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spk04: Ladies and gentlemen, thank you for standing by, and welcome to the FIBA Prologis Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Costa Parmenoulis. Thank you. Please go ahead.
spk06: Thank you, Brandy, and good morning, everyone. Thank you for joining us for our third quarter 2020 earnings conference call. Today, we will hear from Luis Gutierrez, our CEO, who will discuss our strategy and market conditions, and from Jorge Giró, our Senior Vice President of Finance, who will review results and guidance. Also joining us today is Hector Ibarzabo, our Managing Director. Before we begin our prepared remarks, I would like to remind everyone that all of the information presented in this conference call is proprietary and all rights are reserved. The information has been prepared solely for information purposes and is not a solicitation of an offer to buy or sell any securities. Forward-looking statements during this call are subject to a number of risks and uncertainties. Our actual results, performance, prospects, or opportunities may differ materially from those expressed in or implied by the forward-looking statements. These forward-looking statements are current as of the date of this call. We take no obligation to publicly update or revise any forward-looking statements after the completion of this call, whether as a result of new information, future events, or otherwise except as required by law. Additionally, during this call, we may refer to certain non-accounting financial measures. As is our practice, we have prepared supplementary materials that we may reference during the call. If you have not already done so, I would encourage you to visit our website at fibraprologist.com and download this material. With that, it is my pleasure to hand the call over to Luis.
spk02: Thank you, Costa, and good morning, everyone. I hope you and your loved ones are staying healthy and safe. we remain steadfast in doing everything we can to help our employees, customers, and communities through this complicated time. We have been working remotely, our markets have improved, and we have excelled in our customer service and engagement. The combination has resulted in operating a financial performance that exceeded our expectations. Let me highlight the operational results for the third quarter. we had a robust leasing activity that resulted in an increased occupancy. Leasing spread reached an all-time high, and importantly, all six of our markets recorded positive rent change on rollover. As of yesterday, we had collected 99.4% of third-quarter rents and more than 86% of the rent due in October. Today, We have rented rent deferrals totaling 1.8% volume revenues, which is less than we expected at the beginning of the health pandemic. This is a testament to the sector diversification and credit quality of our customer roster. We expect to recover 85% of those rents before year end, with the remainder in early 2021. We had a strong FFO and AFFO growth which exceeded our expectations. Turning to the broader real estate environment, demand exceeded supply by more than 1 million square feet in the third quarter. Development activity remained stable and has been adapting to meet demand. Market vacancy in our six markets tightened 30 basis points to our historical low of 3.1%. Market rental rates increased in the third quarter, rebounding from last quarter a slight drop. Now, let me spend a few moments on what we're seeing on the ground. Customer sentiment continues to be resilient. Despite a weaker economy, there's a lot of demand for modern logistics products in Mexico. We're still engaging our customers on expansions across all of our markets. In Tijuana, where land scarcity has kept supply limited, resulting in low vacancy and higher rents, customers are moving quickly to expand. In other markets, the pace is measured. This quarter, we also started to hear about expansion from our customers in rain also, which is encouraging given the demand there has lacked over the past year. Two key structural drivers of logistic real estate. manufacturing and consumption have advanced significantly this year. While neither is completely decoupled from the broader economy, they have outpaced the economic growth of the country as a whole and have been key factors in the strong performance of the asset class. Starting with manufacturing, nearshoring operations to Mexico continues to be a central theme and one that is building momentum. Proximity to the United States and property quality are paramount in the discussions we have been having with prospective customers. This has been a competitive advantage for us. Notably, two Chinese companies will soon start operations in Mexico, having signed leases in the third quarter. One is a furniture company that will be based in Monterey, The other company is a global leader in adjustable beds and sleep technology, and they will be located in Ciudad Juarez. We're finding nearshoring demand is broad-based across medical, consumer goods, electronics, and digital equipment, among many other industries. I expect greater frequency of companies near shore to Mexico due to the continued trade tensions between the U.S. and China, as well as the ongoing health pandemic, which is forcing customers to hold greater inventory levels closer to the end consumer. On the consumption front, e-commerce continues to accelerate and, in fact, has reached 15% of our portfolio following the acquisition of Prologix Park Grand in April. The lockdown forced many Mexicans to adopt digital consumption sooner. The e-commerce asset percentage of retail sales has doubled over the past six months. However, adoption remains low relative to the rest of the world, signaling that there is more room to grow. Retailers will have to adapt to this trend towards online shopping by carrying more inventory, which will result in more space required. While e-commerce was late coming to Mexico, it is now firmly entrenched, given the space requirements being three times that of a traditional retailer. We expect demand for our product will continue to increase. When we're cautiously optimistic in our outlook, given the pandemic and state of the Mexican economy, we believe Fever for Logistics built to outperform. Due to the logistic asset class has outpaid the other asset classes even more so during the health pandemic. Our portfolio has been resilient during this challenging time, exceeding our performance in recent years. We have a differentiated strategy that focuses on two key drivers of economic growth, along with our stringent guidelines for investing in markets with high barriers to entry. And we are well positioned for the future with low leverage and flexible balance sheet that allows us to be opportunistic when others cannot. The market to deploy capital has become more favorable, and we are in terrific position to take advantage of this opportunity. We expect to become more active in the next few quarters on this front as we strive to create value for certificate holders. With that, let me turn the call over to Paul. Thank you, Luis. Good morning. Thank you for joining us, and I hope everyone is staying healthy. Before commenting on FFO, I would like to remind you that we issued 200 million additional certificates equivalent to 30% increase in the middle of March. Proceeds from these additional certificates were used to acquire Grand Portfolio on April. The NOI associated to this portfolio was not stabilized until September of this year. Therefore, we have not received the full benefit. On a nominal basis, SFO for the quarter totaled almost $37 million, or $4.3 U.S. per certificate, which represents an 8% increase if compared to the same period last year. Excluding the impact from one-time non-operating items on both quarters, such as the relied gain on VAT of $3.6 million, SFO per certificate was basically flat. ASFO was $28.1 million for the water, an increase of more than 26% compared to last year. In the last nine months, we have received around $11 million of additional income derived from non-operating revenues, which are related to withholding tax and VAT reimbursements, as well as reliant income from hedges on ethics. These revenues are not related to the operations of the portfolio. They are, however, related to the risk management of the balance sheet. To this extent, we will continue to protect earnings with best of hedges, which could result in reliant gains in 2021 and beyond. In addition to protecting earnings, they ensure our dollar distribution is unaffected by exchanges in ethics. Moving to operating metrics. Leasing activity was 3.8 million square feet. On a cumulative basis, we have leased 11.5 million square feet during 2020, leaving us with a record low of 2% expiration for the balance of the year. Quarter end occupancy increased 90 basis points from the second quarter to 96.4%. However, it was down 40 basis points year over year. Our leasing teams are doing a phenomenal job. exceeding our expectations from the beginning of the health pandemic. Despite the weaker peso, and in line with our strategy to push rents higher to create value, net effective rent change and rollover increased 16.3% for the quarter and was 12.1% on a trailing four-quarter basis, both of which were above our expectations. Cash, same store NOI, declined 6% and was mainly driven by concessions related to longer lease terms and a weaker peso. I would like to reiterate that increasing free rent is a function of longer term and lease volume and not due to COVID. To this note, free rent is not increasing. The nominal level is higher as a function of longer term and higher volume. To give you some perspective, same-store gap NOI, which moves out the effect of free rent, increased 2.4%. Moving to our balance sheet. As you may have already seen, we have announced that Fibra Prologis has received credit rating from Fridge and HR ratings. On an international scale, each gave us triple B, and HR gave us triple B+. On a Mexican scale, we have also received a triple A rating from both agencies. This is due to the strength of our portfolio, investment strategy, and balance sheet management since IPO. As a consequence, we will have greater flexibility for refinancing alternatives in the near future. Let me go through the balance sheet metrics for the quarter. We ended the quarter with 28% loan-to-value, weighted average debt cost of 4.3%, weighted average maturity of 3.2 years, debt to adjusted EBITDA of 4.0, fixed charge coverage ratio of 5.1, and we have $341 million of total liquidity through our unsecured and committed credit facility. Wrapping up, in this period, we have further improved the credit quality of our portfolio and balance sheet. Our teams have done an excellent job on lowering the leasing risk in operations in 2020 and below average growth through 2021. Also, as you can see, we have actively working on having a more flexible balance sheet. All these together make CIDRA Prologis an attractive investment from a risk and growth perspective. With that, I will turn it to Brandy for Q&A. Thank you.
spk04: At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. Again, that is star, then the number one. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Sheila McGrath with Evercore.
spk01: Yes, good morning. Your balance sheet is low leverage based on LTV. Can you comment how that positions you for additional acquisitions, either from third parties or your sponsor? And are there any opportunities in the pipeline? And if you can comment on pricing, if that's changed since COVID.
spk02: Thank you, Sheila. This is Luis. Yeah, so, you know, after the first quarter in March, you know, we decided to stop all capital deployment activities, given the uncertainty created by the pandemic. And this decision was not only by Peter Prologis. We saw a lot of players, you know, Prologis even globally, our sponsor, decided to stop that. So after two quarters, we have been seeing the sector resilient and have started to see investment activity. For example, our sponsor has started to invest and has resumed activities. We're expecting a healthy pipeline to increase as part of our acquisition proprietary access from Fibra for Logis that will increase during 2021. So we believe it's a good time for Fibra to resume investments. I think, as you say, we're very well positioned. We have $340 million of liquidity and 28% loan-to-value, which, you know, makes us to take advantage of this. So I guess we have 1.7 million square feet in the pipeline of Prologis. We will act in this fourth quarter and acquire two buildings, mainly in Monterey, for about $60 million. And we're also seeing good third-party acquisitions. So we believe the total activity for the fourth quarter will be $100 million. Of course, you know, the plan is to do in the fourth quarter, although some of this activity may sleep for the – for the first quarter. And I guess it's also a position of wealth to take advantage of anything that comes next year. Surprising, we see cap rates maybe remaining stable pre-COVID. We see a lot of investors and stakeholders interested in the logistics sector. So we are not, you know, discounting the possibility of a value increase in the overall sector. But, you know, pre-COVID pricing is something that can be expected. So cap rates for Mexico City, six and three quarters, maybe Monterey and Tijuana, 25 basis above that, and maybe there are other markets, another 25 basis above. So that's what I could comment in terms of pricing.
spk04: Your next question comes from the line of Alan Macias with BAML.
spk02: Hi. Good morning, and thank you for the call. Just a quick question on utility expenses. Quarter of a quarter they declined, and over the last 12 months they have been declining. And just if you can give us some color on what is driving this Should we expect utilities to remain at third quarter levels or second quarter levels of this year? Thanks. Gracias, Alan. This is Jorge. Regarding utility expenses, as you mentioned, they decrease quarter over quarter, but they move around, especially in the fourth and first quarter, given some timing. So you should expect, from a utility perspective, you should see them on an annual basis, and you should be in a relative basis similar to what you have seen in the previous years. So you should see them annually. Quarter over quarter, they fluctuate as, you know, land tax or CST payments. Sometimes they concentrate in the fourth or the first quarter, and then they move out through the year. So I would take an annual number and move it out from projection purposes.
spk04: Your next question comes from the line of Nikolai Lipman with Morgan Stanley.
spk08: Thank you. And thanks for the call and for taking my questions. My questions are very similar to those of Sheila. I was wondering, I saw that Amazon is announcing today an investment in Mexico of $100 million roughly. Can you talk about how that could affect your business in both Monterey and Mexico City? And also we see that Mexico City is about 10% premium to your average. Can you talk a little bit about what you're seeing specifically around the Mexico City market in terms of sort of the marginal sort of the latest contracts that you have signed in that market vis-a-vis your average or vis-a-vis Mexico City? Thank you very much.
spk12: Thank you very much, Nicolai, for your question. This is Hector. Indeed, this announcement that just Amazon did this morning is something that it's a clear reflect of what is happening in the e-commerce. We've seen between the second and the third quarter of 2020, the same growth on e-commerce activities to what has happened since Amazon started operations in Mexico back in 2014 to raise back press reels. The lockdown economy is bringing a lot of new online shoppers, and we're seeing not only Amazon, but we are seeing Mercado Libre, and we're seeing all of the retailers enhancing in a very important manner their online activities. The focus that Prologis has, and it is embedded in our name, is regarding logistics. Amazon rents 5% of the total space globally from PLD. So it's not that we have an exclusivity with Amazon. Amazon does not have an exclusivity with us, but certainly there's a strong corporate global relation with these guys. We're currently working with them in several projects, executed some new activity with them in Mexico City. You mentioned specifically about Mexico City market. uh mexico city market presented uh three and a half million square feet absorption uh during this quarter and this number is higher than the construction start from mexico city so we see that the mexico city market rents are are pushing up uh mexico city market trends during this quarter we increase them uh 11.9 percent so this is a clear testimonium that the most important market for figure parolees which is Mexico City, is a market that will keep on bringing good dividends to us. We are optimistic. Land scarcity in this market is very important. It takes several years to launch projects, and I think that Fibra Polois will keep on taking advantage of this.
spk04: Your next question comes from the line of Gordon Lee with BTG.
spk07: Hi, good morning, everybody. Thank you very much for the call. A couple of questions. First, on your guidance, if you look at your performance through the third quarter, it would seem that you're performing above what your guidance would suggest. And so sitting here in October, I'm wondering whether your decision to keep the guidance untouched was because there's something in the fourth quarter that you're that you're looking at that you might be a little bit concerned about, or are you simply being very conservative? And then the second question, Hector, for you on the contracts that you signed with Chinese customers in the past, you've mentioned that one of the reasons why why they had been slow to move into Mexico was that they really didn't – they wanted contracts with different characteristics from what was the norm in Mexico, both in terms of ownership and currency composition. I was wondering whether you're now seeing them adapting more to the way that Mexican contracts are signed, or are you having to be flexible in the way you're signing contracts with them? Thank you.
spk12: Thank you, Gordon. Let me start with the second question. And effectively, the global Chinese companies that are part of this nearshoring phenomenon are companies that are well adapted to the way of doing business in Mexico and in some other places. The issue that you mentioned is more related to the new Chinese companies that for the first time are getting out of China. As you know, we have to take advantage of having an important operation in China And we have permanent conversations with our Chinese colleagues on the right way to approach the situation. It's very difficult just to be in court in China with a Chinese company. And that's something that represents a big difference compared to some other countries. So whether these companies are adapting, I think it's too early to say. the velocity of this adaption is going to be more related to the flexibility or openness that competition presents. It's not the same thing having a strong public U.S. company guarantee than having a strong public Chinese company guarantee. And I'm not sure if the marketing Mexico competitors know about this. A key factor in this is the way you structure the contracts. I think that we do have an advantage here because of our relations, but very optimistic about the flow of these new companies into the market. Border markets are in very good shape because of these new demands that we have. Let me turn it to Luis to comment about that.
spk02: Thank you, Gordon. I hope everything is well in New York. so uh in uh relation to your question about guidance uh i have to say that uh the results are better than is expected um and uh we don't see anything getting in our way in the fourth quarter so uh i think we will be with shape and the final results will be at the high end of the range now let me comment uh i guess on some of the items so acquisitions as uh you know As I have announced, you know, we will be doing $100 million. We'll probably go above our year end, but we don't know if, you know, any of this activity may slip to 21. So that's why we did not increase guidance. We see, you know, the operating occupancy results to be at the high end of the range. And FFO will be at the high end of the range, but certainly, you know, it could bump the range at the end.
spk04: Your next question comes from the line of Vanessa Chiroga with Credit Suisse.
spk05: Thank you. Hi, Luis Hector, Jorge Costa. I hope you're well. My first question is regarding the lease term expansions or extensions that you have been achieving. Do you expect to continue with these efforts very actively going forward? Is there a target lease term that you want to achieve for your total portfolio? That's the first question. And the second one is about rents. We saw that net effective rents are growing or grew faster in the third quarter than cash rents. So how do you expect those two to evolve going forward? Thank you.
spk12: Thank you, Vanessa, for your questions. I'm glad that you are asking this question because as I have mentioned in the past, we have passed through several changes of cycles besides COVID and we know exactly what to do and how to react to these kinds of situations. We are presenting a longer list term because of a program that we launched with current customers. It's a program that is very well thought out and that has been successful in several markets in which Polois participates. We have 18 transactions in this regard, so it's not that the vast majority of our contracts are going through this structure. It is a win-win because it does provide certainty to both parties, to landlord and to customer, and this has as a consequence an important stability on the portfolio. I think that there's a bit of a misperception between expanding these terms and the so-called free rent grant that is provided. Free rent is not something that we're doing because of COVID. Free rent is part of the regular leasing activity, and it comes as an origin of providing some term for the tenant to do all the final finish-outs that they need to start operations. This is the reason of this re-rent, and it's different in each one of the markets. This is why the net effective rent is different than the cash rent, but this gets stabilized very rapidly. On the long term, this is creating value for the portfolio because we provide the stability at the same time that we optimize the investment that we do in development projects. So it is a good thing, even though it could look like there is some free rent involved. It's part of the regular leasing activity. Your second question regarding to rent in the different markets. You know, we see the two most important markets in which we are focusing, which are Tijuana and Mexico City. I think that we have an important runway to keep on growing. The increased rent of our portfolio in Tijuana is 6.5% approximately below the market trend. Tijuana is a market that we like a lot. We are very well positioned. Our sponsor is developing. And the rent changes that we're providing in that market is very interesting. In Mexico, the situation is the same, upward trend. But, you know, Mexico is a market where the majority of the rents are peso-denominated. So there is an important catch-up on peso rents. If we were to provide a rent growth delta for Mexico City, it would be much more important than the one that you are presenting in dollars. I'm optimistic because of the demand that we have in logistics and in manufacturing, and I am positive that we will keep on providing positive rent growths. The rent growth that we are showing in this quarter is above what we were expecting, and I can anticipate that we will have an important positive rent growth during 2021.
spk02: Vanessa, this is Jorge. Just to reiterate on what Hector said, remember that net effective rent represents the economic value of the contract. So in terms of value, it shows you, it smooths out or takes away the concessions or any giveaways that you may have to give to the tenant and gives you the value, the real value of the contract. So having an increase in net effective rent with one third of our a rent in pesos and a 20% or so devaluation in the year. I think it's remarkable.
spk04: Your next question comes from the line of Enrique Alcantara with Citi.
spk11: Hey, hello, guys. Good morning. Thanks for the call. And I just want to ask you one question. Your net effective rent change was 15.3% year-on-year, but your cash rent changed minus 9%. Is that because new leases are starting at a lower rate so that they step up to a higher rent level towards the end of the lease? If so, what is the rationale for these commercial strategies?
spk12: Thank you for your question, and this is pretty much related to Vanessa's question. The cash rent change is not as positive as the gap rent change, exactly because of the rent concessions that always apply at the beginning of the contract. Let me provide an example that might provide additional clarity to this concept. If I'm enlarging a contract in Mexico City, for example, let's say a four-year contract, I might be providing 0.3 months for every additional year that I'm enlarging the contract. So if I enlarge the contract for years, I would be providing 1.2 months of free rent as part of the rent package customarily for these customers. This has an impact Enlarging the term of the contract, as Vanessa was questioning, but during the first month of that new contract that we have with each customer, we will not be receiving cash. They have the opportunity of having some cash relief because of the new business that they provided to us. This is the main reason because you see the difference between the cash length change and between the gap length change. But in the overall, the right way to look at this is in the mid-term, understanding all the benefits in the stabilization and additional business that we are capturing from all these customers.
spk02: And just to be clear, Mauricio, the cash rate change for the quarter was 7.5% positive, just two. And our cash and net effective rent change was 16.5. So, I think you have negative, so just wanted to clarify that.
spk04: Your next question comes from the line of Mauricio Martinez with GBM.
spk02: Hi, everyone. Thank you for taking my question and congratulations on the results. just a a follow-up question on my colleague uh mr lee what maybe if you can give us a a a more call or on on the strategy of the that you're undertaking to capture the potential clients from the from the near sharing trend and maybe if you can give us some some uh well a sense on the risk profile from these potential tenants. What are the length of the term that they are looking or that they are asking for? Maybe you can give us more color on that.
spk08: And also, a second question, if I may, probably the demand has been quite strong, as you point out in your remarks, but how are you seeing the development front?
spk02: Is there any ramp up of new projects at this particular point in time, or what are you seeing in this?
spk12: Thank you, Mauricio, for your question. And I guess we are learning in this near showing activity, which is good news that the country really requires. Our markets in the border are booming. As you know, we have some association of some properties in Sonora with Aquarius Market, but if we were to analyze only the properties that are in Ciudad Juarez, our occupancy in Ciudad Juarez is 100%, our occupancy in Tijuana is 100%, and our occupancy in Reynosa is 99%. Having said this and trying to understand the new demand that is happening, it is important to establish that probably 50% of this new demand comes from customers that they do want to own their space. This is a business in which Fibra Prologis is not focusing. As we all know, the core business of Fibra Prologis is long-term leases and creating value for the properties. So we're focusing only on those customers that are willing to rent space. As I mentioned in my previous participation, instruction in these contracts in the right manner is important. Chinese companies, they do feel comfortable when they find a Chinese environment here in Mexico. And we are trying to provide that comfort level by means of extending the level of the platform between the relations that we have with some of these customers in China. As you can know, we are the only company in Mexico that eventually could offer a Chinese reach to these companies that are jumping into Mexico. And if it's needed, we are in a position to use this. We know how to structure the transactions, and we know how to deal with these customers. The only way to take care of this additional demand is if you are well-positioned. Prologis, as our sponsor, being in charge of the development program for future Prologis, has an important backlog position of land in the three border markets in which we participate. In Ciudad Juarez, Prologis has the best remaining piece of land available. In Juarez, you can find land, but the best land is with Prologis. Prologis has a joint venture with a large landowner in Tijuana. and we are working as well in extending our one position in Greenland. We are very bullish about this global market, and we will keep on seeing positive news in this. Regarding development, activity is still there. In our market, we were able to see 12.3 million square feet of new construction starts in this quarter. The most active market on this regard was Mexico City. In Mexico City, there was 3.1 million construction starts, while, as I mentioned, the absorption was 3.4 million square feet. So I think that the balance between supply and net absorption, which is a clear parameter that we always monitor, is in very healthy shape in all of our six markets. And the barriers of entrance that we have in the markets is what is really preventing new competitors to jump into these development activities. Interesting times ahead. The environment is uncertain, as Luis mentioned in his opening remarks. But the resiliency of our sector and the operational results that we are providing make us feel very optimistic about the future of Fibra Prologis.
spk02: We'd just like to add, and I guess complementing what Hector is saying, that Fibra Prologis has a big competitive advantage given the selections of our markets in the north. This near-shoring activity is mainly concentrated in in the northern part of the country, not so much in the Bajio area. So I think also given the quality of our portfolio, we are in a good position.
spk04: Your next question comes from the line of Adrian Herada with JPMorgan.
spk03: Hi, Jorge, Luis, and Hector. Hope you're doing well. Thank you for taking my question. Quick question on dividends. The payout given the guidance that you have seems that will be lower than what you had in the past. What are you thinking going forward? You think it could be an opportunity to keep a little bit of cash for investments going forward? And the second question that I had was on the turnover cost on leases commenced. It has come down considerably over the last couple of quarters, $1.33 per square feet from somewhere around $2 a few quarters back. What can we expect in coming quarters, and what is the reason for this lower cost?
spk02: Thank you, Alain. I hope you're well. So certainly as has been said, results have been better than expected before the pandemic. The logistics sector has outperformed. We see how resilient the portfolio has been with very strong operating metrics. And certainly as a result, this has generated better cash flow than what we have anticipated. Our plan is to keep the distribution that we have guided for the year. As I said, the distribution is 9.7 US dollar cents per certificate. That will not change. But we review our policy every quarter. And we're planning to share this additional cash flow with our investors. And of course, we will be announcing in January as part of our fourth quarter results and year end this new distribution policy. But certainly, we are planning to share this additional cash flow with investors.
spk12: The second part of your question, Adrian, regarding turnover costs, effectively this quarter we have 12.4% compared to NOI turnover costs, while in the next quarter we have 15.4%. The difference between these is because of the couple of lockdown months that we have in the second quarter. The size of the portfolio is such that the right way to look at this is on a four-quarter trailing. And the number that we have here is 12.1%. Our regular run rate for these type of companies on an international basis is between 12% to 14%. And I'm expecting going forward to be in the top range of these because of the solar program that we are launching, because of the LED program that we are launching. So let's try to look at this on a four-quarter training because there could be volatility in a specific quarter as it happened in the second quarter because of the lockdown on construction.
spk02: Just a quick comment, Adrian, on dividends and taking advantage of there were some notes that were evident but missed the expectations. We are distributing 9.7 U.S. dollar cents per certificate on an annual basis. Obviously, it depends on the ethics required when we buy the pencils, and that can change vis-à-vis some of the models that are out there. And also, you have to take into consideration that at the beginning of the year, we had 649 million share for certificates and then at the middle of march we should 200 million more so you have to take into account the average the weighted average for that specific quarter but i i wanted to take the opportunity to mention this because we are decoding what we said we are going to distribute 9.7 us dollars per certificate
spk04: Your next question comes from the line of Francisco Suarez with Scotiabank.
spk10: Hi, good morning, congressional results. The questions that I have are, do you plan to issue debt now that you have the global ratings And secondly, on a follow-up question related with Nick's question on Amazon, do you expect to be successful in adding more space for Amazon in those markets where you want to have it? Thank you, and congrats again.
spk02: Thank you. Jorge here. And thank you for your note and everything. Yes, as you saw, we were raided by Fitch and Moody's, and that gives us a lot of flexibility. We also made public or lifted confidentiality on documents regarding a potential bond that we can issue in Mexico for $250 million. So, I mean, we're in that process. The information is there in the supplemental that is now public. And we will keep you posted as we progress.
spk12: Regarding the Amazon question, Francisco, I think that Amazon is just starting the growth. The focus that Amazon and MercadoLibre are having in Monterrey and Guadalajara are important. We have done additional business within this quarter with Amazon. The advantage that CIDRA provides has is that we have a very strong and close relations with them. We have an executive that sits in Seattle all the time talking with these guys. We know exactly what is the kind of product that they're expecting going forward because they have all their faculty and their needs. What they required by a couple of years ago is not necessarily what they will be requiring within two years. So these relations, being Amazon the largest customer that we have is a competitive advantage. I'm positive that we will be able to do additional business with them in Mexico City, Guadalajara, and in Monterrey, even though I've got to be clear that we do not have an exclusivity with them and that they for sure are going to be doing additional business with someone else This is the way Amazon works. They like diversification, and that's an important component of their strategy.
spk04: Your next question comes from the line of Pablo Monsivius with Barclays.
spk09: Hi. Good morning. Thanks for taking my question. I have one just broad question here. From the total inventory of industrial real estate in Mexico, which is, I think, roughly 80 million square meters, what do you think this metric will look like in five years on the back of e-commerce and nearshoring? Do you think it can grow by 20%, 5%, 10%? What do you think the inventory of industrial would look like in the near future? Thank you.
spk12: This is a very big question, Pablo, and I think that my answer could be as good and as bad as everyone's answer. What I can anticipate with the disability that I have, and I was just requested by my corporate to do a three-year development plan, I can anticipate several things. Number one, Prologis is bullish about Mexico. Despite the current economic and political environment, Prologis is not slowing down. The Executive Committee of Prologis is requesting us to be very active and to be taking care of these opportunities. So you can expect that the reason that Prolois is going to be investing is higher than the one that we have invested in the previous years. Number two, regarding these two tailwinds that you mentioned, e-commerce and near-sharing, I can see that it's going to be a two-digit growth at least going forward. The request of e-commerce investors space from warehouse, we have commented it in the past, is three times the traditional brick and mortar sales. And this brings an additional pent-up demand that we will be in a position to be supplying. No matter who wins the election in the U.S., we do see that this near-shoring phenomenon will keep on being active And we see every time more and more new type of activities taking care on this side of the border. We have commented that now there's important e-commerce operations taking place from the border markets to the U.S. So to do it growth, good day wins. Interesting to see how the economy is going to react. We have positive forces and we have negative forces. But at the end of the day, I think that this lockdown has shown that this business is really resilient. We are part of the supply chain that cannot stop. We are part of this essential industry. And we are very well positioned to take advantage of these situations.
spk02: Pablo, the other thing that I just would add is that, you know, the drivers of the Mexican economy and the activities that will take it out of the recession and will start growing first is exports, mainly tied to this activity. And the other one is certainly e-commerce. So I think in that sense we're very well positioned with exports using the micro drivers that drive this company. So we are excited.
spk04: Your next question comes from the line of Francisco Chavez with BBVA.
spk11: Hi. Thanks for the call. And just a few follow-ups on some previous questions. The first one is on the potential debt issues. Will the proceeds be used for refinancing or for acquisitions? And the second question is on the dividend. If I understood correctly, is there a chance to see a higher dividend for the fourth quarter of this year.
spk02: Thank you. Hola, Francisco. How are you? This is Jose. Regarding the third question, I just want to reiterate what I have said since the beginning of the year, that we're looking to refinancing our nearest-term securities. So the proceeds coming from this potential debt, as we've mentioned, will be used for right financing. No additional debt right now. So that's one. The other one on the dividend, is there a chance to increase the dividend per quarter? The answer right now is no. I mean, we are keeping our dividend guidance, as we've mentioned. And we will inform you and let the market know the decision in the fourth quarter regarding going forward on the dividend. Hope this answers your question.
spk04: There are no further questions at this time. I would now like to turn it back over to Louis for closing remarks.
spk02: Thank you all for joining today's call and your interest in Fever Prologis. We remain committed to creating value for all of our investors. We look forward to see you in person soon. And please feel free to reach out if you have any questions or comments. And please keep safe. Goodbye.
spk04: This does conclude today's conference call. You may now disconnect.
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