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spk02: Good day, and thank you for standing by. Welcome to the Freebrook Prologis first quarter 2021 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 need to press the one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Ms. Matej Chavez, Investor Relations for Freebrook Prologis. Please go ahead.
spk12: Thank you, Rochelle, and good morning, everyone. Thank you for joining us for our first quarter 2021 earnings conference call. Today, we will hear from Liz Gutierrez, our CEO, who will discuss our strategy and market conditions, and from Jorge Giro, our Senior Vice President of Finance, who will review results. Also joining us today is Hector Igor Zaval, our Managing Director. Before we begin our prepared remarks, I would like to remind everyone that all 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 that were actually resolved 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, revise any forward-looking statements after completion of this call. without the result of new information, future events, or otherwise, except are required by you. 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 as well. If you have not already done so, I will encourage you to visit our website at peerrepology.com and download this material. With that, it is my pleasure to hand the call over to Luis.
spk11: Thank you, Montse, and good morning, everyone. The positive momentum from fourth quarter has carried into 2021, as evidenced by strong operating and financial results. We feel an even greater level of confidence in our outlook. Let me discuss the highlights for the quarter. We had a healthy increase in cash flow in the quarter, given the strong leasing activity and the revenues from last year's acquisitions. This is evidenced by the cash, same-store NOI, and the quarterly growth in FFO and AFFO. Our operating metrics were solid, and our period of occupancy was one of the highest of any first quarter since IPO in June of 2014. We expect to maintain this level of occupancy given the low leasing role for the remainder of the year. We collected 99% of the first quarter rent and have had no bad debt issues. The resilience of the portfolio during times of crisis is a testament of the credit risk management, solid client list, and the geographic and sector diversification of our portfolio. of three non-strategic buildings in Guadalajara and reinvested the proceeds back into three properties in Toluca and one last touch facility in Mexico City. These properties add state-of-the-art facilities to our portfolio. We have recast our line of credit, providing the liquidity and flexibility to grow with an accretive cost of debt. Our balance sheet at the current leverage is one of the best positions in the sector. Logistic real estate continues to outperform the broader economy globally, and Mexico is not the exception. We expect 2021 to be one of the best years for the industry, given the structural changes underway, including faster fulfillment times and the building of higher inventory levels. As a result, demand remains robust. For the quarter, net absorption in our six markets totaled 6.7 million square feet, with a market vacancy of 3.4%, which is near historic low. For example, the border market ended with a 2% vacancy as a result of the strong activity in the manufacturing sector. The pipeline is solid across all of our six markets, We're expecting demand and supply to move in tandem and keep a balance for the rest of the year. We anticipate this will result in higher market rental rates. Let me spend a few moments on what we're seeing on the ground. On the logistics side, e-commerce continues to be a significant driver of demand. We continue to see aggressive expansion plans which are broad-based. industry leaders expanding their footprint in middle cities and consumer companies beginning to plan new facilities in order to compete. We are well positioned to capture the additional demand of new projects under construction. By the way of example, we entered into a long-term lease in our Santa Maria infill project in Mexico City. This shows that this is a good time to build a last-mile portfolio. Consequently, as I just mentioned, we recently announced a new investment in this new sector. On the manufacturing side, the success of the vaccine program is opening up the economy of the United States faster, and this is driving additional demand for products from Mexico. In light of the ongoing trade tensions between the U.S. and China, some companies have taken the decision of opening a secondary operation as a backup. in case they are forced to shut down. Mexico has been a positive beneficiary of this additional demand. Evidence of that is the signing from Fibra Prologis of two letters of intent for expansions of close to half a million square feet, with current lines from our Monterey market. These developments will be stabilized mid-next year. In addition, markets with sufficient land supply normally have enough spec product under development and no built-to-suits. However, given the high level of demand, there is an unusual pipeline of built-to-suits for manufacturing clients in Tijuana, Reynosa, Juarez, and Monterrey. A sponsor with its land bank is well-positioned to win additional business. These properties will be offered in exclusivity to FEBR. Before concluding, let me summarize our views for the rest of 2021. Logistic real estate continues to be a favored asset class. Investors are strategically reassessing their property type focus. In operations, we will continue to concentrate on pushing rent and turnover. On the deployment front, we expect to be active and opportunistic. We will continue to acquire the Prologis development pipeline as well as explore opportunities from third parties to the extent they align with our disciplined investment strategy. Our banner sheet provides us with major competitive advantage. The flexibility and investment capacity allows us to take advantage of opportunities as they arise. I'm very proud of our team. There is strong culture of customer service, ESG, and excellence which drives seamless execution in challenging times. We believe at current pricing, Fibra Prologis is a compelling opportunity. It provides an attractive corner return in dollar terms, an opportunity for capital appreciation. We remain committed to creating value for certificate holders. Our portfolio is resilient and built to outperform in any environment. With that, let me turn the call over to Jorge.
spk06: Thank you, Luis. Good morning. Thank you for joining us, and I hope everybody is staying healthy. Let me begin with financial results for the quarter. We started the year with strong operational results. FFO for the quarter was $36.7 million, or $4.3 USD per certificate, which was an increase on a sequential basis. If compared to the first quarter of 2020, FFO decreased 9.6% per certificate as expected. This is due to the additional revenue derived from ethics hedges for $3.2 million in the previous quarter. Excluding this non-operational income, SFO would have been flat on a per-certificate basis. A SFO was $28.8 million for the quarter, an increase of about 24% on a nominal basis when compared to last year. Moving to operating methods. Leading activity was almost 860,000 square feet, with a year end occupancy of 96.7%, which is basically flat if compared to the same year last year. Net effective rent change on rollover increased 4%, and for the last 12 months, we have had a positive rent change of 13.2%. For the quarter, Cash same-store NOI was positive 5.2%, and GAAP same-store NOI was a negative 0.4%. This is the effect of rent concessions given in 2020, which will impact GAAP same-store NOI as this free rent is amortized over time. Moving to our balance sheet and capital markets activity. We have a strong and flexible balance sheet. We keep on working on improving it. On this front, let me outline what we're doing. Last week, we recasted our new sustainable line of credit, which was 1.5 times oversubscribed, increasing its capacity to 400 million, obtaining a 26 basis points reduction on spread and longer tenure. We're working in other refinancing activities that should close in the coming months. Our goal is to get the best possible financing costs and terms. We're looking to have a balance sheet with a longer debt expiration schedule, moving from floating to fixed interest rates, therefore increasing slightly our weighted average cost of debt, as well as improving our percentage of total financing identified as green or sustainable. Moving to ESG. We're setting some here goals, such as reach 100% of LED lighting of the portfolio by 2025, currently at 50%. Increase our building green certification to 50% by 2022, from one third today. Start our solar energy initiative in 2021, which will depend on local regulations. The goal is to bring important economic and environmental benefits to our portfolio and clients. 2021 will be the first year when we release our ESG report as will be required by local regulation. With this, let me conclude by saying that our resilient strategy, improved tenant mix, and stronger balance sheet makes T-ReproLogic an attractive investment from a risk and growth perspective. With that, I will turn to the operator for Q&A. Thank you.
spk02: Yes, as a reminder, to ask a question, you need to press star 1 on your telephone. To withdraw your question, press the pound key. One question at a time. For any follow-up questions, you must go back in queue. Your first question line of Sheila McGrath from Evercore. Yes, good morning. You noted that net absorption was very strong in your six markets, 6.7 million square feet. Where was the strongest absorption? Which market? And what's your outlook for 2021 in terms of strongest absorption and rental growth? And if you could elaborate on what industry segments have been the primary drivers of this net absorption?
spk07: Good morning, everyone. This is Hector. Thank you, Sheila, for your answer. Effectively, as you mentioned, net absorption is stronger than what we were anticipating. I think that the logistic and the manufacturing sector are driving this net absorption. The most important one is coming from Mexico City, where we have 2.1 million of debt absorption. And the second market that we have with higher absorption is Monterrey, with almost 1.1 million of debt absorption. In both cases, the main driver has to do with logistics and e-commerce. We anticipate that these trends will continue going forward, so we're expecting very positive 2021.
spk02: And your next question line of Alan Masso from Bank of America. Hi.
spk10: Good morning. Just a question on acquisitions. If you can provide an update on the timeline of the acquisition and if you believe you will be doing acquisitions at the top end of your guidance. And talking about last mile properties, Will your sponsor be developing these properties or will you be acquiring them?
spk11: Thank you. Thank you, Alan. So 2021 is time to play offense. We have prepared the balance sheet and the company for growth. Our long-term value is 29%. And as Jorge mentioned, We have just recaptured our line of credit, so we're ready for that. So we have acquired in the first quarter $29 million, one property in the first quarter and one recently, which was the last mile property. There is 1.6 million square feet, around $130 million, and we will be acting on these acquisitions the ones coming from Tijuana, Monterey, and Juarez. This would probably happen between the second quarter and the third quarter. Let me tell you, we see such a good environment that the sponsor is putting to work, and we are estimating about three million more square feet of additional properties before year-end. This will be around an investment of $200 million. Of course, these properties need to be constructed and stabilized and then offered to the FIBRA sometime in 2022. So we believe this is a great source of competitive advantage. On third-party sales, we will continue to explore that market, at least as we have just said. Last mile properties is a good time to build those properties if there's users that, given the crisis, could give attractive conditions. And these properties are not going to be developed by the sponsor. Most of them will be value-added transactions in which we buy all their properties and they are bought by the FIBA directly. So we believe we will add more properties as the year goes by.
spk02: Next question, Vanessa Carrada with Prom Credit Suisse.
spk04: Hi, good morning. Let me start with a question. The first one is regarding net effective rents. Would you expect to net effective rent for that total portfolio to accelerate in the coming quarters to levels of growth similar to what we saw in the fourth quarter of 2020? And the other question is about ESG, regarding your comments, which are very interesting about the certifications that you expect to obtain. Is this driven by demands from tenants, or are you being proactive in certifying your buildings? And do you expect that to reflect on higher rents as well?
spk07: Thank you, Vanessa, for your question. Let me start with a net effective rent issue. We have been reporting within years how valuable for us is the ability that we have for pushing rents up. On peak, we used to have 16% or 17%. of a spread between net effective rents and market rents. A lot of this value has been captured. So now we are closer, our net effective rents are closer to market rents. So you shouldn't expect a spectacular rent changes number as we have been doing in the past years. However, I got to say that regarding the net absorption that was mentioned in the previous question, And regarding the way market is behaving, we should be expecting an important increase in market trends. So the picture that we have as of today is around 2% or 3% below market trends, but we're expecting in the logistic and in the manufacturing markets, market trends to go up probably between 8% to 10%. So we will keep on showing to the markets our ability to push rents up. Our strategy of focusing in land-constrained markets, it has been working. And our sponsor is doing a disciplined job of trying to replace the backlog so we could keep on participating of these type markets. I will pass the word to Jorge to refer on ESG.
spk06: Gracias, Vanessa. Let me answer the ESG question. Let me just say first that we're being proactive. As I have said in the past, ESG is part of our DNA. It's something that we are pushing everywhere from green buildings to better governance to everything, especially also social approach. So we're being proactive. The new developments that are being done by prologists are being lead certified And the ones that we already have, we have increased our BOMA, for example, footprint, if you may, which is more related to the operations and not necessarily to the construction of the building, which is more on the LEED side. Regarding your question on rents and clients, let me say that rents are established by the market, supply and demand, and not necessarily because they're LEED, they're more expensive, but A product like this causes two things. One, more stickiness from our clients as they have to comply with ESG parameters themselves. So you can think of a multinational company who needs to comply with ESG parameters. Being in a LEED-certified building or an ABOMA building, will help on that certification or that parameter by themselves so it's stickiness and complying with our clients needs uh but that's the way the world is turning so that answers your question next question line of nicola livman from morgan stanley hi good morning thanks for the congrats on the numbers and thanks for taking my question i i also have a question a bit on the lease on the lease friend probably one for you hector
spk05: See if I get it right. Is it 4% for rollover contracts and 13% for new contracts where you have a new tenant, you have one guy going out and a new client coming in? It seems that the 4% would be getting a good deal. You're sold out as much as one can be sold out in this kind of market, I guess. So I guess my question here is, do you often have the ability of existing clients that they can just renew on similar terms so that the repricing becomes kind of difficult? That's basically the question, that maybe the repricing to a mark-to-market level could take a little more time because most clients have an option to just renew on similar kind of terms. Thanks.
spk07: Very good question, Nicola. The way of creating value for our certificate holders is related to create value within the properties. As we have mentioned in the past, value in the properties does not increase just by magic, but you need to make the properties more productive. So this additional productivity with the same investment is really what turns the value up. Having said this, this is where our strategy comes from. We have the ability to push rents because the ratio between supply and demand in the markets is favorable to our investments. This is why we only have decided to be in six out of the 20, 25 markets that exist in industrial real estate in Mexico. What we usually do, and we know our customers are one of the best assets that we have. When we have a customer that we know that we will need to increase the rent, importantly, we work with the customer, so we educate the customer, for the customer to understand where market is. Today, for example, Tijuana, has a very important opportunity to keep increasing rents. So our conversations are constant with our customers, letting them understand how market is and what is happening in the market really makes this process an easy manner to us. We will keep on taking rents off the market. This is one of the strengths that we have. We think that in the market no one has the ability as we do to keep on doing this, and this is one of the best recipes to keep on increasing value for our certificate holders.
spk11: Nicolai, let me just clarify something. In our legal contracts, companies do not have the right to extend their lease at the current rent. At expiration, the rents are reviewed to market. So that's a feature that we have. So that's why we have the ability to adjust the market every time there is a renewal.
spk02: And your next question will wind up Gordon Lee from BTG.
spk01: Hi, good morning. Thank you very much for the call. Two quick questions. The first on Monterrey in particular, you mentioned that it's one of the markets where you're seeing the strongest absorption yet. On your particular occupancy, there was actually a little bit of a slippage from the fourth quarter to the first quarter. So I was wondering if you could maybe... Tell us a little bit of what happened there. I assume it's tenant-specific, but some color would be helpful. And then the other question, Luis, you mentioned that you leased the Santa Maria property, the last touch property that you acquired in early 2020 in Mexico City. I was wondering if you could maybe give us a little color on the terms of that lease, thinking about cap rates, et cetera, and whether you think the one that was acquired in Vallejo this week, you'd see sort of similar economics around that. Thank you.
spk07: Thank you, Gordon. Good to hear from you. Effectively, I see Monterey as a spectacular market for 2021. There is plenty of activity coming from both drivers, from e-commerce and from light manufacturing. As we mentioned, we have a 93% occupancy, which is not as strong for this quarter. But we do expect to finalize the year in Monterrey between 96 to 97. So what we're experiencing is a frictional occupancy. We're participating in important expansions that our customers are requesting. So this will be adding value to the portfolio. And I do see 2021 as probably a record year reaching a big absorption for Monterrey.
spk11: As a last touch, Gordon, and thank you for your question, we have been feeling more confident in our strategy there. And so we acquired this property last year, Santa Maria, and we refurbished it because it was an old – it was owned by Lala, and Lala sold it. So we made a complete refurbishment, and it was leased – to a company that is going to put a showroom and is going to use it for distribution of products. So it was a US dollar denominated 10-year deal. The rent was between $7 and $8 per square meter, which was an upside to what was our original underwriting. And, you know, the Vallejo property, which was just recently acquired, that was also bought empty, and we feel confident about the pipeline of that. So I believe the last touch sector will eventually strengthen. If you look at the phasing of e-commerce, companies will build their big fulfillment centers, phase one. Phase two will be adding properties in middle cities, and Phase 3 will be improving service. Once they decide to go into that Phase 3, then there's going to be more demand for last-touch facilities. So this is a great time to build a portfolio of this type. And given that there is some risk in terms of leasing vacancy, cap rates are between 7% and 8%.
spk10: your next question line of andre madini from citigroup yeah hello team uh thanks for the call my question is uh is on the last topic as well so on the last touch facilities uh and on competition right because when you talk to some feedback peers it seems to us that uh more feedback peers are wanting to get into the e-commerce games, so doing Last Mile and all that. But regarding Last Touch, not a lot of other players seem to be doing that, at least in my perception. I think the perception with a lot of the professional players is that, you know, the Last Touch facility, as they are by definition small in terms of square meter, right, in terms of size and area, there would be a smaller capacity. a smaller capital allocation capacity in this property. So it wouldn't be worth the while of institutional players. So is this reading correct? I know you guys are in the space and doing some nice deals in there. So is there less competition for the last touch? Is it a little bit of an overlooked even though the properties seem to be smaller and it's a lower ticket than the regular last mile facility that is transacted. Thank you.
spk03: Thank you, Andre.
spk07: Thank you for your question. I think that you mentioned an important concept. Because, you know, laptop facilities could be relatively easy to find in the market. If you don't have a clear understanding of what laptop facilities, all properties on sale on infill locations, you know, there's plenty of availability of that type of property. By designing a last-ditch strategy, you need to know your customer, you need to know exactly what they are looking for, you need to know the right areas that eventually would be successful in this regard, and you need to keep a very close look at the price and the cost of this investment. We do see last-ditch facilities with two strategic components. Number one is that these facilities will importantly increase its value. The potential upside that last touched facilities, if they are well-designed, well-thought-out, and well-located, they have a very important upside, an upside which is even bigger than the regular big warehouses that we are used to. As you mentioned, they are not important on the dollar amount perspective. But they could have a very important strategic component because, as Luis mentioned, when service becomes the number one priority for the online players, having this type of facility will help you to tie the big business with this company. It will become like a membership club for them to have access to these facilities. having the entire business with us. A final advantage that we have as prologists with these type of facilities is we have a strong relation with our customers. So I could say that these investments are probably made, I mean, 100% a risk, 100% a call, but we have a lot of feedback from our customers before taking these type of decisions. So it's a kind of a built-to-suit location, built-to-suit type of facility, which is going to be, in the future, a positive advantage that we will have as gaining additional business with important players in the course.
spk02: And your next question is from David Soto from Principal.
spk09: Hi, thanks for taking the call. Just two quick questions. Just a follow-up on the questions regarding M&A activity. Could you remind us which are the regions and the industries that you will be focusing on the next transaction? The second question is, could you provide some color about how is now the breakdown of the U.S. and the Mexican, when the Peso rents been eliminated in Mexico City and Guadalajara market? Thanks.
spk07: Thank you for your question. Mexico City and Guadalajara are markets that are requesting more pesos. This is natural, and somehow we were expecting this evolution. The customers that we have in the markets, even if they are multinational companies, they generate pesos. So in a lot of cases, CFOs, they privilege the fact of not having a mismatch between their expenses and their revenues. In Mexico City, we already have close to 65%. of our rents, which are peso-denominated. And in Guadalajara, we have 35% of our rents, which are peso-denominated. We do not see in any of these two markets an important increase in the peso component. We have, as well, customers that privilege the simplicity of having a dollar lease because it's easy to report. And believe it or not, in a lot of cases, it provides savings to the company to have smaller leases as they end up paying less money on a five-year lease contract.
spk11: So, David, thank you for your question. And I don't know if I heard it right, but let me take a peek of what I think it was the question. So where those acquisitions are going to be based on. So I think, you know, the employees pipeline is from Mexico City, Monterey, Juarez, and Tijuana. And then the pipeline of new product that the sponsor will put into play, I think it's broad-based. I think the strongest markets we see is Juarez, Tijuana, and Mexico City.
spk02: And your next question is from JP Morgan.
spk00: Thank you. Good morning, everyone. Quick question on just the mix of peso-nominated rents within logistics. That would be my first question. And then the second one is, can we expect any further liability management for the rest of the year?
spk07: Thank you, Adriana, for your question. We feel very positive about the way we have balanced our portfolio between manufacturing and logistics, investment dollars. We currently have 60% of our customers who are devoted to logistics and 40.3% of our customers which are devoted to manufacturing. If you were to ask me the question, which sector is going to be stronger in 2021, I would have a lot of difficulties to provide an answer. I'm seeing a very strong year, and I'm seeing both manufacturing and logistics to be very strong and to have structural grounds to have this strength. The second part of your question was... Thank you for your question.
spk06: Regarding the liability management, let me just divide them into two. One, as we did last year, from 2019 to 2020, where we bought some options for ethics cases, which resulted in a positive income during the year. given the evaluation that we have at the beginning of the year in particular. We did the same for this year. At the end of 2020, we got options to cover every quarter at 21.5 FX. So we are covered. It's an option, so it's already paid for. It's like an insurance. We only use it in case the peso goes beyond 21.5. So that's already embedded in our numbers. So that's a part we do it, we have in terms of value management. Besides what we're doing on the refinancing part, that we're trying to get longer term or better terms on our debt. Thank you, Adrian. Thank you, Adrian, Jorge.
spk02: Next question comes from the line of Sheila McGraw from Evercore. Yes, Louise, you mentioned in Monterey some expansion opportunities. I just wanted to clarify if those will be developed on the FEBR's balance sheet, how much capital investment would it take, and what type of yield would you expect on the incremental capital? I would expect it should be higher since you already own the land.
spk11: Yes, thank you very much, Sheila, for your question. And this is probably a very interesting experience that we just recently had because, you know, we had some clients really fighting for that space, and that was kind of a good thing, given, I guess, the state of the market. So this is land that is owned by the FIBRAC. When we did a build-to-suit, this client was requesting that we hold a piece of land which is adjacent to the property. And when Prologis sold this property to the FIBRA, it came with the additional land. So those are two expansions which are the similar cases. And there is about half a million square feet. I think the dollar amount will be around $30 million. And, yes, I think the yield will be higher than what would be a market yield, but I guess something between 7% and 7.5%.
spk02: And your next question might have Francisco Cherez from Scotiabank.
spk10: Thank you so much for the call. And a quick question. It was good to see that you were doing quite better compared to the Mexico City market.
spk07: And judging on the price of vacancies that we saw in the first quarter compared to the quarter earlier, Putting all your efforts on all your releases made last year, can you discuss a little bit about the flight to quality characteristics of your specific portfolio that is helping you to be really much better compared to the rest of the Mexico City industrial market? And if you can add to that your response, the chances of further compression on cap rates for these type of assets. Thank you. Thank you, Paco, for your question. When you mentioned flight quality, I think that we have a position in the market that really recognizes the specifications that we provide in our products. Our properties are always the ones that represent lowest coverage among the market, and this really represents a competitive advantage for our users. Our users are multinational companies, our sophisticated users, and they are trying to optimize their operational cost. They are not trying to minimize the cost of rent. We are, in most of the cases, the face rent more expensive in the market, but our facilities provide the ability to our customers to have a lower operational cost. We will keep on with this strategy. Markets like Mexico City, where land is becoming scarce and expensive, always provide the temptation of trying to have a higher coverage, but we will keep on with the discipline that we have shown in the past. This is the only way to keep and retain the profile of the customers that we work with.
spk11: So cap rates and valuations, Paco, this is a very interesting question. As I mentioned, logistic real estate is the preferred sector, and this has drawn a lot of interest from investors into this property type, and I think cap rates have compressed around the world. In Mexico, we are estimating that cap rates may compress around 40 to 50 basis points. And if you ask me about what are cap rates in some of our markets, I would say probably Mexico City is a 6.4, a 6.5. And then maybe you can add some spread to Tijuana and Monterey, maybe between 25 and 50 basis points. And maybe some of the other markets like Juarez and Reynosa, maybe 75 basis points. But we have been seeing cap rates in Los Angeles at 3%. If you compare that to Mexico City at 6.4%, there's a very healthy spread. So I think this is why, you know, Mexican real estate keeps being very attractive at this point.
spk02: And your next question will line up with Pablo Maceves from Barclays.
spk08: Hello. Hi, guys. Thanks for taking my question. I have two quick questions. Luis, if I understood correctly, you are already working on your Last Mile portfolio, but can you please shed some light on the size of an eventual Last Mile portfolio, say, three, four years from now? How do you envision that if that is going to be another subsector from your DLA or will be on the metropolitan areas classification? That will be my first question. And the second question is, and you kind of already answered this, but you mentioned gave a guidance of a 3% vacancy, which is better from the 3.4% vacancy in your Class A market. Now, how do you see rent? Do you have any idea if rents are going to go up by 10%, 15%, or some sort of the other side of the equation in terms of rent? Thank you.
spk07: Let me start with the second part of your question. I think that rents in some markets are going to be going up. I see rents in Mexico City going up from 8% to 10%. Rents in Tijuana, they will go up. Beyond 10%, we are reaching the lowest vacancy that we have seen in the market, and we are very positive in this regard. If you review, Prolois' sponsor had its earnings call just this Monday, and we're reporting above 25% rent growth. So rents in the U.S. are increasing importantly. Online business and logistics in the U.S. and the diversification of the supply chain are bringing additional business to the company. And, you know, the rebound on the economy of the U.S., which is tied to the Mexican economy, I think that is recovering better and higher than what everyone was expecting. So there's a lot of positive signs, and I don't get tired of saying that this is a very privileged sector, understanding the political and economical environment that makes good.
spk11: I'm Pablo. Thanks for being on the call. And I guess on your question on the last mile, so let me say that, you know, e-comm is about eight, 8.5% of total sales. And as this percentage increases, then the last mile increases. How is this going to evolve? It's a question that it's very difficult to answer. Certainly, if you see Mexico at 8% and the US maybe have between 17% to 20%, so there's a huge room for e-commerce to advance. So I think as the penetration of e-commerce reaches a higher level, we will see a higher speed on the last touch. So very difficult to assess how much or how large the portfolio will be. Let me tell you, we have mapped the areas where we believe, you know, there is – a good space for that. And, you know, as we make investments, we have to lease them, and we will have a very sound strategy so that every step of the way we take is with very strong footings. So we are optimistic. I think it's going to be a great sector, but certainly something we need to watch.
spk08: Perfect. Thank you very much, guys.
spk02: Again, if you'd like to ask a question, please press starting at number one on your telephone keypad. Again, that's starting at number one to ask a question. In your next question, we'll find Francisco Chavez with PPVA.
spk10: Hi. Thanks for the call and for taking my question. The question is regarding the balance sheets and your financial structure. When you mentioned that
spk02: And excuse me, we lost Mr. Chavez's line. And your next question, Francisco Chavez from Scotiabank.
spk07: perhaps it is Francisco Suarez from the Social Bank, but in any case, you mentioned that you were receiving requests for rent relief in the first quarter. Can you Can you share a little bit of what type of industries or where those pressures are coming from? Is that coming out in Mexico City? It's kind of awkward because you mentioned that everybody basically paid their rent during the first quarter, collected 99-something percent of your rent. Nevertheless, you start receiving these requests. Can you give a little bit of color on how they might play out during the year? Thank you so much. Thank you for your question, Paco. No real reliefs were assigned at all on the first quarter. We have done a very good job on the field, and I'm very proud of our team. because collections have been even on better levels than before the pandemic. I think that this emphasizes the importance of really making a good selection of the right customers in the other side of the disagreement. If I may, an additional comment, We see that the power sector is recovering. That was probably one of the sectors that was more hurt during the pandemic. And we see logistics and some fields of manufacturing recovering. in very good shape. The couple of issues that we have in our portfolio were last year, and they were related more to activities that our customers were not evolving rapidly, and they lost their business. But not a specific industry or not a specific thing in our portfolio that I could speak about.
spk02: Thank you. And there are no other questions at this time. I would like to turn the call over to Luis Cortes for final remarks.
spk11: Well, thank you very much to everyone for participating in our first quarter call. I think the year begins with a very good note. We're very optimistic about the market environment, and we're very optimistic about our strategy and penetrating markets. So we look forward to probably having some personal meetings we see like at the end of the tunnel and hopefully before the year ends we can have a cocktail and maybe have an in-person meeting. We look forward to doing that. Thank you very much.
spk02: This concludes today's conference call. Thank you for participating. You may now disconnect.
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