Corporación Inmobiliaria Vesta Reports Fourth Quarter 2023 Earnings Results
- Exceptional financial results for Q4 2023, with a total income of US$ 214.5 million, a 20.5% YoY increase.
- Strong leasing activity in 2023, with 7.9 million sf leased.
- FFO reached US$ 127.9 million, a 23.6% increase from 2022.
- Total portfolio occupancy was 93.4% in Q4 2023.
- Completed a US$ 148.8 million follow-on ADS offering and acquired a 81 thousand sf facility in Toluca.
- Sold a building in Tijuana for US$ 37.0 million.
- Strengthened social and environmental strategies, achieving various milestones.
- Expects revenues to increase by 16-17% in 2024, with a 94.0% NOI margin and an 83.0% EBITDA margin.
- None.
Insights
The reported financial results of Corporación Inmobiliaria Vesta S.A.B. de C.V. for the fourth quarter of 2023 demonstrate a robust performance with a significant 20.5% year-over-year increase in total income, surpassing the company's revenue guidance. This indicates a strong demand for industrial real estate in Mexico, likely driven by factors such as nearshoring and the growth of e-commerce. The company's aggressive growth strategy, evidenced by new construction and acquisitions, aligns with the broader industry trend of expanding industrial footprints to meet rising logistics demands.
Moreover, the company's operational efficiency is highlighted by the impressive Adjusted NOI margin of 94.6% and Adjusted EBITDA margin of 82.0%, both exceeding guidance. Such high margins are indicative of effective cost control and operational optimization, which are critical for maintaining profitability in the real estate sector. The increase in Vesta's funds from operations (FFO) by 23.6% also reflects a healthy cash flow situation, which is vital for sustaining growth and shareholder returns.
From a financial perspective, Vesta's strong balance sheet, characterized by a Net Debt to EBITDA ratio of 2.4x and a Loan-to-Value (LTV) ratio of 24.1%, suggests a conservative capital structure and a lower risk profile. These metrics are particularly relevant to investors and creditors, as they provide insight into the company's financial leverage and ability to service debt. The successful follow-on ADS offering and the IPO earlier in the year have evidently contributed to this solid financial standing.
The reported cap rates on property acquisitions and sales, such as the 8.5% on the Toluca facility and the 6.5% on the Tijuana building, offer a glimpse into the investment yield and the attractiveness of these assets in the current market. These rates are within the typical range for industrial properties, indicating Vesta's transactions are aligned with market expectations. The use of proceeds from asset sales to pay down debt further strengthens the company's financial position.
On the sustainability front, Vesta's inclusion in the S&P/BMV Total ESG Mexico Index and the S&P Global Sustainability Yearbook, as well as its progress towards ISO 14001:2015 Certification and alignment with IFRS ESG Standards, reflect a commitment to environmental and social governance that is increasingly valued by investors. These efforts can enhance the company's reputation and potentially attract a broader investor base that prioritizes ESG factors. The focus on sustainability is not only a response to regulatory pressures but also a strategic move to future-proof the business against environmental risks and to capitalize on the growing demand for green buildings.
Full Year and Q4 2023 Highlights
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Vesta delivered outstanding financial results for the full year 2023, achieving
US in total income; a$ 214.5 million 20.5% year over year increase exceeding the upper range of its 19-20% revenue guidance for the full year 2023. 2023 Adjusted NOI margin1 and Adjusted EBITDA margin2 reached94.6% and82.0% , respectively, both of which exceeded guidance. Vesta FFO ended 2023 withUS ; a$ 127.9 million 23.6% increase compared toUS in 2022.$ 103.5 million - Vesta achieved strong leasing activity in 2023, reaching a total of 7.9 million sf; 4.5 million sf in new leases and 3.4 million in lease renewals, with a six-year average weighted lease life.
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Fourth quarter 2023 leasing activity reached 2.7 million sf: 1.7 million sf in new contracts with top quality companies such as Foxconn, Tesla, BRP, among others, and 1.0 million sf in lease renewals. Vesta’s fourth quarter 2023 total portfolio occupancy reached
93.4% , while stabilized and same-store occupancy reached96.7% and97.0% , respectively. -
2023 renewals and re-leasing reached 4.1 million sf, with a weighted average spread of
6.5% . Same-store NOI increased by9.5% in 2023. -
2023 new construction totaled 3.2 million square feet, at a
10.1% weighted average yield on cost. Vesta’s current construction in progress reached 3.1 million sf by the end of the fourth quarter 2023, representing an estimated investment ofUS and a$ 267.1 million 9.8% yield on cost, in markets includingMexico City ,Ciudad Juarez andBajio region. -
Vesta successfully closed a
US follow-on ADS offering in December 2023, ending the year with a strong balance sheet also with benefit of the Company’s successful July 5, 2023 IPO. This was reflected in 2.4x Net Debt to EBITDA and a$ 148.8 million 24.1% LTV. -
Vesta completed the acquisition of an 81 thousand sf facility located in
Toluca, State of Mexico during the fourth quarter 2023, leased to a tier-1 supplier to the neighboring Stellantis automotive plant. The property was acquired for US$25.3 million 8.5% cap rate. -
During the fourth quarter 2023 and aligned with the Company’s asset recycling strategy, Vesta sold a 313 thousand sf building in
Tijuana, Baja California for US$37.0 million 6.5% cap rate over market rent and4.0% cap rate over in-place rent Net proceeds will be used partially to pay down Vesta’s current debt, taxes and other corporate uses. -
During the fourth quarter, Vesta sold 8.5 hectares of land in
Aguascalientes forUS .$ 5.1 million - Vesta strengthened the social and environmental pillars of its strategy during 2023, including 1) prepared the Company’s first Human Rights Risk Assessment 2) implemented a Level One and Level Two Diagnosis for Vesta’s parks and offices as is required for ISO 14001:2015 Certification; 3) began implementation of sustainable taxonomy (Mexican and EU); 4) completed a biodiversity assessment based on TNFD Standards; 5) aligned with IFRS ESG Standards (S1 & S2); 6) finalized a climate change strategy (Physical and Transitional Analysis) emissions inventory; 7) and rebuilt the Company’s social investment strategy.
- Vesta was also included within the S&P/BMV Total ESG Mexico Index in 2023, for the fourth consecutive year, and was included within the S&P Global Sustainability Yearbook for the second consecutive year. Further, Vesta remains on track to achieve its targets related to the sustainability-linked bond issued at the beginning of 2021, having ended 2023 with seven new LEED certified buildings. Finally, Vesta was recognized as an Edge Champion for square footage certified with Edge Certification in 2023.
Guidance 2024
Vesta expects revenues to increase between 16
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12 months |
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Financial Indicators (million) |
Q4 2023 |
Q4 2022 |
Chg. % |
2023 |
2022 |
Chg. % |
Total Rental Income |
55.9 |
47.4 |
17.9 |
214.5 |
178.0 |
20.5 |
Total Revenues (-) Energy |
54.0 |
46.2 |
17.0 |
212.5 |
176.8 |
20.2 |
Adjusted NOI |
53.0 |
44.3 |
19.7 |
201.2 |
168.7 |
19.2 |
Adjusted NOI Margin % |
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Adjusted EBITDA |
44.1 |
39.4 |
12.0 |
174.2 |
149.9 |
16.2 |
Adjusted EBITDA Margin % |
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EBITDA Per Share |
0.0520 |
0.0573 |
(9.2) |
0.2266 |
0.2160 |
4.9 |
Total Comprehensive Income |
112.3 |
84.6 |
32.7 |
324.5 |
252.5 |
28.5 |
Vesta FFO |
32.6 |
27.2 |
20.0 |
127.9 |
103.5 |
23.6 |
Vesta FFO Per Share |
0.0384 |
0.0395 |
(2.7) |
0.1664 |
0.1492 |
11.6 |
Vesta FFO (-) Tax Expense |
14.4 |
13.2 |
9.3 |
36.0 |
61.6 |
(41.5) |
Vesta FFO (-) Tax Expense Per Share |
0.0170 |
0.0192 |
(11.4) |
0.0468 |
0.0887 |
(47.2) |
Diluted EPS |
0.1323 |
0.1229 |
7.6 |
0.4221 |
0.3638 |
16.0 |
Shares (average) |
848.7 |
688.2 |
23.3 |
768.8 |
694.3 |
10.7 |
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Fourth quarter 2023 revenue reached
US ; a$ 55.9 million 17.9% year on year increase fromUS in the fourth quarter 2022, primarily due to$ 47.4 million US in new revenue-generating contracts and a$ 8.3 million US inflationary benefit on fourth quarter 2023 results. Fourth quarter 2023 Adjusted NOI and EBITDA margins reached$ 1.9 million 98.1% and81.7% , respectively. -
Fourth quarter 2023 Adjusted Net Operating Income (Adjusted NOI)4 increased
19.7% toUS , compared to$ 53.0 million US in the fourth quarter 2022. The fourth quarter 2023 Adjusted NOI margin was$ 44.3 million 98.1% ; a 220-basis-point year on year increase due to lower property-related costs. -
Fourth quarter 2023 Adjusted EBITDA5 increased
12.0% toUS , as compared to$ 44.1 million US in the fourth quarter 2022. The Adjusted EBITDA margin was$ 39.4 million 81.7% ; a 365-basis-point decrease primarily due to the peso appreciation relative to the same period last year, which in turn impacted Vesta´s employee’s benefits, auditing, legal and consulting expenses. -
Fourth quarter 2023 Vesta funds from operations (Vesta FFO) increased by
20.0% toUS , from$ 32.6 million US in 2022. Vesta FFO per share was$ 27.2 million US for the fourth quarter 2023 compared with$ 0.03 84US for the same period in 2022; a$ 0.03 952.7% decrease resulting from the Company’s December 2023 follow-on issuance. Fourth quarter 2023 Vesta FFO excluding current tax expense wasUS compared to$ 14.4 million US in the fourth quarter 2022, due to higher profit with a lower interest expense in the fourth quarter 2023 relative to the same period in 2022.$ 13.2 million -
Fourth quarter 2023 total comprehensive gain was
US , versus$ 112.3 million US in the fourth quarter 2022. This increase was primarily due to increased revenues, higher gain on the revaluation of investment properties and a positive effect from income tax gain for the fourth quarter 2023.$ 84.6 million -
The total value of Vesta’s investment property portfolio was
US as of December 31, 2023; a$ 3.2 billion 17.3% increase compared toUS at the end of December 31, 2022.$ 2.7 billion
For a full version of Corporación Inmobiliaria Vesta Fourth Quarter 2023 Earnings Release, please visit: https://ir.vesta.com.mx/financial-results
CONFERENCE CALL INFORMATION
Vesta will host a conference call on Thursday, February 22, 2024, to discuss these results at 10:00 a.m. Eastern Time / 9:00 a.m. Mexico City Time.
To participate in the conference call, please connect via webcast or by dialing:
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/980213268
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. The call can also be accessed via +1-800-770-2030, Participant Code: 1849111
About Vesta
Vesta is a real estate owner, developer and asset manager of industrial buildings and distribution centers in
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
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| 1 | Adjusted NOI Margin calculations have been modified, please refer to Notes and Disclaimers |
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| 2 | Adjusted EBITDA Margin calculations have been modified, please refer to Notes and Disclaimers |
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| 3 | These amounts are estimates and are based on management’s current expectations. Amounts are subject to change and Vesta undertakes no responsibility to update this outlook. The Company is unable to present a quantitative reconciliation of expected NOI margin and expected Adjusted EBITDA margin which are forward-looking non-IFRS measures, because the Company cannot reliably predict certain of their necessary components, such as gain on revaluation of investment property, exchange gain (loss) – net, or gain on sale of investment property, among others. |
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| 4 | Adjusted NOI and Adjusted NOI Margin calculations have been modified, please refer to Notes and Disclaimers |
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| 5 | 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/20240221476880/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 Q4 2023?
How much did Vesta's FFO increase by in 2023?
What was Vesta's total portfolio occupancy in Q4 2023?
What follow-on offering did Vesta complete in December 2023?
What facility did Vesta acquire in Toluca during Q4 2023?
What was the revenue guidance for Vesta in 2024?
