Fibra Prologis Reit Ctfs

Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Fibra Prologis second quarter earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star 1 on your telephone keypad. Thank you, Alexandra Violante, Head of Investor Relations. You may begin your conference.

Thank you, David, and good morning, everyone. Welcome to our second quarter 2022 earnings conference call. 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 only for information purposes and is not a solicitation of an offer to buy or sell any securities. Forward-looking statements during this call speak only as of the date of this call. Our actual results, performance, prospects, or opportunities may differ materially from those expressed in or implied by the forward-looking statements. Additionally, during this call, we may refer to certain non-accounting financial measures. The company does not assume any obligations to update or revise any of these forward-looking statements in the future, whether as a result of new information, future events, or otherwise, except as required by law. 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 fibraprologist.com and download these materials. Today, we will hear from Luis 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 and guidance. Also joining us today is Hector Ibarzabal, our Managing Director. With that, it is my pleasure to hand the call over to Luis.

Thank you, Ale, and good morning, everyone. The logistic real estate sector in Mexico is having one of its strongest quarters, reflected in our results, which have surpassed our expectations. For this reason, we are adjusting our occupancy and same-store guidance. We are confident of our business resiliency despite the current global uncertainty and inflation. Let me provide some highlights. We had a high occupancy of almost 98%. This is 140 basis points above last year. Our FFO continues to grow mainly due to strong rental growth and the addition of last year's acquisitions. For the last 12 months, we have leased 6.5 million square feet, and our rental change on rollover is 13%, which is reflected in the company's same store NOI. Additionally, on the ESG front, we recently published our ESG report in which we have certain goals and accomplishments, and we have announced our alignment with Prologis commitment to become net zero scope three by 2040 and Jorge will provide more color on this. For the first six months, demand increased almost 20% year over year, and in our markets mainly for manufacturing expansion due to nearshoring in border markets and demand from logistic operators to serve e-commerce adoption in consumer markets has kept a positive trend. Quarterly demand was more than 8 million square feet in our six markets, an increase of 23% year-over-year, outpacing supply by more than 2 million square feet, resulting in market vacancy of 1.8%. Demand continues to surpass supply. Barriers to supply like low utility availability, land scarcity, and increased raw materials are delaying new deliveries to the market. This will benefit the overall occupancy, facilitating rental growth. Market net effective rents have increased around 7% in the first half of 2022. And we expect them to continue with a positive pace towards year end due to the strong demand and limited supply. Let me spend a few moments on what we're seeing on the ground. On the manufacturing side, has been one of our key drivers of the Mexican economy, During the quarter, non-auto manufacturing exports grew 25%. Manufacturing is now two-thirds of the overall industrial demand. Near-shoring and U.S. labor shortages have been the main drivers. We're seeing a strong pipeline of customers willing to expand their operations in Mexico. It is in different sectors from electronics, medical devices, auto, consumer products, et cetera. Near-shoring has been accelerating, and it keeps the same pace. It will double the demand for space from 2021. The main markets have been Monterrey, Tijuana, Juarez, and Reynosa. Our sponsor has a pipeline of 5.1 million square feet of built-to-suits. And of course, the economic recession conversation is present in some of these transactions, but still with a positive sentiment. On the logistics front, retail consumption has had a positive semester, and e-commerce adoption is increasing into a low double digit due to the marketplace expansion and omnichannel activity. For the remainder of the year, consumer spending is expected to have a positive real growth, and e-commerce penetration will be around 11% from a 4.8% pre-COVID asset reference. We're also seeing movement in our leasing of our last mile facilities. This kind of assets are starting to gain traction. Mexico City, which is our most important market, land continues to be very scarce, forcing development to the north of the toll booth. As a result, we remain very bullish on the performance of the portfolio as rents rise. Logistic real estate continues to be the preferred asset class. In summary, we know there is a potential softening of demand. Our best-in-class portfolio has been resilient and has been built to outperform in any part of the cycle. In spite of a higher interest rate environment, values increased 2% in the second quarter, and we expect valuations to keep stable for the remainder of the year as we see a good balance between cap rates and rental growth. In operations, rents continue to grow and our lease market has increased to 15%. This will be a major driver of earnings going forward. On the capital front, we're active and engaged on consolidating our acquisitions plan before year-end. Opportunities are already identified and closing is presenting good progress. We will continue to focus in our Prologis markets with special attention to real estate quality. On top of third-party deals, Prologis pipeline keeps growing with build-suit projects and with positive traction on pre-leasing and speculative investments. Our strong balance sheet, which provides us a major competitive advantage and flexibility to play offense. Finally, we remain committed to creating value for certificate holders. With that, I will pass the word over to Jorge.