Corporación Inmobiliaria Vesta Reports Second Quarter 2024 Earnings Results

Rhea-AI Summary

Corporación Inmobiliaria Vesta reported strong Q2 2024 results, with total income reaching US$ 63.0 million, a 22.4% year-over-year increase. The company's Adjusted NOI margin was 94.7%, while the Adjusted EBITDA margin stood at 82.3%. Vesta's FFO increased by 23.2% to US$ 37.9 million compared to Q2 2023. The company's total portfolio occupancy reached 95.0%, with stabilized and same-store occupancy at record levels of 97.5% and 97.8%, respectively. Vesta's leasing activity for Q2 2024 totaled 2.8 million sf, including 1.0 million sf in new contracts and 1.8 million sf in renewals. The company also began construction on four new buildings, expanding its development portfolio in line with its growth strategy.

Positive

• Total income increased by 22.4% year-over-year to US$ 63.0 million
• FFO grew by 23.2% to US$ 37.9 million compared to Q2 2023
• Total portfolio occupancy reached 95.0%, with record stabilized and same-store occupancy
• Leasing activity totaled 2.8 million sf, including 1.0 million sf in new contracts
• Construction in progress reached 4.7 million sf, representing a US$ 417.2 million estimated investment

Negative

• Adjusted NOI margin decreased by 77 basis points year-on-year to 94.7%
• Adjusted EBITDA margin declined by 188 basis points to 82.3%
• Vesta FFO per share decreased by 3.4% to US$ 0.0428 compared to Q2 2023

Insights

Financial Analyst

Corporación Inmobiliaria Vesta's Q2 2024 results demonstrate robust growth and operational strength in the Mexican industrial real estate market.

Key highlights include:

• Total income increased by 22.4% year-over-year to $63.0 million
• Adjusted NOI margin of 94.7% and Adjusted EBITDA margin of 82.3%
• FFO grew by 23.2% to $37.9 million
• Total portfolio occupancy reached 95.0%, with stabilized occupancy at a record 97.5%

The company's focus on e-commerce and consumer logistics is paying off, with 47% of new contracts in buildings under construction dedicated to these sectors. This strategic alignment positions Vesta well for future growth in these rapidly expanding markets.

The 7.1% weighted average spread on renewals and re-leasing indicates strong demand and pricing power. The 4.5% increase in same-store NOI further underscores the quality of Vesta's portfolio and its ability to drive organic growth.

With $417.2 million in ongoing construction projects yielding an estimated 10.4%, Vesta is well-positioned for continued expansion. However, investors should monitor the slight decrease in NOI and EBITDA margins, which could impact profitability if the trend continues.

Real Estate Market Analyst

Vesta's Q2 2024 results reflect the broader trends in the Mexican industrial real estate market, particularly the surge in demand driven by nearshoring and e-commerce growth. The company's strategic focus on key markets like Mexico City, Puebla and Monterrey aligns well with these macroeconomic shifts.

The 22.4% year-over-year revenue growth outpaces the industry average, indicating Vesta's strong market position. The high occupancy rates, particularly the 97.8% same-store occupancy, suggest a tight supply market, which bodes well for future rental rate growth.

Vesta's development pipeline of 4.7 million square feet is significant, representing about 13% of their current portfolio. This aggressive growth strategy could pay off handsomely if current market conditions persist but also carries increased risk if the market softens.

The 7.1% positive leasing spread on renewals is particularly noteworthy, as it indicates strong tenant demand and Vesta's ability to push rents. This trend, if sustained, could lead to substantial NOI growth in the coming years as leases roll over.

However, the slight compression in NOI and EBITDA margins warrants attention. While still high by industry standards, any continued decline could impact valuation multiples. Investors should monitor these metrics closely in future quarters to ensure Vesta maintains its operational efficiency as it grows.

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 second quarter ended June 30, 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.

Q2 2024 Highlights

• Vesta’s second quarter 2024 total income was US$ 63.0 million; a 22.4% year over year increase. Q2 2024 Adjusted NOI¹ margin and Adjusted EBITDA² margin reached 94.7% and 82.3%, respectively. Vesta FFO ended Q2 2024 at US$ 37.9 million; a 23.2% increase compared to US$ 30.8 million in Q2 2023.
• Second quarter 2024 leasing activity reached 2.8 million sf: 1.0 million sf in new contracts, 47% of which were buildings under construction that deepen Vesta’s e-commerce and consumer logistics sector presence; and 1.8 million sf in lease renewals. Vesta’s second quarter 2024 total portfolio occupancy reached 95.0%, while stabilized and same-store occupancy reached a record 97.5% and 97.8%, respectively.
• Trailing twelve-month renewals and re-leasing reached 4.8 million sf with a weighted average spread of 7.1%. Same-store NOI increased by 4.5% year on year.
• New construction during the quarter reached approximately 1.2 million sf. Vesta began construction on four new buildings during the second quarter 2024: two in Aguascalientes, one in Monterrey³, and another one in Puebla, strengthening the Company’s development portfolio aligned with its growth plan and reflecting continued market strength. Vesta’s current construction in progress reached 4.7 million sf by the end of the second quarter 2024, representing a US$ 417.2 million estimated investment and a 10.4% yield on cost, in markets including Mexico City, Puebla, Ciudad Juarez, Monterrey and the Bajio region.

				6 months
Financial Indicators (million)	Q2 2024	Q2 2023	Chg. %	2024	2023	Chg. %
Total Rental Income	63.0	51.5	22.4	123.6	101.4	21.9
Total Revenues (-) Energy	61.0	50.6	20.6	120.7	100.1	20.6
Adjusted NOI	57.8	48.3	19.6	115.1	96.1	19.8
Adjusted NOI Margin %	94.7%	95.5%		95.4%	95.9%
Adjusted EBITDA	50.2	42.6	17.9	100.8	84.7	19.0
Adjusted EBITDA Margin %	82.3%	84.2%		83.5%	84.6%
EBITDA Per Share	0.0566	0.0612	(7.5)	0.1138	0.1218	(6.6)
Total Comprehensive Income	109.6	98.6	11.2	233.6	157.7	48.1
Vesta FFO (pre tax)	37.9	30.8	23.2	78.3	61.3	27.7
Vesta FFO Per Share	0.0428	0.0443	(3.4)	0.0884	0.0882	0.3
Vesta FFO (-) Tax Expense	20.1	9.3	115.3	53.5	19.1	180.2
Vesta FFO (-) Tax Expense Per Share	0.0227	0.0134	68.8	0.0604	0.0274	120.0
Diluted EPS	0.1237	0.1418	(12.8)	0.2638	0.2268	16.3
Shares (average)	886.6	695.3	27.5	885.7	695.3	27.4

• Second quarter 2024 revenue reached US$ 63.0 million; a 22.4% year on year increase from US$ 51.5 million in the second quarter 2023 primarily due to US$ 8.9 million in new revenue-generating contracts and a US$ 1.9 million inflationary benefit on second quarter 2024 results.
• Second quarter 2024 Adjusted Net Operating Income (Adjusted NOI) increased 19.6% to US$ 57.8 million, compared to US$ 48.3 million in the second quarter 2023. The second quarter 2024 Adjusted NOI margin was 94.7%; a 77-basis-point year on year decrease due to increased property-related costs.
• Second quarter 2024 Adjusted EBITDA increased 17.9% to US$ 50.2 million, as compared to US$ 42.6 million in the second quarter 2023. The Adjusted EBITDA margin was 82.3%; a 188-basis-point decrease primarily due to increased administrative expenses during the quarter.
• Second quarter 2024 Vesta funds from operations (Vesta FFO) increased by 23.2% to US$ 37.9 million, from US$ 30.8 million in 2023. Vesta FFO per share was US$ 0.0428 for the second quarter 2024 compared with US$ 0.0443 for the same period in 2023; a 3.4% decrease resulting from an increase in interest expenses for the quarter. Second quarter 2024 Vesta FFO excluding current tax was US$ 20.1 million compared to US$ 9.3 million in the second quarter 2023, due to higher profit and lower current taxes in the second quarter 2024 relative to the same period in 2023.
• Second quarter 2024 total comprehensive gain was US$ 109.0 million, versus US$ 98.6 million in the second 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$ 3.5 billion as of June 30, 2024; a 20.5% increase compared to US$ 2.9 billion at the end of June 30, 2023.

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

CONFERENCE CALL INFORMATION

Vesta will host a conference call on Friday, July 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/525776694

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 June 30, 2024, Vesta owned 216 properties located in modern industrial parks in 16 states of Mexico totaling a GLA of 37.7 million sf (3.5 million m²). Vesta has several world-class clients participating in a variety of industries such as automotive, aerospace, retail, 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.
³ Subsequent event: Building approved by the board after the quarter end.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240725144874/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 (VTMX) total income for Q2 2024?

Vesta's total income for Q2 2024 was US$ 63.0 million, representing a 22.4% year-over-year increase from Q2 2023.

How much did Vesta's (VTMX) FFO grow in Q2 2024 compared to Q2 2023?

Vesta's FFO grew by 23.2% to US$ 37.9 million in Q2 2024, compared to US$ 30.8 million in Q2 2023.

What was Vesta's (VTMX) total portfolio occupancy rate in Q2 2024?

Vesta's total portfolio occupancy rate reached 95.0% in Q2 2024, with stabilized occupancy at 97.5% and same-store occupancy at 97.8%.

How many new buildings did Vesta (VTMX) begin constructing in Q2 2024?

Vesta began construction on four new buildings during Q2 2024: two in Aguascalientes, one in Monterrey, and one in Puebla.