Deutsche Bank Mexico Reit

Good morning, and welcome to Fibra Macquarie's fourth quarter 2025 earnings call and webcast. My name is Diego, and I will be your operator for this call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If at any time you require operator assistance, please press star zero, followed by zero, and an operator will be happy to assist you. I would now like to turn the conference over to Nikki Sachs. Please go ahead.

Nikki Sachs Thank you, and hello, everyone. Thank you for joining Pfeiffer-McQuarrie's fourth quarter and full year 2025 earnings conference call and webcast. Today's call will be led by Simon Hanna, our Chief Executive Officer, and Andrew McDonald-Hughes, our CFO. Before I turn the call over to Simon, I'd like to remind everyone that this presentation is proprietary and all rights are reserved. The presentation has been prepared solely for informational purposes and is not a solicitation or an offer to buy or sell any securities. Forward-looking statements in this presentation are subject to a number of risks and uncertainties. Actual results, performance prospects, or opportunities could differ materially from those expressed in or implied by the forward-looking statements. These forward-looking statements are made as of the date of this presentation. We undertake no obligation to publicly update or revise any forward-looking statements after the completion of this presentation, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, on this conference call, we may refer to certain non-IFRS measures, as well as to U.S. dollars, which are U.S. dollar equivalent amounts, unless otherwise specified. As usual, we've prepared supplementary materials that we may reference during the call. If you've not already done so, I'd encourage you to visit our website at FibraMcQuarrie.com and download these materials. A link to the materials can be found under the Investors, Events and Presentations tab. And with that, it is my pleasure to hand the call over to Fibra McQuarrie's Chief Executive Officer, Simon Hanna. Simon?

Thank you, Nikki, and hello, everyone. Thank you for joining us for Fibra McQuarrie's fourth quarter and full year 2025 earnings call. I'm pleased to report that FibroMQ concluded 2025 with another quarter of solid operational performance, capping off a year that demonstrated the resiliency and quality of our real estate platform. While navigating a challenging macroeconomic environment, we delivered consistent results that underscored the strength of our strategic execution and the effectiveness of our disciplined approach to capital allocation, positioning us on a path for continued growth. Our results demonstrate the ongoing commitment to four key strategic priorities, optimizing net operating income across our portfolio, disciplined and accretive capital allocation, maintaining a well-positioned balance sheet with embedded firepower, and deepening our commitment to sustainability, safety, and operational excellence. We strive to maximize total returns on a per-certificate basis, and we're very proud to have delivered a total shareholder return of 33% in U.S. dollars, or 19% in Mexican peso terms for FY25. Reflecting on our results, we finished the year with strong momentum, posting record quarterly consolidated revenues and NOI, contributing to a record full-year AFFO in underlying U.S. dollar terms, reflecting both the quality of our asset base and the effectiveness of our operational platform. We remain disciplined in our approach to growth capex, and it's worth calling out a couple of highlights we achieved throughout the quarter. First, in Monterey, in December, we leased a 200,000 square foot flagship development property, achieving a development yield of 10%. Second, we completed the opportunistic acquisition of an under-rented warehouse comprising approximately 165,000 square feet in Mexico City. following a similar 250,000 square foot deal we completed in the third quarter. The lease on this new investment is scheduled for a mid-2026 renewal, with a stabilised cash yield expected to be within our 9% to 11% target range. The Industrial Development Programme has been carefully calibrated to current market conditions. While we've maintained discipline in initiating new projects given the subdued demand environment, We've continued advancing infrastructure and pre-development work across multiple sites. This positions us to accelerate development activity when market conditions align with our investment thesis, and we are currently assessing some likely near-term opportunities to do so on our existing land bank. Beyond our existing land bank, we're also encouraged by our development pipeline, and we look forward to reporting positive news on this front in the hopefully not-too-distant future. Turning to our fourth quarter performance, starting with our industrial portfolio, our stabilised industrial assets continue to generate reliable cash flows, with occupancy levels remaining robust despite the broader market headwinds. We executed meaningful leasing activity during the quarter, ending the year with an uptick in occupancy, closing at a healthy 95.5%. We executed new and renewal leases on approximately 1.2 million square feet of GLA in the fourth quarter, capping a very active year, where we completed 60 leases comprising almost 5 million square feet with a broad range of customers within the industrial portfolio. Notably, we delivered strong full-year lease renewal spreads on commercially negotiated leases of 20%, comfortably exceeding our initial expectations at the start of the year. This progress has been particularly valuable given the current market environment, where tenants are prioritising stability and our existing customer base has demonstrated stickiness, giving us confidence as we approach a manageable lease renewal cycle in 2026, comprising approximately 15% of our annualised base rents. Our retail portfolio also delivered a strong performance in the fourth quarter. with continued occupancy gains driven by a total leasing comprising 26,000 square metres, representing our highest quarter of leasing activity in almost two years. We ended the year with occupancy of 94.1%, up 75 basis points from the end of the prior year. The necessity-based nature of our retail properties has proven to be a competitive advantage, with strong cash collections and tenant retention supporting steady NOI growth of 4% for the year in Mexican peso terms. We are very pleased with the continued improvement in our retail portfolio, with fourth quarter car and foot traffic reaching a post-pandemic high. Having stabilised its overall performance, and notwithstanding some scheduled move outs to work through in the first half of 2026, Overall, we are well positioned to realise further value from our retail portfolio during the year. What makes our approach particularly compelling is MPA, our scalable, vertically integrated platform, which is a proudly unique feature in the Mexican industrial fibro sector. MPA provides us with deep market knowledge and operational expertise that maximises value and customer engagement. Our new developments incorporate the highest sustainability standards, which not only align with our ESG commitments, but also generate operational efficiencies for our customers. As of December 31, our green building certification coverage represented 44.4% of consolidated GLA, an increase of approximately 260 basis points year over year. A highlight for the quarter was the LEED Platinum certification achieved on our 200,000 square foot development property in Mexico City. With a score of 91 points, we're excited to announce that this is a new LEED Platinum category world record, surpassing our previous developments that achieved 90 points. The property has now been installed with solar panels that are poised to achieve incremental green energy income from this year. accretively adding to the existing 12% stabilised yield we already achieved upon lease-up. Our balance sheet remains a key competitive advantage, providing both stability to weather market fluctuations and flexibility to pursue value-creating opportunities. Indeed, our embedded firepower is approximately half a billion US dollars when considering our available credit lines, portfolio recycling opportunities and investment-grade style leverage targets, positioning us well to capture accretive growth opportunities. Before turning the call over to Andrew, I want to emphasise our confidence in Fibra Macquarie's positioning to sustainably deliver on our total returns. We are pleased with the new leasing prospects on our development portfolio and the incremental capital allocation opportunities that should continue to drive both earnings and NAB enhancements. Throughout 2025, we navigated an environment characterised by significant geopolitical uncertainty, particularly around trade policies and the USMCA renegotiation process. While we consider this has impacted market-wide net absorption activity and contributed to more cautious decision-making among potential customers, we remain absolutely confident in Mexico's fundamental role in North American supply chains. Our portfolio is strategically positioned in key manufacturing hubs and transportation corridors, serving our customers, many of whom operate in industries where proximity to the US market is fundamental. Their substantial investments in facilities, workforce development and supply chain integration reinforce their long-term commitment to the region and underpin the stability of our lease income. We're also encouraged by the Mexican government's continued focus on policies that support the manufacturing sector, including infrastructure development initiatives and targeted programs to attract investment in high-value industries. These initiatives reinforce Mexico's position as a premier destination for global manufacturing and logistics operations. While near-term uncertainty persists, We believe our high-quality, diversified portfolio, combined with our disciplined capital allocation approach and strong balance sheet, positions us to continue delivering reliable returns to our certificate holders. I'd like to thank our entire team for their dedication and execution throughout 2025, and all of our stakeholders for your continued support. Andrew.

Thank you, Simon. Our fourth quarter and full year 2025 results demonstrate the continued strength of our business model and our ability to generate sustained returns even in a challenging operating environment. For the full year, we delivered AFFO per certificate of 2.8519 pesos, an 8.3% increase from the prior year and at the high end of our guidance range. Our performance was supported by solid annual NOI growth, with our industrial portfolio achieving an 8.2% year-over-year increase in US dollar terms, whilst consolidated NOI improved 8.5% in USD. Quarterly same-store NOI performance in US dollars was a real highlight, with the industrial portfolio up 6.7%. Our capital markets team was also active during the year, capturing attractive financing opportunities and completing over $1 billion of balance sheet refinancing. In the fourth quarter, we closed on a dual-tranch, sustainability-linked unsecured credit facility for $550 million, as well as an additional $50 million unsecured credit facility with the IFC. These financings provide additional liquidity and funding capacity while extending debt maturities. As a result of these transactions, Fibra Macquarie's cost of funding remains efficient at 5.5%, while increasing available liquidity to $615 million through committed and uncommitted credit facilities. Our balance sheet metrics remain well within our target ranges, with our real estate net LTV at 33% and our debt service coverage ratio a healthy 5.1 times as of year-end. The sustainability-linked portion of drawn debt stands at 68% as of January 31, reflecting our commitment to sustainable financing and our broader ESG initiatives. Our debt profile is well-structured, with 100% fixed-rate debt and 3.7 years of weighted average tenor remaining, with very comfortable scheduled maturities of just $75 million during 2026. We declared a cash distribution for the fourth quarter of 0.6125 pesos per certificate in line with guidance and up 17% on the prior year. Looking ahead to 2026, we maintain a cautious and constructive outlook. Our guidance assumes no material change in the geopolitical landscape or Mexico's key trading relationships, and we expect to continue delivering sustainable returns through AFFO growth and cash distributions. We are initiating our 2026 AFFO per certificate guidance in a range of 2.6 and 2.7 pesos for the full year. This equates to a US dollar range of $120 to $124 million, representing an annual increase of approximately 3% at the midpoint. We are also introducing cash distribution guidance for 2026 of 2.45 pesos per certificate, an increase of more than 11% in underlying US dollar terms, considering the average FX for the period. This outlook reflects the following key factors. Our confidence in the underlying strength of our portfolio and our ability to navigate the current environment. Same-store performance is expected to be steady on a natural currency basis. We are forecasting to achieve industrial lease renewal spreads within a range of 10% to 15%. We also expect to deploy $50 million to $100 million in growth CapEx requirements for existing projects. Importantly, our AFFO guidance does not incorporate funding costs associated with any new acquisitions or the impact of any divestments. Our guidance is based on an average US dollar exchange rate of 17.25 for the remainder of the year, which is a meaningful change from the average FX levels experienced in 2025 of around 19.3 pesos per US dollar, which is particularly relevant given the highly dollarized nature of our business. In closing, our 2025 results and 2026 guidance demonstrate our track record of delivering reliable earnings, disciplined capital allocation and attractive total returns. Our strong liquidity position and prudent balance sheet provide us with flexibility to pursue selective growth opportunities while maintaining financial stability. Our strong operational execution and strategic development capabilities position us well to continue to create long-term value for our stakeholders. On behalf of Simon and myself, I want to recognize the commitment and efforts of the entire Fibra Macquarie team and thank all of our stakeholders for your ongoing support. With that, I'll ask the operator to open the phone lines for your questions.

Thank you. And we will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. And your first question comes from Juan Bonsa with Bradesco BBI. Please state your question.

Hi, Simon. Andrew, thank you for taking my question. Could you provide more color on tenant sentiment across your industrial portfolio as the USMCA review approaches? And specifically, are tenants accelerating commitments to secure space before the review in July, or are they taking a wait-and-see approach? And similarly, of your current development pipeline, what proportion would be pre-leased and how much demand is coming from existing tenants expanding versus new portfolio tenants? Thank you.

Yeah, thanks, Juan. Great question. Look, I think what we're seeing at the moment is still very much a wait-and-see dynamic, it's fair to say. We're still seeing, I would say, in general, net absorption being fairly soft, fairly muted, particularly in the northern part of the country. Now, that doesn't mean that we still can't do well in that dynamic. You've seen that we've got the uptick in occupancy to 95.5%, average rents up 6.5%. So I think... good momentum as part of that retention rates holding at 80%. So definitely tenants are not also moving out, which is a fundamental point to note, even though you have that sort of muted demand dynamic on new investment coming into the country. We have seen some green shoots, though. We saw some tenants making a move in December. or even in January where I guess you can only kick the can down the road for so long and some of these companies need to get on with business of course and start making decisions and Mexico still is a very competitive place to invest even in this uncertain environment. So we saw those green shoots, whether it's in Monterey, where we had actually an existing tenant in our portfolio. They moved in to take on the 200,000 square foot development property we had vacant in Apodaca. You'll see in Q1 there's a country – well, there's a company moving from Asia to Tijuana, relocating production into one of our facilities So that's, I guess, a first-time entrant for that type of company. They're also making those decisions in this type of environment. So there's definitely green shoots out there where we are seeing companies making a move, but I would say fundamentally it's still a wait-and-see dynamic, but we're obviously picking up those opportunities and starting to see some good dynamic across the market. Where we are in terms of spec versus built-to-suit, we obviously prefer and have always preferred that spec development, building the best-in-class design. It's worked well. It continues to work well for us. And obviously, if there's a built-to-suit opportunity that's out there that works for us as well, from a design perspective, we'll take it, but we will continue to work on a spec basis.

OK, thank you. Very clear.

Thank you. And your next question comes from Carlos Perelongue with Bank of America. Please state your question.

Thank you. Thank you, Simon and Andrew, for the call. My question is a bit of a follow-up on the previous one. In terms of vacancies on your key markets, how have they been evolving? Have you seen some improvements? And are there any markets in particular that things are a bit more challenging? Would be the first and the second, on your spec developments that you mentioned, can you comment on the location, you know, where is it in the north, more in the centre, just to get a rough idea of where you're deploying the new capital? Thank you.

Yeah, no, sure. Thanks, Carlos. Look, I think you're sort of breaking that down sort of regionally. What we saw, we were pleased – We did new leasing in Guadalajara, Monterey, Juarez, Tijuana. We're working on a new lease in Reynosa. So I would say there's certainly activity out there. The big box lease up we did in Monterey, the 200,000 square foot, that was, I guess, a good leading indicator of what's to come in terms of being able to put some of those those flagship developments off the board. We really expect most of that to be done, you know, post USMCA, because they're mainly linked to larger CapEx investments and sort of longer-term investments. So we don't necessarily expect a lease-up of those in the near term, particularly before USMCA, and that's not factored into our guidance. We continue to see that dynamic, I'd say, the more sort of plug and play, 100,000 square foot type properties, less CapEx involved, you know, A good chunk of the leasing we're seeing is still in that bucket and I think that will continue to be the case. So expect that dynamic and expect, I guess, the larger Class A type leases to be done probably towards the second half of the year, you know, subject to TMEC renewal. The spec buildings that we've done so far are mainly in our core buildings. growth markets. So you're looking again at places like Tijuana, Monterey, Pires, and I think you expect to see again Guadalajara being a focus area for us and Mexico City subject to additional land banking. That will continue to be our focus and where we think the long-term demand fundamentals will be best playing out.

Great. Thank you. Thank you so much.

Your next question comes from Piero Prota with Citi. Please state your question.

Hi, Simon. Hi, Andrew. Thank you for the call. I have two questions. The first one is a follow-up on Juan's question, but more specific on the auto sector. How have been the conversations with these types of tenants? And what is your perspective for 2026? Are you thinking they are more cautious than the average tenant or not? And as we've been seeing the auto exports to US falling throughout the 2025, we would like to understand if the auto sector is a bit more cautious or not. when compared to the average. And the second question is about the 2026 guidance. Just to understand, if you could give us more color about what is the occupancy and the rotation rate that is implied in this guidance, just to see throughout the year if we could see some upside or downside to the guidance. That's it. Thank you.

No, thanks very much, Carla. Look, when it comes to auto sector, auto parts, I'd say it's a steady backdrop overall. And again, I think a large part of that retention, the 80% auto parts for sure is a big part of that. And we're not seeing really all that much in terms of systemic risk or move out velocity. The auto parts production for the year for Mexico, it's slightly off year over year. We're sort of talking, you know, low to mid single digits. So certainly you're not going to go up every year, and of course not in a year where you've had this sort of tariff uncertainty. So I would say coming off a few percentage points is very manageable and is not going to be all that disruptive in terms of leasing and demand. And so I think that's... It's tough for you to work through, certainly for a lot of tenants, but I'd say in general doing okay and sort of mainly working to also get through to USMCA. Having said that, the current tariff dynamic is not all that bad, where the vast majority of tenants, auto parts and other sectors are actually shielded. from any tariff impact. So that's also playing to the benefit of a lot of customers. And whilst that auto parts export volume is slightly off, I think what ultimately drives the sector here is US car sales and they're actually doing pretty well and even slightly up. So I think that's good to see. We expect to see Further regionalisation and, if you like, onshoring of the auto parts sector in general, as you've seen out of the US encouragement for increased car production, even if that's in the US, we're somewhat agnostic, because from an auto parts perspective, That's what we're mostly interested in as that feeds into a supply chain, whether it's in Mexico or the US, as we all know. So I do think that the outlook remains steady and, if anything, we should be seeing improving trends as you get better visibility on US MCA renewal. With the second part of the question on guidance, I'll hand it over to Andrew.

Yeah, happy to take that. I think particularly, as you may know, we do not provide specific guidance on occupancy or retention for the year. However, I can... I can say that our expectations with respect to leased GLA particularly are expected to remain stable throughout the year and we're expecting consistent retention metrics which reflect that sort of broader wait-and-see approach that Simon spoke about earlier. I think it's important also to call out that we have not assumed any material lease-up of our development program or our completed development projects as part of the FY26 guidance, and that represents meaningful upside in the order of north of $10 million ultimately. as we stabilise those projects through 26 and 27. And so that provides, I think, you know, on balance more upside to the guidance should we see an overall improvement in market conditions throughout the year and obviously sort of subject to what we see on the USMCA resolution and outcome. And hopefully we see that sort of sooner rather than later because we think there's good tailwinds there that will support further market activity in the second half of the year.

Thank you.

Thank you very much.

And your next question comes from Alejandra Obregon with Morgan Stanley. Please state your question.

Hi. Good morning, Simon and Andrew. Thank you for the call. I guess my question is on your retail portfolio. So we were looking at the variable portion of your income and some of your traffic indicators over the last quarters, and it appears that growth might be moderating to some degree here. So I was just hoping if you can help us understand what are you seeing in terms of tenant sales and trends in your portfolio with that respect and whether this could be triggering perhaps a more proactive approach when it comes to events or marketing spend just to support for traffic and tenant sales. Thank you.

Thanks, Alejandra. Look, I think retail, in fact, we've been very happy overall with the full-year performance. I would say that the 4% increase in NOI has been a good result. We've seen occupancy move up, crossing the 94%. So I would say the performance for this year has been very good. And if anything, we'd like to think there's further upside when it comes to 2026 and NOI in particular. So we do have a constructive outlook on the portfolio as a whole. component, I think we wouldn't expect it to move too much from where it is on a full year basis as a percentage of total income. Most of our income, as you can appreciate, is on a fixed rate lease basis and that will continue to be the case. I think what you've seen is if you have well-positioned shopping centres, necessity-based in major metro areas such as ourselves, and that's where you're going to do well, and I think that's where we've benefited from always knowing we've got a good set-up there. Having said that, we are still seeing, I'd say, variable level of performance between different types of customers. I think gyms continue to do pretty well and we're seeing expansion opportunities with certain operators. Supermarkets doing very well. Small shops in the main are actually pretty healthy. You've seen the foot traffic recover to support all that. Probably the cinemas, I would say, still remain a soft patch. and still prone to, or still very movie dependent, I would say, to have a good quarter. So that remains probably the softest part of the portfolio, it's fair to say. But look, overall, we're very happy with the performance and that cash performance at an ROI level we expect to, if anything, increase into 2026 with, of course, a little bit of marking support where it's needed in selected areas, but nothing too much off-trend from what you've seen this year.

Gotcha, that's very clear. And if I can add an additional question here, when you think perhaps for the medium or long-term evolution of your portfolio, do you see any opportunities perhaps for a change in your asset mix, or would you think that that's going to be largely stable over the long run, whether it's acquisitions or recycling opportunities, mostly perhaps recyclings on the different buckets or the original buckets? How do you think of your long-term mix on the portfolio?

I think longer term, you know, there's a good case to saying specialised industrial would be following investor sentiment and investor preference. So we see that as a viable long-term strategy. I think where we've seen with retail portfolio, some of the key factors we've always been thinking about in thinking about that longer term path to specialisation is firstly optimising NOI performance and essentially value of the retail portfolio. We've continued to do that this year. We think there's upside to come next year. And in conjunction with that, also mindful of where the local interest rate environment is very encouraging to see the meaningful drop in local rates over the last year. I think that also provides a more conducive M&A backdrop. So certainly that recycling opportunity I think is becoming increasingly attractive. For the time being, our focus will be to continue maximising NOI. We'll be monitoring that broader retail M&A backdrop through the year just to see how that all all squares up, but certainly as time goes on and from a longer-term perspective, maybe into a longer-term perspective, I would say that as we think about embedded firepower, we usually think about that these days as half a billion dollars, whether that's to do with our available balance sheet committed funding lines or that retail recycling opportunity.

Gotcha. That was very clear. Thank you very much.

Your next question comes from Felipe Barragan with JP Morgan. Please see your question.

Hey, good morning. Simon Andrew. Thanks for the call for taking my question. So I want to talk about the leasing spreads. Obviously, this quarter, we saw retail leasing spreads a little bit above the industrial, and it's positive to see the guidance for next year being the 10%, 15% on leasing spreads. So my question is, How much upside is there to that guidance assuming that the USMCA gets swiftly approved and whatnot in July? Are tenants more or less ready to just sign and get these properties up and running, or is it something that we might be seeing more in 2027? Thank you, guys.

Yeah, sure. Thanks, Philippe. Look, I think what we saw in fourth quarter was just the 4%, I'd personally say, was a non-representative quarter. We had basically two industrial leases there. One was for 290,000 square foot. The other one's for 40,000 square foot and they're basically renewed at a market rate that they're pretty much at already. So very, very sort of thin renewal volume. I think it's not something to read too much into. Probably more representative in terms of where we are from a leasing spread point of view You know, firstly, what we did for the full year, that was actually 20%, a good increase actually from last year, which was 14%. So I think the 20% overall we're certainly happy with. And when we were actually having a similar conversation this time last year around Outlook, we were thinking, you know, it's going to be closer to 10% than 20%. So I think we beat our initial expectations, very happy for the year. And I think it's also good to reference the weighted average rental rates for industrial were actually up 6.5% over the course of the year, which is, again, obviously a very strong beat for CPI. And it actually accelerated from last year's rental rate increase, which was 5.8%. So 6.5% increase overall in, I'd say, a tough market is a great outcome. Coming more towards your question on outlook, the 10% to 15%, we think is where we should be based on current market dynamics and what we're currently forecasting. I think it's right to say, Felipe, that, look, if there's a USMCA renewal sooner rather than later, then... we can see the demand environment shift pretty quickly. So, yeah, potential upside on that. But I would say that, you know, we're a long way from seeing that USMCA renewal. We are forecasting our guidance and outlook on basically a wait-and-see dynamic for the remainder of the year. And that's where you get to the 10 to 15. But, yeah, potentially upside, depending on where USMCA is.

Thank you, Simon. Thank you, Simon.

Your next question comes from Jarell Guiotti with Goldman Sachs. Please state your question.

Thank you for taking my questions. I have two. Speaking to the leasing spreads, if I look at your renewal spreads in 2025, it was 20%. And then guidance is 10 to 15. And so I just want to understand the downshift. I mean, at the midpoint, we're talking about 750 basis points lower. So I'm just trying to understand is that downshift in leasing spread expectations, how much of that is driven by just higher base rents, which are closer to market, versus your expectations of incremental demand? And then the other question I had was around Tijuana. Since you have a JV development over there, I just I just want to understand how the conversations are going in the sense of trying to lease up those properties or just to try and understand what the potential demand is for those properties that are being developed right now and maybe for the market overall. Those are my questions. Thanks.

No, thanks, Raoul. Look, I think what we're seeing with regards to renewal spreads, that 10% to 15%, you're right to suggest it's also just a reflection of the fact that where those leases currently are, they're probably, I guess, somewhat closer to market on average than prior years. So there's a bit of a function on that. We're basically expecting – when we're thinking about 10% to 15%, we're basically expecting those spot prices to be holding up at around the current levels. So, yeah, steady in terms of mark-to-market pricing, and it's just a reflection on a bottom-up working through the leases where they are relevant to that spot price reference point. Nothing more complicated than that. When it comes to Tijuana, again, this is, in general, and the JV development we have there, in general, Tijuana is a market that we very much love from a long-term outlook. We think that the location and the diversity of tenants and sectors you have there is a great foundation. We obviously have our 385,000 square foot that's in our wholly-owned portfolio that is available for lease-up. That's going to do well. We're encouraged by the... the level of interest from different types of customers in that product given the location and the KBAs. The land bank that we have with our JV partner is a different sub-market, different type of building customer and again I think that one is going to do well just given that it's a walk to work type market with the labour around it. We're encouraged actually by the sub-market demand-supply dynamics in that particular location, and we think there's a good basis also to see a construction start in 2026, taking note that, as I said earlier, we've seen some new leasing actually already in our portfolio in Tijuana with a relocation from Asia of manufacturing operations. So certainly it's a market that can shift. quite meaningfully, and whether it's in our portfolio or other new leasing that's happened in the last month or so with some of our peers, it's certainly, I think, a market that's definitely got more upside to come.

And quick follow-up on the leasing spreads. When you're talking about 10 to 15, those are in dollars. I mean... They're based on the currency for the lease, or when you say $10.15, that's $10.15. How should we think about the currency for the leasing spreads?

Get back to those U.S. dollars. As you know, we have 93% of our leases in dollars in the industrial, and it's effectively a U.S. dollar denominated number. Great. Thank you.

Your next question comes from Anton Morsanater with JBM. Please state your question.

Hi, guys. Thank you for taking my question. Just a quick one. I know it might be a little bit soon, but recently we saw the announcement of the infrastructure investment plan from the Food Administration. I was just wondering. if maybe all of these projects announced towards energy and transportation and all of that got some of your clients excited. Not sure if maybe you saw a shift in the sentiment from maybe all of the infraside getting resolved so the developments could accelerate. I'm not sure if you've heard anything there. Thank you.

Thanks, Anton. Look, we spoke about some of this earlier. We're encouraged by the Mexican government's tone and policy implementation. I think it's very constructive. They're obviously focused also on building up the manufacturing base in Mexico and having a great infrastructure and energy plan around that is fundamental. I think we need to recognise that a lot of the the benefits that will be coming from these policy implementations, whether it's on the energy transmission distribution or infrastructure in general. It's a multi-year. it's a multi-path to fully realise those benefits, which is fine. I think we have a long-term investment outlook, so do many of our tenants. And so I think that definitely creates a positive sentiment and tone, knowing that there is an alignment here with regards to building up the infrastructure and energy capacity to support long-term investment. So that's positive. I wouldn't say that necessarily shifts anything in terms of shorter-term leasing decisions, just because, as I say, there's nothing there that's tangible or makes a difference that quickly. What we need to be focused on is making sure that we have the right portfolio in the right locations with the KBAs to service that demand, and that's what we have and will continue to focus on.

Thank you very much.

And a reminder to the audience, to ask a question, press star 1 on your phone. To remove your question from the queue, press star 2. Your next question comes from Jorge Vargas with GBM. Please state your question.

Hi. Good morning, Simon and Andrew. Thank you for the call. Only one question from my side. Professional fields and maintenance expenses increase meaningfully this quarter. Were these primarily one-off in nature? or should we expect a structurally higher expense base going forward? Thank you.

Hi Jorge, happy to take that question. I think the very sort of short answer to that is that that's really a product of seasonality of expenses and we typically see a step up in those types of expenses in the fourth quarter and so largely speaking that's really driven by the seasonality. We are seeing slight increases in costs across the portfolio going into FY26, sorry, but generally speaking, the costs that you're referring to are exactly that, driven by seasonality, as well as some customary year-end provisioning.

Thank you. And there are no further questions. I'd like to turn the conference back to Simon Hanna for closing remarks.

Thank you, Diego, and thanks for everyone for participating in today's call. Along with Andrew, I want to thank all of our stakeholders for your ongoing support, and we look forward to speaking with many of you over the coming days and weeks, as well as updating you again at the end of next quarter. Thanks, everyone.

The conference is now concluded. Thank you for joining our presentation today. You may now disconnect.