tenants, and we've been having that to understand not only specifics of tenants, but also try to identify what are the trends on certain industries, on certain regions, and what might be the implications with new tariffs. Overall, we have been very we're very positive on what our clients are experiencing. First of all, in terms of the auto industry, it is very much integrated to the US and we believe that all of them have identified their impacts either with being exporting right now as most favored nation and including those tariffs, as well as the ones that rely with USMCA tariff rules. Both of them, we believe, regardless of what scenario and what plan they're using, we believe that They have great long-term plans, and they will be able to solve all the tariffs issues, depending on the type of production they have. So the auto industry, we believe, is in good shape, particularly the type of tenants that we got. Remember that these are tenants that are either tier one companies, many of them well-established also in the US, or tier two companies that have global footprints and have Great relationship, many of them European companies, American companies, and have a broader relationship with the OEM. So in that regard, I think that Mexico is in a favorable position, and the other industry will continue to be competitive. Other industries are also quite strong. For example, the medical device industry. which also has a very good relationship with U.S. companies and U.S. demand, as well as other industries, of course, regarding logistics and e-commerce. Remember that Mercado Libre is now one of our most important tenants. And for the structure of their business, we think that and we see that they will continue to grow as well as other e-commerce players. All in all, we are very positive with the conversations we've been having. Everyone is trying to figure out and solve out. But remember that Vesta is very cautious on the type of clients we got. We revised carefully their origin. We revised carefully their track records. And for that reason, that resilience will prevail not only in our portfolio with long-term leases, U.S. dollar leases, but also in the businesses of our own clients, which we think will prevail.

Gotcha. That was very clear. And perhaps just an additional follow-up, especially around the Bajio. Have you seen any sort of new ecosystem building around the area, perhaps any different sort of tenant, especially around Guadalajara, anything that you think was not there before. And of course, there's a lot of moving parts and there's a lot of uncertainty still. But anything that you think might be building perhaps towards a more value add around IT hardware or another ecosystem around the Vahio.

Sure. So what we have seen is an increased demand of companies in the electronic sector and technology-based companies, most of them in Guadalajara. And I think that particular ecosystem will continue to grow. Actually, that might happen not only in the Bajio, but also particularly in markets like Ciudad Juarez. which has also had a strong track record of companies in the electronic sector. And I think that will continue to grow. And that growth might actually be a sharp growth. And many of these companies clearly are global companies that are analyzing their alternatives, and they cannot get back to Mexico and see Mexico as a strong alternative still for the production they might be having. Even that the first quarter was slow in the markets overall, slow in closings, because again, companies are taking longer to make decisions, but there's many companies analyzing in detail and considering expansions or considering new arrivals. So we will continue to see a big shift in certain regions on certain industries. And I think that in the upcoming quarters and even for the rest of the year, there will be also some positive signs. The Bajio will continue to be a good market for logistics, e-commerce, as well as the auto industry. And I think that some of the some of the existing clients are still making long-term commitments and are considering Mexico as their main manufacturing platform for North America and to integrate their supply chains to the OEMs in North America.

Thank you, Loren. That was very clear.

Your next question comes from the line of Adriana Huerta with J.T. Morgan. Please go ahead.

Thank you. Hi, everyone. Thank you for taking my, my question. I have just 2 questions. Um, Lauren 1st on on everything that you have just said in terms of, um. New clients interest, et cetera. What would you say? It is a likelihood then of, um, of the greenfields that you have, let's say in Monterey, you have 2 properties. Uh, they're going to be finished in April 1 and another 1 in novels. the likelihood of those properties to be leased this year already. That's my first question. And the second question is, we've seen a lot of activity on your land bank. Happy to see that. Should we expect more still for the rest of the year?

Gracias, Adrián, and thank you for your questions. Well, even from the last quarter and end of last year, We identified that clearly 2025 was going to be a slow year because of the uncertainty that we have perceived. And that we have incorporated that scenario that the year will continue to be slow. We might get some positive news. However, our scenario said that the market will continue to be, we're more on the conservative side. And I think that should be the approach. Nevertheless, I think that the projects that we have under development, I think are very high quality buildings. I can even say that these will be the best buildings in Monterrey because of their sustainability attributes, because of their quality standards. And I'll be glad to have a uh a tour a whenever they're done which will be soon or even before that so that you can see it for yourself and be able to compare and i think that will eventually have um will be a very important part of the decision for many of the companies that are analyzing space in Monterrey. Monterrey is the largest industrial market in Mexico, will continue to thrive. What might have happened in the first quarter, which was a slow quarter, doesn't mean that it will be the same going forward. So we feel comfortable that eventually those buildings will be leased. actually very well leased with good companies, long-term leases, and keep and maintain the quality and standard of the lease agreements that Vesta has had in the past. We on the right considering some downtime for development of spec buildings, but even with the downtime, with even some months of downtime, we think that these are very attractive return on costs. We're still developing at returns of above 10%. And that compared to stabilized assets, which are still trading in Mexico between 6% and 7%, we think that the spread is so high that it's definitely worth considering some downtime. but continue to have projects under development, which we eventually are going to be able to lease up well. For the new land acquisitions, we are very happy that we have been able to identify very good quality land parcels in Mexico City, in Monterrey, Guadalajara, Juarez, and those are going to be key for the growth in the company in now looking towards the 2030, Route 2030 strategy. These are urban infill locations that will be very well, very strongly demanded, particularly from e-commerce and logistic companies. But also, since these are urban infill with good proximity to labor pools, this could also become a strong manufacturing and advanced manufacturing facilities. All in all, we think that the strategy will pay off. We have high returns on the development front. We are doing good quality land acquisitions. And I think that over time, we will continue to add value to the portfolio. But I think today, and I think that one of the previous questions came with a comment of saying, well, we have to look at the existing Vesta portfolio, which is outstanding. It's a state-of-the-art facilities. It's the most modern portfolio in Mexico, 43 million square feet with good companies, and there's potential to continue to generate value through mark-to-market with rent spread increases and continue to build up on occupancy. But eventually, we will talk about growth, and that will also be an important trigger for value creation for Vesta shareholders.

Understood, Loren. Thank you.

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

Good morning, everyone. Thank you for taking my question. I have two questions. The first one, I wanted to get a sense of, you say you're having plenty of conversations with potential tenants for your development pipeline, but I wanted to get a sense of if you have a target of the type of tenant that you are seeking, if you're Um, because for example, now you have a Maryford as your biggest tenant. So are you leaning more towards becoming more logistics focused? Um, are you looking to reduce exposure to autos? Are you looking to, um, increase exposure to a certain type of industry? Um, just want to understand how much of this is, you know, push and pull, how much is your target versus what's incoming and then, um, The second question is around inventory and the construction in the north. So I wanted to get a sense from you, how are you seeing the growth of development pipelines in cities like Juarez, Tijuana, Monterrey? Are you essentially seeing these pipelines at an industry level decline? Are they maintaining? Are they increasing? So any color you can provide at the industry level would be helpful. Thank you.

Great, gracias. Thank you for your question. To your first question, Vesta has done a great job diversifying its portfolio in terms of industries so that we do not rely on one particular industry too much, too heavily. I think right now auto industry for Vesta, I think it's only about one quarter of the total portfolio. And actually, that's a very healthy number. We believe the portfolio going forward should continue to maintain this exposure in the auto industry, which will continue to thrive. I think that logistics and e-commerce is probably close to 50%, a little bit lower than 50%, but will be will be maybe 45%. So maybe it will be still at 50% or maybe higher, let's say 50, 55% going forward. So we have some room to do more logistics and e-commerce. And then the rest is diversify industries such as aerospace industry, medical device industry, electronic sector. So we feel very comfortable with the diversification of Vesta. So going forward, and to your question on who we are targeting, every time we develop a building, we have firsthand information on what are the industries in that region that are thriving? What are the main drivers for them to be established in that particular area? And we try to target those sectors and those industries. So we think that Our selection process of clients will continue to be the same and has not changed because we have that particular, we have it well diversified and we don't have any material exposure to one single industry. What is very important is that we continue the discipline of having very high quality buildings with high credit rating tenants, with long-term leases in US dollars, and with corporate guarantees, which will enable the company to continue to be resilient and go over, take advantage of good times and also be able to be resilient in complicated times. And that's what we have done for the last years. And I think that particular discipline will hold on for new leases and new clients that might be part of the Vesta portfolio. To your second question regarding pipelines, well, we think that even that it was analyzing some of the market reports, we have definitely perceived that there was a slowdown in most of the markets, not necessarily Mexico City. and markets like Guadalajara, but yes, a bit more in the north, which is understandable given the circumstances. However, on the positives, we see that rents continue to increase or stabilize at high levels. Vacancies are in very moderate levels. In some cases, have increased slightly, but even in some markets, they have decreased. And for that reason, we think, and there's limited supply coming in the markets. So we think that as of today, the markets continue to be well balanced, even understanding that there could be a slower year of demand, considering all the uncertainties just mentioned, definitely slower than the years 2024 and 2023, but still not putting too much pressure on the markets. So that is having us or making us be on a positive side, but we will continue to monitor very carefully the evolution of all of the market fundamentals and real estate dynamics.

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

Hi, good morning. Thank you very much for the call. Just one quick question, Loren, on the land bank. I was wondering, you bought a pretty meaningful piece of land in Monterrey and Barbaros in Mexico City this year. More recently, obviously, during the period of uncertainty that you've described affecting your tenants. And I was wondering whether that uncertainty is playing in your favor when you're looking at land, whether that's already prompting maybe sellers to become a little bit more motivated to sell, whether you're seeing a little bit of an adjustment in expectations of price, or whether it hasn't really filtered to that level yet. That would be question one on the land bank. And then the second would be, given sort of this, not the long-term adjustment to your expectations, but the short-term adjustment, what's the level of land bank that you would be comfortable finishing the year with? Thank you.

Great. Thank you, Gordon, for your question. And yes, we have been very careful in terms of land acquisitions. We have been able to close some transactions, but we have also passed on some transactions. Some landowners might be asking for very high prices still, but Every now and then we find opportunities to be able to close. I think that Vesta has done a good job by maintaining its credibility when it comes to uncertainty, when it comes to closing a transaction with a landowner. And I think that can give us some positive advantage in order to close in the right land that we want to buy at the right price. We think that we can continue to add value to Vesta. to our shareholders. Having said that, I think that we currently, Vesta is in a very good position because our land bank was in a very manageable number, a very low value, very low, the amount of investment in land is very low compared to total assets of the company. So we think that over the year, we will continue to do some land acquisitions. and without giving you an exact number, but we think that that particular number will continue to be very manageable compared to the rest of the total assets of the company. So I think that Vesta is very prudent and disciplined not to overshoot in terms of land acquisitions, but also we don't want to lose the opportunity to close some good transactions at moments where other competitors and other peers might be focusing in other aspects of their own strategy. I think that these are good moments to take advantage of opportunities for the companies that have long-term plans. And I think Vesta is one of those companies that have long-term plans, that know the markets well, maintain a leadership in its existing regions. And for that reason, we think that we can be able to continue to close good land acquisitions that will position us better for the future.

Perfect. Thank you very much.

Question comes from the line of actress Andres Aguirre with GBM. Please go ahead.

Hi, Madam Chair. Thanks for the call and for the answer and the results. Regarding land acquisition, maybe in the quarter, You can't be doing any development of these properties in the near term, or will they be part of your land use rate for future projects? Thank you.

Excellent. Thank you very much for being on the call, Andres, and thank you for your question. So I think it's very important what you just asked, because the approach on Vesta is we First, we identify the markets where we want to be that are in line to our strategy. Secondly, if we identify the land at the right price in the right location, urban infill, and again, adds value to our portfolio, we can do the acquisition. And that's where we are standing right now. And thirdly, we analyze in detail in the investment committee each of the transactions and the new buildings we're going to do. So, and we analyze carefully the current situation, we analyze how demand is, and we do some underwriting and do some assumptions as to when demand will pick up and how supply and competition might impact. So for that reason, we are currently very, we're being cautious. We are conservative. There's no rush to go out and build. But there's always an opportunity to do a lot of planning, to do a lot of internal work on the projects. We can do some good progress. And whenever we see that demand picks up, either through build-to-suits or if we lease up some of the spec buildings we have, then we can start new spec buildings. So that has been the strategy of VEST in the past. And that will continue to be the same way. In other words, we like to drive with the accelerator and the brakes and hit the accelerator when needed, but also let go the accelerator and start hit the brakes also when needed. And right now, I think it's good moments when you have to be very strategic as to when to speed up and when to hold the brakes and try to drive with both pedals. And the investment committee looks very carefully. So eventually, when we see certain market indicators increase or improve, then we might start new buildings. Thank you. And of course, we analyze market by market and region by region. So I think that That's what we've done in the past, and I think it's the right strategy. Thank you.

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

Thank you for the call, Jens. Precisely on this question that Andres made on keeping the brakes or pushing the pedal, accelerator pedal, do you think it is actually fair to state that in the future the overall mix of your development pipeline will be far more towards having built-ins rather than spec properties as it currently is. And the second question, and actually a follow-up on one of Alexandra's questions, it relates with this new ecosystem in Guadalajara. I mean, you already have been able to capture a lot of the market share from Foxconn. and foxconn has been some pending deals with nvidia in mexico making big things in mexico can you update um what do you see on the ground if it's actually foxconn adding far more exposure or if it is one of the companies that there is also waiting a bit to to push the pedal thank you gracias uh thank you for for being on the call francisco for your question so

So I cannot talk specifically for the plans of our clients. Nevertheless, what I can say is that the electronic sector is increasing. And you have seen some of those public announcements made by some companies. And I think that that will continue. And I think that's an interesting and very interesting a sector where Vesta will continue to be close to and will continue to evaluate and analyze whenever there's an opportunity for either built-to-suits as well as to be able to lease spec buildings that could be also turned into spec-to-suits. And I think that will be an interesting, a very interesting sector to follow closely. Secondly, on your first question, Mesta has had a good track record of having spec building as well as built-to-suits, or at some point, as mentioned, we have done a lot of spec-to-suits. Right now, we believe that analyzing carefully built-to-suits is worth, particularly when you have good land bank that has the right location and right improvements. And eventually, when markets permit, we also might get back with the spec buildings. But we will analyze carefully market by market. We will analyze carefully into our own portfolio. And with that, we will analyze in detail in the investment committee if it makes sense to start spec buildings or build projects. As you could see, there were no new starts in the quarter. But that doesn't mean that we might start in the future other spec buildings, particularly if there's markets that have so strong demand that it's worth considering spec buildings. So we'll continue to analyze both built-to-suits as well as spec buildings.

Got you. And as you mentioned, it seems that overall market dynamics in Guadalajara and Mexico are different. And that allows you to be much more on the offensive with spec properties, isn't it?

I think that spec buildings have been key to our strategy. We have benefited from anticipating to the market. And we have benefited from having high-quality, flexible buildings where we can allocate logistics, e-commerce, and light manufacturing at very high returns. So that strategy has paid off a lot. Now we are living some uncertain times, which better certainty at some point might dissipate. So we will analyze eventually when we will start to do back to develop state. But I think you're right. I mean, markets like Mexico City, there's nothing available in the market. Rents are increasing. And it continues to be a market with strong needs for e-commerce and logistics. So having spec buildings in Mexico City will continue to make sense. The last buildings we did, particularly the one that we recently developed in Punta Norte, it was a spec building that turned into a spec to suit, which was pre-leased. And I think that's a good example of the strategy of starting a building as a spec But in the meantime, be in close communication with potential tenants.

Thank you so much. Congrats.

Thank you, Francisco.

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

Hi. Good morning and thank you for the call. Just a quick question on share buybacks. Should we expect at these levels to, They have to continue to aggressively buy back, continue the buybacks during the next quarters. Thank you.

Alan, thank you for the call. We will be watching the markets, and whenever there's an opportunity, we will buy aggressively on the stock. I cannot comment if these levels are the ones that I will operate on. But I will keep an eye, and if there's an opportunity, the objective is to execute $150 million throughout the year when the opportunity arises. So we'll be watchful of the stock price.

Thank you. Your next question comes from the line of Bernardo Malpito with Santander. Please go ahead.

Hi, Lorenzo. Hi, Juan. Thanks for taking my question. Just a quick one. You mentioned this in general terms. I wanted to see if you could give us a bit more color in terms of dynamics or any metrics in terms of occupancy and market rents that you see in Monterrey and Tijuana specifically, and what your outlook is for this year in those two markets. Thanks so much.

Can you repeat the question a little bit again, please? Closer to the mic. It took me some time to hear you out.

Yes, of course. I just wanted to know if you have more detail in terms of the market dynamics, as in occupancy and market rents in both Monterrey and Tijuana specifically.

Sure. Yes, I think that so vacancy rates in Monterrey, I think stood in the first quarter close to 7%, which is kind of in line to historic levels, a little bit higher than last year, but still in very healthy numbers. And I believe Tijuana is in close to 8%. First quarter was slow for both markets. And again, I think that that's as a result of the uncertainties that we have perceived, not only specific to those markets, but overall in Mexico industrial market, which actually is in line to what we have seen in the US in industrial sector, and even in some other regions like Europe. I think this particular cloud of uncertainty driven by trade tariffs and Trump is kind of affecting the whole sector, industrial sector, even in different regions. But still, vacancy rates, we believe, in Mexico are still very healthy numbers. And maybe to elaborate further on the market, which is positive, is that rents continue to increase or stabilize at high numbers, which is very positive. So we have not seen any material adjustments on rents. And that is good news.

Perfect. Thank you so much.

Gracias.

Your next question comes from the line of Armando Rodriguez with Signum Research. Please go ahead.

Hello, everyone. Thank you for the call and congratulations on the results. Just a follow-up on the previous questions. You recently drew then around $100 million of your credit line. So just wanted to know if this is related to the bank reserves that you are mentioning recently or some opportunistic acquisitions or it's just to get something about your financial side?

Thank you for the call and thank you for the question. Look, we established the line as we mentioned on the last quarter with an 18 months drawback, I mean drawdown. So we will be drawing on the line as cash needs happen on the company. The cash needs could be just land acquisition or what have you. And we will continue to draw on that line. I like to keep the balance sheet leveraged low, so we will draw down when needed. It depends on what Carlos Zarazaga- or capex is oriented if it's a share buyback if it's a land acquisition, if it shows the general working capital needs of the company.

Carlos Zarazaga- Okay, perfect one, thank you very much.

Thank you. As there are no further questions, I would now like to turn the call back over to Mr. Berho for his concluding remarks, please go ahead.

Thank you, operator, and thank you everyone for being on today's call. We are very optimistic in the relationship between the U.S. and Mexico, and we suspect that the second half of the year is likely to see a more active decision-making among tenants. Vesta will be ready with high-quality buildings in key corridors, a premium client base, a strong balance sheet, and the operational capability to respond quickly. I'd like to thank our employees, clients, partners, and our investors for your continuous confidence. We remain committed to transparency, to discipline execution, and to building a stronger Vesta. Thank you.

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