Fibra Prologis Reit Ctfs

Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fieber Prologis second 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, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Alexandra Villalante, Head of Investor Relations. Please go ahead.

Thank you, Dennis, and good morning, everyone. Welcome to our second quarter 2023 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 of the date of this call. Our 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 Chavelas, our Head of Evaluations and Research. With that, let me pass the call over to Luis.

Thank you, Ale, and good morning, everyone. Our results continue to demonstrate one of the strongest quarters exceeding our expectations. We remain confident of an outstanding second half of the year. Let me give some highlights. FFO and AFFO recorded the largest increase since our IPO. Occupancy continues to be at 98 percent. This is due to strong market conditions and our focused strategy. Same-store cash NOI was positive 9.4 percent. One of the main drivers was our almost 31 rental growth on rollover, generating a strong cash flow. In May, we successfully completed our follow-on transaction. There was significant interest, mainly from new international investors, most of them wanting to play the nearshoring trend. We raised close to $400 million to fund new acquisitions. With this issuance, we have improved our liquidity increase and diversify our shareholder base. Related to the offering in June, we announced the acquisition of three properties from our sponsor for $75 million. We will continue to move forward with the remaining of the Prologis pipeline that we presented during the Roadshow, as well as third-party acquisitions. Industrial real estate fundamentals remain solid, Demand continues to surpass supply, and we expect a very positive 2023, mainly due to nearshoring. As we have mentioned in the past, this is a trend that will persist for the upcoming years since it is a structural change in supply chains as companies are making strategic decisions to relocate their manufacturing operations for the long term to Mexico. Demand in the second quarter persists to be at high levels. Net absorption in our six markets reached 17.5 million square feet flat versus the strong first half of 2022, mainly driven by continuous strength in demand from the northern markets. On the back of this, our forecast of balance supply demand and similar levels of net absorption compared to last year remains unchanged. Vacancy in our market is close to record low levels of 1.2%. Particularly, they benefited from lack of sufficient supply in Mexico City, which brought market vacancy down to a record low. Rents continue to rise with an accumulated increase of about 10% year-to-date in our markets. Given the very tight supply-demand environment, rent levels remain those justified by replacement costs. We expect rental growth for the year to be around mid-teens, reflecting better than expected dynamics. Let me expand on what we're seeing on the ground. Built-to-suit projects represent more than 50% of total space under construction. This does not take into account pre-lease space, which we think is also substantial. Availability of land with energy infrastructure remains very limited. We believe a large portion of space under construction is not ready to provide energy to customers. Even in this tight environment, we're not seeing clients reduce their interest in their data sharing operations or securing space. On the manufacturing side, Monterey continues to show very strong fundamentals as continued deliveries have been easily absorbed by the market. The main sectors that stand out are 3PL is oriented to providing logistics and light assembly services to manufacturing companies. Representing an outside share of our new leasing, given our industry-leading building and site specifications, which are particularly important for logistic operations. Electronics, as we saw a couple of closings from world-leading manufacturers, which are expanding their footprint in the country, mostly formation. Regarding our activity, we have recently been able to close several renewals with top-quality tenants at 10 to 15 percent higher rents compared to our expectations at the beginning of the year, which will support our rental growth for the rest of 2023. We also highlight a recent new lease in Juarez with one of the most world-leading electronics manufacturers. On the logistics side, consumption expectations have improved materially in the year. with consensus now expecting 2.4% real growth, well above prior expectations. This much-improved environment should lead more aggressive decision-making regarding demand for space by the retail and logistics industry. Mexico City continues to show extremely attractive supply-demand dynamics, with vacancy declining for the 10th consecutive quarter. Leasing activity is led by consumer-oriented 3PLs, which continue to require space to service brick and mortar companies looking to provide digital offerings. Lack of land is driving potential clients to look for space in either Toluca or other regions of the Mexico City metro. Our sponsor is also pursuing development opportunities in Toluca, which we see as a natural extension of the Mexico City market, with excellent connectivity to the main metro via two toll roads. Clients have been receptive to this alternative. On valuations, our values increased 5.3% the quarter, which was fully explained by rental growth. While cap rates remain flat, Mexico values are outperforming compared to other parts of the world. We're very confident about our values for the remainder of the year. We expect cap rates to keep in line with current values while we continue to see market rents growing. In summary, logistic real estate continues to be a favorite asset class among investors, and Fibra Prologis is well positioned to outperform. Rents continue to grow, and our lease mark to market has increased from 24 to 30 percent. This will be a major driver of FFO per share going forward. On the capital side, we're active. Our sponsor has on the development pipeline 4.6 million square feet, which most of it we expect to be acquired this year. We're also in some third-party acquisition processes that are aligned to our business strategy, and we hope to provide more color in the upcoming months. Our balance sheet is one of our major competitive advantages and provides us flexibility to play offense. Finally, we remain committed to creating value for certificate holders. With that, let me pass the call over to Jorge.