Funo Day

The commercial segment has shown a very solid operating recovery that has been reflected in lower discounts and deferrals towards tenants given a greater influx of consumers

We attended the Fibra Uno “Funo Day” Investors Day in New York, where the current situation of Fibra was discussed, as well as the short and medium-term prospects.

The presentation was introduced by the teacher Arturo Herrera, who presided over the Ministry of Finance and Public Credit, and will soon serve as governor of Banco de México. It began under the global context of the pandemic, which forced the exercise of monetary and fiscal policies implemented differently, given the situation in public finances in each of the economies. It was highlighted that Mexico reflected a banking sector with healthy capitalization ratios that allowed the flow of credit to companies with greater needs due to the pandemic.

In addition to this, the efforts for the rapid development of the vaccine meant that the recent crisis was not as deep as others experienced by our country, such as those of 1982, 1995 and 2009.

We consider that Master Herrera’s position on the current issue of inflation and unemployment is centered on a temporary problem that has been explained by disruptions in demand and supply, and that have mostly been due to the affectation of Covid-19 .

Continuing with the Funo presentation, it began by addressing the current and expected panorama of the office leasing sector, which has been one of the most currently affected by the pandemic crisis. Based on this, Fibra has sought strategies for the conversion of certain properties for a total of 1.1 million square feet (approx. 10% of the total segment) towards health formats, particularly hospitals and clinics that have shown strong demand .

We believe that this strategy could be beneficial to investors without compromising any significant market risk given the gradual exposure to this segment. However, Funo is adamant that cyclicality in the office sector will eventually reflect a greater appetite for these spaces, so they will keep much of the inventory under the current format.

The commercial segment has shown a very solid operating recovery that has been reflected in lower discounts and deferrals towards tenants given a greater influx of consumers. Reiterating Fibra’s significant exposure to this segment, we consider that the short-term outlook would show increases in occupancy and portfolio income.

The industrial segment led the portfolio’s operating performance in recent quarters, leading in occupancy indicators given the strength in the logistics and manufacturing segment. The sector’s prospects remain very strong given the current situation due to the disruption in supply chains and the conflict between China and the United States that has permeated new investments in our country.

On the other hand, they mentioned the progress of the country’s largest mixed-use project, Mitikah, which will have the opening of the commercial component in April 2022 that will include different anchor stores such as Palacio de Hierro and Liverpool.

It was also pointed out that the commercialization of the residential tower already stands at 90 percent. This project in total will integrate around 500K square meters of gross profitable area.

The results guide provided by the administration contemplated an annualized Net Operating Income by 2024 of 23,000 million pesos, which would be equivalent to a growth of 35% based on the figures reported for the third quarter of the current year.

The foregoing derived from improvements in rents, occupancy and increases in the portfolio area. This would lead to a solid advance in Operating Funds of more than 50%, also assuming efficiencies in financial expenses.

We conclude that the outlook for Fibra remains positive, which may continue to benefit from the strength in the industrial, commercial and health segment, despite the current difficult situation in the office segment.

Armando Rodríguez, CEO.