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 FIBA Prologis first quarter earnings conference 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'll be a question and answer session. If you'd like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one once again. Thank you, Alexandra Violante, Head of Investor Relations. You may begin your conference.

Thank you, David, and good morning, everyone. Welcome to our first quarter 2023 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 the forward-looking statement. 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, and Alejandro Chabelas, our head of valuations and research. With that, it is my pleasure to hand the call over to Luis.

Thank you, Ale, and good morning, everyone. 2023 has started on a strong note, which is reflected in our operation on the financial results above expectations, providing us confidence in our outlook for the year. We're adjusting our guidance, and Jorge will provide more color. Let me give you some highlights. FFO and AFFO had the highest growth since IPO in 2014, about 20%. Obesity remains above 98% reflecting favorable market conditions and the quality of our portfolio. We had a strong cash flow generation reflected in the same store cash NOI mainly to the record rental growth and rollover of 38.5%. On the ESG front, and one of our milestones, is to provide clean energy to our customers. I would like to announce that we expect to install solar panels in around 120 buildings in the next 12 to 24 months. Industrial real estate fundamentals remain solid. Demand has more than doubled since 2020, and we expect a better year in 2023, mainly due to nearshoring. We think this trend is durable for years to come. This is caused by a structural shift in supply chains as companies are making strategic decisions to relocate their manufacturing operations. Disjunctures come in cycles of 15 to 20 years. Demand differs for its high levels. Net absorption in our sixth market was a record 12.1 million square feet, representing a 44% increase against the first quarter of 2022. This is mainly driven by leasing activity from companies that are growing their presence in the country. On the back of this, our updated forecast points to a similar level of absorption in 2023 to last year's. We believe the main restriction for further growth will be a scarcity of entitled land limited by energy and permitting restrictions. While the construction pipeline has increased materially in some markets, 60% of it is already pre-leased, indicating supply tightness may continue. Vacancy in our markets is one of the lowest at 1.1%, with border markets still solid, sold out. Rents remain an upward trajectory, rising 4% sequentially and 20% year over year. We expect rents to continue increasing throughout the year, as replacement costs are still rising, and also in light of a very low availability of high-quality product. Let me expand on what we're seeing on the ground. B2S projects have reached a record of 60% of all construction. Clients are bidding aggressively for space, with some willing to provide concessions such as advanced payments and earlier pre-leasing to secure it. On the manufacturing side, Monterey has been the major winner by tripling its net absorption in the quarter compared to pre-COVID levels, while border markets have doubled it. Without a doubt, net absorption could be higher, but there are multiple challenges in delivering new space. The main sectors that stand out are First, the auto sector, as OEMs are changing their production lines to electric vehicles, and as a result, we have been seeing the Tesla announcement. And secondly, the electronics sector. We are seeing some major hubs being built in different markets. In the quarter, most of the largest transactions were undertaken by companies doing inventory management services for manufacturers. We believe this capacity additions are leading indicator or further nearshoring activity in the country. Our sponsor has leased four new buildings in Juarez and is in the process of closing an additional one representing 1.7 million square feet of new space. And all of these are related to what I just talked about, inventory management services for manufacturers. On the logistics side, And in addition to the good news on the manufacturing, Mexico City, which is the most consumption-oriented market, saw a significant decline in vacancy, as demand remains elevated and construction levels are insufficient. In this market, demand has outpaid supply for the last six quarters, a trend that we expect to continue during the year, driving rental growth acceleration and development is starting after the toll. In addition, the big e-com companies are working to secure new spaces, and our sponsor has a land bank that is attractive for them. They are currently under discussion. Logistic real estate continues to be a favorite asset class among investors, and Fever Prologis is well positioned to outperform. Despite higher interest rates and margin of cap rate expansions, valuation valuations came flat for the quarter that were upset by rental growth. Mexican real estate remains resilient in comparison to other markets around the world, and the gap between cap rates has narrowed given the local investor interest and market fundamentals in our country. In summary, we're more optimistic of 2023's outlook. On the internal growth side, raising rents to market is the main source of value generation. Our mark to market increased 320 basis points quarter over quarter to 23.7%. We will continue to push rents and term. On the external front, our capital deployment plan is now to invest up to 450 million. This will mainly come from our sponsor development pipeline, which is currently at 5.3 million square feet. These assets are well located and no other competitor has access to anything remotely close to the size and quality. And in addition, we will keep exploring third-party assets that align with our investment strategy. Our balance sheet is the best in the sector and one of our biggest competitive advantages. We have enough firepower to be opportunistic and act quickly. Also, I would like to thank our team which continue proving themselves as the best in class and have been able to deliver outstanding results. Finally, we remain committed to our shareholders and putting their interests first. With that, let me pass the call over to Jorge.