First Quarter 2014 Earnings Report
First Quarter 2014 Earnings Report Mexico City, April 29, 2014 – Terrafina (“TERRA”) (BMV: TERRA13), a leading Mexican industrial real estate investment trust (“FIBRA”), externally advised by Pramerica Real Estate Investors and dedicated to the acquisition, development, lease and management of industrial real estate properties in Mexico, today announced its first quarter 2014 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 unless otherwise stated. Additionally, figures can vary due to rounding. Terrafina’s financial results included in this report are unaudited; as a result, the figures used throughout this report could be adjusted in the future. Terrafina’s 1Q14 financial results are presented from January 1, 2014 to March 31, 2014. It is important to consider that comparisons in this earnings report are made to fourth quarter 2013 numbers since first quarter 2013 results only include operations for the period from March 20 to March 31, 2013. Additionally, 1Q13 results do not include the effects of the American industries – Kimco acquisition.
Financial and Operational Highlights as of March 31, 2014
Operational
• Occupancy rate at March 31, 2014, was 90.6%, a 92 basis points increase compared to fourth quarter of 2013. Additionally, considering the signed letters of intent, occupancy for 1Q14 was 91.1%.
• Annualized average leasing rate per square foot for 1Q14 was US$4.74.
• Terrafina reported a total of 30.9 million square feet (msf) of Gross Leasable Area (GLA) comprised of 217 properties and 228 tenants in the first quarter 2014.
• 1Q14 leasing activity totaled 1.5 msf, of which 36.0% corresponds to new leasable area and 64.0% to lease renewals. Leasing activity was mainly concentrated in the Queretaro, Cuautitlan Izcalli, Ciudad Juarez Chihuahua, San Luis Potosi and Silao markets.
• In 1Q14, a BTS contract was signed for the development of 131 thousand square feet. This new development is expected to contribute US$0.6 million to Net Operating Income (NOI) for the 2015 period. The projected return rate, or yield on cost, for the new development is approximately 11.3%.
• A 120 thousand square foot plot of land was sold in the city of Apodaca, Nuevo Leon for a total sales price of US$0.8 million.
Contacts in Mexico City: Francisco Martinez/ Angel Bernal Investor Relations Officer / Chief Financial Officer Tel: +52 (55) 3601-0702 / +52 (55) 3601-0654 E-mail: [email protected] / [email protected]
Contacts in New York: Maria Barona i-advize Corporate Communications, Inc. Tel: +1 (212) 406-3691 E-mail: [email protected]
1
Financial
• 1Q14 net revenues reached US$37.5 million. In addition, rental revenues increased approximately 0.4% or US$0.1 million compared to 4Q13 reaching US$31.7 million. • 1Q14 NOI was US$30.5 million; NOI Margin1 reached 86.4%, 112 basis points lower compared to 4Q13. Moreover, implied cap rate was 8.2%, considering the average share price for 1Q14 of US$1.92 (Ps. 25.08) and 2014 expected NOI of US$125 million. • 1Q14 EBITDA reached US$26.9 million; EBITDA Margin1 was 76.2%, a 308 basis points decrease compared to 4Q13. • 1Q14 Adjusted Funds for Operations (AFFO) reached US$15.1 million; AFFO margin was 42.4%, a 215 basis points increase compared to 4Q13. • 1Q14 distributions totaled US$15.1 million. As a result of 1Q14 operations, Terrafina will pay Ps. 0.5244 per CBFI (US$0.0396 per CBFI) as distributions corresponding to the period from January 1 to March 31, 2014. This represents an increase of 10.0% in terms of pesos compared to 4Q13. • An annualized CBFI distribution for 1Q14 was US$0.1585, considering the average share price for 1Q14 of US$1.92 (Ps. 25.08). Terrafina reached a dividend yield of 8.4%.
(1) NOI and EBITDA margin decreases are due to one-‐time property tax expenses, which are paid during the first quarter of the year and are non-‐ recurring. 2
Financial Highlights Operating Number of Developed Properties
1Q14 217 30.89
4Q13 216 30.76
Var. 1 0.13
0.13 7.32 90.6% 4.74
0.09 7.51 89.7% 4.76
0.05 -‐0.19 92 bps -‐0.02
3.59
3.74
81.8%
Quarterly Financial
1Q14
(million pesos unless otherwise stated)
1
Gross Leasable Area (GLA) (msf) 2 New Developments (msf) Land Reserves (msf) Occupancy Rate Avg. Leasing Rent / Square Foot (dollars) Weighted Avg. Remaining Lease Term (years) 3
Renewal Rate
Rental Revenues Other Operating Income Net Revenues Net Operating Income (NOI)* NOI Margin 4*
EBITDA EBITDA Margin Funds from Operations (FFO)* FFO Margin Adjusted Funds from Operations (AFFO)* AFFO Margin Distributions 5 Distributions per CBFI Balance Sheet
Cash & Cash Equivalents Investment Properties Land Reserves Total Debt Net Debt
-‐0.16
72.1%
973 bps
4Q13
Var.
1Q14
4Q13
Var.
fx
13.2344
13.0262
(million dollars unless otherwise stated)
441.9 54.2 496.1 404.3 86.4% 357.4 76.2% 234.3 50.0% 199.8 42.4% 199.8
437.8 52.6 490.4 404.1 87.5% 365.9 79.3% 232.5 50.3% 187.5 40.3% 181.7
0.9% 3.0% 1.2% 0.1% -‐112 bps -‐2.3% -‐308 bps 0.8% -‐24 bps 6.6% 215 bps 10.0%
0.5244
0.4769
10.0%
Mar14
Dec13
33.4 4.1 37.5 30.5 86.4% 26.9 76.2% 17.7 50.0% 15.1 42.4% 15.1
33.6 4.0 37.6 30.9 87.5% 28.0 79.3% 17.7 50.3% 14.3 40.3% 13.9
-‐0.6% 2.4% -‐0.3% -‐1.1% -‐112 bps -‐3.8% -‐308 bps -‐0.3% -‐24 bps 5.2% 215 bps 8.2%
0.0396
0.0366
8.2% Var.
Mar14
Dec13
fx
13.0837
13.0765
(million pesos unless otherwise stated)
(million dollars unless otherwise stated)
594.1 21,118.0 956.9 11,950.3 11,356.2
728.6 21,146.3 966.6 11,987.3 11,258.7
Var.
-‐18.5% -‐0.1% -‐1.0% -‐0.3% 0.9%
45.4 1,614.1 73.1 913.4 868.0
55.7 1,616.2 73.9 916.2 860.5
_
-‐18.5% -‐0.1% -‐1.0% -‐0.3% 0.9%
Figures in dollars in the Income Statement were converted into pesos at 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) Indicates the lease renewal rate with contract expirations during the 1Q14 period. (4) Earnings before financial expenses, taxes, depreciation and amortization. (5) Real Estate Investment Certificates. (*) Revenues and expenses have been adjusted for the calculation of the above mentioned metrics. Please refer to the "1Q14 Financial Performance" and "Annexes" section available in this document. 3 Source: Pramerica Real Estate Investors Latin America – Portfolio Management – Fund Accounting
Comment by Alberto Chretin, Chief Executive Officer and Chairman of the Board During the first quarter 2014, Terrafina obtained positive results, underscored by a 90.6% occupancy rate, a 92 basis point increase compared to the previous quarter. We are pleased to see that results are in line with 2014 expectations of reaching an occupancy rate between 91.0% to 91.5%. As a result of our joint collaboration with our property managers, during this quarter leasing contracts reached 1.5 million square feet, of which 36% corresponded to new contracts and 64% to leasing renewals Moreover, we made progress in the development of a 131 thousand square foot BTS. This development will add approximately 550 thousand dollars to 2015 NOI. Among other relevant highlights, at the end of the quarter we obtained US$8.8 million from the VAT reimbursement, which was applied towards the HSBC credit facility denominated in pesos. Also, as a result of our solid operating performance for the quarter, Terrafina will distribute US$15.1 million, which is equivalent to an annualized distribution of US$0.15 per CBFI and an 8.4% dividend yield. Finally, I would like to mention the fact that recently, the Mexican Securities and Exchange Commission (CNBV) has proposed a series of changes to Fibra regulations that will aim to strengthen the industry with stronger controls in order to protect shareholder interests. Currently, we are analyzing these new regulatory proposals and will discuss their impact further with the market as they are approved. Sincerely, Alberto Chretin
Terrafina’s Chief Executive Officer and Chairman of the Board
4
Operational Highlights
Highlights by Region
(as of March 31, 2014)
North
Bajio
Central
Total
# Buildings
150
40
27
217
# Tenants
148
41
39
228
18.4
6.4
6.0
30.9
0.0
0.1
0.0
0.1
3.7
0.1
3.6
7.3
88.8%
91.8%
94.9%
90.6%
GLA (msf) New Developments
1
(msf)
Land Reserves (msf) Occupancy Rate Average Leasing Rent / Square Foot (dollars)
4.59
4.82
5.10
4.74
Annualized Rental Base %
56.7%
21.5%
21.9%
100.0%
Renewal Rate
72.5% 100.0%
77.5%
81.8%
-
NORTH -
-
-
Baja California Sonora Chihuahua Coahuila Nuevo Leon Tamaulipas Durango
BAJIO
(1) Includes expansions and Built-‐to-‐Suit (BTS). Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
CENTRAL Estado de Mexico Distrito Federal Puebla Tabasco
San Luis Potosi Jalisco Aguascalientes Guanajuato Queretaro Terrafina’s operations 1Q14.
Composibon by Asset Type as of 1Q14
Leasing Activity
(as a % of total GLA)
1Q14
Operating Portfolio (msf):
31.4%
68.6%
Var.
Renewals
1.0
1.9
-‐88.7%
New Leases
0.4
0.8
-‐40.4%
Properties Under Development
0.1
0.1
4.6%
Total Square Feet of Leases Signed
1.5
2.8
-‐124.6%
81.8%
71.7%
1,014 bps
Renewal Rate
Distribukon
4Q13
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
Manufacturing
5
Operational Highlights (continued) Occupancy and Rents by Region
Maturities and Renewals by Region 0
Consolidated
Avg. Leasing Rent/ Square Foot (dollars)
(As of March 31, 2014)
88.8%
4.59
North
Baja California
79.1%
4.57
Sonora
86.3%
3.84
Chihuahua
95.0%
4.79
Coahuila
95.2%
4.36
Nuevo Leon
74.0%
Tamaulipas
62.2%
Durango
Occupancy Rate
Maturities % o f T otal
Renewals % o f Total (number of contracts) Renewals
(number of contracts)
Maturities
18
75.0%
14
70.0%
Baja California
-‐
0.0%
-‐
0.0%
Sonora
-‐
0.0%
-‐
0.0%
Chihuahua
14
58.3%
11
55.0%
Coahuila
0
0.0%
-‐
0.0%
4.50
Nuevo Leon
2
8.3%
2
10.0%
4.11
Tamaulipas
2
8.3%
1
5.0%
85.2%
3.90
Durango
-‐
0.0%
-‐
0.0%
91.8%
4.82
3
12.5%
3
15.0%
San Luis Potosi
94.3%
4.74
San Luis Potosi
-‐
0.0%
-‐
0.0%
Jalisco
93.0%
5.36
Jalisco
-‐
0.0%
-‐
0.0%
Aguascalientes
100.0%
4.47
Aguascalientes
-‐
0.0%
-‐
0.0%
Guanajuato
98.0%
5.10
Guanajuato
-‐
0.0%
-‐
0.0%
Queretaro
84.1%
4.56
Queretaro
3
12.5%
3
15.0%
94.9%
5.10
3
12.5%
3
15.0%
Estado de Mexico
94.1%
5.10
Estado de Mexico
3
12.5%
3
15.0%
Distrito Federal
100.0%
10.30
Distrito Federal
-‐
0.0%
-‐
0.0%
Puebla
100.0%
4.01
Puebla
-‐
0.0%
-‐
0.0%
Tabasco
100.0%
5.18
Tabasco
-‐
0.0%
-‐
0.0%
90.6%
4.74
24
100.0%
20
100.0%
(As of March 31, 2014)
North
Bajio
Central
Total
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
Bajio
Central
Total
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
6
1Q14 Operational Performance Composition by Geographical Diversification
For 1Q14, the geographical diversification of Terrafina’s properties (based on GLA per square foot) was mainly located in the northern region of Mexico, representing 59.7% of GLA; for the Bajio and Central regions, it represented 20.9% and 19.4%, respectively. 1Q14
as a % of 1Q14
4Q13
as a % of 4Q13
18.44
59.7%
18.44
60.0%
Baja California
1.13
3.7%
1.13
3.7%
Sonora
0.28
0.9%
0.28
0.9%
Chihuahua
9.84
31.9%
9.84
32.0%
Coahuila
3.38
11.0%
3.38
11.0%
Nuevo Leon
1.58
5.1%
1.58
5.2%
Tamaulipas
1.76
5.7%
1.76
5.7%
Durango
0.46
1.5%
0.46
1.5%
6.45
20.9%
6.32
20.5%
San Luis Potosi
1.87
6.1%
1.74
5.7%
Jalisco
1.29
4.2%
1.29
4.2%
Aguascalientes
0.75
2.4%
0.75
2.4%
Guanajuato
0.54
1.7%
0.54
1.8%
Queretaro
1.99
6.5%
1.99
6.5%
6.00
19.4%
6.00
19.5%
Estado de Mexico
5.14
16.6%
5.14
16.7%
Distrito Federal
0.02
0.1%
0.02
0.1%
Puebla
0.18
0.6%
0.18
0.6%
Tabasco
0.65
2.1%
0.65
2.1%
30.89
100.0%
30.76
100.0%
North
Bajio
Central
Total
Total Gross Leasable Area / million square feet. Potential leasable area of land reserves are not included. Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
Composition by Asset Type
At the end of the 1Q14, 31.4% of Terrafina’s total portfolio consisted of distribution and logistics properties, and 68.6% were manufacturing properties, closing at stable levels compared to 4Q13. Composibon by Asset Type as of 1Q14 (as a % of total GLA)
1Q14
4Q13
Var.
Distribution
31.4%
31.3%
3 bps
Manufacturing
68.6%
68.7%
-‐3 bps
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
31.4%
68.6%
7
Distribukon
Manufacturing
Composition by Sector
As of March 31, 2014, tenant diversification by industrial sector was as follows: Diversificabon by Sector as of 1Q14 (as a % of leased GLA)
7.5% 9.2%
Automokve Industrial properkes
29.1%
10.2%
Consumer goods Logiskcs and Trade
16.9%
Aviakon
27.0%
Non-‐durable consumer goods
Industrial Sector Diversification
1Q14
4Q13
Var.
Automotive
29.1%
27.8%
133 bps
Industrial properties
27.0%
27.4%
-‐36 bps
Consumer goods
16.9%
17.5%
-‐56 bps
Logistics and Trade
10.2%
10.6%
-‐36 bps
Aviation
9.2%
9.1%
6 bps
Non-‐durable consumer goods
7.5%
7.6%
-‐11 bps
100.0%
100.0%
Total
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
Top Clients’ Composition
Terrafina’s tenant leasing base is widely diversified across Mexico’s main cities. In 1Q14, Terrafina’s top client, top 10 clients and top 20 clients base, represented 4.9%, 22.8% and 33.9% of total revenues, respectively. Top Clients
Leased Square Feet (million)
% Total GLA
% Total Revenues
Top Client
1.36
4.9%
4.9%
Top 10 Clients
6.08
21.7%
22.8%
Top 20 Clients
9.15
32.7%
33.9%
(As of March 31, 2014)
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
8
Occupancy
1Q14 occupancy rate was of 90.6%, an increase of 92 basis points compared to 4Q13. Moreover, considering the letters of intent, occupancy rate was 91.1%. In the first quarter 2014, Terrafina’s leasing activity reached 1.5 msf, of which 36.0% correspond to new leasing contracts (including expansions and BTS) and 64.0% for contract renewals. Leasing activity took place mainly in the Queretaro, Cuautitlán Izcalli, Ciudad Juárez, Chihuahua, San Luis Potosi and Silao markets. In addition to this leasing activity, Terrafina signed letters of intent for an additional 0.17 msf, which are expected to be finalized during 2Q14. It is important to mention that Terrafina has historically closed approximately 90% of its letters of intent. Occupancy as of 1T14 (as % of Total GLA)
1Q14
4Q13
Var.
Leased GLA
90.6%
89.7%
92 bps
Vacant GLA
8.9%
9.5%
-‐56 bps
Signed Letters of Intent
0.5%
0.9%
-‐35 bps
100.0%
100.0%
8.9% 0.5%
Leased GLA Vacant GLA Signed Lemers of Intent
Total
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
90.6%
Lease Maturities
Terrafina had 228 leasing contracts in 1Q14. 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 activities. Annual average maturities remain at levels of 20% (as a percentage of annual base rents). The following table shows Terrafina’s leasing maturity schedule for the coming years: 2014 2015 2016 2017 2018 Thereafter
Annual Base Rent % o f T otal (million of dollars)
16.65 22.80 17.12 15.83 9.72 50.57
12.6% 17.2% 12.9% 11.9% 7.3% 38.1%
Occupied Square Feet (million)
% of Total
3.67 4.69 3.57 3.29 2.13 10.64
13.1% 16.7% 12.8% 11.7% 7.6% 38.0%
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
9
Capital Deployment New Developments and Non-‐Strategic Asset Sales
New Developments
In 1Q14, Terrafina signed a new leasing contract for the development of a 131 thousand square foot BTS in the city of San Luis Potosi. This new development will be used for manufacturing activities and will contribute US$0.6 million to 2015 NOI, which had a 11.3% estimated development yield, considering the total expected investment for US$4.9 million. January -‐ March 2014
Square Feet (millions)
Capital Deployment -‐ New Developments
Total % Paying Total Expected Cost per Expected Investment Square F eet Rent b y End Investment (millions o f d ollars) (dollars) of the Period (millions of pesos)
North
0.00
0.0
0.0
0.00
0.0%
Bajio
0.13
64.4
4.9
37.81
0.0%
Central
0.00
0.0
0.0
0.00
0.0%
Total
0.13
64.4
4.9
37.81
0.0%
1
Proforma NOI (million dollars)
0.6
2
Estimated Stabilized Yield
11.3%
(1) Net Operating Income for the next twelve months
(2) Proforma NOI divided by the total expected investment Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
Type of Development as of 1Q14 (as a % of GLA)
Projects Under Development
39.4%
4Q13
Developed Properties
99.3%
99.7%
Properties Under Development
0.7%
0.3%
100.0%
100.0%
Total
60.6%
1Q14
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
Expansions
Build-‐to-‐Suits (BTS)
10
Capital Expenditures (CAPEX)
Terrafina’s CAPEX are classified as those recurring expenses that materialize based on upcoming leasing maturities and properties 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. Moreover, Terrafina expects capital expenses for vacant properties and the development of new GLA by means of expansions or new developments. Additionally, it is important to consider that capital expenditures intended for expansions and new developments are not financed with Terrafina’s operational 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) Brokers and administrator fees 3) CAPEX for new developments, which due to their nature, are generally capitalized In 1Q14, Terrafina’s total CAPEX investment was US$8.0 million. The breakdown for 1Q14 CAPEX is shown in the following table:
1Q14
1Q14
(millions of (millions of pesos) dollars)
Tenant Improvements & Recurring CAPEX Leasing Commissions 1
23.8 8.3
1.8 0.6
Development CAPEX
74.1
5.6
Total CAPEX
106.2
8.0
Maintenance expenses for vacant properties are included in the Tenant Improvements & Recurring CAPEX figures. (1) Capex for expansions/new developments.
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
Land Reserves
Terrafina’s land reserves as of March 31, 2014 was comprised of 13 land reserve properties, which accounted for 7.3 msf of potential GLA for the development of future industrial assets. Terrafina’s 1Q14 land reserves distribution was as follows: Square Feet (millions) 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)
3.7 0.1 3.5
450.1 19.1 584.0
34.4 1.5 44.6
489.3 19.5 448.1
37.4 1.5 34.3
7.3
1,053.2
80.5
956.9
73.1
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management and Fund Accounting
11
Non-‐Strategic Asset Sales
During 3Q13, Terrafina initiated a capital recycling strategy through the sale of non-‐strategic properties. The implementation of this strategy is consistent with Terrafina’s objective of specializing in key markets in order to increase revenues, improving profitability of the assets and maintaining constant and sustainable growth for Terrafina and its shareholders. Terrafina expects that with this initiative, it can reach the sale of approximately US$150 to US$180 million of non-‐ strategic assets. Currently, we are reviewing different sales opportunities that once achieved, will be announced to the market. During 1Q14, a 119.6 thousand square foot tract of land was sold in Apodaca, in the state of Nuevo Leon for a sales price of US$0.8 million.
January -‐ March 2014 Square Feet (millions)
Total Proceeds
Total Proceeds
(millions of pesos)
(millions of dollars)
Property Dispositions Land Dispositions
0.00 0.12
0.0 11.0
0.0 0.8
Total Dispositions
0.12
11.0
0.8
Capital Deployment -‐ Dispositions
Source: Pramerica Real Estate Investors Latin America -‐ Portfolio Management
1Q14 Financial Performance
Financial Results and Calculations
Terrafina’s 1Q14 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 1Q14, for the balance sheet, the exchange rate used at March 31, 2014. It is important to consider that comparisons in this earnings report are made to fourth quarter 2013 numbers since first quarter 2013 results only includes operations from March 20 to March 31, 2013 as well as it does not reveal the American industries – Kimco acquisition effects 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.
12
In addition, Terrafina recommends reviewing the Appendixes 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.
Rental Revenues
In 1Q14, rental revenues totaled US$33.4 million, a 0.6% or US$0.2 million marginal decrease compared to 4Q13.
Other Operating Income
In 1Q14, other operating income totaled US$4.1 million, an increase of US$0.1 million or 2.4% compared to 4Q13; these mainly stem from leasing contract deposits refunds from Triple-‐Net Leases. Expenses reimbursable to Terrafina mainly include electricity, property taxes, insurance and repair and maintenance activities. 1Q14 net revenues reached US$37.5 million, a marginal decrease of US$0.1 million, or 0.3% compared to 4Q13.
1Q14
4Q13
Var. %
1Q14
(millions of pesos)
4Q13
Var. %
(millions of dollars)
Rental Revenues
441.9
437.8
0.9%
33.4
33.6
-‐0.6%
Other Operating income
54.2
52.6
3.0%
4.1
4.0
2.4%
Net Revenues
496.1
490.4
1.2%
37.5
37.6
-‐0.3%
Source: Pramerica Real Estate Investors Latin America -‐ 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 1Q14, real estate expenses totaled US$9.3 million, an increase of US$1.3 million or 16.3% compared to 4Q13. These expenses mainly include repair and maintenance, electricity, fees, property taxes and insurance expenses. A total of US$2.3 million in property taxes were paid in January, which represented 25% of the total real estate expenses for the first quarter. These are one-‐time expenses and are disbursed only in the beginning of the year. Therefore, we do not expect to see additional charges in the property tax account in the following quarters. It is important to differentiate between expenses directly related to the operation and maintenance of industrial portfolio, as these are used for the NOI calculation. The remainder of the accounts included into the 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)
During 1Q14, NOI reached US$30.5 million, a decrease of 1.1%, or US$0.4 million compared with 4Q13. NOI margin decreased 112 basis points reaching 86.4% compared to 87.5% in 4Q13. The NOI decrease was mainly explained by property tax expenses paid in January, which are considered as one-‐time expenses for the year. The following table displays the calculation of NOI for 1Q14:
1Q14
4Q13
Var. %
(millions of pesos unless otherwise stated)
1
Rental Revenues
1Q14
4Q13
Var. %
(millions of dollars unless otherwise stated)
419.9
411.3
2.1%
31.7
31.6
0.3%
48.2
48.2
0.0%
3.6
3.7
-‐1.4%
468.1
459.5
1.9%
35.3
35.3
0.1%
Repair and Maintenance
-‐9.3
-‐8.7
6.9%
-‐0.7
-‐0.7
0.0%
Property Taxes
-‐29.5
-‐6.5
353.8%
-‐2.2
-‐0.5
340.0%
Property Management Fees
-‐6.5
-‐10.6
-‐38.7%
-‐0.5
-‐0.8
-‐37.5%
Electricity
-‐9.0
-‐16.7
-‐46.1%
-‐0.7
-‐1.3
-‐46.2%
Property Insurance
-‐3.7
-‐4.6
-‐19.6%
-‐0.3
-‐0.4
-‐25.0%
Security
-‐3.0
-‐3.6
-‐16.7%
-‐0.2
-‐0.3
-‐33.3%
Other Operational Expenses
-‐2.8
-‐4.7
-‐40.4%
-‐0.2
-‐0.4
-‐50.0%
-‐63.8
-‐55.4
15.2%
-‐4.8
-‐4.4
9.1%
Net Operating Income
404.3
404.1
0.05%
30.5
30.9
-‐1.1%
NOI Margin
86.4%
87.5%
-‐112 bps
86.4%
87.5%
-‐112 bps
2
Other Operating income Net Revenues for NOI Calculation
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 calculation. (3) The income 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: Pramerica Real Estate Investors Latin America -‐ Fund Accounting
Fees and Administrative Expenses
Fees and administrative expenses in 1Q14 totaled US$3.7 million, which decreased 2.8%, or US$0.1 million, compared to 4Q13. Fees and administrative expenses for 1Q14 were comprised as follows: • 32.7% were related to advisory fees paid to the external advisor1 • 32.5% for professional and consulting services • 34.8% for payroll, administrative and other expenses
1) PLA Administradora Industrial, S. de R.L. de C.V., is a Mexican affiliate of Pramerica Real Estate Investors Latin America, and Advisor as per the Advisory Contract.
14
EBITDA
In 1Q14, EBITDA totaled US$26.9 million, a decrease of US$1.1 million, or 3.8%, compared to 4Q13. EBITDA margin for 1Q14 was 76.2%, a 308 basis point decrease compared to the previous quarter. The following shows the EBITDA calculation 1Q14: 1
Rental Revenues
1Q14
4Q13
Var. %
(millions of pesos unless otherwise stated)
1Q14
4Q13
Var. %
(millions of dollars unless otherwise stated)
419.9
411.3
2.1%
31.7
31.6
0.3%
Other Operating income
48.2
48.2
0.0%
3.6
3.7
-‐1.4%
Real Estate Expenses for EBITDA Calculation
-‐65.2
-‐56.4
15.6%
-‐4.9
-‐4.5
8.9%
Real Estate Operating Expenses for NOI Calculation
-‐63.8
-‐55.4
15.2%
-‐4.8
-‐4.4
9.1%
Advertising
-‐0.2
-‐0.4
-‐50.0%
0.0
0.0
-‐
Admin. Property Insurance Expenses
-‐0.7
-‐0.7
0.0%
-‐0.1
-‐0.1
-‐
Other Admin. Real Estate Expenses
-‐0.5
0.0
-‐
0.0
0.0
-‐
Fees and Admin. Expenses
-‐45.5
-‐37.2
22.3%
-‐3.5
-‐2.8
25.0%
External Advisor Fees
-‐26.2
-‐15.9
64.8%
-‐2.0
-‐1.2
66.7%
Legal, Admin. and Other Professional Fees
-‐13.0
-‐20.9
-‐37.8%
-‐0.9
-‐1.6
-‐43.8%
Trustee Fees
-‐0.8
6.6
-‐112.1%
-‐0.1
0.5
-‐120.0%
Payroll
-‐4.7
-‐5.5
-‐14.5%
-‐0.4
-‐0.4
-‐
Other Expenses
2
-‐0.8
-‐1.5
-‐46.7%
-‐0.1
-‐0.1
-‐
3
EBITDA
357.4
365.9
-‐35.8%
26.9
28.0
-‐3.8%
EBITDA Margin
76.2%
79.3%
-‐308 bps
76.2%
79.3%
-‐308 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: Pramerica Real Estate Investors Latin America -‐ Fund Accounting
For additional information regarding the commissions and administrative expenses breakdown used for the calculation of EBITDA and AFFO, please refer to Appendix 3 located in the last section of this document.
Financing Costs
In 1Q14, Terrafina registered net financing costs of US$10.0 million, which decreased US$4.6 million or 31.7% compared to the prior quarter.
15
1Q14
4Q13
Var. %
1Q14
(millions of pesos)
4Q13
Var. %
(millions of dollars)
Interest Paid
-‐123.6
-‐127.6
-‐3.1%
-‐9.3
-‐9.8
-‐5.1%
Borrowing Expenses
-‐10.0
-‐62.2
-‐83.9%
-‐0.7
-‐4.8
-‐85.1%
Recurring
-‐0.2
-‐6.4
-‐96.9%
0.0
-‐0.5
-‐
Non Recurring
-‐9.8
-‐55.8
-‐82.4%
-‐0.7
-‐4.3
-‐83.7%
0.7
0.6
16.7%
0.1
0.0
-‐
-‐132.9
-‐189.2
-‐29.8%
-‐10.0
-‐14.6
-‐31.7%
Interest Income Total
Source: Pramerica Real Estate Investors Latin America -‐Fund Accounting
Funds from Operations (FFO) Adjusted Funds from Operations (AFFO)
In the 1Q14, Terrafina’s FFO was US$17.7 million and FFO Margin of 50.0%, which decreased 24 basis points compared to 4Q13. Additionally, Terrafina reported an AFFO of US$15.1 million, an increase of US$0.8 million, or 5.2%, compared to 4Q13. AFFO margin was 42.4%, an increase of 215 basis points versus 4Q13. Funds from Operations (FFO)
EBITDA 1
Finance Cost
1Q14
4Q13
Var. %
(millions of pesos unless otherwise stated)
1Q14
4Q13
Var. %
(millions of dollars unless otherwise stated)
357.4
365.9
-‐2.3%
26.9
28.0
-‐3.8%
-‐123.1
-‐133.4
-‐7.7%
-‐9.3
-‐10.3
-‐9.7%
Funds from Operations (FFO)
234.3
232.5
0.8%
17.7
17.7
-‐0.3%
FFO Margin
50.0%
50.3%
-‐24 bps
50.0%
50.3%
-‐24 bps
Tenant Improvements
-‐23.8
-‐16.5
44.4%
-‐1.8
-‐1.3
38.3%
Leasing Commissions
-‐8.3
-‐17.1
-‐51.5%
-‐0.6
-‐1.3
-‐53.8%
2
Other Non Recurring Expenses
-‐2.4
-‐11.4
-‐78.9%
-‐0.2
-‐0.8
-‐75.0%
Adjusted Funds from Operations (AFFO)
199.8
187.5
6.6%
15.1
14.3
5.2%
AFFO Margin
42.4%
40.3%
215 bps
42.4%
40.3%
215 bps
(1) Net Operational Interest Expenses comprised by interest paid, recurring borrowing expenses and interest income. (2) Related expenses to acquisitions, legal and other. Source: Pramerica Real Estate Investors Latin America -‐ Fund Accounting
Net Profit (Loss)
In 1Q14, Terrafina experienced a net loss of US$0.7 million, mainly as a result of fair value adjustment on investment properties. This was due to an adjustment made to the only property in Terrafina’s portfolio that is leased to a public homebuilding company. This property only represents 0.8% of Terrafina’s total GLA. Moreover it is important to mention that the rent income from this property is not considered in Terrafina’s 2014 NOI projections, thereby reaffirming the US$125 million NOI projected for the year.
16
The following table presents the calculation of Net (Loss) Profit for 1Q14:
1Q14
4Q13
Var. %
(millions of pesos unless otherwise stated)
1Q14
4Q13
Var. %
(millions of dollars unless otherwise stated)
0
0
Net Revenues
496.1
490.4
1.2%
37.5
37.6
-‐0.4%
Real Estate Expenses
-‐123.4
-‐102.0
21.0%
-‐9.3
-‐7.8
18.8%
Fees and Other Expenses
-‐47.9
-‐48.7
-‐1.6%
-‐3.7
-‐3.7
-‐1.0%
0.7
-‐110.1
-‐
0.1
-‐8.4
-‐
Net Income (Loss) from Fair Value Adjustment on Investment Properties
-‐104.2
153.2
-‐
-‐7.9
11.8
-‐
Net Income (Loss) from Fair Value Adjustment on Derivative Financial Instruments
-‐13.1
2.6
-‐
-‐1.0
0.2
-‐
Net Income (Loss) from Fair Value Adjustment on Borrowings
-‐84.5
139.9
-‐
-‐6.4
10.7
-‐
Foreign Exchange Gain (loss)
0.0
-‐9.9
-‐
0.0
-‐0.8
-‐
Acquisition Related Expenses
0.0
-‐4.4
-‐
0.0
-‐0.3
-‐
Operating Profit
123.8
511.0
-‐75.8%
9.3
39.8
-‐76.6%
Operating Margin
24.8%
105.7%
-‐8,094 bps
24.8%
105.7%
-‐8,094 bps
Financial Income
0.7
0.6
16.7%
0.1
0.0
0.0%
Financial Expenses
-‐133.6
-‐189.8
-‐29.6%
-‐10.0
-‐14.6
-‐31.3%
Net Financial Cost
-‐132.9
-‐189.2
-‐29.8%
-‐10.0
-‐14.6
-‐31.7%
-‐9.1
321.8
-‐102.8%
-‐0.7
25.2
-‐102.6%
-‐1.8%
67.0%
-‐
-‐1.8%
67.0%
-‐
Gain (Loss) from Sales of Real Estate Properties
Net Profit (Loss) Net Margin Source: Pramerica Real Estate Investors Latin America -‐ Fund Accounting
Distributions per CBFIs
Terrafina distributed US$15.1 million, or US$0.0396 per CBFI in 1Q14, an increase of 8.2%, compared to 4Q13. Terrafina’s 1Q14 and 4Q13 distributions are presented in the following table: 1Q14
4Q13
Total Outstanding CBFIs (million shares)
381.0
381.0
CBFI Price (quarterly average)
25.08
24.26
Distributions
199.8
181.7
Distributions Per CBFI
0.5244
0.4769
FX Rate USD/MXN (closing period)
13.2344
13.0262
15.1
13.9
0.0396
0.0366
8.4%
7.9%
(million of pesos unless otherwise stated) 1
Distributions (million dollars) Distributions Per CBFI (dollars) 2
Annualized Distribution Yield
(1) Total number of outstanding CBFIs: 381,014,635. (2) Distribution per share divided by the average CBFI price of the quarter. The distribution yield calculation has been annualized for comparison purposes. Source: Pramerica Real Estate Investors Latin America -‐ Fund Accounting
17
Total Debt
As of March 31, 2014, Terrafina’s total debt reached for US$913.4 million. The average cost Terrafina’s long-‐term debt, which is U.S. dollar-‐denominated, was 3.72%. Most of Terrafina’s loans are set at variable interest rates and are hedged with interest rate caps and fixed rate options. millions of pesos
Currency (as of March 31, 2013)
Short Term Debt
HSBC Long Term Debt 1 Citibank Banorte
Pesos
Dollars Dollars
2,3
GEREM 3 HSBC
Dollars
Total Debt Net Cash Net Debt 4
LTV
Interest Rate
Terms
TIIE + 2.60%
Interest + Principal
623.2
47.6
6,499.5 501.1 3,701.2
496.8 38.3 282.9
Dollars
625.3
47.8
11,950.3
913.4
594.1
45.4
millions of dollars
11,356.2
Mar 2015
-‐
Libor + 3.50%
Interest Only
Mar 2016
-‐
Libor + 3.30%
Interest + Principal
May 2016
-‐
Libor + 3.50%
Interest + Principal
Sep 2018
Sep 2020
Libor + 3.50%
Interest + Principal
Sep 2018
Sep 2020
868.0
53.8%
(1) Syndicated loan facility with six banks. (2) Syndicated loan facility with four banks. (3) One-‐year interest only grace period. (4) Calculated as total debt divided by the value of the properties (including appraisals). Source: Pramerica Real Estate Investors Latin America -‐ Fund Accounting and Capital Markets
Extension Option
Maturity
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, Bajío and northern regions of Mexico. It is internally managed by highly qualified industry specialists, and externally advised by Pramerica Real Estate Investors Latin America. Terrafina owns 230 real estate properties, including 217 developed industrial facilities with a collective GLA of approximately 31 million square feet and 13 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 Pramerica Real Estate Investors Pramerica Real Estate Investors is a leader in the global real estate investment management business, offering a broad range of investment vehicles that invest in private and public market opportunities in the United States, Europe, the Middle East, Asia, Australia and Latin America. Headquartered in Madison, N.J., the company also has offices in Atlanta, Chicago, Miami, New York, San Francisco, Frankfurt, Lisbon, London, Luxembourg, Munich, Paris, Abu Dhabi, Mexico City, Sao Paulo, Beijing, Hong Kong, Seoul, Singapore, Sydney and Tokyo. In addition, the company has representatives in Milan. Pramerica Real Estate Investors has gross assets under management of USD $55.7 billion ($41.0 billion net assets), as of December 31, 2013. For more information, please visit www.pramericarei.com
About Pramerica Financial Pramerica Financial is a trade name used by Prudential Financial, Inc., a company incorporated and with its principal place of business in the United States, and its affiliates in select countries outside the United States. PFI (NYSE: PRU), a financial services leader with more than $1.1 trillion of assets under management as of December 31, 2013, has operations in the United States, Asia, Europe, and Latin America. PFI’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., the company’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit http://www.news.prudential.com/. PFI of the United States is not affiliated in any manner with Prudential plc, a company incorporated in the United Kingdom. Pramerica, the Pramerica logo and the rock symbol are service marks of Pramerica Financial and its related entities, registered in many jurisdictions worldwide
19
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.
Note to Investors
Our CBFIs may not be offered or sold to any person in the United Kingdom, other than to persons whose ordinary activities involve them acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom. For further details about eligible offerees and transfer restrictions, see the section “Transfer Restrictions” referenced in the Offering Memorandum of Terrafina.
20
Conference Call
(BMV: TERRA13) Cordially invites you to participate in its First Quarter 2014 Results Wednesday, April 30, 2014 12:00 p.m. Eastern Time 11:00 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=98731 Conference Replay Will be provided for your call Dial 1-‐877-‐919-‐4059 or 1-‐334-‐323-‐0140 to listen Passcode: 30392580
21
Appendix
Appendix 1 – Revenues
Terrafina’s revenues are classified as rental revenues and other operating reimbursable revenues mainly. Additionally, there are accounting revenues that most be booked as IFRS indicates, nevertheless these are considered as non-‐cash items and therefore excluded in some calculations. Reimbursable tenant improvements are included in the tenant improvement expenses for the AFFO calculation.
Revenues
1Q14 Revenues NOI calculation Non Cash
AFFO calculation Non Cash
(millions of pesos)
1Q14
4Q13
(millions of dollars)
441.9
437.8
33.4
33.6
419.9
411.3
31.7
31.6
22.0
26.5
1.7
2.0
54.2
52.6
4.1
4.0
Reimbursable Expenses as Revenues
48.2
48.2
3.6
3.7
Reimbursable Tenant Improvements
2.7
4.4
0.2
0.3
Other non-‐cash income
3.3
0.0
0.2
0.0
496.1
490.4
37.5
37.6
Rental Revenue 1
Accrued Income Other Operating Revenues
NOI calculation
4Q13
2
Net Revenue
(1) Straight line rent adjustment. (2) Triple net leases expenses reimbursed to Terrafina from its tenants.
Source: Pramerica Real Estate Investors Latin America -‐ Fund Accounting
22
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). Terrafina’s 1Q14 and 4Q13 real estate expenses breakdown is available in the following table and indicates the figures used for the calculation of these metrics: Real Estate Expenses
Repair and Maintenance
1Q14
4Q13
(millions of pesos)
1Q14
4Q13
(millions of dollars)
-‐35.8
-‐29.6
-‐2.7
-‐2.3
Recurring
-‐9.3
-‐8.7
-‐0.7
-‐0.7
Non Recurring
-‐26.5
-‐20.9
-‐2.0
-‐1.6
-‐30.9
-‐7.2
-‐2.3
-‐0.6
Operating
-‐29.5
-‐6.5
-‐2.2
-‐0.5
Non Operating
-‐1.4
-‐0.7
-‐0.1
-‐0.1
NOI calculation Property Management Fees
-‐6.5
-‐10.6
-‐0.5
-‐0.8
NOI calculation Electricity
-‐9.0
-‐16.7
-‐0.7
-‐1.3
AFFO calculation Brokers Fees
-‐8.3
-‐17.1
-‐0.6
-‐1.3
Property Insurance
-‐4.4
-‐5.3
-‐0.4
-‐0.5
Operating
-‐3.7
-‐4.6
-‐0.3
-‐0.4
Administrative
-‐0.7
-‐0.7
-‐0.1
-‐0.1
-‐3.0
-‐3.6
-‐0.2
-‐0.3
-‐0.2
-‐0.4
0.0
0.0
-‐3.3
-‐4.7
-‐0.2
-‐0.4
Operational Related
-‐2.8
-‐4.7
-‐0.2
-‐0.4
Administrative
-‐0.5
0.0
0.0
0.0
-‐22.0
-‐6.8
-‐1.7
-‐0.5
-‐123.4
-‐102.0
-‐9.3
-‐8.0
NOI calculation AFFO calculation
Property Taxes NOI calculation Non Cash
NOI calculation EBITDA calculation
NOI calculation Security EBITDA Publicity calculation Other Expenses NOI calculation EBITDA calculation
Non Cash Bad Debt Expense
Total Real Estate Expenses
Source: Pramerica Real Estate Investors Latin America -‐ Fund Accounting
23
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 1Q14 and 4Q13 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
EBITDA External Advisor Fees calculation Legal Fees EBITDA Recurring calculation Non Recurring AFFO calculation
AFFO calculation EBITDA calculation EBITDA calculation EBITDA calculation EBITDA calculation
(millions of pesos)
-‐2.0
-‐1.2
-‐2.3
-‐16.4
-‐0.1
-‐1.2
-‐0.6
-‐4.3
0.0
-‐0.3
-‐1.7
-‐12.1
-‐0.1
-‐0.9
-‐2.6
-‐6.0
-‐0.2
-‐0.4
Recurring
-‐1.9
-‐6.7
-‐0.1
-‐0.5
Non Recurring
-‐0.7
0.7
-‐0.1
0.1
Administrative Fees
-‐10.5
-‐9.9
-‐0.8
-‐0.8
Payroll
-‐4.7
-‐5.5
-‐0.4
-‐0.4
Trustee Fees
-‐0.8
6.6
-‐0.1
0.5
Other Expenses
-‐0.8
-‐1.5
-‐0.1
-‐0.1
Total Fees and Admin. Expenses
-‐47.9
-‐48.6
-‐3.7
-‐3.6
(millions of dollars)
-‐15.9
Source: Pramerica Real Estate Investors Latin America -‐ Fund Accounting
1Q14 4Q13
-‐26.2
Other Professional Fees EBITDA calculation
4Q13
1Q14
24
Appendix 4 -‐ Reconciliation Reconciliation of Net Profit (Loss) to FFO, EBITDA and NOI Net Profit (Loss) Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses Add (deduct) Non-‐Cash Adjustment: Acquisition Related Expenses Foreign Exchange Adjustments 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 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
1Q14
4Q13 1Q14 4Q13 (million dollars)
(million pesos)
-‐9.1 9.8 0.0 0.1 84.3 13.1 104.2 -‐0.7 26.5 1.4 8.3 22.0 1.7 0.7 -‐22.0 -‐3.3 -‐2.7 234.3 123.6 0.2 -‐0.7 357.4 26.2 0.6 1.9 10.5 4.7 0.8 0.8 0.2 0.7 0.5 404.3 9.3 29.5 6.5 9.0 3.7 3.0 2.8
301.6 55.8 4.4 9.9 -‐119.7 -‐2.6 -‐153.2 110.1 20.9 0.7 17.1 6.8 12.1 -‐0.7 -‐26.5 0.0 -‐4.4 232.5 127.6 6.4 -‐0.6 365.9 15.9 4.3 6.7 9.9 5.5 -‐6.6 1.5 0.4 0.7 0.0 404.1 8.7 6.5 10.6 16.7 4.6 3.6 4.7
3.3 0.0 22.0 26.5 2.7 496.1
4.4 490.4
-‐0.7 0.7 0.0 0.0 6.4 1.0 7.9 -‐0.1 2.0 0.1 0.6 1.7 0.1 0.1 -‐1.7 -‐0.2 -‐0.2 17.7 9.3 0.0 -‐0.1 26.9 2.0 0.0 0.1 0.8 0.4 0.1 0.1 0.0 0.1 0.0 30.5 0.7 2.2 0.5 0.7 0.3 0.2 0.2 0.2 1.7 0.2 37.5
23.1 4.3 0.3 0.8 -‐9.2 -‐0.2 -‐11.8 8.4 1.6 0.1 1.3 0.5 0.9 -‐0.1 -‐2.0 0.0 -‐0.3 17.7 9.8 0.5 0.0 28.0 1.2 0.3 0.5 0.8 0.4 -‐0.5 0.1 0.0 0.1 0.0 30.9 0.7 0.5 0.8 1.3 0.4 0.3 0.4
0.0 2.0 0.3 37.6
25
Reconciliation of Net Profit (Loss) to AFFO Net Profit (Loss) Add (deduct) Cost of Financing Adjustment: Non Recurring Borrowing Expenses Add (deduct) Non-‐Cash Adjustment: Acquisition Related Expenses Foreign Exchange Adjustments 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 Add (deduct) Revenues Adjustment: Accrued Income Other Non-‐Cash Income AFFO
1Q14 4Q13 1Q14 4Q13 (million pesos) (million dollars) -‐9.1 9.8 0.0 0.1 84.3 13.1 104.2 -‐0.7 1.4 22.0 -‐22.0 -‐3.3 199.8
301.6 55.8 4.4 9.9 -‐119.7 -‐2.6 -‐153.2 110.1 0.7 6.8 -‐26.5 0.0 187.5
-‐0.7 0.7 0.0 0.0 6.4 1.0 7.9 -‐0.1 0.1 1.7 -‐1.7 -‐0.2 15.1
23.1 4.3 0.3 0.8 -‐9.2 -‐0.2 -‐11.8 8.4 0.1 0.5 -‐2.0 0.0 14.3
26
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. 25.08 pesos and a closing exchange rate as of March 31, 2014 of Ps. 13.0837. Implied Cap Rate
Quarterly Average Price (dollars)¹
1.92
(x) CBFIs (million shares)
381.0
(=) Market Capitalization
730.4
(+) Total Debt
913.4
(-‐) Cash
45.4
(=) Enterprise Value
1,598.3
(-‐) Landbank
80.5
(=) Implied Operating Real Estate Value
1,517.8
Net Operating Income (NOI) 2014e
125.0
Implied Cap Rate
8.2%
Figures expressed in million dollars unless otherwise stated.
(1) Quarterly average price of Ps.25.08 and exchange rate of Ps.13.0837 (as of March 31, 2014).
27
Financial Statements 1Q14
Income Statement
(thousands of pesos)
Rental revenues Other operating income Real estate operating expenses
$441,941
54,145
Fees and other expenses Acquisition related expenses Realized gain from disposal of investment properties
(123,384)
(47,881)
-‐
Net Income (Loss) from Fair Value Adjustment on Borrowings
Net gain (loss) from fair value adjustment on investment properties
Net (loss) gain unrealized from fair value on derivative financial instruments
703 (84,459) (104,183) (13,070)
46
Operating profit
123,858
Finance income
722
(133,719)
Finance cost -‐ net
(132,997)
Net Profit for the period
(9,139)
Foreign exchange (loss) gain
Finance cost
Results for the period January 01, 2014 to March 31, 2014.
28
Financial Statements
Balance Sheet
Mar-‐31-‐14
$21,117,969
$21,146,337
(Cost: 03/31/2014 -‐ $21,023,650; 12/31/2013 -‐ $20,949,047)
$27,208
$26,561 $935,307 $28,580 $63,106 $66,106
Restricted cash
$39,852
Total assets Net assets attributable to Investors Contributions, net Retained earnings
Currency translation adjustment
(Cost: 03/31/2014 -‐ $11,272,699; 12/31/2013 -‐ $11,311,842)
Tenant deposits Current liabilities Trade and other payables Borrowings (Cost: 03/31/2014 -‐ $734,790; 12/31/2013 -‐ $816,134)
-‐0.1% -‐31.7% -‐31.0% -‐12.2% 239.9% 52.9% -‐16.4%
$56,935
6.1%
$594,122
$728,550
-‐18.5%
22,919,395
23,203,670
-‐1.2%
$9,900,604 $55,584 $518,830 10,475,018
$9,900,604 $246,413
0.0% -‐77.4%
$511,856
1.4%
10,658,873
-‐1.7%
$11,222,829
$11,183,919
0.3%
Total net assets (Net Equity) Liabilities Non-‐current liabilities Borrowings
$38,513 $1,064,715 $8,409 $41,282 $79,077
$60,436
Cash and cash equivalents
Var.
Assets Non-‐current assets Investment properties
(Net of allowance for doubtful accounts: 03/31/2014 -‐ $71,015; 12/31/2013 -‐ $49,279)
Dec-‐31-‐13
Derivative financial instruments Current assets Other assets Recoverable taxes Prepaid expenses Deferred charges and accrued income Accounts receivable
(thousand pesos)
$159,626
$334,425 $727,497
$147,986 $409,537 $803,355
7.9% -‐18.3% -‐9.4%
Total liabilities (excluding net assets attributable to the Investors)
12,444,377
12,544,797
-‐0.8%
Total net assets and liabilities
22,919,395
23,203,670
-‐1.2%
29
Financial Statements Attributable to Investors
Statement of Changes in Equity
Net contributions
(thousand pesos)
Balance at January 1, 2014 (Audited) 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 March 31, 2014 (Unaudited)
Currency translation adjustment
Net assets attributable to Investors
Retained earnings
$9,900,604 $511,856 $246,413 $10,658,873 -‐ -‐ (181,690) (181,690) -‐ -‐ -‐ $9,900,604
-‐ 6,974 6,974 $518,830
(9,139) -‐ (9,139) $55,584
(9,139) 6,974 (2,165) $10,475,018
Results for the period January 01, 2014 to March 31, 2014.
30
Financial Statements Cash Flow Statement
Mar-‐14
(thousand pesos)
Cash flows from operating activities (Loss) profit for the period
$(9,139)
104,183
Adjustments: Net loss (gain) unrealized from fair value adjustment on investment properties Net loss (gain) unrealized from fair value adjustment on derivative financial instruments
13,070
Net loss (gain) unrealized from fair value adjustment on borrowings Realized gain from disposal of investment properties
(703)
Bad debt expense
21,980
(Increase) in restricted cash
(3,501)
(Increase) in accounts receivable
(30,833)
Decrease in recoverable taxes
129,408
(Increase) in prepaid expenses
(20,171)
Decrease in other assets
11,952
Increase in tenant deposits
11,640
(Decrease) in accounts payable
(75,112)
Net cash (used in) generated from operating activities
237,233
Cash flows from investing activities Acquisition of investment properties
Improvements of investment properties
(8,101) (66,003)
Dispositions of investment properties
11,011
Net cash (used in) generated from investing activities
(63,093)
Cash flows from financing activities Acquisition of derivative financial instruments Proceeds from borrowings
(275) -‐
Principal payments on borrowings
(126,752)
Distributions to investors
(181,690)
Proceeds from CBFI issued
-‐
Net cash (used in) generated from financing activities
(308,717)
Net (decrease) in cash and cash equivalents
(134,577)
Cash and cash equivalents at the beginning of the period Exchange effects on cash and cash equivalents Cash and cash equivalents at the end of the period
728,550 149 $594,122
Results for the period January 01, 2014 to March 31, 2014.
31
