Fibra Prologis Reit Ctfs

Ladies and gentlemen, thank you for standing by and welcome to today's FIBRA Prologis Fourth Quarter Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your host, Mr. Costa-Carmagnolas, Head of Investor Relations. Thank you. Please go ahead, sir.

Thank you, Katrina. And good morning, everyone. Thank you for joining us for our fourth 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 Giraud, our Senior Vice President of Finance, who will review results and guidance. Also joining us today is Hector Ibarzabal, 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 had prepared supplementary materials that we may reference during the call as well. 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.

Thank you, Costa, and good morning, everyone. I hope you are all staying safe and healthy. 2020 was an exceptional year for fibroprologists, as our operating and financial results surpassed our expectations. We exceeded our internal growth objectives and completed our capital deployment goals. While our accomplishments were extraordinary, the ongoing health pandemic and the impact it has had on our country weighs heavy on our hearts. Let me discuss highlights for the year. Our FFO and AFFO increased 26 and 19% year over year respectively. The growth was driven by acquisitions made in the first half of 2020, higher rents achieved through our leasing activity, and non-recorded income, which Jorge will cover in greater detail. Operating metrics were strong, highlighted by a record leasing volume of 12.5 million square feet. This was approximately one third of our portfolio and importantly, minimize the leasing role to just 10% in 2021. We collected more than 98% of rent due in 2020. Not only is this a testament to our real estate professionals, but also our credit risk management that reviews the financial health of customers before we sign the leases. Our balance sheet remained strong, and we had an active 2020, which resulted in the lowest cost of debt in our sector. We also raised $730 million of capital through a subscription rights offering and a green bond issuance, the latter being the first of its kind for a real estate company in Mexico. We acquired 5.3 million square feet throughout the year, for $438 million. These properties fit our investment strategy of being located in irreplaceable locations, built to the highest standards, and leased to some of the best global customers. While we have consistently delivered strong results, it is during these times of uncertainty when our strategy shines the brightest. Our performance demonstrates the importance of focusing on both consumption and manufacturing, as well as owning modern facilities in key markets, close to the end consumer. All of which is why we have been able to outperform the broader economy. Consumption and manufacturing exports continue to drive demand for logistic real estate. A trend we expect will continue in 2021. Despite exceeding our expectations, demand outpaced supply by more than 2 million square feet, resulting in vacancy declining to 3.3%. Logistic demand came in at 17 million square feet flat to the prior year. Supply was constrained in 2020 with the lockdown limiting construction for several months. In Mexico City, land scarcity and a lengthening retirement process had limited completions. In our border markets, limited access to electricity has lowered new supply. Even Monterey, which historically has had a higher supply, was balanced. For 2021, we expect a balanced market with a market vacancy remaining below 4%, the cumulative effect resulting in higher market rental rates. Now, let me spend a few moments on what we're seeing on the ground. E-commerce. which changed consumer behavior around the world, has become a significant driver of logistics demand in Mexico. Adoption was further accelerated by the state home economy, with digital sales doubling as a percentage of retail sales to 8%. With e-commerce requiring three times the logistics space of a traditional brick and mortar retailer, the benefit to logistics real estate demand should continue for the foreseeable future. We saw two of our largest e-commerce customers take additional space from us in Mexico City while they analyzed expansion plans which potentially would include leasing under construction projects from our sponsor. A third company known for groceries and everyday household products is also growing their e-commerce business and has discussed leaving more space with us. While those conversations are just starting, I believe it is a leading indicator of demand. Manufacturing remains an important segment, particularly as the broader economy weakens. Proximity to the United States and cost of labor have always been a key competitive advantage and is being further fueled by threat tensions, geopolitical turmoil, and the health pandemic all converging. Evidence of nearshoring is real and will continue to grow. During 2020, we signed leases in Juarez and Monterrey with customers in the consumer electronics, sleep technology, and furniture industries. In other words, the tailwinds helping to drive the agroecological performance have a lot more room to run. Before concluding, let me discuss our 2021 outlook. We are optimistic as we start the year. We're expecting a rebound in the economy, which should be another catalyst to an already strong business. Logistic real estate continues to be the favorite asset class among investors. The combination of retail and office shutdown, as well as the strong industrial fundamentals, drove values higher. In fact, we saw meaningful cap rate compression in the fourth quarter, and we are optimistic this will continue this year. In operations, our focus remains pushing rent and maximizing lease term. However, our opportunity will be limited this year given the amount of leasing during 2020 and the available role. On the deployment front, we expect to be active and opportunistic. In addition to assets from the Prologis development pipeline, we're exploring third-party assets that align with our investment strategy. We view our balance sheets as a major competitive advantage. The flexibility we have allows us to play more often. Our team of real estate professionals prove why they are the best in class during 2020 with seamless execution despite unprecedented challenges. Putting everything together, we are excited about 2021. Our hard work will carry forward this year. where we expect our cash flow generation to be even stronger. We are increasing our distribution 11%, sharing our success with our investors. In summary, we remain committed to creating value for certificate holders. Our portfolio is resilient and built to outperform in any environment. With that, let me tell the Corps over to Jorge.