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spk06: 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.
spk12: 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.
spk03: 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.
spk11: Thank you, Luis. Good morning, and thank you for joining us. We keep on seeing excellent results for our portfolio. Operating metrics are strong, and our balance sheet management has proven to be a competitive advantage. Turning to our results for the quarter, SFO and ASFO reached $49 and $42 million, respectively, a 24 and 41% versus last year and above our expectations. It was driven by higher rents on rollover, occupancy levels, and last year's acquisitions. Moving to operating metrics, leasing activity was 1.4 million square feet with a period end and average occupancy around 98%. in line with previous quarters. Net effective rent change and rollover increased almost 31 percent, and for the last 12 months it has been above 30 percent. As we've mentioned, our portfolio lease mark-to-market is 30 percent. What this means is that we could generate seven U.S. dollar cents of FFO per certificate of incremental earnings as leases roll over time. which is equivalent to almost 40 percent increase to the midpoint of our guidance. In terms of same-store cash and GAAP NOI, we have a positive increase of 9.4 and 7.8 percent. I'd like to go through our accomplishments regarding capital markets and balance sheet during the quarter. Last May, we did a successful fall-on, which allowed us to bring new investors and increase our liquidity. We raised close to $400 million at 59 pesos per CDFI, above our NAB. And since then, we have been trading above this benchmark. We recasted our green line of credit for $500 million, including our accordion feature, adding five years and reducing the cost of borrowing by 50 basis points, as well as our unused fees. Standard & Poor's gave Fibra Prologis a triple B plus rating. one notch above Mexico's sovereign, and at least two notches above our closest peer, which represents a clear testament of our risk and balance sheet management. To give you some perspective, let me go quickly through some of our financial metrics. Our average debt maturity is seven years, and we do not have any debt termination until 2026. 100% of our debt is fixed at weighted average cost of 4%. More than 80% of our debt is unsecured. Loan-to-value is below 11%, and our fixed coverage ratio is 6.1, and debt-to-adjusted EBITDA is 1.9. Turning to guidance. Given the strength of our rent growth, occupancy levels, and FX, we have updated our same-store cash NOI growth to be between 8.2% and 11.2%. We are keeping the rest of our guidance unchanged, which you can see on page 8 of our supplemental financial information. Now, let me move to ESG. During the quarter, we certified 10% additional area, reaching 65% of the total portfolio. The result puts us closer to the 2025 goal of 100% based on 2021 total area. Early this week, we published our ESG annual report in line with previous years. I would like to finish by thanking our investors for delivering their trust in our teams and business model, supporting us in our last capital raise, and also to our teams on the ground who have made an excellent job. With that, I'll turn the call back to Luis.
spk03: Thank you, Jorge. Before passing the call for Q&A, I would like to talk about the press release we issued this morning relating to the leadership changes. These changes are part of the ongoing succession for our sponsor Prologis. As of January 1st of 2024, I will be moving to a new role as senior advisor to Prologis, and Hector Ibarzaba will replace me. He is currently the COO and will become the new chief executive officer CEO. I will also remain as chair of the FIBRA technical committee. I could not be more excited to see Hector take this new role. He has been my partner for the last 30 years in which we have worked together. He's someone that you already know as we launched the FIBRA together in 2014. He brings deep experience that will benefit our customers, investor, employees, and communities. This is a great moment for the FIBRA, and I am confident Hector will take it to a new level. I could not think of a better person to hand over this position. Finally, I am deeply grateful with investors and analysts for your time and interest over the year. With that, let me open it up for Q&A.
spk06: At this time, I would like to remind everyone, in order to ask a question, simply press star, then the number one on your telephone keypad. Please limit yourselves to one question, and you may reenter the queue if you have any additional questions. We'll pause for just a moment to compile the Q&A roster. And your first question is from the line of Juan Ponce with Bradesco BBI. Please go ahead.
spk13: Hey, good morning, everybody. Thanks for taking the question. So given the current environment, do you see potential upside risk to your acquisition guidance for this year? And if you can comment on the factors that may impact the timeline to complete all acquisitions, please. Thanks.
spk03: Thank you, Juan. We remain with our top of the guidance, $450 million. This will mainly come from the Prologis pipeline and third-party acquisitions. On the Prologis pipeline, we have 4.6 million feet, and we will acquire 3.5 million feet, which will be roughly $350 million, and most of them will be completed in the second half of the year. The properties will be located in the north, in Monterey, Juarez, Tijuana, and Reynosa. All of them are leased to manufacturing clients and with great accruing returns with an IRR of 9.5%. In relation to the third-party sales, we have several processes ongoing. These third-party sales sometimes are more unpredictable than the Prolois pipeline. We are participating, and we feel comfortable these are going in the right direction.
spk07: Thank you.
spk06: Your next question is from the line of Pablo Montevias with Barclays. Please go ahead.
spk17: Hi, Tim. Thanks for taking my question. I have a quick question on land cost. To what extent are rising cost of land is pushing out competitors to develop more properties? Do you think that a higher rent can offset a higher cost? What's the lack there for new developments? That's the first one.
spk15: Thank you. Thank you, Pablo. This is Hector, and I want to thank Luis for his kind words. Land is very scarce. Our strategy is focused to be in markets where there's Apple barriers of entrance. The combination of having land with energy and with entitlement certainly is making land prices with these conditions to go up. We are seeing a very important increase, I would say a kind of focused increase on new rents related to new projects, either they are spec or built to suit. Probably these rents could be 50% higher than operating regular rents. So land is up, construction costs are going up, and new rents are going up as well.
spk06: Your next question is from the line of Gordon Lee with BTG. Please go ahead.
spk09: Hi, good morning. Thank you very much for the call. And first of all, I'd like to congratulate both Luis and Exodo for the Luis, for the 10-year CEO and for his new role at Prologis, and Hector, obviously, for the appointment, congratulations. I just have one really quick question on the operating side, which is leasing activity has been pretty strong for the past several quarters, but I noticed that your retention rate has slipped for the past three or four quarters sequentially, not hugely, but materially. So I was wondering whether there's anything to be gleaned from that. or if this is just, you know, the starting point was a very high retention rate and we're looking at more normalized levels. Thank you.
spk15: Thank you, Gordon. I think retention is not necessarily an evidence of how our business is going. We are probably the best in the markets pushing rents up. Part of these loss of customers is related to push these rents up, but the most of the customers that we lost in these periods are because we have not been able to provide expansion of spaces for them. Occupancy is in good shape, rent growth is in good shape, so I wouldn't be that concerned about retention.
spk06: Your next question is from the line of Luis Yance with Santander Asset Management. Please go ahead.
spk07: Hi, guys.
spk08: Thanks for taking my question. And also, congratulations on the announcement. Thanks a lot, Luis, for all those years. Just a quick follow-up on the... on the pipeline that your parent company has. I mean, you mentioned that, you know, a big chunk of what's in the development pipeline you'll be acquiring this year. Can you talk a little bit about, you know, the possibility of potentially accelerating from your parent company standpoint the development pipeline, you know, adding more into that, you know, given the strong demands What would be the constraints? Is it energy a big factor, or is that something that we could start seeing in the next few quarters as you buy some of that development pipeline that gets leased? Is it fair to assume that given the opportunities you might be seeing, there might be a possibility that you're applying accelerated development there? So that would be my question.
spk03: Thanks. Thank you, Tokayo. Good to see you're in Santander now. So this is a very good question. You know, in fact, I see that, you know, having our sponsor Prologis develop in its balance sheet and then, you know, having this exclusive access to it is a huge development, a huge competitive advantage. You know, we have 4.6 million feet of property that we will acquire between 24 and 23 and 24, and it's around $460 million. And what I can say is that, you know, development conditions have gotten much more tougher. So to begin development has to do with a lot of infrastructure challenges that have to do with energy. But in addition, you know, you also have entitlement challenges, a little bit as a result of the pandemic, and municipalities have closed, and it just has been taking a little longer than before. But having said that, I think business conditions are in good shape to continue development. As we said in our remarks, rents are growing, vacancies are record low, and most importantly, our sponsor has the capital to put to work. So I think we will see a more active second half of the year. I think you can expect maybe two to three million square feet of properties that will be put to work in the second half. And then maybe for 24, you know, our pipeline, I think it's going to be between three and four million square feet. So this is a pretty healthy. In addition, the sponsor is also in good progress to replenish our land bank. especially in those markets that have very tight conditions. So we have been in the market for many years, and I think we're in a special position to take advantage of this special opportunity that Mexico has.
spk06: Your next question is from the line of Vanessa Quiroga with Credit Suisse. Please go ahead.
spk00: Thank you for taking my question and congrats also to Luis and Hector for this transition of leadership. So my question is regarding a comment that you made on your letter on the results about some markets slowing down. I was wondering if you can specify what market you are referring to and if this poses any risk to the trends that we're seeing for nearshoring in Mexico. Thank you.
spk03: Thank you, Vanessa. I, you know, we have been reviewing, you know, our forecasts of demand, and we are very bullish for the year. You know, this is driver is mainly driven by structural changes, you know, companies need to relocate their manufacturing facilities, and these are long-term decisions which somehow, you know, are going over the short-term volatility that the slow environment is putting, you know. We also see this trend lasting, and it has to do with labor shortages in the U.S., the U.S.-China dispute. And, you know, sectors that are changing like electronic vehicles and electronics. And in that sense, you know, why see Mexico well positioned? So to be very specific on your question, I see our six markets with a strong demand for the year. Very similar to what was in 2022, but this is double pre-pandemic demand.
spk06: Your next question is from the line of Francisco Chavez with BBVA. Please go ahead.
spk05: Francisco Chavez Hi. Thanks for taking my question and also congratulations for Luis and Hector for these new changes in the leadership roles. My question is regarding the items between SFO The CAPEX to NOI ratio has been below the guided range. Can we expect CAPEX to catch up in the second half of this year? And also, if you can give us an idea of the AFFO payout that we can expect for this year. Thank you.
spk11: Jorge Mancilla- Thank you, Francisco, for your question. This is Jorge. Let me start with the second one. Our ASFO rate is going to be around 90% on our guided distribution. That's where we are going to be. Regarding the items between SFO and ASFO, we will end the year with 13 to 14% of NOI as guided. It depends on the time of the year, et cetera. As you said, probably some of the capex will accelerate in the second half of the year to get into the 13%, 14% level. The way that you might see it is that if you look at the last 12 months or the last four quarters, our FFO and ASFO margin has been 60% and 50% respectively. So, I mean, you can see, you will see those margins going forward. This quarter, obviously, is higher than that, even exactly what you said. But I think at the end of the year, on a normalized basis, on an annual basis, you will see those levels, as I mentioned, and as guided. Thank you, Francis.
spk06: Your next question is from the line of Jorrell Gilati with Goldman Sachs. Please go ahead.
spk10: Good morning, everyone. First off, I want to say congrats to Hector and thanks, Luis, for the partnership and the transparency. I wanted to dig a bit more into the net effective rent change number that you published this quarter. Last quarter, this figure was 39%, which is the record. This quarter, it came down to 31%. It's still strong, but it is a step down. I just wanted to see if you can comment on this dynamic. Because when we start digging through, for example, we see that in 1Q23, 50% of leasing activity was in Mexico City. That's a near 40% net effective rent change. 2Q23, 40% of the leasing activity was in Guadalajara, 26% net effective rent change. So I was wondering, Is this 30% for this figure specifically? Is it more of a normalization? Is it more market-specific? Could we see an acceleration? That's my question. Thank you very much.
spk15: Thank you very much, Jorn, for your question. If you analyze the spread of in-place rent to market that we had previous quarter was 23.7%. This quarter, we are above 30% in just one quarter. These rent changes that you are mentioning, we have some cases in which we were able to raise almost 70%, 69.8% the rent in some specific markets. So what is happening and what is prevailing is the lack of supply of new space. And this will keep on bringing rents up. As analyzing potential opportunities, we see that trends are spiking importantly. Tijuana and Mexico City, for example, in the last year they have increased potentially 20 or 25 percent. And the lack of supply of new space is enhancing these conditions. I would be expecting going forward similar ranges of rent growth. If they're going to move, they're going to move upwards. Because of the current conditions, demand is still very strong and supply is limited. This is one of the best mechanisms that Prologis has to create value to our shareholders. We probably are leaders in the market in pushing rents up. We will keep on doing it, learning from the market or creating market as market leaders that we are.
spk11: And Darrell, this is Jorge. Just to pile up on what Hector said, remember that net effective rent change is a function of, obviously, the volume list in that quarter, where those lists are, meaning which market is. It's not the same Tijuana, Mexico, and Guadalajara, for example, and also the conditions of the previous rent. We might be a little bit below last quarter rent change, but this is a function of what you're leasing, where it is, and what the conditions were. The main point is rents are going up, and we keep on pushing.
spk06: Your next question is from the line of Nikolai Littman with Morgan Stanley. Please go ahead.
spk02: Thank you very much. Congrats on the numbers and also, Hector, on the new role. Luis, thanks for this partnership. You've changed guidance twice already this year. Rents are vertical. It's happening very quickly. Can you give us a sense of where you think we'll see some level of stabilization in some of the key markets in terms of rates per pricing per feet per square meter? And also how this plays into your thinking around M&A from external sources. The whole market is repricing. A lot of people have issues building. It seems like, you know, obviously we would have loved to buy stuff two years ago, but it still seems like a market where external M&A could be favored. So I was wondering what you can say about that.
spk07: Thanks a lot again. Congrats. Thanks, Thomas. It's really kind of fantastic.
spk11: Regarding your question on rents and that we keep guidance where it is, I mean, we look every quarter how our results are. As I said in my preliminary remarks, some of our AFFO and AFFO and some other metrics are higher than expected. And regarding that, we keep on changing. We will keep on revising our guidance. If it makes sense, we will go upward as we did this time with same-store cash and OI. Also, FX has a role in all these changes. Where do we see rents and if we see them, stabilization going forward? It's hard to say. I think that this year, in the whole year, we expect, like we said, mid-teens in terms of increase on rents, market rents, I mean. And probably next year we're going to see a more stable number, maybe a lower number. Who knows? We don't have a crystal ball in front of us, but we think that the dynamic is going to be positive. But it's hard to say where they're going to be stable at this moment, Nick.
spk15: The two most expensive markets, Nick, which are Mexico City and Tijuana, We are presenting new proposals in Mexico City above $9 per square feet per year and in Tijuana above $10 per square feet per year. Let's remind that the least cost for customers is not the most important cost that they have. It could be a very high cost if they don't have the right space to take care of their business. So it's not that we are taking advantage of our customers. It's just where the market is. And if these conditions of lack of energy and complexity on the entitlement prevail, rents will just keep on increasing. The way rents have increased compared to the way transportation costs and energy have increased is minimum. So we're in this environment, and we don't see fundamentals changing in the short term. So we should be expecting, as Jorge mentioned, 10% to 15% at least increase in market trends.
spk03: I guess on the last part of your question, Nick, so I think we are in a mood to play offense. We have a fantastic balance sheet with very low loan-to-value, and we have a great team on the ground to grow the portfolio. uh additionally the uh share price is also trading at a premium and this just uh you know makes conditions uh you know much better to to play often so so i think we just need to be patient um you know opportunities will come you know so uh so so you know there could be some additional portfolios and whatever moves in the market we will be able to see it and and have a shot at it
spk06: Your next question is from the line of Francisco Suarez with the Scotiabank. Please go ahead.
spk14: Good morning. Thanks for the call. Congrats on the results. Congrats on the new roles. And a big thank you, Luis, for all these years. Thank you very much. My question is a follow-up to Luis Jans' question. It's the second quarter where ICPLD with zero starts in Mexico, and I just want to clarify. So the reason why PLD has not started new developments and why it is actually cutting their guidance on deliveries in Mexico is basically because of the lack of the permitting or energy. Can you clarify that for me? So to make sure that that is not related by PLD having second thoughts on what the drivers of demand might be in Mexico. Thank you.
spk03: Thank you, Paco, for your question, and thank you also for your kind note. It has been a pleasure to work together. So, yeah, I fully support what you're saying. So business conditions are in very good shape. As I said, rents are growing, vacancies are low, The sponsor has capital and there is no restriction from corporate in terms of deploying capital in Mexico. In fact, I would say that Mexico is probably all of the markets all over the world, the one that it's outperforming. And maybe you see values went up in Mexico where probably in other areas of the world, you know, values are either flat or going down. And this is because, you know, we have this manufacturing driver. that is very different than, you know, it is not existent in other geographies. And it's the part of the cycle that we need to take advantage of. So in that sense, you know, the lack of starts in the first half has to do just with timing considerations on the specific projects that relate to just, you know, getting the land with full infrastructure and sometimes energy, sometimes entitlements. So, as I said, you can expect 2 to 3 million feet of the starts for the second half of the year and 3 to 4 million feet in 2024, plus replenishment of the land back.
spk06: Your next question is from the line of Andre Nuzini with Citigroup. Please go ahead.
spk04: First of all, I want to second other people in congratulating Hector for the CEO promotion in 2024 and to Luis for the amazing work he has done in that chair. So congrats, guys. So the question is about the disposition strategy in which you are selling in non-core assets, non-core markets, sorry, I should say. If you could talk a little bit about what makes a market non-core. Is it the city size or some other metric? Children's divestments happen in Nuevo Laredo and Matamoros, which are border towns with the U.S., and normally we associate border towns with New Shorey, which is, of course, super hot. So being a border town is not enough to make it a core market, apparently, right? And, of course, the investments and acquisitions have been in bigger cities, Ciudad Juarez, Tijuana, et cetera. If you can talk about what is a non-core market vis-a-vis a core market in the northern part of the country. Thank you.
spk15: Thank you, Andre, for your question. I think one of the factors of success of Fibra Prologis is that we have a very clear strategy and that we have had the discipline to keep a stick to it. We have selected only six markets. You can have industrial real estate activity in Mexico, probably in 15 to 20 different markets. The main condition that we look to target one of our markets as core, as a target market, is that there are sample barriers of entry. The best way to create value for our stockholders is through pushing rents up. The only way you have to push rents up is if there is limited supply. So the assets that we sold were not core because they were part of previous acquisitions that we made in the past and they were not fitting in the markets, in the six markets that we all know we participate. Besides the barriers of entry, that in most of the cases is land, today an important barrier of entry is on top energy and entitlement, as Luis has mentioned, but we also care about the size of the market. I mean, these assets need to have a little similarity to securities So you need to have liquidity, and if you are chasing for liquidity in one market, you need to have a specific volume of activity. We do not expect to open so far any new market in Mexico. Part of our strategy is to go deeper in the markets in which we participate, have a higher penetration, allow us to see all the opportunities, and that's, again, an advantage that we have.
spk06: Your next question is from the line of Anton Mortenkotter with GBM. Please go ahead.
spk01: Hello, guys. Thank you for taking my question and congratulating the results. My question is related to the development pipeline from Prologis. I'm not sure if I'm seeing it right, but it looks like not all the properties that Prologis has been developing in Mexico have been acquired by you. If you could provide some color on the reasoning on this. Is it because those properties are still being stabilized or maybe you're passing on those for other reasons. If you could provide some color there, it would be great. Thank you.
spk03: Yes, so thank you for your question, Anton. You know, we have in the pipeline 4.6 million square feet currently. Just as a clarification, all of the Prologis pipeline has been acquired by Prologis in the past. There is no, you know, Prologis has not sold any pipeline property to anyone else but Fever. So I guess if you look at the stabilization progress today, it's 72.2%. And mainly the properties in Monterey, Juarez, Tijuana, and Alamos, Reynosa are, you know, at about 100%. Reynosa is at 75%. We need to wait for that to be at 90%. So we expect all of these properties to be stabilized before the year end. And as I said, those will be acquired by FEBRA, you know, following the tail committee process and everything before year end. There is 1.2 million square feet that is 14.4% leased. And we're expecting to acquire that in 2024. as uh as these properties are in uh construction and as soon as we finish those uh you know those will be acquired by the fibra in 2024. for next questions from line of alan macias with bank of america please go ahead uh thank you for for the call and and and congrats on the new rose
spk16: Just a quick question on adjusted FFO payout ratio. Given the strong PESO, is there a risk that at the end of the year, the payout ratio will be higher? Do you see that happening, or we should expect the same level as last year, for instance? Thank you.
spk11: Thank you for your question, Anna. This is a little bit of a technical question, and let me divide it into two. First, according to our guidance, the ASFO rate is going to be, as I said, around 90%. That said, you are correct. The level of the peso today will make fibroecologists and anyone who has a foreign currency debt will generate some gain, some fiscal gain or tax gain, which FIBA will have to distribute 95% of that. What we have done and what we have at FIBA Prologis is that last January 30th, we got approval from holders to distribute above the guided distribution that we have, if there is additional taxable gain coming from ethics and inflation, that piece that is above our guided distribution, we as a management have the option to distribute that in cash, in certificate, or in both. So to be clear on your question, most probably the cash that we will distribute is going to be around 90% of ASFO. If we have to distribute above that and above our guidance, we could be distributing certificates on that piece.
spk06: Once again, everyone, if you would like to ask a question, simply press star, then the number one on your telephone keypad. And at this time, I would like to turn the call over to the company's CEO, Luis Gutierrez, for closing remarks.
spk03: Well, I want to thank everyone that are participating in this call for all your kind comments. It has been a pleasure to work over the years. You know, my professional career has been enlightened and got much better with the interactions we have with you every day. So, thank you very much for that. Also, I want to say that I'm very confident Hector, you know, will be continuing to outperform DeFebra. DeFebra is in great shape, and I think Hector will just take it, as I said, you know, to a whole new level. And we're very well prepared to do that. So I will be here, you know, as responsible until January 1st, and then I will be chairing the committee. So I will not be going away. You guys will probably see me for a little while. So thank you very much, and I hope we can interact before now and year end. Certainly, you guys are welcome to come and visit. You know, Monterey has been really a key place market that has a lot of growth. So I encourage any one of you to come and visit us there. So with that, thank you very much and see you on the next call.
spk06: This does conclude the FIBA ProLogic second quarter earnings conference call. Thank you for your participation. You may now disconnect.
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