SECOND QUARTER 2015 EARNINGS REPORT
SECOND QUARTER 2015 EARNINGS REPORT Mexico City, July 23, 2015 – Terrafina® (“TERRA”) (BMV: TERRA13), a leading Mexican industrial real estate investment trust (“FIBRA”), externally advised by Prudential Real Estate Investors and dedicated to the acquisition, development, lease and management of industrial real estate properties in Mexico, today announced its second quarter 2015 (2Q15) earnings results.
The figures in this report have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Figures presented in this report are presented in millions of Mexican pesos and millions of U.S. dollars. Additionally, figures may vary due to rounding. Terrafina’s financial results included in this report are unaudited. As a result, the mentioned figures in this financial report are preliminary figures and could be adjusted in the future.
Financial and Operational Highlights as of June 30, 2015 Operational •
• •
•
•
As of June 30, 2015, the occupancy rate was 93.1%, a 200 basis point increase compared to the second quarter of 2014 (2Q14). Additionally, considering the signed letters of intent, occupancy for 2Q15 was 93.8%. Annualized average leasing rate per square foot at 2Q15 was US$4.89, a US$0.11 increase compared to 2Q14. Terrafina reported a total of 28.3 million square feet (msf) of Gross Leasable Area (GLA) comprised of 196 properties and 204 tenants. 2Q15 leasing activity totaled 1.9 msf, of which 15.4% corresponded to new leases, 61.6% are lease renewals and 23.0% correspond to early renewals. Leasing activity was mainly concentrated in the Chihuahua, San Luis Potosi, Ciudad Juarez, Ramos Arizpe, Cuautitlan Izcalli and Toluca markets. Total developments as of June 30, 2015 included 570,000 square feet of GLA, which are expected to contribute US$2.6 million to Net Operating Income (NOI) for the 2016 period. The return rate for the expansions was 12.0%.
Contacts in Mexico City: Francisco Martinez/ Angel Bernal Investor Relations Officer / Chief Financial Officer Tel: +52 (55) 5279-8107 / +52 (55) 5279-8109 E-mail: [email protected] / [email protected]
Contacts in New York: Maria Barona / Juan Carlos Gomez Stolk i-advize Corporate Communications, Inc. Tel: +1 (212) 406-3691 / (646) 462-4517 E-mail: [email protected] / / [email protected]
1
Financial
• 2Q15 rental revenues reached US$31.7 million, a 2.9% or US$0.9 million decrease compared to 2Q14. It is important to mention that as a result of the asset sale that took place in 1Q15, revenues, NOI and EBITDA for the quarter decreased compared to 2Q14 figures, which included these properties. • 2Q15 NOI was US$30.3 million, a 2.9% or US$0.9 million decrease compared to 2Q14. Moreover, the implied cap rate was 8.3%, considering the average share price for 2Q15 of US$1.99 (Ps. 30.53) and 2015 expected NOI of US$125 million. • The NOI margin for 2Q15 reached 91.2%, a 277 basis points increase compared to 2Q14. • 2Q15 EBITDA reached US$27.2 million, a decrease of 1.5% or US$0.4 million compared to 2Q14. • The EBITDA margin for 2Q15 was 81.8%, a 364 basis point increase compared to 2Q14. • 2Q15 adjusted funds for operations (AFFO) reached US$19.6 million, a 16.0% increase compared to 2Q14. • AFFO margin for 2Q15 was 58.6%, a 1,101 basis point increase compared to 2Q14. • 2Q15 distributions totaled US$19.6 million. As a result of 2Q15 operations, Terrafina will pay Ps.0.4956 per CBFI (US$0.0323 per CBFI) as distributions corresponding to the period from April 1 to June 30, 2015. • The annualized distribution of 2Q15 was US$0.1291; considering the average closing share price for the quarter of US$1.99 (Ps.30.53), Terrafina’s dividend yield for the quarter was 6.5%.
2
Financial Highlights Operating
Jun15
Number of Developed Properties 1
Gross Leasable Area (GLA) (msf) 2
New Developments (msf) Land Reserves (msf) 3
Occupancy Rate Avg. Leasing Rent / Square Foot (dollars) Weighted Average Remaining Lease Term (years) 4
Renewal Rate
Jun14
196
217
28.3 0.61
Var.
5 Rental Revenues Other Operating Income Net Revenues Net Operating Income (NOI)* NOI Margin 6 EBITDA * EBITDA Margin Funds from Operations (FFO)* FFO Margin Adjusted Funds from Operations (AFFO)* AFFO Margin Distributions 7 Distributions per CBFI
Balance Sheet
30.9
-‐2.6
0.00
0.61
5.74
7.32
-‐1.58
93.1%
91.1%
200 bps
4.89
4.78
0.11
3.61
3.67
-‐0.06
86.2%
82.1%
414 bps
2Q15
2Q14
Var.
(millions of pesos unless otherwise stated)
484.8 22.0 507.8 463.7 91.2% 416.0 81.8% 331.4 65.2% 300.9 58.6% 300.9 0.4956
424.0 42.7 474.6 404.6 88.4% 358.6 78.2% 255.4 55.8% 219.8 47.6% 219.8 0.5769
14.4% -‐48.5% 7.0% 14.6% 277 bps 16.0% 364 bps 29.8% 938 bps 36.9% 1,101 bps 36.9% -‐14.1%
Jun15
Mar15
Var.
Quarterly Financial
-‐21
(millions of pesos unless otherwise stated)
Cash & Cash Equivalents Investment Properties Land Reserves Total Debt Net Debt
4,833.3 24,116.6 692.5 10,229.2 5,395.9
5,565.8 23,487.2 876.6 10,309.9 4,744.1
-‐13.2% 2.7% -‐21.0% -‐0.8% 13.7%
2Q15
2Q14
Var.
fx
15.3162
12.9997
(millions of dollars unless otherwise stated)
31.7 1.5 33.2 30.3 91.2% 27.2 81.8% 21.7 65.2% 19.6 58.6% 19.6 0.0323
32.6 3.3 36.5 31.2 88.4% 27.6 78.2% 19.7 55.8% 16.9 47.6% 16.9 0.0444
Jun15
Mar15
15.1542
fx
15.5676
-‐2.9% -‐54.1% -‐8.9% -‐2.9% 277 bps -‐1.5% 364 bps 9.9% 938 bps 16.0% 1,101 bps 16.0% -‐27.2% Var.
(millions of dollars unless otherwise stated)
310.5 1,549.2 44.5 657.1 346.6
367.3 1,549.9 57.8 680.3 313.1
-‐15.5% 0.0% -‐23.1% -‐3.4% 10.7%
Figures in dollars in the Income Statement were converted into pesos using the average exchange rate for the period; for the Balance Sheet the exchange rate for the close of the period was used. (1) Millions of square feet. (2) Includes expansions and Built-‐to-‐Suits (BTS). (3) Occupancy at the end of the period. (4) Indicates the lease renewal rate of the leases, includes early renewals. (5) Excluding accrued income as it is a non-‐cash item (6) Earnings before interest, taxes, depreciation and amortization. (7) Certificados Bursátiles Fiduciarios Inmobiliarios -‐ Real Estate Investment Certificates. Figures in dollars in the Balance Sheet were converted using the closing exchange rate of the period. (*) Revenues and expenses have been adjusted for the calculation of the above mentioned metrics. Please refer to the “2Q15 Financial Performance" and "Annexes" section available in this document. 3 Source: PREI – Portfolio Management – Fund Accounting
Comment by Alberto Chretin, Chief Executive Officer and Chairman of the Board During the second quarter of 2015, Terrafina achieved positive results in terms of its main operating and financial indicators. Occupancy levels remain high and rental rates increased while the stand-‐outs in leasing activity were the Chihuahua, San Luis Potosi, Ciudad Juarez, Ramos Arizpe, Cuautitlan Izcalli and Toluca markets. Additionally, in the second quarter period, we reaffirmed the operating and financial efficiencies generated from the asset sale that took place in March 2015. Terrafina’s leasing activity for the second quarter of 2015 included 1.9 million square feet of leasing contracts comprised of the following: 15.4% in new leasing contracts, 61.6% in lease renewals and 23.0% in early renewals. The average annual leasing rent was US$4.89 per square foot, a US$0.2 increase compared to the first quarter of 2015 and a US$0.11 increase compared to the second quarter of 2014. Average rents by region also strengthened; price per square foot was US$4.77 in the Northern region, US$4.96 in the Bajio region and US$5.12 in the Central region. The occupancy rate for 2Q15 reached 93.1%, a 200 basis point increase compared to the second quarter of 2014. Additionally, including signed letters of intent, occupancy for the quarter was 93.8%. Occupancy by region reached 93.8% in the Northern region, 88.6% in the Bajio region and 96.2% in the Central region. Last, and with respect to the main financial indicators for the period, rental revenues reached US$31.7 million, net operating income reached US$30.3 million and the operating margin reached 91.2% and generated US$19.6 million in adjusted funds for operations. Distribution per CBFI was Ps. 0.4956, or US$0.0323, which represented an annualized distribution of Ps. 1.98 or US$0.1291 per CBFI, and a 6.5% dividend yield considering the average CBFI price for 2Q15. Sincerely, Alberto Chretin
Chief Executive Officer and Chairman of the Board
4
Operational Highlights Highlights by Region
North
Bajio
Central
Total
# Buildings
127
40
29
196
# Tenants
126
40
38
204
GLA (msf)
15.8
6.5
6.0
28.3
0.2
0.2
0.3
0.6
2.3
0.1
3.3
5.7
93.8%
88.6%
96.2%
93.1%
4.77
4.96
5.12
4.89
54.8%
22.3%
22.9%
100.0%
(as of June 30, 2015)
New Developments
1
(msf)
Land Reserves (msf) Occupancy Rate Average Leasing Rent / Square Foot (dollars) Annualized Rental Base % (1) Includes expansions and Built-‐to-‐Suit (BTS). Source: PREI -‐ Portfolio Management
BAJIO -
NORTH -
-
Baja California Sonora Chihuahua Coahuila Nuevo León Tamaulipas Durango
CENTRAL Estado de México Distrito Federal Puebla Tabasco
San Luis Potosí Jalisco Aguascalientes Guanajuato Querétaro Terrafina’s operations 2Q15.
Composicon by Asset Type as of 2Q15 (as a % of total GLA)
29.0%
71.0%
Leasing Activity
Operating Portfolio (msf):
2Q15 2Q14
Var.
Renewals
1.2
1.3
-‐0.1
Early Renewals
0.4
0.0
0.4
New Leases
0.3
0.4
-‐0.1
Total Square Feet of Leases Signed
1.9
1.7
0.1
Source: PREI -‐ Portfolio Management
Distribumon
Manufacturing
5
Operational Highlights (continued) Occupancy and Rents by Region (As of June 30, 2015)
93.8%
4.77
Baja California
84.7%
4.70
Sonora
86.3%
4.18
Chihuahua
96.6%
4.95
Coahuila
93.7%
4.38
Nuevo Leon
74.4%
5.37
Tamaulipas
88.6%
4.46
Durango
100.0%
3.82
88.6%
4.96
San Luis Potosi
95.4%
4.91
Jalisco
100.0%
5.39
Aguascalientes
100.0%
4.51
Guanajuato
87.5%
4.88
Queretaro
70.4%
4.89
96.2%
5.12
Estado de Mexico
95.5%
5.24
Distrito Federal
100.0%
10.42
Puebla
100.0%
3.63
Tabasco
100.0%
4.53
93.1%
4.89
Bajio
Central
Total
Source: PREI -‐ Portfolio Management
Maturities and Renewals by Region
0
Occupancy Avg. Leasing Rent/ Square Rate Foot (dollars)
North
Consolidated
83.3%
23
85.2%
Baja California
2
6.7%
2
7.4%
Sonora
0
NA
0
NA
Chihuahua
19
63.3%
18
66.7%
Coahuila
2
6.7%
1
3.7%
Nuevo Leon
1
3.3%
1
3.7%
Tamaulipas
1
3.3%
1
3.7%
Durango
0
NA
0
NA
3
10.0%
2
7.4%
San Luis Potosi
1
3.3%
1
3.7%
Jalisco
1
3.3%
1
3.7%
Aguascalientes
0
NA
0
NA
Guanajuato
0
NA
0
NA
Querétaro
1
3.3%
0
0.0%
2
6.7%
2
7.4%
Estado de Mexico
2
6.7%
2
7.4%
Distrito Federal
0
NA
0
NA
Puebla
0
NA
0
NA
Tabasco
0
NA
0
NA
30
100.0%
27
100.0%
Centro
25
Bajio
Maturities
Norte
Renewals % o f Total (number of contracts) Renewals
(number of contracts)
(As of June 30, 2015)
Maturities % o f T otal
Total
Source: PREI -‐ Portfolio Management *Over the number of expired leases during the quarter
6
2Q15 Operational Performance Composition by Geographical Diversification
The geographical diversification of Terrafina’s properties, at 2Q15 (based on GLA per square foot), was mainly located in the northern region of Mexico, representing 55.7% of GLA, while for the Bajio and Central regions, it represented 23.1% and 21.2%, respectively. Geographic Diversification by Region and State 2Q15
as a % of Total GLA 2Q15
2Q14
as a % of Total GLA 2Q14
15.79
55.7%
18.45
59.6%
Baja California
1.13
4.0%
1.13
3.7%
Sonora
0.28
1.0%
0.28
0.9%
Chihuahua
9.41
33.2%
9.84
31.8%
Coahuila
3.39
12.0%
3.38
10.9%
Nuevo Leon
0.77
2.7%
1.58
5.1%
Tamaulipas
0.34
1.2%
1.76
5.7%
Durango
0.46
1.6%
0.46
1.5%
6.54
23.1%
6.49
21.0%
San Luis Potosi Jalisco
1.97
7.0%
1.87
6.1%
1.29
4.6%
1.29
4.2%
Aguascalientes Guanajuato
0.75
2.6%
0.75
2.4%
0.54
1.9%
0.54
1.7%
Queretaro
1.98
7.0%
2.04
6.6%
6.00
21.2%
6.00
19.4%
Estado de Mexico Distrito Federal
5.14
18.1%
5.14
16.6%
0.02
0.1%
0.02
0.1%
Puebla Tabasco
0.18
0.7%
0.18
0.6%
0.65
2.3%
0.65
2.1%
28.32
100.0%
30.94
100.0%
North
Bajio
Central
Total
Total Gross Leasable Area / million square feet. Potential leasable area of land reserves is not included.
Source: PREI -‐ Portfolio Management
Composition by Asset Type
As of June 30, 2015, 29.0% of Terrafina’s total portfolio consisted of distribution and logistics properties and 71.0% were manufacturing properties. Composicon by Asset Type as of 2Q15 (as a % of total GLA)
Composition by Asset Type 29.0%
2Q15
2Q14
Var.
Distribution
29.0%
30.9%
-‐187 bps
Manufacturing
71.0%
69.1%
187 bps
Source: PREI -‐ Portfolio Management
71.0%
Distribumon
Manufacturing
7
Composition by Sector
As of June 30, 2015, tenant diversification by industrial sector was as follows: Diversificacon by Sector as of 2Q15 (as a % of leased GLA)
Automomve Industrial propermes Consumer goods Logismcs and Trade Aviamon Non-‐durable consumer goods Electronics
6.1% 7.3%
11.3% 20.7%
16.4%
Diversification by Industrial Sector
28.0%
10.2%
2Q15
2Q14
Var.
Automotive
28.0%
28.1%
-‐15 bps
Industrial Goods
20.7%
18.3%
240 bps
Consumer Goods
16.4%
19.1%
-‐269 bps
Logistics and Trade
11.3%
9.7%
161 bps
Aerospace
10.2%
9.4%
75 bps
Non-‐durable Consumer Goods
7.3%
6.8%
51 bps
Electronics
6.1%
8.5%
-‐242 bps
100.0%
100.0%
Total Source: PREI -‐ Portfolio Management
Top Clients’ Composition
Terrafina’s tenant leasing base is widely diversified across Mexico’s main cities. For 2Q15, Terrafina’s top client, top 10 clients and top 20 clients, represented 4.7%, 23.6% and 36.7% of total revenues, respectively. Top Clients Leased Square Feet (millions)
% Total GLA
% Total Revenues
Top Client
1.24
4.7%
4.7%
Top 10 Clients
6.16
23.4%
23.6%
Top 20 Clients
9.48
(as of June 30, 2015)
Source: PREI -‐ Portfolio Management
36.0%
36.7%
8
Occupancy
2Q15 occupancy rate was 93.1%, a 200 basis point increase compared to 2Q14. Additionally, including signed letters of intent for the quarter, occupancy rate was 93.8%. It is important to mention that occupancy rate metrics presented in this report only show the quarterly closing rate. For 2Q15, Terrafina’s leasing activity reached 1.9 msf, of which 15.4% correspond to new leasing contracts (including expansions), 61.6% for contract renewals and 23.0% for early renewals. Leasing activity mainly took place in the Chihuahua, San Luis Potosi, Ciudad Juarez, Ramos Arizpe, Cuautitlan Izcalli and Toluca markets. In addition to this leasing activity, Terrafina signed letters of intent for an additional 941,000 square feet. Occupancy as of 2Q15 (as % of Total GLA)
6.2% 0.7%
2Q15
2Q14
Var.
Leased GLA
93.1%
91.1%
200 bps
Vacant GLA
6.2%
8.9%
-‐267 bps
Signed Letters of Intent
0.7%
0.0%
70 bps
100.0%
100.0%
Leased GLA
Vacant GLA Signed Leners of Intent
93.1%
Total
Lease Maturities
Source: PREI -‐ Portfolio Management
Terrafina had 204 leasing contracts as of June 30, 2015. The leasing characteristics of these contracts have an average maturity of 3 to 5 years for logistics and distribution properties activities and 5 to 7 years for manufacturing. Annual average maturities (as a percentage of annual base rents) remain at levels of 8% to 20% for the next five years. The following table shows Terrafina’s leasing maturity schedule for the coming years: 2015 2016 2017 2018 2019 Thereafter
Annual Base Rent % o f T otal (millions of dollars)
Occupied Sq. Ft(millions)
% of Total
9.8 19.5 16.4 15.4 26.4
7.6% 15.2% 12.7% 12.0% 20.5%
2.04 4.10 3.42 3.23 5.39
7.7% 15.6% 13.0% 12.2% 20.4%
41.3
32.1%
8.18
31.0%
Source: PREI – Portfolio Management
9
Capital Deployment New Developments
In 2Q15, Terrafina signed 87,421 square feet in new contracts. These new developments were distributed as follows: 4.9% in the northern region (Ramos Arizpe) and 95.1% in the Bajio region (San Luis Potosi). As of June 30, 2015, new developments will contribute US$2.6 million to 2016 NOI, with a 12.0% estimated development yield, considering the total expected investment for US$21.6 million.
January -‐ June 2015 Square Feet (millions)
% Paying Cost per Total Expected Total Expected Rent by Square Investment Investment Feet End of the (millions of pesos) (millions of dollars) (dollars) Period
North
0.13
70.2
4.6
34.40
0.0%
Bajio
0.18
124.3
8.1
44.63
0.0%
Central
0.26
136.1
8.9
34.67
0.0%
Total
0.57
330.6
21.6
37.75
0.0%
1
Proforma NOI (millions of dollars)
2
Estimated Stabilized Yield
2.6 12.0%
( 1) Net Operating Income for the next twelve months. (2) Proforma NOI divided by the total expected investment. Proforma figures are not a guarantee of future results. Source: PREI -‐ Portfolio Management
Projects Under Development
2Q15
2Q14
Developed Properties
98.0%
99.6%
Properties Under Development
2.0%
0.4%
100.0%
100.0%
Total
Source: PREI -‐ Portfolio Management
Capital Expenditures (CAPEX)
Terrafina’s CAPEX is classified as those recurring expenses that took place based on upcoming leasing maturities and property improvements. The main goal of these expenses is the renewal of leasing contracts as well as the improvement of property conditions taking into account tenant requirements. Terrafina expects to apply CAPEX towards vacant properties as well as towards the development of new GLA by means of expansions and/or new developments. Additionally, it is important to consider that CAPEX intended for expansions and new developments are not financed with Terrafina’s operating cash flow and therefore do not pass through the income statement. Capital expenditures accounts are comprised as follows: 1) Tenant improvements resources as well as recurring maintenance CAPEX. 2) Broker and administrator fees. 3) CAPEX for new developments, which due to their nature, are generally capitalized.
10
In 2Q15, Terrafina’s total CAPEX investment was US$6.6 million. CAPEX breakdown is shown in the following table:
2Q15
2Q15
(millions of pesos)
(millions of dollars)
Tenant Improvements & Recurring CAPEX Leasing Commissions 1 Development CAPEX
23.9 10.2 66.7
1.6 0.7 4.4
Total Capital Expenditures
100.7
6.6
Maintenance expenses for vacant properties are included in the Tenant Improvements & Recurring CAPEX figures. (1) CAPEX for expansions/new developments. Source: PREI -‐ Portfolio Management
Land Reserves
Terrafina’s land reserve as of June 30, 2015 was comprised of nine land reserve properties, which accounted for 5.7 msf of potential GLA for the development of future industrial assets. Terrafina’s 2Q15 land reserves distribution was as follows: As of June 30, 2015
Square Feet (million)
North Bajio Central Total Land Portfolio
Land at Land at Appraisal Market Cost Cost Value Value
(millions of pesos)
(millions of dollars)
(millions of pesos)
(millions of dollars)
2.3 0.1 3.3
337.0 11.1 578.2
21.6 0.7 37.1
343.6 10.0 338.9
22.1 0.6 21.8
5.7
926.3
59.4
692.5
44.5
Source: PREI -‐ Portfolio Management and Fund Accounting
11
2Q15 Financial Performance
Financial Results and Calculations
Terrafina’s 2Q15 financial results are presented in Mexican pesos and U.S. dollars. Figures on the income statement for each period were converted to dollars using the average exchange rate for 2Q15. The June 30, 2015 exchange rate was applied to the balance sheet. Terrafina has in place best accounting practices for measuring the FIBRA’s (REIT) performance results by providing relevant metrics to the financial community. Throughout the following financial performance section, additional calculations are available. It is important to note that these metrics must not be considered individually to evaluate Terrafina’s results. It is recommended to use them in combination with other International Financial Reporting Standards metrics to measure the Company’s performance. Terrafina presents in this earnings report additional metrics such as Net Operating Income (NOI), Earnings Before Interests, Taxes, Depreciation and Amortization (EBITDA), Funds from Operations (FFO), and Adjusted Funds from Operations (AFFO). Each breakdown calculation is available in this document. In addition, Terrafina recommends reviewing the Appendices as a reference of the integration of different items of Terrafina’s financial statement. This information is available in the last section of this document. Past performance is not a guarantee or reliable indicator of future results.
12
Rental Revenues
In 2Q15, Terrafina registered US$31.7 million in rental revenues, a 2.9% or US$0.9 million decrease compared to 2Q14. It is important to mention that there was a revenue, NOI and EBITDA decrease compared to 2Q14 numbers as a result of the asset sale closed in 1Q15. Conversely, Terrafina registers operating and financial efficiencies as a result of this transaction, which strengthens margins and AFFO generation. Rental revenues do not include accrued revenues, as these are a non-‐cash item.
Other Operating Income
In 2Q15, other operating income totaled US$1.5 million, a 54.1% or US$1.8 million decrease compared to 2Q14. Other operating income mainly stems from leasing contract deposits and refunds from triple-‐net leases. Expenses reimbursable to Terrafina principally include electricity, property taxes, insurance costs and maintenance activities. Net revenue reached US$33.2 million in 2Q15, a decrease of US$3.3 million, or 8.9% compared to 2Q14 resulting from the asset sale during 1Q15.
Rental Revenue
2Q15
2Q14
(millions of pesos)
Var. %
2Q15
2Q14
(millions of dollars)
Var. %
484.8
424.0
14.3%
31.7
32.6
-‐2.9%
0.9
7.9
-‐
0.1
0.6
-‐
22.0
42.7
-‐48.4%
1.5
3.3
-‐54.1%
Reimbursable Expenses as Revenues
23.8
34.3
-‐30.5%
1.6
2.7
-‐42.2%
Reimbursable Tenant Improvements
3.3
2.7
20.9%
0.2
0.2
6.6%
Other non-‐cash income
-‐5.1
5.7
-‐188.8%
-‐0.3
0.4
-‐164.6%
507.8
474.6
7.0%
33.2
36.5
-‐8.9%
1
Accrued Income Other Operating Revenues 2
Net Revenue
(1) Straight line rent adjustment; non-‐cash item. (2) Triple-‐net leases expenses reimbursed to Terrafina from its tenants. Source: PREI -‐ Fund Accounting
For additional information regarding the revenue breakdown used to calculate additional metrics presented in this earnings report, please refer to Appendix 1 in the last section of this document.
Real Estate Expenses
In 2Q15, real estate expenses totaled US$8.1 million. These expenses mainly included repair and maintenance, electricity, fees, property taxes and insurance expenses. It is important to differentiate between expenses directly related to the operation and maintenance of the industrial portfolio, as these are the ones used to calculate NOI. The remainder of the accounts included in real estate expenses are considered non-‐recurring expenses and are used to calculate EBITDA and AFFO.
13
For additional information regarding the real estate expenses breakdown, please refer to Appendix 2 in the last section of this document.
Net Operating Income (NOI)
In 2Q15, NOI totaled US$30.3 million, a 2.9% decrease, or US$0.9 million compared with 2Q14. NOI margin increased 277 basis points reaching 91.2% compared to 88.4% in 2Q14. The following table displays the calculation of NOI for 2Q15:
2Q15
2Q14
(millions of pesos)
1
Rental Revenues 2
Other Operating income Net Revenues for NOI Calculation Repair and Maintenance
Var. %
2Q15
2Q14
Var. %
(millions of dollars)
484.8
424.0
14.4%
31.7
32.6
-‐2.9%
23.8
34.3
-‐30.5%
1.6
2.7
-‐42.2%
508.7
458.3
11.0%
33.2
35.3
-‐5.9%
-‐14.6
-‐9.1
60.4%
-‐1.0
-‐0.7
36.6%
Property Taxes
-‐5.1
-‐6.9
-‐25.5%
-‐0.3
-‐0.5
-‐33.0%
Property Management Fees
-‐10.7
-‐13.1
-‐18.3%
-‐0.7
-‐1.0
-‐30.1%
Electricity
-‐6.8
-‐12.2
-‐44.3%
-‐0.4
-‐0.9
-‐50.9%
Property Insurance
-‐1.3
-‐5.4
-‐75.9%
-‐0.1
-‐0.4
-‐78.8%
Security
-‐2.6
-‐3.6
-‐26.5%
-‐0.2
-‐0.3
-‐42.4%
Other Operational Expenses
-‐3.8
-‐3.4
12.5%
-‐0.2
-‐0.3
-‐17.0%
-‐45.0
-‐53.7
-‐16.2%
-‐2.9
-‐4.1
-‐28.3%
Net Operating Income
463.7
404.6
14.6%
30.3
31.2
-‐2.9%
NOI Margin
91.2%
88.4%
277 bps
91.2%
88.4%
277 bps
Real Estate Operating Expenses for NOI Calculation 3
(1)Excludes accrued income from straight line rent adjustments as it is a non-‐cash item. (2) Excludes tenant improvements reimbursements which are included in AFFO ' (3) The income calculation generated by the operation of the property, independent of external factors such as financing and income taxes. NOI is the result of Net Revenues (includes rental income and triple net leases expenses reimbursements) minus Real Estate Operating Expenses (costs incurred during the operation and maintenance of the industrial portfolio). Source: PREI -‐ Fund Accounting
Fees and Administrative Expenses (G&A)
G&A in 2Q15 totaled US$4.0 million, a 13.6%, or US$0.5 million increase compared to 2Q14. The following table shows total G&A:
2Q15
2Q14
(millions of pesos) 1
Var. %
2Q15
2Q14
(millions of dollars)
Var. %
External Advisor Fees
-‐29.1
-‐26.3
10.5%
-‐1.9
-‐2.0
-‐6.0%
Professional and Consulting Services
-‐6.9
-‐6.3
9.3%
-‐0.5
-‐0.5
6.2%
Payroll, Admin. Fees and Other Expenses
-‐24.0
-‐12.3
94.8%
-‐1.6
-‐1.0
56.6%
-‐59.9
-‐44.9
33.4%
-‐4.0
-‐3.5
13.6%
2
Total G&A
(1) PLA Administradora Industrial, S. de R.L. de C.V., is a Mexican affiliate of PREI, and Advisor as the Advisory Contract. (2) General and Administrative Expenses Source: PREI -‐ Fund Accounting
14
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
In 2Q15, EBITDA totaled US$27.2 million, a decrease of US$0.4 million, or 1.5%, compared to 2Q14. EBITDA margin for 2Q15 was 81.8%, a 364 basis point increase compared to the previous year. The following shows the EBITDA calculation for 2Q15:
1
Rental Revenues
2Q15
2Q14
(millions of pesos)
Var. %
2Q15
2Q14
(millions of dollars)
Var. %
484.8
424.0
14.3%
31.7
32.6
-‐2.9%
Other Operating income
23.8
34.3
-‐30.5%
1.6
2.7
-‐42.2%
Real Estate Expenses for EBITDA Calculation
2
-‐47.3
-‐57.0
-‐17.0%
-‐3.1
-‐4.4
-‐29.8%
Real Estate Operating Expenses for NOI Calculation
-‐45.0
-‐53.7
-‐16.2%
-‐2.9
-‐4.1
-‐28.3%
Advertising
-‐0.8
-‐0.5
68.6%
-‐0.1
0.0
-‐
Admin. Property Insurance Expenses
-‐0.8
-‐0.8
-‐6.0%
0.0
-‐0.1
-‐
Other Admin. Real Estate Expenses
-‐0.7
-‐2.0
-‐
0.0
-‐0.2
-‐
Fees and Admin. Expenses
-‐45.4
-‐42.7
6.2%
-‐3.0
-‐3.3
-‐10.6%
External Advisor Fees
-‐29.1
-‐26.3
10.5%
-‐1.9
-‐2.0
-‐6.0%
Legal, Admin. and Other Professional Fees
-‐10.6
-‐11.1
-‐4.4%
-‐0.7
-‐0.9
-‐22.3%
Trustee Fees
-‐1.0
-‐1.6
-‐36.7%
-‐0.1
-‐0.1
-‐33.9%
Payroll
-‐3.3
-‐2.9
14.1%
-‐0.2
-‐0.2
8.0%
Other Expenses
-‐1.4
-‐0.8
71.4%
-‐0.1
-‐0.1
-‐
3
EBITDA
416.0
358.6
-‐5.4%
27.2
27.6
-‐1.5%
EBITDA Margin
81.8%
78.2%
364 bps
81.8%
78.2%
364 bps
(1) Excludes accrued income from straight line rent adjustments as it is a non-‐cash item. (2) Excludes tenant improvements reimbursements which is included in AFFO calculation. (3) Earnings before interest, taxes, depreciation and amortization. Source: PREI -‐ Fund Accounting
For additional information regarding the commissions and administrative expenses breakdown used for the calculation of EBITDA and AFFO, please refer to Appendix 4 located in the last section of this document.
Financing Costs
In 2Q15, financing costs totaled US$5.5 million, a decrease of 30.0% or US$2.4 million compared to 2Q14.
Interest Paid
Borrowing Expenses
2Q15
Non Recurring
Var. %
(millions of pesos)
Recurring
2Q14
2Q15
2Q14
Var. % 0
(millions of dollars)
0
-‐108.6
-‐103.4
5.0%
-‐7.1
-‐8.0
-‐11.3%
-‐0.2
-‐0.5
-‐66.5%
0.0
0.0
-‐
-‐0.2
-‐0.5
-‐66.5%
0.0
0.0
-‐
0.0
0.0
-‐
0.0
0.0
-‐
Interest Income
24.1
0.7
3345.5%
1.6
0.1
1479.7%
Total
-‐84.6
-‐103.2
-‐18.0%
-‐5.5
-‐7.9
-‐30.0%
Source: PREI -‐ Fund Accounting
15
Funds from Operations (FFO) / Adjusted Funds from Operations (AFFO)
In 2Q15, Terrafina’s FFO increased by US$2.0 million, or 9.9% compared to 2Q14, reaching US$21.7 million. FFO Margin was 65.2%, a 938 basis point increase compared to 2Q14. Additionally, Terrafina reported an AFFO of US$19.6 million, an increase of US$2.7 million, or 16.0% compared to 2Q14. AFFO margin was 58.6%, an increase of 1,101 basis points versus 2Q14. EBITDA 1 Finance Cost Funds from Operations (FFO) FFO Margin Tenant Improvements Leasing Commissions CAPEX Reserve 2 Other Non Recurring Expenses Adjusted Funds from Operations (AFFO) AFFO Margin
2Q15
2Q14
Var. % 2Q15 2Q14 Var. % (millions of dollars) 0 0 358.6 16.0% 27.2 27.6 -‐1.5% -‐103.2 -‐18.0% -‐5.5 -‐7.9 -‐30.0% 255.4 29.8% 21.7 19.7 9.9% 55.8% 938 bps 65.2% 55.8% 938 bps -‐13.1 33.0% -‐1.1 -‐1.1 2.8% -‐10.7 -‐13.6% -‐0.6 -‐0.8 -‐24.5% -‐9.6 -‐ 0.0 -‐0.7 -‐ -‐2.2 72.8% -‐0.3 -‐0.2 61.9% 219.8 36.9% 19.6 16.9 16.0% 47.6% 1,101 bps 58.6% 47.6% 1,101 bps
(millions of pesos)
416.0 -‐84.6 331.4 65.2% -‐17.4 -‐9.2 0.0 -‐3.8 300.9 58.6%
(1) Net Operational Interest Expenses comprised by interest paid, recurring borrowing expenses and interest income. (2) Related expenses to acquisitions, legal and other. Source: PREI -‐ Fund Accounting
Comprehensive Income
Comprehensive Income for 2Q15 reached US$25.3 million, compared to the US$56.6 million in 2Q14. The following table presents the calculation of Comprehensive Income:
2Q15
2Q14
(millions of pesos)
Var. %
2Q15
2Q14
Var. %
(millions of dollars)
Net Revenues
507.8
474.6
7.0%
33.2
36.5
-‐9.0%
Real Estate Expenses
-‐124.3
-‐80.6
54.2%
-‐8.1
-‐6.2
31.0%
Fees and Other Expenses
-‐59.9
-‐44.9
33.4%
-‐4.0
-‐3.5
15.1%
Gain (Loss) from Sales of Real Estate Properties
0.0
0.0
-‐
0.0
0.0
-‐
-‐78.6
315.9
-‐124.9%
-‐5.1
24.3
-‐121.1%
0.0
-‐21.6
-‐
0.0
-‐1.7
-‐
-‐215.8
241.1
-‐189.5%
-‐14.1
18.5
-‐176.0%
Foreign Exchange Gain (loss)
7.4
0.0
-‐
0.5
0.0
-‐
Acquisition Related Expenses
-‐69.3
-‐5.8
1094.2%
-‐4.5
-‐0.4
913.6%
Operating Profit
-‐32.6
878.7
-‐
-‐2.1
67.6
-‐103.1%
Net Income (Loss) from Fair Value Adjustment on Investment Properties Net Income (Loss) from Fair Value Adjustment on Derivative Financial Instruments Net Income (Loss) from Fair Value Adjustment on Borrowings
Financial Income
24.1
0.7
3345.5%
1.6
0.1
-‐
Financial Expenses
-‐108.7
-‐103.9
4.7%
-‐7.1
-‐8.0
-‐11.1%
Net Financial Cost
-‐84.6
-‐103.2
-‐18.0%
-‐5.5
-‐7.9
-‐30.4%
Net Profit (Loss)
-‐117.3
775.5
-‐
-‐7.6
59.7
-‐
Items Reclassified after Net Profit (Loss) -‐ Currency Translation Adjustments
503.9
-‐40.4
-‐
32.9
-‐3.1
-‐
Comprehensive Income
386.6
735.2
-‐47.4%
25.3
56.6
-‐55.3%
Source: PREI -‐ Fund Accounting
16
Distributions per CBFIs
In 2Q15, Terrafina distributed US$19.6 million, or US$0.0323 per CBFI. Terrafina’s 2Q15, 1Q15 and 2Q14 distributions are presented in the following table: 4
2Q15
1Q15
2Q14
Var.
607.2
607.2
381.0
59.4%
CBFI Price
30.53
31.52
26.48
15.3%
Distributions
300.9
296.3
219.8
36.9%
Distributions Per CBFI
0.4956
0.4880
0.5769
-‐14.1%
FX Rate USD/MXN (average closing period)
15.32
14.93
13.00
17.8%
Distributions (million dollars)
19.6
19.9
16.9
16.0%
0.0323
0.0327
0.0444
-‐27.2%
6.5%
6.2%
8.7%
-‐222 bps
(millions of pesos unless otherwise stated) 1
Total Outstanding CBFIs (millions of CBFIs) 2
Distributions Per CBFI (dollars) 3
Annualized Distribution Yield
(1) In 3Q14, Terrafina increased its number of CBFIs from 381,014,635 to 602,487,069. 4,723,291 CBFIs were paid to the external advisor as a result of an Incentive Fee. Number of CBFIs at the end of each period (2) Average closing price for the period. (3) Annualized distribution per share divided by the average CBFI price of the quarter. Quarterly distribution yield calculation has been annualized. (4) Comparison between 2Q15 and 2Q14. Source: PREI -‐ Fund Accounting
Total Debt
As of June 30, 2015, Terrafina’s total debt reached US$657.1 million. The average cost of Terrafina’s long-‐term debt, which is U.S. dollar-‐denominated, was 3.90%. Most of Terrafina’s loans are set at variable interest rates and are hedged with interest rate caps and fixed rate options. (as of June 30, 2015)
Long-‐Term Debt 1 Citibank 2,3
GEREM 3
HSBC
Interest Rate
Millions of dollars
5,233.9
336.2
Dollars
Libor + 3.50%
Interest Only
Mar 2017
-‐
Dollars
4,287.0
275.4
Libor + 3.75%
Sep 2018
Sep 2020
708.3
45.5
Libor + 3.75%
10,229.2
657.1
Dollars
Total Debt
Net Cash
4,833.3
310.5
Net Debt
5,395.9
346.6
Terms
Maturity
Interest + Principal Interest + Principal
(1) Syndicated loan facility with six banks. (2) Syndicated loan facility with four banks. (3) One-‐year grace period, interest payments only. Source: PREI -‐ Fund Accounting and Capital Markets
Extension Option
Millions of pesos
Currency
Sep 2018
Sep 2020
17
Additionally, Terrafina’s leverage (LTV) and debt service coverage ratio (DSCR) metrics are included as requested by the Mexican Securities and Exchange Commission (CNBV) as part of its regulations. The following tables show Terrafina’s leverage and debt service coverage as of June 30, 2015 and based on projections for the next six quarters:
Leverage (LTV) (millions of pesos)
(millions of dollars)
Total Assets
29,423.4
1,890.0
Total Debt
10,229.2
657.1
(as of June 30, 2015)
Loan-‐to-‐Value 1 (LTV)
34.8%
(1) Total Debt divided by Total Assets as defined by the National Securities and Banking Commission (CNBV)
Source: PREI -‐ Fund Accounting and Capital Markets
Debt Service Coverage Ratio (DSCR) period
(millions of pesos)
(millions of dollars)
June 30, 2015
4,833.3
310.5
Σ next 6 quarters
145.5
9.3
Σ next 6 quarters
980.8
63.0
June 30, 2015
2,550.0
163.8
Cash & Cash Equivalents Recoverable Taxes 1
EBIT after distributions Available Credit Line
period
(millones de pesos)
de (millones dólares)
Interest Payments
Σ next 6 quarters
681.6
43.8
Principal Payments
Σ next 6 quarters
35.5
2.3
Recurring CAPEX
Σ next 6 quarters
246.0
15.8
Development Expenses
Σ next 6 quarters
37.4
2.4
Debt Coverage Ratio Service 2 (DSCR)
8.5x
(1) Earnings Before Interest and Taxes (2) (Cash & Cash Equivalents + Recoverable Taxes + EBIT After Distributions + Available Credit Line) / (Interest Payments + Principal Payments + Recurring CAPEX + Development Expenses) Source: PREI -‐ Fund Accounting and Capital Markets
18
About Terrafina Terrafina (BMV:TERRA13) is a Mexican real estate investment trust formed primarily to acquire, develop, lease and manage industrial real estate properties in Mexico. Terrafina’s portfolio consists of attractive, strategically located warehouses and other light manufacturing properties throughout the Central, Bajio and Northern regions of Mexico. It is internally managed by highly qualified industry specialists, and externally advised by PREI. Terrafina owns 204 real estate properties, including 196 developed industrial facilities with a collective GLA of approximately 28.3 million square feet and 9 land reserve parcels, designed to preserve the organic growth capability of the portfolio. Terrafina’s objective is to provide attractive risk-‐adjusted returns for the holders of its certificates through stable distributions and capital appreciations. Terrafina aims to achieve this objective through a successful performance of its industrial real estate and complementary properties, strategic acquisitions, access to a high level of institutional support, and to its management and corporate governance structure. For more information, please visit www.terrafina.mx About Prudential Real Estate Investors Prudential Real Estate Investors is the global real estate investment business of Prudential Financial, Inc. (NYSE: PRU). Investing in real estate on behalf of institutional clients since 1970, PREI today has more than 650 employees located in 19 cities around the world, and gross assets under management of $61.7 billion ($45.6 billion net) as of March 31, 2015. PREI offers to its global client base a broad range of real estate investment vehicles across the risk-‐return spectrum and geographies, including core, core plus, value-‐add, opportunistic, debt, securities, and specialized investment strategies. For more information, visit www.prei.com About Prudential Financial, Inc. Prudential Financial, Inc. (NYSE:PRU), a financial services leader with more than $1.2 trillion of assets under management as of March 31, 2015, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-‐related services, mutual funds and investment management. In the U.S., Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit www.news.prudential.com Forward Looking Statements This document may include forward-‐looking statements that may imply risks and uncertainties. Terms such as "estimate", "project", "plan", "believe", "expect", "anticipate", "intend", and other similar expressions could be construed as previsions or estimates. Terrafina warns readers that declarations and estimates mentioned in this document, or realized by Terrafina’s management imply risks and uncertainties that could change in function of various factors that are out of Terrafina’s control. Future expectations reflect Terrafina’s judgment at the date of this document. Terrafina reserves the right or obligation to update the information contained in this document or derived from this document. Past or present performance is not an indicator to anticipate future performance.
19
Conference Call
(BMV: TERRA13) Cordially invites you to participate in its Second Quarter 2015 Results Friday, July 24, 2015 11:00 a.m. Eastern Time 10:00 a.m. Central Time
Presenting for Terrafina: Alberto Chretin, Chief Executive Officer Angel Bernal, Chief Financial Officer
*** To access the call, please dial: from within the U.S. 1-‐800-‐311-‐9404 from outside the U.S. 1-‐334-‐323-‐7224 Conference ID Number: 34974 Audio Webcast Link: http://www.videonewswire.com/event.asp?id=102550 Conference Replay Will be provided for your call Dial 1-‐877-‐919-‐4059 or 1-‐334-‐323-‐0140 to listen Passcode: 63180407
20
Appendix
Appendix 1 – Revenues
Terrafina’s revenues are mainly classified as rental revenues and other operating reimbursable revenues. Additionally, there are accounting revenues that must be registered according with IFRS; however these are considered non-‐cash items and therefore are excluded in some calculations. Reimbursable tenant improvements are included in the tenant improvement expenses for the AFFO calculation. Revenues
NOI calculation Rental Revenue
2Q15
2Q14
(million of dollars)
31.7
32.6
0.9
7.9
0.1
0.6
22.0
42.7
1.5
3.3
Reimbursable Expenses as Revenues
23.8
34.3
1.6
2.7
Reimbursable Tenant Improvements
3.2
2.7
0.2
0.2
Other non-‐cash income
-‐5.1
5.7
-‐0.3
0.4
507.8
474.6
33.2
36.5
Other Operating Revenues
424.0
1
Non Cash
2Q14
484.8
Non Cash Accrued Income
AFFO calculation
(million of pesos)
NOI calculation
2Q15
2
Net Revenue
(1) Straight line rent adjustment. (2) Triple net leases expenses reimbursed to Terrafina from its tenants. Source: PREI -‐ Fund Accounting
21
Appendix 2 – Real Estate Expenses
Real estate expenses are comprised of recurring figures related with the operation (used for the Net Operating Profit calculation) as well as non-‐recurring figures used for metric calculations such as Earnings Before Interests, Taxes, Depreciation and Amortization (EBITDA), Funds from Operations (FFO), Adjusted Funds from Operations (AFFO). The following table presents the real estate expenses’ breakdown, which are used for the calculation of several metrics. Real Estate Expenses
Repair and Maintenance
AFFO calculation
-‐35.2
2Q14
2Q15
2Q14
(millions of dollars)
-‐24.9
-‐2.3
-‐2.0
Recurring
-‐14.6
-‐9.1
-‐1.0
-‐0.7
Non Recurring
-‐20.6
-‐15.8
-‐1.3
-‐1.3
-‐32.9
-‐6.7
-‐2.2
-‐0.5
Operating
-‐5.1
-‐6.9
-‐0.3
-‐0.5
Non Operating
Property Taxes NOI calculation
(millions of pesos)
NOI calculation
2Q15
-‐27.8
0.2
-‐1.8
0.0
NOI calculation Property Management Fees
-‐10.7
-‐13.1
-‐0.7
-‐1.0
NOI calculation Electricity
-‐6.8
-‐12.2
-‐0.4
-‐0.9
AFFO calculation Brokers Fees
-‐9.2
-‐10.7
-‐0.6
-‐0.8
Property Insurance
-‐2.1
-‐6.2
-‐0.1
-‐0.5
Operating
-‐1.3
-‐5.4
-‐0.1
-‐0.4
Administrative
-‐0.8
-‐0.8
0.0
-‐0.1
-‐2.6
-‐3.6
-‐0.2
-‐0.3
-‐0.8
-‐0.5
-‐0.1
0.0
Non Cash
NOI calculation EBITDA calculation
NOI calculation Security EBITDA Advertising calculation Other Expenses
-‐4.5
-‐5.4
-‐0.3
-‐0.5
Operational Related
-‐3.8
-‐3.4
-‐0.2
-‐0.3
Administrative
-‐0.7
-‐2.0
0.0
-‐0.2
Non Cash Bad Debt Expense
-‐18.4
2.7
-‐1.2
0.2
Non Cash Transaction Expense
-‐0.9
0.0
-‐0.1
0.0
-‐124.3
-‐80.6
-‐8.1
-‐6.3
NOI calculation EBITDA calculation
Total Real Estate Expenses Source: PREI -‐ Fund Accounting
22
Appendix 3 – Fees and Administrative Expenses
Fees and administrative expenses include figures used for metric calculations such as Earnings before Interests, Taxes, Depreciation and Amortization (EBITDA), Funds from Operations (FFO), Adjusted Funds from Operations (AFFO). Terrafina’s fees and administrative expenses breakdown is available in the following table and indicates the figures used for the calculation of these metrics: Fees and Administrative Expenses
2Q15 EBITDA calculation External Advisor Fees Legal Fees Recurring EBITDA calculation
2Q15
2Q14
(millions of dollars)
-‐29.1
-‐26.3
-‐1.9
-‐2.0
-‐2.6
-‐1.1
-‐0.2
-‐0.1
-‐0.6
0.0
0.0
0.0
-‐1.9
-‐1.1
-‐0.2
-‐0.1
-‐3.3
-‐3.6
-‐0.2
-‐0.3
-‐1.4
-‐2.5
-‐0.1
-‐0.2
Non Recurring
-‐1.9
-‐1.1
-‐0.1
-‐0.1
Administrative Fees
-‐19.3
-‐8.6
-‐1.3
-‐0.7
-‐8.5
-‐8.6
-‐0.6
-‐0.7
-‐10.7
0.0
-‐0.7
0.0
EBITDA calculation Payroll EBITDA calculation Trustee Fees
-‐3.3
-‐2.9
-‐0.2
-‐0.2
-‐1.0
-‐1.6
-‐0.1
-‐0.1
EBITDA calculation Other Expenses
-‐1.4
-‐0.8
-‐0.1
-‐0.1
-‐59.9
-‐44.9
-‐4.0
-‐3.5
AFFO calculation
Non Recurring Other Professional Fees
EBITDA calculation AFFO calculation EBITDA calculation Non Operational related
2Q14
(millions of pesos)
Recurring
Recurring 1
Non Recurring
Total Fees and Admin. Expenses
(1) Non operational related administrative fees; 1Q15 expenses related to asset sale transaction
activities. Source: PREI -‐ Fund Accounting
23
Appendix 4 – Reconciliation Reconciliation of Net Profit (Loss) to FFO, EBITDA and NOI Comprehensive Income (Loss) Add (deduct) Currency Translation Adjustment: Currency Translation Adjustment Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses Add (deduct) Non-‐Cash Adjustment: Foreign Exchange Adjustments Fair Value Adjustment on Bank Investment Fair Value Adjustment on Borrowings Fair Value Adjustment on Derivative Financial Instruments Fair Value Adjustment on Investment Properties Sales of Real Estate Properties Adjustment Add (deduct) Expenses Adjustment: Non Recurring Repair and Maintenance Non Operating Property Taxes Brokers Fees Bad Debt Expense Non Recurring Legal Fees Non Recurring Other Professional Fees Add (deduct) Revenues Adjustment: Accrued Income Other Non-‐Cash Income Reimbursable Tenant Improvements Add (deduct) Non Operational Administrative Fees Non Operational Administrative Fees FFO Add (deduct) Cost of Financing Adjustment: Interest Paid Recurring Borrowing Expenses Interest Income EBITDA Add (deduct) Expenses Adjustment: External Advisor Fees Recurring Legal Fees Recurring Other Professional Fees Administrative Fees Payroll Trustee Fees Other Expenses Advertising Administrative Property insurance Other Administrative Expenses NOI Add (deduct) Expenses Adjustment: Recurring Repair and Maintenance Operating Property Taxes Property Management Fees Electricity Operating Property Insurance Security Other Operational Expenses Add (deduct) Revenues Adjustment: Other Non-‐Cash Income Accrued Income Reimbursable Tenant Improvements Net Revenue
2Q15
2Q14 2Q15 2Q14 (millions of dollars)
(millions of pesos)
386.6 -‐503.9 0.0 69.3 -‐7.4 215.8 0.0 78.6 0.0 20.6 27.8 9.2 18.4 1.9 1.9 -‐0.9 5.1 -‐3.2 10.7 331.4 108.6 0.2 -‐24.1 416.0 29.1 0.6 1.4 8.5 3.3 1.0 1.4 0.8 0.8 0.7 463.6 14.6 5.2 10.7 6.8 1.3 2.6 3.8 -‐5.1 0.9 3.2 507.8
735.2 40.4 0.0 5.8 0.0 -‐241.1 21.6 -‐315.9 0.0 15.8 -‐0.2 10.7 -‐2.7 1.1 1.1 -‐7.9 -‐5.7 -‐2.7 0.0 255.4 103.4 0.5 -‐0.7 358.6 26.3 0.0 2.5 8.6 2.9 1.6 0.8 0.5 0.8 2.0 404.6 9.1 6.9 13.1 12.2 5.4 3.6 3.4 5.7 7.9 2.7 474.6
25.2 -‐32.9 0.0 4.5 -‐0.5 14.1 0.0 5.1 0.0 1.3 1.8 0.6 1.2 0.1 0.1 -‐0.1 0.3 -‐0.2 0.7 21.7 7.1 0.1 -‐1.6 27.2 1.9 0.0 0.1 0.6 0.2 0.1 0.1 0.1 0.0 0.0 30.3 1.0 0.3 0.7 0.4 0.1 0.2 0.2 -‐0.3 0.1 0.2 33.2
56.6 3.1 0.0 0.4 0.0 -‐18.5 1.7 -‐24.3 0.0 1.2 0.0 0.8 -‐0.2 0.1 0.1 -‐0.6 -‐0.4 -‐0.2 0.0 19.7 8.0 0.0 -‐0.1 27.6 2.0 0.0 0.2 0.7 0.2 0.1 0.1 0.0 0.1 0.2 31.2 0.7 0.5 1.0 0.9 0.4 0.3 0.3 0.4 0.6 0.2 36.5
24
Reconciliation of Net Profit (Loss) to AFFO Comprehensive Income (Loss) Add (deduct) Currency Translation Adjustment: Currency Translation Adjustment Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses Add (deduct) Non-‐Cash Adjustment: Foreign Exchange Adjustments Fair Value Adjustment on Bank Investment Fair Value Adjustment on Borrowings Fair Value Adjustment on Derivative Financial Instruments Fair Value Adjustment on Investment Properties Sales of Real Estate Properties Adjustment Add (deduct) Expenses Adjustment: Non Operating Property Taxes Bad Debt Expense Transaction Expense Add (deduct) Revenues Adjustment: Accrued Income Other Non-‐Cash Income Add (deduct) Non Operational Administrative Fees Non Administrative Fees Add (deduct) CAPEX Adjustment: CAPEX Reserve AFFO
2Q15
2Q14 2Q15 2Q14 (millions of dollars)
386.6 -‐503.9 0.0 69.3 215.8 0.0 78.6 0.0 27.8 18.4 -‐0.9 5.1 10.7 0.0 0.0 300.9
735.2 40.4 0.0 5.8 -‐241.1 21.6 -‐315.9 0.0 -‐0.2 -‐2.7 -‐7.9 -‐5.7 0.0 0.0 -‐9.6 219.8
(millions of pesos)
25.2 -‐32.9 0.0 4.5 14.1 0.0 5.1 0.0 1.8 1.2 -‐0.1 0.3 0.7 0.0 0.0 19.6
56.6 3.1 0.0 0.4 -‐18.5 1.7 -‐24.3 0.0 0.0 -‐0.2 -‐0.6 -‐0.4 0.0 0.0 -‐0.3 16.9
25
Appendix 5 -‐ Cap Rate Calculation
Terrafina subtracts cash and land reserves book value for the cap rate calculation. In the following table, the cap rate calculation is shown assuming a CBFI quarterly average price of Ps. 30.53 pesos and an average exchange rate for 2Q15 of Ps. 15.3162. Implied Cap Rate
Quarterly Average Price (dollars)¹
1.99
(x) CBFIs (million shares)
607.2
(=) Market Capitalization
1,210.4
(+) Total Debt
657.1
(-‐) Cash
310.5
(=) Enterprise Value
1,557.0
(-‐) Land reserve
59.4
(=) Implied Operating Real Estate Value Net Operating Income (NOI) 2015e
1,497.6 125.0
Implied Cap Rate
8.3%
Figures expressed in millions of dollars unless otherwise stated. (1) 2Q15 average share price of Ps.30.53; and average exchange rate of Ps.15.3162.
26
Financial Statements 2Q15
2Q14
$485,754
$431,902
22,040
42,631
(124,307)
(80,528)
(59,900)
(44,804)
-‐
-‐
(215,798)
241,055
7,383
-‐
(78,550)
315,873
(2)
(21,565)
(69,263)
(5,753)
Operating profit
(32,643)
878,811
Finance income
24,118
742
(108,747)
(103,875)
Finance cost -‐ net
(84,629)
(103,133)
Net Profit for the period
(117,272)
775,678
Income Statement
(thousand pesos)
Rental revenues Other operating income
Real estate operating expenses
Fees and other expenses Realized gain from disposal of investment properties
Net Income (Loss) from Fair Value Adjustment on Borrowings
Net gain (loss) from fair value adjustment on bank investment
Net gain (loss) from fair value adjustment on investment properties
Net (loss) gain unrealized from fair value on derivative financial instruments Foreign exchange (loss) gain
Finance cost
Items that may be subsequently reclassified to profit or loss-‐ currency translation differences
Total Comprehensive income for the period
503,884
386,612
(40,409)
735,269
27
Financial Statements
Balance Sheet
Jun-‐30-‐15
Assets Non-‐current assets Investment properties
$24,116,615
$23,487,201
(Cost:30/06/2015 -‐ Ps.23,504,424; 31/03/2015 -‐ Ps.22,814,228)
(Net of allowance for doubtful accounts: 30/06/2015 -‐ Ps.81,977; 31/03/2015 -‐ Ps.77,151)
Currency translation adjustment Total net assets (Net Equity)
Tenant deposits Current liabilities Trade and other payables
-‐
109,795 125,535 22,908 86,182 58,193
56,622
Total assets
(Cost: 30/06/2015 -‐ $10,185,339; 31/03/2015 -‐ $10,478,762)
112,195 145,500 15,510 89,490 54,142
Cash and cash equivalents
Liabilities Non-‐current liabilities Borrowings
-‐
Restricted cash
Net assets attributable to Investors Contributions, net Accumulated Losses
Mar-‐31-‐15
Derivative financial instruments Current assets Other assets Recoverable taxes Prepaid expenses Deferred charges and accrued income Accounts receivable
(thousands of pesos)
53,441
4,833,283
5,565,750
29,423,357
29,509,005
15,332,816 (117,272) 3,550,248 18,765,792
10,229,212
246,816
181,537
15,629,142 -‐ 3,046,366 18,675,508
10,309,887 166,997 356,613
Total liabilities (excluding net assets attributable to the Investors)
10,657,565
10,833,497
Total net assets and liabilities
29,423,357
29,509,005
28
Financial Statements
Cash Flow Statement
Jun-‐15
(thousands of pesos)
Cash flows from operating activities (Loss) profit for the period
$(62,691)
Adjustments: Net loss (gain) unrealized from fair value adjustment on investment properties
Net loss (gain) unrealized from fair value adjustment on derivative financial instruments
108,361 470
Net loss (gain) unrealized from fair value adjustment on borrowings Realized gain from disposal of investment properties
Bad debt expense
272 31,849
Differed rents receivable
9,153
Decrease (increase) in restricted cash
(3,361)
Decrease (increase) in accounts receivable
(45,093)
Decrease (increase) in recoverable taxes
(29,817)
(Increase) in prepaid expenses
(6,652)
Decrease (increase) in other assets
(58,175)
Increase in tenant deposits
19,661
(Decrease) in accounts payable
(106,928)
Net cash (used in) generated from operating activities
18,739
Cash flows from investing activities Acquisition of investment properties
-‐
Improvements of investment properties
(111,855)
Dispositions of investment properties
1,552,237
Net cash (used in) generated from investing activities
1,440,382
Cash flows from financing activities Acquisition of derivative financial instruments
Principal payments on borrowings
(1,515,648)
Distributions to investors
-‐ (550,978)
Proceeds from CBFI issued
147,461
Net cash (used in) generated from financing activities
(1,919,165)
Net (decrease) in cash and cash equivalents
(460,044)
Cash and cash equivalents at the beginning of the period
5,002,554
Exchange effects on cash and cash equivalents Cash and cash equivalents at the end of the period
290,773 $4,833,283
29
Financial Statements Statement of Changes in Equity
Net contributions
(thousands of pesos)
Balance at January 1, 2015 Capital Contribution, Net of Issuing Costs Distributions to Investors Comprehensive Income Net loss of the period Other Comprehensive Income Currency Translation Total Comprehensive (loss) income Net Assets attributable to investors for the period from January 1 to June 30, 2015 (Unaudited)
Currency translation adjustment
$15,681,752 $147,461 (496,397)
-‐ -‐ -‐ $15,332,816
$2,500,872 -‐ -‐ -‐ 1,049,376 1,049,376 $3,550,248
Net assets attributable to Investors
Retained earnings
$-‐ $18,182,624 -‐ 147,461 (54,581) (550,978) (62,691) -‐ (62,691) $(117,272)
(62,691) 1,049,376 986,685 $18,765,792
30
