Fibra Prologis Reit Ctfs

Thank you for standing by and welcome to the FEBRA Prologis Second Quarter 2026 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 that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Matsarat Chavez, Head of Investor Relations. Please go ahead.

Thank you, Tiffany, and good morning, everyone. Welcome to our second quarter 2026 earnings conference call. Before we begin our prepared remarks, please note that all information disclosed during this call is proprietary and all rights are reserved. This material is provided for informational purposes only and is not a solicitation of an offer to buy or sell any securities. Forward-looking statements made during this call are based on information available as of today. 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 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 this call. If you have not already done so, I invite you to visit our website at FibraPrologis.com and download our earnings materials. On today's call, we will hear from Jorge Girault, our CEO, who will disclose our strategy, market conditions, and will review results. Also joining us today is Federico Cantú, our Head of Operations. With that, it is my pleasure to hand the call over to Jorge.

Thank you, Montse. and good morning everyone. As I begin my tenure as CEO, I'm honored to lead Fibra Prologis. With an exceptional team and benefiting from the strength of Prologis platform, we are well positioned to enter this next phase with strong continuity across the leadership team, the strategy and operating approach. Our strategy remains unchanged. We will continue to run this business with discipline, focusing on high quality industrial markets in Mexico, serving our customers, and allocate capital thoughtfully to create long term value. Today, our portfolio comprises approximately of 87 million square feet across more than 500 properties in 14 markets throughout Mexico, making Fibra Prologis the largest publicly traded industrial real estate company in Latin America by market capitalization. We manage the portfolio as one integrated business, while directing new investments toward the market with the strongest long-term fundamentals, such as limited land availability, modern logistics infrastructure, and customer demand. Our relationship with Prologis, as our sponsor, is a significant competitive advantage. It provides access to global customer relationships, market intelligence, Capital Market Expertise Technology and operating capabilities that strengthen our execution and help us serve our customers better. Turning to Mexico, after an exceptional period of growth driven by e-commerce and nearshoring, industrial near-term environment has become more challenging than it was several years ago. With uncertainty surrounding USMCA, In the context of slower economic growth and infrastructure constraints, customers remain measured in their living deficient, while elevated meal supply in certain areas continues to pressure occupancy and market price. Net absorption increased to 6.1 million square feet from 4.3 million in the first quarter, but remained below completions of 7.4 million square feet. As a result, market vacancy increased 10 basis points during the quarter. Despite these near-term headwinds, Mexico's long-term fundamentals remain intact. Its strategic location, skilled workforce, integrated manufacturing base, central role in North America's supply chain, and sound monetary policy continue to support long-term demand for modern logistics and manufacturing facilities. Our portfolio End of the quarter with occupancy 250 basis points above the market, reflecting the benefits of the Prologis platform. In addition, we have a 30% embedded lease mark to market, which reflects an opportunity to keep on growing cash flow over time. As we all know, markets move in cycles. Our objective is not simply to perform well where conditions are strong, but to outperform across the cycle. The last several years rewarded market momentum. The next phase is likely to reward execution, capital discipline, and operating excellence, which we believe are enduring strengths of Fibra Prologis. Moving to our financial results for the quarter. FFO totaled $102 million, or 6.13 cents per CBFI, a 4.4% growth year over year, on a CBFI basis, mainly driven by rent increase and the contribution on a fully integrated Serafina portfolio. AFFO was approximately $86.5 million, in line with our expectations. On the operation front, we live 2.3 million per feet, Ciudad Juarez being the largest contributor of leasing volume. Period end occupancy was 95.8%, while average occupancy was 96.1%. Same-store cash and net affected NOI increased approximately 13% and 9% respectively. Net affected rain change remains strong at approximately 41% for the quarter and more than 53% over the trailing 12 months. On the capital front side, we acquired a 590,000 square feet facility in Mexico City for $94 million. The properties 100% leased in U.S. dollars to our global e-commerce customers. During the quarter, the performance threshold under our promote structure was achieved, resulting in $115.5 million fee up payable to Prologis in CBFIs. Since our IPO, Fibra Prologis has delivered a 16% annualized total return to investors, which is the highest among peers. Turning to the balance sheet, We continue to maintain a prudent financial profile. Our loan-to-value was approximately 25% and FEBRAC Rated Rating was ratified at BBB+, with a stable outlook in May. Financial flexibility remains one of our greatest strengths, and we will continue to deploy capital selectively while keeping balance sheet capacity. Moving to ESG, we have released our 2025 Impact and Sustainability Report. which introduces FEBRA Prologis 2030 goals and includes disclosures prepared in accordance with IFRS S1 and S2. This is the first regulator climate risk filing across the Prologis network and provides an important foundation in our global footprint. I'm very pleased that the Mexican team is part of this important milestone, which reinforces our commitment to sustainability, transparency, and long-term value creation. Finally, regarding guidance, we are keeping our guidance unchanged, which you can find in page 8 of our supplemental financial information. In closing, I want to thank our entire team for their dedication and execution. Their commitment is what allows us to deliver strong long-term results through changing market conditions. We enter this next phase with a high-quality portfolio, a conservative balance sheet, and an experienced team. and the capabilities of the Prologis platform. With that, Tiffany, please open the line for questions.

At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. We kindly ask that you limit yourself to one question when your line is opened. You may rejoin the queue for any additional questions. We will pause for just a moment to compile the Q&A roster. Your first question comes from Juan Ponce with Redesco BBI. Please go ahead.

Good morning, everybody. Thank you for taking my questions. And Jorge, congratulations on your new role. This is your first quarter as CEO. So just more high level, what are the two, three highest priorities for the platform over the next 12 to 18 months?

Thank you, Juan, and thank you for your words. Very excited taking this role. I think that the main highlight that you have to put on the table here is that we will keep our strategy. We will focus our capital, our investment in the main markets, which have the strongest fundamentals, as you have seen in the past. So that won't change. I think that the other one that you have to take into consideration, I have been very vocal since I was CFO and now I'm CEO, is to keep a flexible and strong balance sheet that gives us leverage to do things in the market. So those two would be the main ones from a strategy or going forward perspective. Always take in mind that Prologis, that's not an exception for Fibra Prologis, we're very disciplined on capital allocation. It's a very important part of the success of the certificates and the return that we have shown over time since IPO. So I would focus on those two if you ask me. Thank you Juan.

Your next question comes from the line of Piero Prada with Citigroup. Please go ahead.

Hi, team. Thank you very much for the call. Congrats Jorge on the new role. My question is regarding Mexico City vacancy that sell more than 300 base points on their second quarter. I would like to understand what We know that the market has a solid demand and a constrained supply. So what are the main reasons for this move out? Was something specific or not? And I would like to understand my second question is about the customer retention that declined to 60%. and if there is related to this higher vacancy in Mexico City as well. So that's it. Thank you.

Thank you, Piero. This is Federico. Appreciate your question. So let me first talk about more broadly about Mexico City, what we're seeing in our largest market. So for the market, net absorption in the quarter was 1.9 million square feet. with construction starts at 5.7 million square feet. So we're seeing an increase in construction and overall in the market, there's been some vacant deliveries. In addition, we've seen move outs and consolidations over the past few quarters, which largely reflect tenant space rationalizations coming off of record years of absorption. As leases that were signed in the boom years expire, some companies are thinking about optimization For our portfolio in Mexico City, we had a number of move outs, 880,000 square feet with three customers that drove this drop in occupancy. We actually retained one of those customers as our teams continue to focus on demand and the pipeline. So the way we see this market, it has very strong fundamentals and From the conversation we're having with customers and the pipeline that we are working on, we are very positive for the remainder of the year. And with respect to retention, for the quarter, yes, it dropped to 60. If you look at the trading fourth quarters for the region, that is 75%. And yes, for this quarter, it was mainly driven by the Mexico City move outs. Thank you very much, Federico.

And thank you for your work, Fierro.

Your next question comes from the line of Droyle Giotti with Goldman Sachs. Please go ahead.

Thank you for taking my questions and congrats to her on the new role. So earlier, if I heard correctly, there's a comment that Fierro Prologis have benefited from strong logistics demand over the past few years. And if I understood correctly, you were mentioning that there seems to be normalization now. And if that is the case, is there an expectation that future leasing spreads could be lower vis-a-vis what we have seen recently? And the reason I'm asking this is because when I look at the cash lease spreads for this quarter, they were 25%. We saw 36% want Q26. We saw 40% for Q25. So I'm just trying to put it all together and in particular understanding that cash lease spread that we saw for this quarter is just a one-off that happens to be because of the type of tenants you were looking to or actually did renewals for. Thank you.

Jorge Roberto Guerrero Thank you, Jarell, for your question. This is Jorge, and thank you for your work, by the way. Regarding your question on leasing spreads going forward, I mean, right now the market is about 30%. We showed a leasing increase of 41% or so in the quarter. And you have to understand that leasing spreads, they depend on rollover, depend on a couple of things. One, where the market is. I mean, it's not the same in Mexico City, for example. and two, what the specifics of each lease agreement. It's not the same lease agreement that is 10 years old and a lease agreement that is two years old when it comes to term. So it depends on each of those things. And obviously we have seen, we have commented this, we have seen a higher vacancy in the border, for example, and market rents come a little bit down, have adjusted. And you have that, and we're rolling those, we're rolling leases to market. So as we go, as we capture that market to market, the idea in general is that you capture to market, no, you grow to market. As market rents go up again, then it's going to be, you know, again, it will take some time. But if you put it in perspective, and just from a mass point of view, You have 20% of your leases rolling every year. You say, well, in five years, I'm rolling the whole portfolio. In five years, you get to market, unless, you know, markets, rent markets. So we expect still to capture this 30% going forward. And we'll see how markets behave going forward. But we're very positive on how we're seeing the dynamics today. Thank you. Thanks.

Your next question comes from the line of Gordon Lee with BTG. Please go ahead.

Hi, good morning. Thank you very much for the call. I'll add my congratulations, Jorge. Just a quick question. How would you share the blame, let's say, in this mild deterioration of market dynamics between demand and supply? Which of the two worries you most? And to the degree that demand is contributing, you had mentioned uncertainty around USMCA. And I know this is a difficult question to answer. But if you had to take the temperature of your customers that are concerned about USMCA, do you think they need absolute clarity in the form of an actual renewal of the agreement for them to pull the trigger? Or do you think some sort of bilateral agreement on Section 232 tariffs between Mexico and the US would be enough? Thank you.

I mean, it's hard to speculate. Thank you, Gordon, for your question. And just let me say that it's hard to speculate on some of your questions regarding your SMCA. The first part of your question regarding sharing the blame, I don't think it's a blame per se, but if you ask me, there's more this softness, if you may, it's more on the supply side than on the demand side, meaning there's a lot of developers For some developers or merchant builders, however you want to call them, are increasing supply. And we have seen that. And by the way, we have talked about it in the last two quarters. So if I have to share the blame, as you say, I would point to why. Regarding our clients and their USMCA rhetoric, I let Fede.

Thank you, Gordon, for your question. So, yes, I mean, we are staying very close to our customers. And of course, there is prevailing uncertainty, but we're encouraged to see good activity and encouraged to see a pipeline over the last couple of months in terms of companies having to make decisions. You know, their markets are demanding. And despite the uncertainty, let's bear in mind that even with a recent announcement, USMCA Javier Rodríguez, Javier Rodríguez, Contributed to significant trade with our North American partners, and we don't see that going away anytime soon, despite all the rhetoric and challenges. So yeah, that's the outlook on the demand. And just to double-click a bit on what Jorge mentioned on the supply side, we are a bit surprised to see some undisciplined construction happening in the border markets in Monterrey. Just given the current fundamentals, so that is something that I wanted to highlight.

With Mexico, strong fundamentals are here, Gordon. So, I mean, that's why customers are taking decisions in this space. Thank you.

Thank you very much.

Your next question comes from the line of Alejandra Obregon with Morgan Stanley. Please go ahead.

Hi, good morning, everyone. Thank you for taking my call. And I'll echo all the wishes to you, Jorge and Ale, on the new role. My question is on your acquisition guidance. So you kept that unchanged, that $200 to $500 million range. So I was hoping if you can elaborate on how you're thinking about this on this front, and if you can evaluate on the opportunities across markets, right? So when you balance all the factors, demand, rent, Ocupancy, asset availability, even for the acquisition side. If you can talk about how this opportunity might be concentrated in specific markets. Are we seeing more Reynosa, more Mexico City? What are the characteristics that make an asset or a market attractive these days, given all that you've mentioned in the prior answers? Thank you.

Thank you, Ale, for your question. I'll start with the last part of your, and thank you for your work, by the way. I'll start with the last part of your question, and the way that we analyze every acquisition that we do is on a total return or an IRR basis. We see everything that is going on, and that's how, on an unleveraged basis, obviously. So that's how we see or evaluate every acquisition. either coming from Prologis or third-party. Regarding our guidance, I mean, we acquired in the Mexico City Toluca and specifically this building for almost $100 million. And there are some other opportunities that we're looking at. Some of them, you can see them in our supplemental financial information. I mean, you can see where Prologis is developing. And regarding third-party acquisitions, I think there is a little bit of everything. I wouldn't say that specific markets have the bigger volume. We have seen some funds or private investors that are willing to sell in different markets. Among them, the six markets that we have talked about in the past We have some fundamentals, but it's a little bit of to be true, if you may, from that perspective. I wouldn't say on a specific market. We're seeing every single market opportunities, and we will evaluate as they come.

Got it, and if I may follow up, is that Tutti Frutti expanded, meaning is it still focused on the same six markets, or is there any other of what you have that is perhaps looking more attractive that you might be willing to keep?

I would say, I mean, we like markets that have strong fundamentals, you know, the names of those markets. Sometimes, like it has happened in the past, We buy portfolios that have properties outside those markets. That's okay. To the extent that most of it, from a value perspective, is concentrated in the strongest markets. So answering your question, to the extent that these portfolios, if you talk about a portfolio, is more concentrated in these stronger markets, we would be looking into it. Does that answer your question?

It did.

Thank you very much.

Thanks.

Your next question comes from the line of David Soto with Scotiabank. Please go ahead.

Hi. Thanks for checking my questions and congrats on the new role, Jorge. A quick one. We have seen CRE-PL something a relevant driver for demand. Are you seeing a move out or consolidation and which markets are the most affected and who are capturing the displaced demand?

Thank you, David, for your question. So yes, as I mentioned before, we have seen some consolidation space rationalizations, primarily in Mexico City. In other markets, we have also seen some. And I would point to, again, coming off of very strong years where there was significant take-up in space, and we're seeing some leases roll over, companies are thinking, in light of the current circumstances, you know what their their space needs are so that is a trend that we're seeing our teams are staying close to our customers and capturing some of those consolidations but evidently there's there's some that have moved out to other other locations and as far as 3PLs as you know we cater to to that sector and some of it is related to consumption others are related to manufacturing, supporting the manufacturing supply chains. We're seeing some dynamism in that sector, in the border markets, as we're seeing some green shoots of activity across the advanced manufacturing technology sectors. So yeah, I mean, that is a trend that we were expecting to see. And it is playing out. We don't think this is a structural shift. It's something that is natural as companies right-size their operations. Perfect. Thanks.

Your next question comes from the line of Ernst Anton Mortenkotter with GBM. Please go ahead.

Hi, Jorge. Thank you for taking my question and also congrats on taking on the new role. When looking at the occupancy across the non-strategic asset portfolio, the occupancy remains above the consolidated average. So, I mean, for us on a top level, this might look good. And I mean, I'm not sure if this is maybe a stronger than expected performance and could this lead you to reassess Thank you, Ernst, for your question and thank you for your words.

As I said many times, I'm excited and honored. Regarding your question, look, markets move, different markets move differently depending on their demand. I think that the market where we are in, I'm not saying that they're good markets. Every single one has its own activity, if you may. We believe that there are some markets that have stronger fundamentals. We have seen it in the past. Where there is especially land constraint and there is demand in those spaces, you get rents picked up because there is more, normally there is more demand on supply, so rents go up and values go up. And that's basically what we see in the strongest markets. I think that over time, as we said at the beginning of the year, we will be recycling capital as needed. We have sold $40 million this six months. We see good prospects in the next six to nine months to sell some of the other assets. And we keep on doing this and putting the money in, as I said in my opening remarks, in the stronger markets that we see. So I don't think, I mean, it varies. I always say, That industrial portfolio, real estate portfolios are living things. They move along the quarter. They move for different aspects. Sometimes occupancies are higher than others. But I mean, it is a dynamic thing. And as we see fit this capital recycling, we will keep on doing it and putting the money where it makes more sense from a value perspective. So that's the way that you should look at it.

Thank you, Jorge.

Again, if you would like to ask a question, please press star and then the number one on your telephone keypad. Your next question comes from the line of Francisco Chavez with BBBA. Please go ahead.

Hi. Thanks for the call, and Jorge, congrats on the new role. My question is regarding the EBITDA margin. We have seen a recovery in the last two quarters, and can you give us more color on the drivers for this recovery, and will this recovery continue? Where do you see EBITDA margin in the coming months? Thank you.

Thank you, Paco, and thank you for your words. I mean, EBITDA margin, and I think I have said this Many Quarters already. It's going to be around 87% TACO. That's where I see the margin going forward. The recovery that you talked, that you referred to in the last quarters is basically, and it's more than the just two last quarters, by the way. It's mainly coming from the integration of Terrafina. As we integrated Terrafina, we had The expenses that we needed to take care of from the acquisition of Terra. Then, last February, we finally, you know, delisted Terafina that had other expenses. Expenses related to all those things are now, you know, we have gone through that. There were some expenses this quarter. and many more related to the tender offer we did in the previous months and those expenses you know I don't see them going forward so that's why you're seeing this normalization mainly comes from these non-recurrent expenses from these acquisitions and basically going forward you should see and 87% American in Medica. Thank you.

Your next question comes from the line of Francisco Suarez with Scotiabank. Please go ahead.

Hey, thank you for the call. Congrats, Jorge, on the new role. The question is for both you and Fede. It relates now with your higher exposure that you have online manufacturing after the acquisition of Terrafina. Are you detecting a higher demand from these value chains that are feeding all the capex needed for AI, data centers, and so on in your footprint? And in connection to that, Do you see any synergies with your parent company, with PLD, because perhaps some of the tenants that you have on this side of the border are also on the other side of the border and are feeling the same?

Thank you for your words and everything, but before I answer your question, I want to understand The first part of your question, your question is related to demand from AI products?

Yeah, anything that goes into infrastructure from racks to chips to, you know, to even ventilators in data centers, what have you, any along this huge value chain that at the end of the day is affected by this huge capital expenditures related with Expansion, Investments in AI, Data Centers, and so on. Did I explain myself? Thank you.

Yeah, yeah, yeah. Thank you, Paco. I couldn't hear the first part at the beginning. And by the way, I've seen many reports from you guys on the AI boom, if you may, or the way that you see it. And basically, you have very good points. I would say that you have to consider, Paco, that not everything that shines is gold. What I want to say is that we don't see a structural change on demand because of AI-related products. Like, for example, we saw in 2015 when we started to talk about e-commerce. To put it in perspective, Paco, AI-related demand or products This quarter was 20% to 25% of total net absorption. But this trend is something that we saw this quarter. I cannot say that we saw that percentage in the past. So could it be the case that this demand will be an important demand? I wouldn't say no. Right now, we need more data, and Mexico has required The right public policies to make this happen, like what happened with the auto sector, for example, 30 years ago. So long story short, yes, you're right. We have seen some demand related to AI products. I think that it's part of the overall demand. I wouldn't say today that it's a booming thing that will Thank you for your question. Yes, just to add on to what Jorge mentioned, we are indeed seeing demand from the sector as we are from other manufacturing sectors. As you know, we are very much focused, that's one of our two

and the main drivers, together with logistics and consumption. But yeah, so actually one of our new transactions in this quarter had to do precisely with that. Bear in mind, we've done business with electronics companies for many, many years. In Juarez, evidently there's been a strong activity, particularly from large Taiwanese electronics manufacturers, a couple of them In the quarter acquiring space, so that's going to be positive for absorption. We're encouraged to see that activity and expect it to play out. But again, that's one of many sectors within manufacturing that we are seeing and yet remains to be seen how much of a demand driver it will be going forward. And then to the second part of your question on PLD, on Prologis, of course that is a very important relationship and we are in very close communication through the sponsor with of course you know over 6,000 customers that global scale global vision that nobody else has in the market that we we leverage that day to day our teams are well connected and certainly we connect the dots to to really bring more business in Mexico so that is certainly happening and we're proud of that and will continue to happen Thank you very much.

Your next question comes from the line of Alan Macias with Bank of America. Please go ahead.

Hi. Good morning and thank you for the call and again congrats on the new role, Jorge. If you can just provide an overview on what's happening in the Tijuana market, I believe they can see Thank you for your question. Definitely we're keeping an eye on Tijuana for the first time in many years it reached double-digit vacancy.

Thank you for joining us today. But again, we are constructive in the fundamentals going forward of this important market. And again, there's a good diversification in terms of industries that should point towards a better performance in the near term, probably in the next six to 12 months. But that is what I would say about the one.

Thank you for your work.

At this time, if you would like to ask a question, you may press star 1 on your telephone keypad. We will pause for just a moment to allow any additional questions. There are no further questions at this time. That concludes our question and answer session. I will now turn the call back to Jorge Girault for closing remarks.

Thank you, Tiffany. Thank you all for joining us and thank you for your kind words and congrats. Also, thank you to our Prologis colleagues for yet another great quarter. We look forward to speaking to you all in the coming days and have a great weekend. Thanks.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.