Vesta

Welcome to the VESTA Second Quarter 2021 Results Conference Call. At this time, all participants are on a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would now like to turn the call over to your host for today's call, Ms. Claudia Medina, VESTA's Head of Communications. Please go ahead.

Claudia Medina Thank you, and good morning. Welcome to VESTA's conference call to review our second quarter 2031 results. On today's call will be Lorenzo Dominique Berho, Chief Executive Officer, and Juan Sotillo, Chief Financial Officer. Our results were released yesterday afternoon and can be found on the Inventor Relations section of our website, along with our supplemental package and the appropriate filing with the Mexican Stock Exchange. A replay will be available shortly at the conclusion of the call. Certain comments we make during today's discussion will be deemed forward-looking statements within the meaning prescribed by the securities law, including statements related to the future performance of our portfolio, financing activities, our pipeline, and other investments. All forward-looking statements represent best of judgment as of the date of this conference call. and are subject to risks and uncertainty that can cause natural results to differ materially from our current expectations. Investors are asked to fully review various disclosures made by the company, including the risk and other information disclosed in the company's filings with the Mexican Stock Exchange. In particular, uncertainty remains about the duration and contemplated impact of the COVID-19 pandemic. This means investors' results could change at any time, and they instead of COVID-19 and our company's business results. Our outlook is a best estimate based on the information available as of today's date. Finally, note that all figures included herein were prepared in accordance with ISI and are stated in normal U.S. dollars unless otherwise noted. With that, I will now turn the call over to Mr. Behar.

Thank you, Claudia, and good morning, everyone. Thank you for joining us today. The first quarter of 2021 was a positive but tentative start to the year, and I'm pleased to say we saw continued strengthening during the second quarter. We reached a decisive moment, having passed an inflection point. as the unprecedented effects of the COVID-19 pandemic finally show significant signs of resigning. Demand for industrial and logistic real estate in Mexico is gaining momentum on the back of meaningful U.S. economic recovery. Mexico's industrial real estate market reached more than 800 million square feet during the second quarter, with 34 million square feet in available gross leaseable area. Vesta's tenants have also reached a comfort level where they're starting to make decisions, many who are expanding operations. Turning to our quarterly results, Vesta's second quarter 2021 revenues increased to $39.8 million, an 8.6% year-on-year increase, while NOI and EBITDA increased 10.2% and 9.8% respectively. Our second quarter performance was supported by the inflow of our 229 million equity follow-on profits with strong Level 3 strategy execution and solid activity due to close client relationships, strong sales and marketing, and our country's outstanding reputation as a prominent global industrial manufacturing hub. We saw demand for industrial space from high-quality tenants and a wide range of international and local companies, and sectors during the quarter, including Coprol, the Home Depot, and Samsung, among others. We pre-leased a development building with Eaton Corporation that is currently under construction. Reviewing our portfolio stats at quarter end, leasing reached 1.3 million square feet with 92.5% occupancy in the second quarter, up from 90% in the first quarter of 2021. It's important to note that today Vesta has ultra-low vacancy numbers in very healthy markets, particularly northern Mexico. E-commerce and logistics represented 994,000 square feet during the quarter, 72% of our total leasing. Our success in this regard reflects a continued e-commerce focus as part of our nimble and adaptive Level 3 strategy. with Tijuana and Puebla as two newly added e-commerce markets for Vesta during the second quarter. We also saw promising leasing activity from the electronics, electric car component, and energy sectors. Further, while construction costs have increased, demand for Vesta's buildings remains strong due to our demonstrated ability to differentiate ourselves through Vesta's unique and compelling products that are offering that tailor to our customers' specific needs. Taking a closer look at regional dynamics, automotive and logistics continue to drive future investment within the Bajio region, with strong performance in data center land purchases, tenant expansions, and built-to-suit construction during the second quarter. Demand for industrial space in the Mexico City metropolitan area continues to be led by logistics and e-commerce tenants. We also note Occupancy increases with transactions for safety stock facilities. In northern Mexico, the Monterrey industrial market remains active with the highest half-year net absorption in the last 10 years. Similarly, demand is outpacing supply in the Tijuana and Juarez markets. Tijuana and Ciudad Juarez comprise 41% of second quarter leasing activity, with Tijuana achieving a 12.6% increase compared with previous tenants in terms of rents. Inflation had a favorable impact in our company's uniquely dollar-denominated rents during the quarter, an important competitive advantage related to our peers. Vesta's US dollar-denominated contractual rent increase index to the US CPI were favorably impacted by inflation during the first half of the year. as the US CPI increased to 5.4% in June from 1.4% in January 2021. Further, looking back at prior periods of inflation in relation to commercial real estate, property values and rent levels have increased overall. Given that these two items are primary drivers of real estate returns, a natural inflationary hedge is built into real estate investment, providing security in times of economic volatility. This has never been more evident than in the current environment. We maintain an unwavering focus on ESG excellence, for which we were recognized during the second quarter when VESTA was included in the S&P Bolsa Mexicana de Valores Total Mexico ESG Index, based on the S&P's corporate sustainability assessment for the second consecutive year. In conclusion, following a strong start to the year, we have hit the ground running in today's reinvigorating market environment. We are as bullish as we have ever been on our outlook for industrial fundamentals and the strength of our markets, and we foresee a continued strong trend in the quarters ahead with robust cash flow outflows from new projects under development. Our concentration on the segments which thrived during the pandemic, e-commerce in particular, proved to be a winning strategy. We are focused on expanding our e-commerce footprint into new markets through strong relationships with high-quality global clients in diversified industry sectors while capturing the opportunities we're seeing related to U.S. clients' new assuring trends as well as exciting new Asian clients now reshoring to Mexico. Properties in our wheelhouse and our markets continue to appreciate in value. It will be hard for them not to, with new supply remaining constrained in our target markets and tenants looking for space to accommodate growth and access to Mexico's uniquely skilled labor centers. Let me now turn our discussion over to Juan, who will review key financial highlights.