Corporación Inmobiliaria Vesta Reports First Quarter 2024 Earnings Results

Rhea-AI Summary

Corporación Inmobiliaria Vesta reported strong financial results for Q1 2024, with total income reaching US$60.6 million, a 21.3% increase year over year. Adjusted NOI margin and EBITDA margin were 96.0% and 84.7% respectively. Vesta's FFO increased by 32.4% to US$40.4 million. Leasing activity reached 2.0 million sf, and total portfolio occupancy stood at 94.0%. Vesta achieved 28% of its ESG Bond KPIs ahead of schedule. The company sold a non-strategic land lease property for US$780,000. Financial indicators showed positive growth in revenue, NOI, EBITDA, and FFO.

Positive

• Vesta reported total income of US$60.6 million for Q1 2024, a 21.3% increase year over year.
• Adjusted NOI margin and EBITDA margin reached 96.0% and 84.7% respectively.
• Vesta's FFO increased by 32.4% to US$40.4 million compared to Q1 2023.
• Leasing activity in Q1 2024 reached 2.0 million sf, with total portfolio occupancy at 94.0%.
• Vesta achieved 28% of its ESG Bond KPIs ahead of schedule.
• The company sold a non-strategic land lease property for US$780,000.
• Financial indicators showed positive growth in revenue, NOI, EBITDA, and FFO.

Negative

• None.

Insights

Financial Analyst

Vesta's recent earnings release presents a robust financial performance with a significant year-over-year increase in total income, primarily driven by new lease contracts and an inflationary benefit. Investors would note the 21.3% increase in total rental income and the 32.4% surge in funds from operations (FFO), both indicative of strong operational efficiency and revenue growth. The company's strategic focus on pre-leasing to major e-commerce players, as evidenced by the deal with Latin America's largest e-commerce company, is a testament to their market positioning and ability to attract and retain high-profile tenants.

However, the slight decline in EBITDA per share and the decrease in adjusted NOI and EBITDA margins, albeit marginal, may reflect rising costs or administrative expenses. While these dips are not alarming, they merit close monitoring in subsequent quarters for potential trends. Diving deeper into the robust 84.7% Adjusted EBITDA margin, investors should appreciate it as a sign of operational effectiveness, especially when compared to industry averages, which typically hover around 30-50% for real estate companies.

The comprehensive gain reported is exceptionally high, influenced by revaluation gains on investment properties. While this is positive, the sustainability of these valuation gains may vary with market conditions. The 10.1% yield on cost for Vesta's construction in progress suggests that the new projects are expected to offer attractive returns relative to investment, a key metric for evaluating the potential success of ongoing developments.

ESG Analyst

A standout aspect of Vesta's report is their achievement of 28% of their Environmental, Social and Governance (ESG) Bond Key Performance Indicators (KPIs) related to green-certified Gross Leasable Area (GLA), far outpacing the company's 2031 targets. This swift progress displays Vesta's commitment to sustainability and could enhance their reputation among socially responsible investors. It's also important to note that as ESG factors are increasingly incorporated into investment decisions, such achievements could positively influence investor sentiment and potentially contribute to a decrease in the cost of capital over time.

Real Estate Market Analyst

The real estate sector is intricately linked to broader economic dynamics and Vesta's performance in this quarter, including a 4.4% increase in the value of its investment property portfolio, reflects strong market conditions. The specific focus on industrial real estate, with significant leasing activity and construction expansion in key metropolitan areas such as Mexico City, Monterrey and the Bajio region, aligns with current demands driven by the e-commerce sector's growth. Their targeted approach to construction and leasing, particularly preleasing large spaces to major players, indicates confidence in the sector's ongoing expansion and the company's ability to meet the demand.

MEXICO CITY--(BUSINESS WIRE)-- Corporación Inmobiliaria Vesta S.A.B. de C.V., (“Vesta”, or the “Company”) (BMV: VESTA; NYSE: VTMX), a leading industrial real estate company in Mexico, today announced results for the first quarter ended March 31, 2024. All figures included herein were prepared in accordance with International Financial Reporting Standards (IFRS), which differs in certain significant respects from U.S. GAAP. This information should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements, including the notes thereto. Vesta’s financial results are stated in US dollars unless otherwise noted.

Q1 2024 Highlights

• Vesta delivered outstanding financial results for the first quarter 2024, achieving US$ 60.6 million in total income; a 21.3% year over year increase. Q1 2024 Adjusted NOI margin and Adjusted EBITDA margin reached 96.0% and 84.7%, respectively. Vesta FFO ended Q1 2024 at US$ 40.4 million; a 32.4% increase compared to US$ 30.5 million in Q1 2023.
• First quarter 2024 leasing activity reached 2.0 million sf: 1.2 million sf in new contracts- including a pre-lease with Latin America’s largest e-commerce company and longtime Vesta client- among others, and 0.8 million sf in lease renewals. Vesta’s first quarter 2024 total portfolio occupancy reached 94.0%, while stabilized and same-store occupancy reached 97.1% and 97.4%, respectively.
• During the first quarter 2024, Vesta preleased 845,957 sf within its Vesta Park Punta Norte building in Mexico City to one of the largest e-commerce Companies in Latin America, underscoring Vesta’s leadership position and success in building a strong presence within Mexico’s key metropolitan areas.
• Trailing twelve-month renewals and re-leasing reached 4.1 million sf with a weighted average spread of 8.0%. Same-store NOI increased by 5.6% year on year.
• New construction during the quarter exceeded 1.0 million sf: Vesta began construction on three new buildings in Monterrey and one in Queretaro for Vesta´s longtime client Safran, aligned with the Company’s growth plan and reflecting strong market dynamics. Vesta’s current construction in progress reached 4.1 million sf by the end of the first quarter 2024, representing a US$ 344.5 million estimated investment and a 10.1% yield on cost, in markets including Mexico City, Ciudad Juarez, Monterrey and Bajio region.
• Vesta achieved 28% of its ESG Bond KPIs related to the portfolio’s green certified GLA, by year end 2023, exceeding its targeted 2031 timeframe. This was achieved through the Company´s focus on GLA certification for existing properties and by the accelerated portfolio growth in recent years. Vesta continues to monitor these KPIs, as any asset sales or changes to the portfolio composition can impact this metric.
• Vesta sold a non-strategic land lease property in the Bajio for US $780,000 during the first quarter 2024 as part of the Company’s strategy to opportunistically recycle non-strategically relevant assets.

Financial Indicators (million)	Q1 2024	Q1 2023	Chg. %
Total Rental Income	60.6	49.9	21.3
Total Revenues (-) Energy	59.7	49.6	20.5
Adjusted NOI	57.4	47.8	20.1
Adjusted NOI Margin %	96.0%	96.4%
Adjusted EBITDA	50.6	42.1	20.2
Adjusted EBITDA Margin %	84.7%	84.9%
EBITDA Per Share	0.0572	0.0606	(5.6)
Total Comprehensive Income	124.0	59.1	109.8
Vesta FFO	40.4	30.5	32.4
Vesta FFO Per Share	0.0456	0.0439	3.9
Vesta FFO (-) Tax Expense	33.4	9.7	242.9
Vesta FFO (-) Tax Expense Per Share	0.0377	0.0140	169.1
Diluted EPS	0.1402	0.0851	64.6
Shares (average)	884.8	694.3	27.4

• First quarter 2024 revenue reached US$ 60.6 million; a 21.3% year on year increase from US$ 49.9 million in the first quarter 2023 primarily due to US$ 8.9 million in new revenue-generating contracts and a US$ 2.1 million inflationary benefit on first quarter 2024 results.
• First quarter 2024 Adjusted Net Operating Income (Adjusted NOI) ¹ increased 20.1% to US$ 57.4 million, compared to US$ 47.8 million in the first quarter 2023. The first quarter 2024 Adjusted NOI margin was 96.0%; a 35-basis-point year on year decrease due to increased property-related costs.
• First quarter 2024 Adjusted EBITDA ² increased 20.1% to US$ 50.6 million, as compared to US$ 42.1 million in the first quarter 2023. The Adjusted EBITDA margin was 84.7%; a 21-basis-point decrease primarily due to increased administrative expenses during the quarter.
• First quarter 2024 Vesta funds from operations (Vesta FFO) increased by 32.4% to US$ 40.4 million, from US$ 30.5 million in 2023. Vesta FFO per share was US$ 0.0456 for the first quarter 2024 compared with US$ 0.0439 for the same period in 2023; a 3.9% increase resulting from an increase in Adjusted EBITDA, while interest expenses and current tax for the quarter decreased. First quarter 2024 Vesta FFO excluding current tax was US$ 33.4 million compared to US$ 9.7 million in the first quarter 2023, due to higher profit, lower interest expense and lower current taxes in the first quarter 2024 relative to the same period in 2023.
• First quarter 2024 total comprehensive gain was US$ 124.0 million, versus US$ 59.1 million in the first quarter 2023. This increase was primarily due to increased revenues and a higher gain on the revaluation of investment properties during the quarter.
• The total value of Vesta’s investment property portfolio was US$ 3.4 billion as of March 31, 2024; a 4.4% increase compared to US$ 3.2 billion at the end of March 31, 2023.

For a full version of Corporación Inmobiliaria Vesta First Quarter 2024 Earnings Release, please visit: https://ir.vesta.com.mx/financial-results

CONFERENCE CALL INFORMATION

Vesta will host a conference call on Friday, April 26, 2024, to discuss these results at 11:00 a.m. Eastern Time / 9:00 a.m. Mexico City Time.

To participate in the conference call, please connect via webcast or by dialing:

U.S. Toll-Free: +1 (888) 350-3870
International Toll: +1 (646) 960-0308
International Dial-In: https://events.q4irportal.com/custom/access/2324/

Participant Code: 1849111

Webcast: https://events.q4inc.com/attendee/715377601

A telephonic replay will be available for one week following the conference call and can be accessed two hours subsequent to call’s completion via Vesta’s IR website, along with the company's earnings press release, financial tables, and slide presentation.

About Vesta

Vesta is a real estate owner, developer and asset manager of industrial buildings and distribution centers in Mexico. As of March 31, 2024, Vesta owned 214 properties located in modern industrial parks in 16 states of Mexico totaling a GLA of 37.3 million sf (3.5 million m2). Vesta has several world-class clients participating in a variety of industries such as automotive, aerospace, high-tech, pharmaceuticals, electronics, food and beverage and packaging. For additional information visit: www.vesta.com.mx.

Note on Forward-Looking Statements

This report may contain certain forward-looking statements and information relating to the Company and its expected future performance that reflects the current views and/or expectations of the Company and its management with respect to its performance, business and future events. Forward looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like “believe,” “anticipate,” “expect,” “envisages,” “will likely result,” or any other words or phrases of similar meaning. Such statements are subject to a number of risks, uncertainties and assumptions. Some of the factors that may affect outcomes and results include, but are not limited to: (i) national, regional and local economic and political climates; (ii) changes in global financial markets, interest rates and foreign currency exchange rates; (iii) increased or unanticipated competition for our properties; (iv) risks associated with acquisitions, dispositions and development of properties; (v) tax structuring and changes in income tax laws and rates; (vi) availability of financing and capital, the levels of debt that we maintain; (vii) environmental uncertainties, including risks of natural disasters; (viii) risks related to any potential health crisis and the measures that governments, agencies, law enforcement and/or health authorities implement to address such crisis; and (ix) those additional factors discussed in reports filed with the Bolsa Mexicana de Valores and in the U.S. Securities and Exchange Commission. We caution you that these important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in this presentation and in oral statements made by authorized officers of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to update or revise any forward-looking statements, including any financial guidance, whether as a result of new information, future events or otherwise except as may be required by law.

¹ Adjusted NOI and Adjusted NOI Margin calculations have been modified, please refer to Notes and Disclaimers
² Adjusted EBITDA and Adjusted EBITDA Margin calculations have been modified, please refer to Notes and Disclaimers

View source version on businesswire.com: https://www.businesswire.com/news/home/20240425013278/en/

Juan Sottil, CFO

+52 55 5950-0070 ext. 133

jsottil@vesta.com.mx

Fernanda Bettinger, IRO

+52 55 5950-0070 ext. 163

mfbettinger@vesta.com.mx

investor.relations@vesta.com.mx

Barbara Cano, InspIR Group

+1 646 452-2334

barbara@inspirgroup.com

Source: Corporación Inmobiliaria Vesta S.A.B. de C.V.

FAQ

What was Vesta's total income for Q1 2024?

Vesta reported total income of US$60.6 million for the first quarter of 2024, representing a 21.3% increase year over year.

What were Vesta's FFO results for Q1 2024?

Vesta's FFO increased by 32.4% to US$40.4 million in the first quarter of 2024 compared to the same period in 2023.

What was Vesta's total portfolio occupancy in Q1 2024?

Vesta's total portfolio occupancy stood at 94.0% in the first quarter of 2024.

Did Vesta achieve any ESG Bond KPIs in Q1 2024?

Vesta achieved 28% of its ESG Bond KPIs related to the portfolio's green certified GLA ahead of schedule.

Did Vesta sell any properties in Q1 2024?

Vesta sold a non-strategic land lease property for US$780,000 during the first quarter of 2024.

How did Vesta's financial indicators perform in Q1 2024?

Vesta's financial indicators showed positive growth in revenue, NOI, EBITDA, and FFO for the first quarter of 2024.