Fibra Prologis Reit Ctfs

Good morning. My name is Devin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fibra Prologis fourth quarter earnings conference call. 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question at any time, again, press star, followed by the number one on your telephone keypad. Thank you for your patience. Ms. Violente, you may begin the conference.

Thank you, Devin, and good morning, everyone. Welcome to our fourth quarter and full year 2022 earnings conference call. Before we begin our prepared remarks, I would like to remind everyone that all 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 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 this material. 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 Ibarzabal, our Managing Director. With that, it is my pleasure to hand the call over to Luis.

Thank you, Ale, and good morning, everyone. 2022 was an exceptional year for the FIRA as our operating and financial KPIs have reached new high watermarks, surpassing our expectations. All thanks to our team on the ground. We have exceeded our internal objectives and completed our capital deployment goals. Let me discuss some highlights for the year. Our FFO and AFFO continues to increase year over year on a nominal basis, 11% and 9% respectively. The growth was driven by higher rents and acquisitions. Operating metrics were strong, highlighted by rental growth on rollover, a record of 20.5%. This is the main driver of same-store cash NOI of 6.5% and occupancy reach a record high of 98.9%. We raised around $400 million of capital through a subscription rights offering. This was the biggest capital issuance in Mexico in 2022 during a period of financial volatility. Our balance sheet is one of the strongest in the market. We have the lowest cost of capital and prudent leverage, which leaves us with ample firepower to be opportunistic during times of uncertainty. We acquire 1.4 million square feet during the year for $135 million. This property is fit our investment strategy of being located in irreplaceable locations built to the highest standards and leased to some of the best global customers. We have made substantial steps on ESG during the year, and I will let Jorge go into more detail. While we have consistently delivered strong results, it is time of uncertainty when our strategy shines the brightest. Our performance demonstrates the importance to focus on both manufacturing and consumption as owning the best facilities in key markets close to the end consumer, all while we have been able to outperform the broader economy. Real estate fundamentals continue to be very solid. Demand for space has doubled since pre-pandemic levels. This was mainly driven by manufacturing sector. led by companies making long-term decisions on supply chains as they become more regional, and this is a structural change. In Mexico, logistics and manufactured real estate recorded its strongest end of the year, accelerating its past performance from previous quarters. Near-shoring and receding local consumption drove the fundamentals, and we believe those trends will remain in 2023. We saw record demand in 2022 in our six markets, reaching 36 million square feet of net absorption, an increase of 10% year over year. Supply barriers remain very tight, preventing developers from catching up. Land is scarce, utility electricity are insufficient in certain regions, and entitlement periods are taking longer. Vacancy in our markets declined 120 basis points over 2022, reaching its lowest level of 1%. Border markets and Guadalajara are sold out, and the vacancy in Monterey is at historic lows. As a result of these imbalances, rents are accelerating. Market rental growth increased by 15% during 2022. For 2023, we expect this to continue and vacancy to remain at very low levels. Fever valuations came flat at the end of the year. Our market cap rate was 6.65%, and this is 50 basis points increase, which was offset by market rental rates. With the raise of interest rates, we expect a pressure of real estate valuations as we enter the year. Let me expand on what we're seeing on the ground. More than 50% of the projects were built to suit our pre-leasing. Customer sentiment is positive as they're trying to secure the few available spaces ahead of future demand. On the manufacturing side, nearshoring continues to be the most robust trend driving demand in our markets. We estimate three-fourths of demand came from these opportunities. Shifts in the supply chain is making companies make long-term decisions toward regionalization, relocating whole manufacturing process to our markets. Mexico is very well positioned to continue levering this opportunity in the years to come. Monterrey represented 30% of total demand due to its infrastructure and qualified labor, while border markets had record activity. Additionally, we're seeing an incremental activity of logistics in the manufacturing side. Inventory management services from local and multinational 3PLs have been increasing. One example is that during the year of our sponsor signed four business projects in border markets plus Monterey for 2 million square feet. We believe these firms will keep on growing and some of these companies are already our global customers. On the logistics front, customers including e-commerce, 3PLs and retailers had a positive utilization of more than 80% to face seasonal sales. and are trying to secure spaces ahead of future demand. Because of that, Mexico City recorded its strongest quarter, absorbing 4 million square feet in the same period, driving the vacancy rate towards 2%. As land scarcity gets more severe, we expect to see new projects beyond the toll booth emerging and the consolidation of last-dutch facilities. As an example of this last one, we recently secured one of our last-dutch spaces in Vallejo to a convenience store. We are seeing more traction in this kind of activity. Before concluding, let me discuss the 2023 outlook. We're optimistic as we start the year. I have never seen such market conditions in any time in my professional career, and we're very well positioned. On the internal growth side, Increasing rent is the main driver to higher cash flow with no significant investment. Our mark-to-market is 21%. This is a great opportunity to have another record year of rental growth as we push rent and turn. On the external growth side, we expect to be active and opportunistic. In addition to the Pellois pipeline of 5.3 million square feet, we will be patient and keep exploring third-party assets that align with our investment strategy. With your balance sheet as a major competitive advantage, the flexibility we have allows us to play more offense. Our team of real estate professionals proved why they are the best in class during 2022 with seamless execution despite a changing operating environment. Putting everything together, we're excited about 2023. Our hard work will carry to this year, where we expect our cash flow generation to be even stronger. We are increasing our distribution above 8%, sharing our success with our investors. With that, let me turn the call over to Jorge. Thank you, Luis.